UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C.
20549
FORM 10-Q
[X]
QUARTERLY REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30,
2008
[ ]
|
TRANSITION REPORT UNDER SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period
from _________________ to
_______________
|
Commission File Number
2-73389
STRIKER OIL & GAS,
INC.
(Exact name of small business issuer as
specified in its charter)
Nevada
|
|
75-1764386
|
(State or other jurisdiction of
incorporation or organization)
|
|
(IRS Employer Identification
No.)
|
5075 Westheimer Rd., Suite 975, Houston,
Texas 77056
(Address of principal executive
offices)
(713) 402-6700
(Issuer’s telephone
number)
Check whether the issuer has (1) filed
all reports required to be filed by Section 13 or 15(d) of the Exchange Act
during the past 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [
X]
No
[_]
As of August
19
, 2008, there were outstanding
23,
469,360
shares of common stock, $.001 par value
per share.
Transitional Small Business Disclosure
Format (Check one): Yes [ ] No
[X]
Indicate by check mark whether the
registrant is a large accelerated filer, and accelerated filer, a
non-accelerated filer, or a smaller 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
¨
|
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
STRIKER OIL & GAS,
INC.
INDEX TO FORM 10-Q
June 30, 2008
|
|
Part I
|
Financial
Information
|
Page No.
|
|
|
|
|
|
Item 1.
|
Financial
Statements
|
1
|
|
|
|
|
|
|
Consolidated Balance Sheets
(unaudited)
June 30, 2008 and
December 31,
2007
|
2
|
|
|
|
|
|
|
Consolidated Statements of
Operations (unaudited) Three
and Six
Months Ended June 30, 2008 and
2007
|
4
|
|
|
|
|
|
|
Consolidated Statements of Cash
Flow (unaudited)
Six
Months Ended June 30,
2008 and 2007
|
4
|
|
|
|
|
|
|
Notes to Unaudited Consolidated
Financial Statements
|
5
|
|
|
|
|
|
Item 2.
|
Management’s Discussion and
Analysis of Results of Operations and Financial
Condition
|
6
|
|
|
|
|
|
Item 3.
|
Controls and
Procedures
|
8
|
|
|
|
|
Part II
|
Other
Information
|
|
|
|
|
|
|
Item 1.
|
Legal
Proceedings
|
9
|
|
|
|
|
|
Item 2.
|
Unregistered Sales of Equity
Securities and Use of Proceeds
|
10
|
|
|
|
|
|
Item 3.
|
Exhibits
|
10
|
|
|
|
|
PART
I.
FINANCIAL
INFORMATION
ITEM
1.
FINANCIAL STATEMENTS
STRIKER OIL & GAS,
INC.
|
|
AND
SUBSIDIARIES
|
|
CONSOLIDATED BALANCE
SHEETS
|
|
(Unaudited)
|
|
|
|
June 30,
2008
|
|
|
December 31,
2007
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
628,883
|
|
|
$
|
608,944
|
|
Oil and gas receivable, net of
allowance of
$70,398
at June 30, 2008 and
December $
166,789
31
, 200
7,
respectively
|
|
|
680,420
|
|
|
|
1,574,097
|
|
Prepaid
expenses
|
|
|
421,447
|
|
|
|
333,164
|
|
Deferred financing costs,
net
|
|
|
52,593
|
|
|
|
59,131
|
|
Total
current assets
|
|
|
1
,783,343
|
|
|
|
2,575,336
|
|
Property and
equipment:
|
|
|
|
|
|
|
|
|
Oil and
gas properties, full-cost method:
|
|
|
|
|
|
|
|
|
Subject
to depletion
|
|
|
12,652,131
|
|
|
|
1
1,913,806
|
|
Unevaluated
costs
|
|
|
827,806
|
|
|
|
711,521
|
|
Other
fixed assets
|
|
|
264,679
|
|
|
|
263,059
|
|
Accumulated
depletion, depreciation and impairment
|
|
|
(3,
973,752
|
)
|
|
|
(3,165,108
|
)
|
Property and equipment,
net
|
|
|
9,770,864
|
|
|
|
9,723,27
8
|
|
Other
assets
|
|
|
131,13
0
|
|
|
|
128,146
|
|
Total
assets
|
|
$
|
11,685,337
|
|
|
$
|
12,426,760
|
|
See accompanying notes to unaudited
consolidated financial statements.
STRIKER OIL & GAS,
INC.
|
|
AND
SUBSIDIARIES
|
|
CONSOLIDATED BALANCE
SHEETS
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
June 30,
2008
|
|
|
December 31,
2007
|
|
LIABILITIES AND SHAREHOLDERS’
EQUITY
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts
payable
|
|
$
|
778,436
|
|
|
$
|
797,502
|
|
Accrued
interest
|
|
|
17,384
|
|
|
|
61,035
|
|
Oil and gas royalties
payables
|
|
|
42,29
6
|
|
|
|
167,917
|
|
Accrued
liabilities
|
|
|
17,57
8
|
|
|
|
1,005
|
|
Notes
payable
|
|
|
78,682
|
|
|
|
100,111
|
|
Drilling contract
liability
|
|
|
-
-
|
|
|
|
326,187
|
|
Current portion – secured
convertible note payable net of
unamortized discount
|
|
|
|
|
|
|
|
|
of $
256,378
and $1,064,419,
respectively
|
|
|
217,223
|
|
|
|
2,166,341
|
|
Derivative
liabilities
|
|
|
5,3
85,202
|
|
|
|
1,479,268
|
|
Total current
liabilities
|
|
|
6,536,801
|
|
|
|
5,099,366
|
|
|
|
|
|
|
|
|
|
|
Long term
liabilities:
|
|
|
|
|
|
|
|
|
Secured convertible note payable
net of unamortized discount of
|
|
|
|
|
|
|
|
|
$
3,072,851
and$
2,821,181
,
respectively
|
|
|
1,235,510
|
|
|
|
221,995
|
|
Asset retirement
obligation
|
|
|
652,362
|
|
|
|
748,757
|
|
Total long term
liabilities
|
|
|
1,887,872
|
|
|
|
970,752
|
|
Total current and long term
liabilities
|
|
|
8,
424,673
|
|
|
|
6,070,118
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $.001 par value,
25,000,000 shares authorized, none issued
|
|
|
--
|
|
|
|
--
|
|
Common stock, $.001 par value,
1,500,000,000 shares authorized,
|
|
|
|
|
|
|
|
|
23,
432,980
and 20,
212,968
issued and outstanding,
respectively
|
|
|
23,433
|
|
|
|
20,
213
|
|
Treasury stock, at cost; 1,237,839
shares
|
|
|
(331,014
|
)
|
|
|
(331,014
|
)
|
Additional paid-in
capital
|
|
|
25,107,732
|
|
|
|
21,767
,
65
2
|
|
Accumulated
deficit
|
|
|
(
21,539,487
|
)
|
|
|
(15
,
100
,
209
|
)
|
Total shareholders’
equity
|
|
|
3,260,664
|
|
|
|
6,356
,
642
|
|
Total liabilities and
shareholders' equity
|
|
$
|
11,685,337
|
|
|
$
|
12,426,760
|
|
See accompanying notes to unaudited
consolidated financial statements.
STRIKER OIL & GAS,
INC.
|
|
|
|
AND
SUBSIDIARIES
|
|
|
|
CONSOLIDATED STATEMENTS OF
OPERATIONS
|
|
|
|
THREE AND SIX MONTHS ENDED JUNE
30, 2008 AND 2007
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
|
June 30,
2008
|
June 30,
2007
|
|
June 30,
2008
|
June 30,
2007
|
|
|
|
|
|
|
|
|
|
|
Oil and gas
revenue
|
$ 1,4
56
,
526
|
$ 643,554
|
|
$ 2,6
35
,
661
|
$ 965,902
|
Oil and gas production
costs
|
278
,
599
|
137,254
|
|
75
6
,
867
|
285,134
|
Depletion
and accretion
expense
|
503,646
|
296,587
|
|
829,349
|
481,520
|
Gross profit
(loss)
|
674,281
|
209,713
|
|
1,
049,445
|
199,248
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
General and
administrative
|
1
,767,486
|
875,306
|
|
2,295,888
|
1,911,066
|
Drilling rig
contract
|
--
|
5,466
|
|
--
|
402,464
|
Depreciation
|
12,876
|
11,154
|
|
25,579
|
22,247
|
Other
|
46,966
|
137,389
|
|
105,028
|
182,782
|
Total operating
expenses
|
1,
827,328
|
1,029,315
|
|
2,426,495
|
2,518,559
|
|
|
|
|
|
|
Loss from
operations
|
(1,153,047)
|
(819,602)
|
|
(1,377,049
)
|
(2,319,311)
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
Interest
income
|
1,77
9
|
9,279
|
|
8,88
5
|
12,575
|
Interest
expense
|
(1,460,454)
|
(1,168,334)
|
|
(1,962,653)
|
(1,17
5,806
)
|
Change in fair value of
derivatives
|
(4,244,368)
|
476,522
|
|
(3,108,465)
|
476,522
|
Total other
|
(
5
,7
03
,0
43
)
|
(682,533)
|
|
(5,062,233
)
|
(686,
709
)
|
Net loss
|
$ (6,
856,090
)
|
$ (1,502,135)
|
|
$ (6,439,283
)
|
$ (3,00
6,020
)
|
|
|
|
|
|
|
|
Net loss per
share:
|
|
|
|
|
|
|
Basic and
diluted
|
(0.3
3
)
|
(0.07)
|
|
(0.
31
)
|
(0.15)
|
|
|
|
|
|
|
|
|
Weighted average number of common
shares outstanding:
|
|
|
|
|
|
|
Basic and
diluted
|
20,954,797
|
20,034,180
|
|
20,630,257
|
19,634,265
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited
consolidated financial statements.
STRIKER
OIL & GAS, INC.
|
|
AND
SUBSIDIARIES
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
SIX
MONTHS ENDED JUNE 30, 2008 AND 2007
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six
Months Ended
|
|
|
|
June
30, 2008
|
|
|
June
30, 2007
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
Net
Loss
|
|
|
|
|
|
|
Adjustments to reconcile net loss
to cash used in operating activities:
|
|
$
|
(6,439,283
|
)
|
|
$
|
(3,006,020
|
)
|
Depletion and
depreciation
|
|
|
808,644
|
|
|
|
503,767
|
|
Impairment of oil and gas
properties
|
|
|
(96,395
|
)
|
|
|
372,668
|
|
Stock and stock options issued for
services
|
|
|
-
|
|
|
|
50,235
|
|
Stock issued for loan
commitment
|
|
|
-
|
|
|
|
-
|
|
Stock option
expense
|
|
|
663,693
|
|
|
|
492,491
|
|
Amortization of debt
discounts
|
|
|
532,437
|
|
|
|
1,130,383
|
|
Amortization of deferred financing
costs
|
|
|
-
|
|
|
|
3,731
|
|
Fair value of stock
options
|
|
|
(1,819
|
)
|
|
|
|
|
Non-cash investment
income
|
|
|
(2,985
|
)
|
|
|
(3,588
|
)
|
Change in fair value of
derivatives
|
|
|
3,905,934
|
|
|
|
(476,522
|
)
|
Changes in assets and
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
893,677
|
|
|
|
(325,123
|
)
|
Prepaid drilling
contract
|
|
|
(722,091
|
)
|
|
|
958,789
|
|
Deferred financing
costs
|
|
|
6,538
|
|
|
|
(78,500
|
)
|
Prepaid
expenses
|
|
|
307,621
|
|
|
|
(608,067
|
)
|
Accounts payable and accrued
liabilities
|
|
|
(171,759
|
)
|
|
|
315,812
|
|
Drilling contract
liability
|
|
|
-
|
|
|
|
(658,025
|
)
|
Net cash used in operating
activities
|
|
|
(315,788
|
)
|
|
|
(1,327,967
|
)
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
Purchase of certificate of
deposit
|
|
|
-
|
|
|
|
(80,000
|
)
|
Investment in oil and gas
properties and other fixed assets
|
|
|
(856,230
|
)
|
|
|
(3,509,180
|
)
|
Note receivable – related
party
|
|
|
|
|
|
|
-
|
|
Deposits
|
|
|
|
|
|
|
-
|
|
Net cash used in investing
activities
|
|
|
(856,230
|
)
|
|
|
(3,589,180
|
)
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
Proceeds from secured convertible
note payable
|
|
|
-
|
|
|
|
5,500,000
|
|
Debt issuance
costs
|
|
|
-
|
|
|
|
(580,000
|
)
|
Conversion
of notes
payable
|
|
|
313,845
|
|
|
|
-
|
|
Stock issued for
cash
|
|
|
-
|
|
|
|
1,950,040
|
|
Exercise of stock
options
|
|
|
878,112
|
|
|
|
5,000
|
|
Net cash provided by financing
activities
|
|
|
1,191,957
|
|
|
|
6,875,040
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in
cash
|
|
|
19,939
|
|
|
|
1,957,893
|
|
Cash and cash equivalents,
beginning of period
|
|
|
608,944
|
|
|
|
414,884
|
|
Cash and cash equivalents, end of
period
|
|
$
|
628,883
|
|
|
$
|
2,372,777
|
|
See accompanying notes to unaudited
consolidated financial statements.
STRIKER
OIL & GAS, INC.
|
|
AND
SUBSIDIARIES
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
SIX
MONTHS ENDED JUNE 30, 2008 AND 2007
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Six
Months Ended
|
|
|
June
30, 2008
|
June
30, 2007
|
|
Supplemental cash flow
disclosures:
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Supplemental non-cash
disclosures:
|
|
|
|
Stock issued for prepaid
expenses
|
|
|
$ -
|
Stock issued for payment of
accounts payable
|
|
$
|
702,091
|
|
|
$
|
-
|
|
Note issued for acquisition of
leasehold interests
|
|
$
|
-
|
|
|
$
|
-
|
|
Purchase of treasury stock for
note receivable – related party
|
|
$
|
-
|
|
|
$
|
211,014
|
|
Transfer to oil and gas properties
from prepaid expenses
|
|
$
|
-
|
|
|
$
|
1,702,780
|
|
See accompanying notes to unaudited
consolidated financial statements.
STRIKER OIL & GAS, INC. AND
SUBSIDIARIES
Notes to Unaudited Consolidated
Financial Statements
June 30, 2008
Note
1.
Organization and Nature of
Business
The accompanying unaudited consolidated
financial statements of Striker Oil & Gas, Inc. (formerly Unicorp, Inc.)
(the "Company" or "Striker") have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and the rules of the Securities and Exchange
Commission (“SEC”). In the opinion of management, all adjustments,
consisting only of normal recurring adjustments, considered necessary for a fair
presentation, have been included in the accompanying unaudited consolidated
financial statements. Operating results for the periods presented are
not necessarily indicative of the results that may be expected for the full
year. Notes to the consolidated financial statements that would
substantially duplicate the disclosures contained in the audited financial
statements for the fiscal year ended December 31, 2007, as reported in the Form
10-KSB
/1A
, have been omitted.
These consolidated financial statements
should be read in conjunction with the financial statements and footnotes, which
are included as part of the Company's Form 10-KSB
/1A
for the year ended December 31,
2007.
Striker was originally incorporated in
May 1981 in the State of Nevada under the name of Texoil, Inc., changed its name
to Unicorp, Inc. in March 1999, and subsequently changed its name to Striker Oil
& Gas, Inc. in April 2008. Striker is a natural resource company
engaged in the exploration, exploitation, acquisition, development and
production and sale of natural gas, crude oil and natural gas liquids from
conventional reservoirs within the United States. Substantial
portions of the Striker’s operations are conducted in Louisiana, Mississippi and
Texas.
On July 29, 2004, the Company closed on
a transaction acquiring all of the common stock of Affiliated Holdings, Inc., a
Texas corporation (“AHI”), pursuant to a stock agreement by and among the
Company, AHI and the stockholders of AHI (the “Stock
Transaction”). As a result of the Stock Transaction, AHI became a
wholly-owned subsidiary of the Company, through which oil and gas operations are
being conducted. References herein to the Company include
AHI.
On April 4, 2008, the board of directors
of the Company authorized a 1 for 5 reverse stock split of the common
stock. The reverse stock split became effective for trading in the
Company’s securities on April 24, 2008. Accordingly, all references
to number of shares (except shares authorized), options, warrants and to per
share information in these financial statements have been adjusted to reflect
the reverse stock split on a retroactive basis.
New Accounting
Pronouncements
In March 2008, the Financial Accounting
Standards Board issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities” (“SFAS 161”), and an amendment of FASB
Statement No. 133, “Accounting for Derivative Instruments and Hedging
Activities” (“SFAS 133”). SFAS 161 requires entities to provide qualitative
disclosures about the objectives and strategies for using derivatives,
quantitative data about the fair value of and gains and losses on derivative
contracts, and details of credit-risk-related contingent features in their
hedged positions. The standard is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008, with
early application encouraged but not required. SFAS 161 also requires entities
to disclose more information about the location and amounts of derivative
instruments in financial statements, how derivatives and related hedges are
accounted for under SFAS 133, and how the hedges affect the entity’s financial
position, financial performance, and cash flows. The Company is currently
evaluating whether the adoption of SFAS 161 will have an impact on its
financial position or results of operations.
In December 2007, the FASB issued SFAS
No. 141(R), “Business Combinations” (“SFAS 141(R)”). SFAS 141(R) replaces
SFAS 141, “Business Combinations”; however it retains the fundamental
requirements that the acquisition method of accounting be used for all business
combinations and for an acquirer to be identified for each business combination.
SFAS 141(R) requires an acquirer to recognize the assets acquired, liabilities
assumed, and any noncontrolling interest in the acquiree at the acquisition
date, be measured at their fair values as of that date, with specified limited
exceptions. Changes subsequent to that date are to be recognized in earnings,
not goodwill. Additionally, SFAS 141 (R) requires costs incurred in
connection with an acquisition be expensed as incurred. Restructuring costs, if
any, are to be recognized separately from the acquisition. The acquirer in a
business combination achieved in stages must also recognize the identifiable
assets and liabilities, as well as the noncontrolling interests in the acquiree,
at the full amounts of their fair values. SFAS 141(R) is effective for business
combinations occurring in fiscal years beginning on or after December 15,
2008. The Company will apply the requirements of SFAS 141(R) upon its adoption
on January 1, 2009 and is currently evaluating whether SFAS 141(R) will
have an impact on its financial position and results of
operations.
In February 2007, the FASB issued SFAS
No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities” (“SFAS 159”). SFAS 159 permits companies to elect to measure many
financial instruments and certain other items at fair value. Upon adoption of
SFAS 159, a company may elect the fair value option for eligible items that
exist at the adoption date. Subsequent to the initial adoption, the election of
the fair value option should only be made at initial recognition of the asset or
liability or upon a remeasurement event that gives rise to new-basis accounting.
The decision about whether to elect the fair value option is applied on an
instrument-by-instrument basis is irrevocable and is applied only to an entire
instrument and not only to specified risks, cash flows or portions of that
instrument. SFAS No. 159 does not affect any existing accounting standards
that require certain assets and liabilities to be carried at fair value nor does
it eliminate disclosure requirements included in other accounting standards.
The Company
adopted SFAS No. 159 effective
January 1, 2008 and did not elect the fair value option for any existing
eligible items.
Fair Value
Measurements
The Company adopted SFAS No. 157
effective January 1, 2008. SFAS 157 established a framework for
measuring fair value in GAAP and clarified the definition of fair value within
that framework. SFAS 157 does not require assets and liabilities that were
previously recorded at cost to be recorded at fair value or for assets and
liabilities that are already required to be disclosed at fair value, SFAS 157
introduced, or reiterated, a number of key concepts which form the foundation of
the fair value measurement approach to be used for financial reporting purposes.
The fair value of the Company’s financial instruments reflects the amounts that
the Company estimates to receive in connection with the sale of an asset or paid
in connection with the transfer of a liability in an orderly transaction between
market participants at the measurement date (exit price). SFAS 157 also
established a fair value hierarchy that prioritizes the use of inputs used in
valuation techniques into the following three levels:
Level 1—quoted prices in active markets
for identical assets and liabilities.
Level 2—observable inputs other than
quoted prices in active markets for identical assets and
liabilities.
Level 3—unobservable
inputs.
The adoption of FAS 157 did not have an
effect on the Company’s financial condition or results of operations, but SFAS
157 introduced new disclosures about how we value certain assets and
liabilities. Much of the disclosure is focused on the inputs used to measure
fair value, particularly in instances where the measurement uses significant
unobservable (Level 3) inputs.
As required by SFAS 157, financial
assets and liabilities are classified based on the lowest level of input that is
significant to the fair value measurement. Our assessment of the significance of
a particular input to the fair value measurement requires judgment and may
affect the valuation of the fair value of assets and liabilities and their
placement within the fair value hierarchy levels. Following are the major
categories of assets and liabilities measured at fair value on a recurring basis
as of June 30, 2008, using quoted prices in active markets for identical assets
(Level 1); significant other observable inputs (Level 2); and significant
unobservable inputs (Level 3):
|
|
Fair Value Measurements at June
30, 2008 Using
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Assets
(Liabilities):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liabilities
|
|
$
|
-
|
|
|
$
|
(5,385,202)
|
)
|
|
$
|
-
|
|
|
$
|
(5,385,202)91,763
|
)
|
|
Total
|
|
$
|
-
|
|
|
$
|
(5,385,202)
|
)
|
|
$
|
-
|
|
|
$
|
(5,385,202)
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
2.
Going Concern
The accompanying consolidated financial
statements have been prepared on a going concern basis, which anticipates the
realization of assets and the liquidation of liabilities during the normal
course of operations. However, as shown in these consolidated
financial statements, the Company, as of June 30, 2008, had working
capital of
$
631,744
. In addition, the Company
has an accumulated deficit of
$
21,539,487
. These factors raise doubt
about the Company’s ability to continue as a going concern if changes in
operations are not forthcoming.
The Company’s ability to continue as a
going concern will depend on management’s ability to successfully obtain
additional forms of debt and/or equity financing to execute its drilling and
exploration program. The Company believes it can obtain additional
funding to execute its drilling and exploration program, but it cannot give any
assurances that it will be successful in obtaining additional funding on terms
acceptable to it, if at all. These financial statements do not
include any adjustments that might be necessary if the Company is unable to
continue as a going concern.
Note
3.
Stock-Based
Compensation
On July 2004, the Board of Directors
adopted the 2004 Stock Option Plan (the “2004 Plan”), which allows for the
issuance of up to 1,200,000 stock options to directors, executive officers,
employees and consultants of the Company who are contributing to the Company’s
success. As of June 30, 2008, there were 208,400 non-qualified stock
options outstanding at exercise prices ranging from $0.05 to $15.00 per
share
.
As of June 30, 2008, there
were
273,859
shares available for issuance pursuant
to the 2004 Plan. The 2004 Plan was approved by the shareholders on
September 20, 2004.
On September 4, 2007, the Board of
Directors adopted the 2007 Stock Option Plan (the “2007 Plan”), which allows for
the issuance of up to 1,600,000 stock options to directors, executive officers,
employees and consultants of the Company who are contributing to the Company’s
success.
In the
current reporting quarter, the Company
issued
options to purchase 760,700
shares of the
C
ompany’s common
stock under the 2007 Plan at
exercise prices ranging
from $0.50 to $1.5
0
per share to
various consultants for
services. All options are fully vested and have a 3 year
life.
The fair
market value of the option
s
was $
702,091
on the date of grant. As of
June 30, 2008, there were 3
39
,
300
shares available for issuance pursuant
to the 2007 Plan.
The fair market value of
these options was calculated using the Black-Scholes option pricing model and
the following inputs: (1) risk free interest rate of
1.25%, (2) volatility of 270.9% (3) exercise prices ranging from
$0.50 to $1.50 per share, (3) expected term of 1.5 years and (4) zero expected
dividends. All 760,700 options were exercised during the second
quarter and the company received cash proceeds of $779,780.
In February, 2008, an option to purchase
130,000 shares of the Company’s common stock was exercised by the former CEO for
gross proceeds of $6,500.
In June 2008, an option to purchase
66,667 shares of the Company’s common stock as exercised by our VP of Land and
Development for gross proceeds of $3,333. In June 2008, the Company
issued 35,000 shares to a vendor as a payment for services. The fair
market value of the shares on the date of issuance was
$44,100.
As June 30, 2008, a total of 5,013,159
options remain outstanding under the 2004 and 2007 Stock Option
Plans. As of June 30, 2008, the range of exercise prices and weighted
average remaining contractual life of outstanding options was $0.05 to $17.50
and 28.3 months.
As of June 30, 2008, there
were 3
39
,
300
shares available for issuance pursuant
to the 2007 Plan.
Note
4.
Accounts Receivable
Accounts receivable consists of the
following:
|
|
June 30,
2008
|
|
December 31,
2007
|
Accrued production
receivable
|
|
$
658,658
|
|
$
1,740,88
7
|
Joint interest
receivables
|
|
87,932
|
|
-
|
Employee
Advances
|
|
2,500
|
|
-
|
Allowance for bad
debts
|
|
(68,67
0
)
|
|
(166,790)
|
|
|
$ 6
8
0
,
420
|
|
$ 1,574,097
|
Note
5.
Notes Payable
Secured Convertible
Notes
To obtain funding for the Company’s
ongoing operations, the Company entered into a securities purchase agreement
with YA Global Investments, L.P. (formerly, Cornell Capital Partners L.P.), an
accredited investor, on May 17, 2007, for the sale of $7,000,000 in secured
convertible debentures. YA Global Investments provided the Company
with an aggregate of $7,000,000 as follows:
·
|
$3,500,000 was
disbursed on May 17,
2007;
|
·
|
$2,000,000 was disbursed on June
29, 2007; and
|
·
|
$1,500,000 was disbursed on
October 24, 2007.
|
Accordingly, during 2007 the Company
received a total of $7,000,000, less a 10% commitment fee of $700,000 and a
$15,000 structuring fee for net proceeds of $6,285,000 pursuant to the
securities purchase agreement. The Company had previously paid an
additional $15,000 to Yorkville Advisors as a structuring fee. The
Company incurred debt issuance costs of $78,500 associated with the issuance of
the secured convertible notes. These costs were capitalized as
deferred financing costs and are being amortized over the life of the secured
convertible notes using the effective interest method. Amortization
expense related to the deferred finan
cing costs was $7
,778 for the three months ended June 30,
2008.
In connection with the securities
purchase agreement, the Company issued YA Global Investors warrants to purchase
an
aggregate of 1,624,300
shares of common stock. All of the warrants expire five years from
the date of issuance.
In connection with the securities
purchase agreement, the Company also entered into
a registration rights agreement;
and
a security agreement in favor of YA
Global Investments.
The registration rights agreement
provided for the filing, by July 2, 2007, of a registration statement with the
Securities and Exchange Commission registering the common stock issuable upon
conversion of the secured convertible debentures and warrants. The
registration statement was declared effective by the SEC on October 12,
2007.
The Company executed a security
agreement in favor of YA Global Investments granting them a first priority
security interest in certain of the Company’s goods, inventory, contractual
rights and general intangibles, receivables, documents, instruments, chattel
paper and intellectual property. The security agreement states that
if an event of default occurs under the secured convertible debentures or
security agreements, YA Global Investments has the right to take possession of
the collateral, to operate the Company’s business using the collateral, and have
the right to assign, sell, lease or otherwise dispose of and deliver all or any
part of the collateral, at public or private sale or otherwise to satisfy the
Company’s obligations under these agreements.
On February 20, 2008, the Company
entered into an Amendment Agreement with YA Global Investments, amending certain
notes and warrants entered into in connection with the Securities Purchase
Agreement dated May 17, 2007. The amendment agreement includes the
following changes:
·
|
the interest rate was increased
from 9% to 14%;
|
·
|
the maturity date was changed from
November 17, 2009 to December 31,
2010;
|
·
|
the conversion price was changed
from $2.50 per share to $0.75 per share;
and
|
·
|
The Company agreed to make monthly
payments of principal and interest of $100,000 beginning March 1, 2008 and
a one-time balloon payment of $1,300,000 due and payable on December 31,
2009.
|
The amendment agreement modified
warrants as follows:
Warrant
|
Description
|
Original Exercise Price per
Share
|
Amended
Exercise Price per
Share
|
A-1
|
Warrant to purchase 509,000 shares
of common stock
|
$2.75
|
$0.75
|
B-1
|
Warrant to purchase 430,800 shares
of common stock
|
$3.25
|
$1.25
|
C-1
|
Warrant to purchase 373,400 shares
of common stock
|
$3.75
|
$1.35
|
D-1
|
Warrant to purchase 311,100 shares
of common stock
|
$4.50
|
$2.50
|
In addition, in connection with the
Amendment, the Company issued the following four warrants:
Warrant
|
Description
|
Exercise Price
Per
Share
|
A-2
|
Warrant to purchase 1,357,334
shares of common stock
|
$0.75
|
B-2
|
Warrant to purchase 689,280 shares
of common stock
|
$1.25
|
C-2
|
Warrant to purchase 426,743 shares
of common stock
|
$1.75
|
D-2
|
Warrant to purchase 248,880 shares
of common stock
|
$2.50
|
All of the warrants expire five years
from the date of issuance.
The Company analyzed the convertible
notes and the warrants for derivative financial instruments, in accordance with
SFAS No. 133,
Accounting
for Derivative Instruments and Hedging Activities
and EITF 00-19,
Accounting
for Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Company's Own Stock.
The convertible notes are hybrid instruments which contain more than
one embedded derivative feature which would individually warrant separate
accounting as derivative instruments under SFAS 133. The various
embedded derivative features have been bundled together as a single, compound
embedded derivative instrument that has been bifurcated from the debt host
contract. The single compound embedded derivative features include
the conversion feature with the convertible notes, the interest rate adjustment,
maximum ownership and default provisions. The Company valued the
compound embedded derivatives based on a probability weighted discounted cash
flow model. The value at inception of the single compound embedded
derivative liability
was
$1,958,285 and
was
bifurcated from the debt host contract and recorded as a derivative
liability. The discount for the derivative will be accreted to
interest expense using the effective interest method over the life of the
convertible notes.
Probability - Weighted Expected Cash
Flow Methodology
Assumptions:
Single Compound Embedded Derivative
within Convertible Note
|
Inception
May 17,
2007
|
As of
June 30,
2008
|
Risk free interest
rate
|
4.86%
|
(4.59%)
|
Timely
registration
|
95.00%
|
95.00%
|
Default
status
|
5.00%
|
5.00%
|
Alternative financing available
and exercised
|
0.00%
|
0.00%
|
Trading volume, gross monthly
dollars monthly rate increase
|
1.00%
|
1.00%
|
Annual growth rate stock
price
|
29.7%
|
29.2%
|
Future projected
volatility
|
211%
|
90%
|
The stock purchase warrants are
freestanding derivative financial instruments which were valued using the
Black-Scholes method. The fair value of the derivative liability of
the warrants was recorded at $2,723,239 at inception on May 17,
2007. The unamortized discount of the warrant derivative
liability of $2,539,093 will be accreted
to interest expense using the effective interest method over the life of the
convertible notes, or 37 months. The total accretion expense was
$236,366 for the three months ended June 30, 2008. The remaining value of
$955,739 was expensed at inception to change in fair value of derivative
financial instruments since the total fair value of the derivative at inception
exceeded the note proceeds.
Variables used in the Black-Scholes
option-pricing model include (1) 5.11% to 4.89% risk-free interest rate, (2)
expected warrant life is the actual remaining life of the warrant as of each
period end, (3) expected volatility is from 211% to 156%; and (4) zero expected
dividends.
Both the embedded and freestanding
derivative financial instruments were recorded as liabilities in the
consolidated balance sheet and measured at fair value. These
derivative liabilities will be marked-to-market each quarter with the change in
fair value recorded as either a gain or loss in the income
statement.
To determine the appropriate accounting
for the February 2008 Modifications noted above, the Company applied the
provisions of EITF 96-19. Under EITF 96-19, a substantial modification of loan
terms results in accounting for the modification as a debt extinguishment. EITF
96-19 specifies that a modification should be considered substantial if the
present value of the cash flows under the new terms is at least 10% different
from the present value of the remaining cash flows under the original loan
terms. EITF 96-19 requires the use of the original effective interest rate for
calculating the present value of the cash flows under the modified
loan.
In order to apply EITF 96-19, the
Company determined the annual payments (principal and interest) under the new
loan terms. If either debt instrument is callable or putable, EITF
96-19 requires that the present value calculation should be made assuming the
instrument is called (put) and assuming the instrument is not called (put). The
cash flow assumptions that generate the smaller change are to be used in the 10%
test. In this case, both instruments had a call options.
Using the original effective interest
rate as the discount factor for each set of cash flows, the Company computed the
present values under the various scenarios. In completing the analysis, the
change in value based on the modification and issuance of additional warrants
was treated as a current period cash flow. Based on this analysis,
the Company determined that the difference between the cash flows under the
original terms and the modified terms was not in excess of 10% which suggested
that the February 2008 Modifications were not substantial and the notes were not
extinguished. The value of the additional warrants issued are
accounted for as a derivative
liability and treated as an
additional debt discount of
$1,030,193 to
the note and that is amortized over the
remaining life of the note. The embedded derivatives and warrants
continue to be reported at fair with the change in fair value recorded
in current earnings
.
The
impact of the application of SFAS No. 133 and EITF 00-19 in regards to the
derivative liabilities on the balance sheet and statements of operations as of
and through June 30, 2008 are as follows:
|
|
Period
ending
June
30, 2008
|
|
Year
ending
December
31, 2007
|
Derivative
liability – single compound embedded derivatives within the convertible
notes
|
|
$ 2,454,068
|
|
$ 1,233,244
|
Derivative
liability – warrants
|
|
2,806,833
|
|
206,156
|
Derivative
liability – options
|
|
124,301
|
|
40,492
|
Total
|
|
$ 5,385,202
|
|
$ 1,479,892
|
|
|
|
|
|
Net
change in fair value of derivatives
|
|
4,244,368
|
|
(3,437,780)
|
The
following summarizes the financial presentation of the convertible notes at
inception and June 30, 2008:
|
|
|
|
At
Inception
|
|
|
June
30, 2008
|
|
May
17, 2007
|
Notional
amount of convertible notes
|
|
$ 4,781,962
|
|
$ 3,500,000
|
Adjustments:
|
|
|
|
|
Unamortized
discount
|
|
(3,329,229)
|
|
(3,500,000)
|
|
|
|
|
|
Convertible
notes balance, net
|
|
$ 1,452,733
|
|
$ -
|
Existing Non-Employee Stock
Options
The secured convertible notes are
potentially convertible into an unlimited number of common shares, resulting in
the Company no longer having the control too physically or net share settle
existing non-employee stock options. Thus under EITF 00-19, all
non-employee stock options that are exercisable during the period that the notes
are outstanding are required to be treated as derivative liabilities and
recorded at fair value until the provisions requiring this treatment have been
settled.
As of the
date of issuance of the notes on May 17, 2007, the fair value of options to
purchase 717,000 shares totaling $107,766 was reclassified to the liability
caption “Derivative liability” from additional paid-in capital. The
fair value of $40,492 as of June 30, 2008, was determined using the closing
price of $0.21, the respective exercise price ($1.75 to $17.50), the remaining
term on each contract (.85 to 4.6 years), the relevant risk free interest rate
(4.23%) as well as the relevant volatility (174.79%).
The determination of fair value for the
non-employee stock options includes significant estimates by management
including volatility of the Company’s common stock and interest rates, among
other items. The recorded value of the non-employee stock options can
fluctuate significantly based on fluctuations in the fair value of the Company’s
common stock, as well as in the volatility of the stock price during the term
used for observation and the term remaining for exercise of the stock
options. The fluctuation in estimated fair value may be significant
from period-to-period which, in turn, may have a significant impact on the
Company’s reported financial condition and results of
operations.
Notes
Payable
During March 2006, the Company issued
$75,000 principal amount in the form of a two-year, 10% convertible unsecured
note to La Mesa Partners, L.C. The note became due on March 9, 2008
and the funds were used to pay for lease bonus costs on the Company’s Ohio and
Logan County, Kentucky prospects. At the option of the note holder,
the note is convertible into common stock of the Company at a conversion price
of $1.00 per share anytime after March 9, 2007. Interest on the 10%
convertible note is payable quarterly out of available cash flow from operations
as determined by the Company’s Board of Directors, or if not paid but accrued,
will be paid at the next fiscal quarter or at maturity. The
conversion price of the note was calculated based on a discount to the bid price
on the date of funding. As the conversion price was below the fair
value of the common stock on the date issued, the Company has recorded the
beneficial feature of the note in accordance with the provisions found in EITF
98-5 by recording a $22,500 discount on the note. The discount was
being amortized over a twelve month period beginning April 1, 2006
.
The convertible notes payable at June
30, 2008 and December 31, 2007, are as follows:
|
|
June
30, 2008
|
|
December 31,
2007
|
La Mesa Partners,
L.C.
|
|
$ 75,000
|
|
$ 75,000
|
Advantage Premium
Finance
|
|
3,182
|
|
25,111
|
Total convertible notes
payable
|
|
$ 78,682
|
|
$ 100,111
|
Note
6.
Common Stock
During the
six
months ended
June 30, 2008
, the Company issued
the following shares of common
stock:
·
|
20,000 shares of its common stock
to an individual for legal services which were valued at $12,000 ($0.60
per share).
|
·
|
10,000 shares of its common stock
to an individual for consulting services valued at $6,000 ($0.60 per
share).
|
·
|
130,000 shares of its common stock
upon the exercise of an option for gross proceeds of
$6,500.
|
·
|
35
,000 to an individual for legal
services which were valued at $
32,102
($0.
92
per share)
.
|
·
|
66,668 to the Company’s VP of Land
upon the exercise of an option for gross proceeds of
$3,334
|
·
|
150,000
to an individual
upon the exercise of an option for
gross proceeds of $75,000. Options were issued for
s
ervices which were
valued at $
95,198.
|
·
|
55,000
to an individual
upon the exercise of an option for
gross proceeds of $48,750. Options were issued for
s
ervices which were
valued at $
61,306.
|
·
|
555,700
to an individual
upon the exercise of an option for
gross proceeds of $656,030. Options were issued for
s
ervices which were
valued at $
545,587.
|
N
ote
7.
Subsequent Events
In August 2008, the Company issued
36,380 shares of its common stock in settlement of the conversion portion of its
convertible notes payable
ITEM
2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion and analysis of
the Company’s financial condition as of June 30, 2008, and its results of
operations for the three
and six
months ended
June 30, 2008
and 2007, should be read in conjunction
with the audited consolidated financial statements and notes included in
Striker’s Form 10-KSB
/1A
for the year ended December 31, 2007,
filed with the Securities and Exchange Commission.
Overview
Striker is a natural resource company
engaged in the exploration, acquisition, development, production and sale of
natural gas, crude oil and natural gas liquids from conventional reservoirs
within the United States. A majority of the Company’s operations are
in the states of Louisiana, Mississippi and Texas.
Property and
Equipment
Following is a description of the
properties to which the Company is participating as of June 30, 2008, or intends
to participate during fiscal 2008.
Abbeville Field – Vermillion Parish,
Louisiana
The Company has a 96.25% and 73.5%
working interest, respectively, in two producing oil wells and a saltwater
disposal well with production facilities in the Abbeville Field located in
Vermillion
Parish,
Louisiana. The two wells are currently producing approximately 27
gross barrels of oil per day.
The Company is the designated operator
of the field and has contracted with a contract operator to operate the field on
its behalf. The Company intends to perform a full reservoir
engineering analysis to determine if there are opportunities to expand
production within the field and will utilize a 3-D seismic survey it acquired in
the 2005 acquisition of an additional working interest to search for additional
exploration and/or development prospects.
North Edna Field – Jefferson Davis
Parish, Louisiana
The Company has a 35% working interest
and a 25.9% net revenue
interest
in the LeJuene
Well No. 1.
The Lejuene Well No. 1 was successfully
worked over during the reporting quarter, however the Well is currently
undergoing additional work over operations.
North Sand Hill Field – Greene County,
Mississippi
Th
is
well is producing approximately
3 gross barrels
of oil per day. In addition
to the producing well, the Company has acquired an “orphan well” from the State
of Mississippi which it intends to convert into a saltwater disposal
well. The Company has a 60% working interest and an approximate
47.55% net revenue interest. An additional proven undeveloped well
location has been identified by the Company’s independent reservoir engineer in
this field which the Company anticipates will be drilled during fiscal 2008 or
the first half of 2009.
South Creole Prospect – Cameron Parish,
Louisiana
On September 2006, the Company
entered into a farmout agreement to participate in the South Creole prospect
located in Cameron Parish, Louisiana. The South Creole prospect was
drilled to a depth of approximately 11,300 feet to test the Planulina A
sand. The Company has a 2
1
.
247
% before payout working interest and an
approximate
14.87
% net revenue interest in the
well. Electric logs indicated approximately 35 feet of pay sand in
the Planulina A sand. Production equipment was installed and the well
was tied into a pipeline and began producing to sales on May 2007. As
of the end of the reporting quarter,
t
his well
was
producing approximately
3,200 gross Mcf of gas and 40 gross barrels of condensate per
day.
North Cayuga Prospect – Henderson
County, Texas
On January 2007, the Company entered
into an agreement to participate in the North Cayuga prospect located in
Henderson County, Texas. The Easter Seals Well No. 1-R has been
drilled to a depth of approximately 9,000 feet and initially tested
approximately 50 barrels of oil per day from the Rodessa Bacon Lime sand but did
not sustain production
. The Company and its working
interest partners are attempting to farm out this acreage
.
Catfish Creek Prospect – Henderson and
Anderson Counties, Texas
In April 2007, the Company entered into
a participation agreement to participate in the Catfish Creek prospect located
in Henderson and Anderson Counties, Texas. The operator of this
prospect recently recompleted the previously drilled Catfish Creek Well No. 1
which flow tested 87 barrels of oil and 266 gross Mcf of gas per
day. Production is from the Rodessa Bacon Lime formation which is
located between 9,651 to 9,658 feet deep. The Catfish Creek prospect
consists of over 8,200 gross acres in which the Company, along with its
partners, has mineral rights to a depth of 10,600 feet, and the
right
to participate in wells below 10,600
feet. This
deep
right
is important as it
will allow the Company to test both the deeper Cotton Valley and Bossier
formations which are present throughout the acreage at depths below 10,600
feet. These formations are prolific hydrocarbon producers in other
fields in the region. The Company has a 33% before payout and 25%
after payout working interest in each
shallow
well drilled and an approximate 25%
before payout and 18.75% after payout net revenue interest in each
deep
well
drilled
.
The Company has begun
operations to install a four mile gas pipeline to connect its gas production
from its Catfish Creek Prospect.
Welsh Field – Jefferson Davis Parish,
Louisiana
Effective June 2007, the Company closed
on a transaction and acquired a 100% working interest (75% net revenue interest)
in the Welsh Field located in Jefferson Davis Parish, Louisiana from two
separate sellers. On June 2007, the Welsh Field had two wells
producing approximately 45 gross barrels of oil per day, two salt water disposal
wells and an additional ten wells which were not producing. Upon
closing of the purchase, the Company immediately began operations to repair one
saltwater disposal well and two shut-in wells which were not producing due to
mechanical problems. All work was successful and resulting production
had increased to approximately 70 gross barrels of oil per day, since then
mechanical issues with one of the salt water disposal wells has caused the
Company to shut in two production wells due to insufficient disposal
capacity. Current gross
production is 3
4
barrels
of oil per day. The Company
intends to perform well repairs and/or recomplete into new formations the
remaining seven wells. In addition to the Welsh Field, the Company
obtained additional acreage in the North, Northeast and Northwest Welsh
prospects and is evaluating two proven undeveloped well locations for possible
drilling in
2009.
West Abbeville Prospect – Vermillion
Parish, Louisiana
The Company has identified a new
prospect located in West Abbeville in Vermillion Parish, Louisiana utilizing its
previously purchased 60 square miles of 3-D seismic data it acquired with the
Abbeville Field purchase. The Company’s consulting geophysicist
utilized the seismic data to map and identify this prospect. In
addition, the Company has received satellite technology data over the area to
further delineate the prospect. The Company intends to begin
reviewing lease records to determine the availability of the leasehold acreage
in order to prepare to drill this prospect. There can be no assurance
that the Company will be successful in acquiring rights to drill this
prospect.
Lavaca
River Prospect – Lavaca County, Texas
The
Lavaca River prospect has a 10% carried working interest to casing point and the
company received a cash payment of $50,000 in connection with lowering its
carried interest from 15% to 10%. This prospect will target the Yegua sands at a
depth of approximately 5,500 feet and has expected reserves of 1 to 2 Bcf of
gas. Striker expects this well will be drilled during the second half of fiscal
2008.
Critical Accounting
Policies
General
The Unaudited Consolidated Financial
Statements and Notes to Unaudited Consolidated Financial Statements contain
information that is pertinent to this management’s discussion and
analysis. 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 any contingent assets and
liabilities. Management believes these accounting policies involve
judgment due to the sensitivity of the methods, assumptions and estimates
necessary in determining the related asset and liability
amounts. Management believes it has exercised proper judgment in
determining these estimates based on the facts and circumstances available to
its management at the time the estimates were made. The significant
accounting policies are described in more detail in Note 2 to the Company’s
audited consolidated financial statements included in its Form
10-KSB
/1A
filed with the SEC.
Oil and Gas
Properties
The Company follows the full cost method
of accounting for its oil and gas properties. Accordingly, all costs
associated with the acquisition, exploration and development of oil and gas
properties, including costs of undeveloped leasehold, geological and geophysical
expenses, dry holes, leasehold equipment and overhead charges directly related
to acquisition, exploration and development activities are
capitalized. Proceeds received from disposals are credited against
accumulated cost except when the sale represents a significant disposal of
reserves, in which case a gain or loss is recognized. The sum of net
capitalized costs and estimated future development and dismantlement costs for
each cost center is depleted on the equivalent unit-of-production method, based
on proved oil and gas reserves as determined by independent petroleum
engineers. Excluded from amounts subject to depletion are costs
associated with unevaluated properties. Natural gas and crude oil are
converted to equivalent units based upon the relative energy content, which is
six thousand cubic feet of natural gas to one barrel of crude oil. Net
capitalized costs are limited to the lower of unamortized costs net of deferred
tax or the cost center ceiling. The cost center ceiling is defined as
the sum of (i) estimated future net revenues, discounted at 10% per annum, from
proved reserves, based on unescalated year-end prices and costs, adjusted for
contract provisions and financial derivatives, if any, that hedge its oil and
gas reserves; (ii) the cost of properties not being amortized; (iii) the lower
of cost or market value of unproved properties included in the cost center being
amortized and; (iv) income tax effects related to differences between the book
and tax basis of the natural gas and crude oil properties.
Revenue Recognition
Revenue is recognized when title to the
products transfer to the purchaser. The Company follows the “sales
method” of accounting for its natural gas and crude oil revenue, so that it
recognizes sales revenue on all natural gas or crude oil sold to its purchasers,
regardless of whether the sales are proportionate to its ownership in the
property. A receivable or liability is recognized only to the extent
that it has an imbalance on a specific property greater than the expected
remaining proved reserves.
Accounting For Stock-Based
Compensation
In December 2004, the Financial
Accounting Standards Boards (“FASB”) issued SFAS No. 123 (revised
2004),
Share-Based Payment
(“SFAS
No. 123(R)”)
.
This statement requires the cost
resulting from all share-based payment transactions be recognized in the
financial statements at their fair value on the grant date. SFAS No.
123(R) was adopted by the Company on January 1, 2006. The Company
previously accounted for stock awards under the recognition and measurement
principles of APB No. 25,
Accounting for
Stock Issued to Employees
,
and related interpretations. The Company adopted SFAS No. 123(R)
using the modified prospective application method described in the
statement. Under the modified prospective application method, the
Company applied the standard to new awards and to awards modified, repurchased,
or cancelled after January 1, 2006.
Results of Operations for the
Six
Months Ended June 30,
2008 Compared to the
Six
Months Ended June 30,
2007
Revenue
For the
six
months ended June 30, 2008, the Company
generated revenue from the sale of oil and natural gas of $
2
,
635
,
661
, an increase of $
1,669,759
(2
73
%) over the prior year period amount of
$
965
,
902
. Revenue from the sale of oil was
$
1,444,464
for the 2008 period compared to
$
737,744
for the
same period in 2007.
The average price received
per barrel was $1
05
.
8
1 for the 2008 period compared to
$
56
.
20
for the 2007 period. Oil and
gas revenues are as follows:
|
June
30, 2008
|
|
June
30, 2007
|
|
|
Volume
|
Sales
|
|
Volume
|
Sales
|
Oil
(barrels)
|
13,652
|
$ 1,444,464
|
|
13,141
|
$ 738,516
|
Gas
(Mcf)
|
114,327
|
$ 1,191,197
|
|
28,400
|
$ 227,386
|
|
|
|
|
|
|
Total
|
|
$ 2,635,661
|
|
|
$ 965,902
|
Oil and Gas Production Costs and
Depletion Expense
Oil and gas production costs are
comprised of the cost of operations, maintenance and repairs and severance taxes
of the Company’s interests in its producing oil and gas
properties. Oil and gas production costs were $
756,867
for the
six
months ended June 30, 2008, compared to
$
285,134
for the
six
months ended June 30,
2007. The Company experienced an increase in lease operating expenses
of $
474,733
(
including
severance taxes) over the prior year
period. The increase was attributable to an increase in the number of
producing properties over the prior year period and well repair
expenses.
Depletion expense was $
829,349
for the
six
months ended June 30, 2008, which was
an increase of $
347,829
over the prior year period of
$
481,520
. The Company follows the
full cost method of accounting for its oil and gas properties. As the
oil and gas properties are evaluated, they are transferred to the full cost
pool, either as successful with associated oil and gas reserves, or as
unsuccessful with no oil and gas reserves.
Gross Profit (Loss)
For the
six
months ended June 30, 2008, the Company
experienced a gross profit from oil and gas operations of $
1,049,445
compared to a gross profit of
$199,248
for the
same
period
in 2007
. The Company has experienced
a significant increase in revenue due to the successful completion of the Carter
29 Well No.1, State Lease 13955 Well No. 1, Farmers Well No. 11 and Catfish
Creek Well No. 1. As discussed above, the Company experienced an
increase in oil and gas production costs due to the addition of these producing
properties, well repairs at North Edna Fields and increased severance taxes as a
result of increased revenue.
Operating Expenses
– Quarter ended June 30, 2007 and
2008
Operating expenses for the
six
months ended June 30, 2008 were
$
2,426,495
which was a
decrease
of
$92,064
when compared to the prior year period
of
$2,518,559.
The major components of
operating expenses are as follows:
·
|
Office
administration
–
Office administration expenses are comprised primarily of office rent,
office supplies, postage, telephone and communications and
Internet. Office administration increased from $
113,728
for the 2007 period to
128,762
for the 2008 period, an increase
of 1
3
%. The increase was due
to office administration expenses increase in
various maintenance and repairs
and subscriptions
expenses.
|
·
|
Payroll and
related
– Payroll and
related expenses increased from $
275,603
for the 2007 period to
$
473,231
for the 2008 period, an increase
of
72
%. Payroll expenses
increased as the Company added technical and administrative personnel to
fully implement its business plan.
The Company also
increased its employee benefits expense, which has also increased the
overall payroll expenses.
|
·
|
Investor
relations
- The
Company continued to invest in its investor relations program during the
period to inform current and potential investors of its projects and
results of operations. For the
six
months ended June 30, 2008, the
Company incurred expenses from its investor relations program of
$
669,171
compared to $
353,640
for the 2007
period. The Company intends to continue to incur these costs in
the future to keep its investors apprised of the progress of the
Company.
|
·
|
Professional
services
–
Professional services are comprised of accounting and audit fees, legal
fees, engineering fees, directors’ fees and other outside consulting
fees. Professional services increased from $
309,852
for the 2007 period to
$
431,942
for the 2008 period,
a
n increase of
39%.
|
·
|
Drilling rig
contract
– The
Company had an agreement with the operator of the St. Martinville
prospect, the second well drilled with the rig, that the operator would
pay a flat fee of $200,000 to truck the rig to the operator’s well and rig
up in preparation for drilling. The Company was obligated to
pay the excess cost which amounted to $345,414 and was charged to
expense. Additionally, pursuant to its rig sharing agreement
with a third party, the Company reimbursed the third party 50% of the cost
to move the drilling rig from the St. Martinville prospect to the third
party’s location. This resulted in a charge to expense of
$
402,464
for the period ending June 30,
2007. The Company has fulfilled its obligation pursuant to the
drilling rig contract and does not anticipate any charges in the
future.
|
·
|
Stock option
expense
– For the
six
months ended June 30, 2008, the
Company performed a Black-Scholes valuation of stock options issued to its
employees and, noting that no vesting occurred during the period, recorded
no additional expense for the period.
However, the Company recorded a
$690,900 expense after performing a Black-Scholes valuation for stock
options issued to various contractors for various
services.
For the three months ended June
30, 2007, the Company performed a Black-Scholes valuation of the stock
options issued to its CEO, CFO and COO and incurred expense for the fair
value of those options of $
492,491.
|
·
|
Depreciation
– The Company has recorded
$
25,579
of depreciation expense
associated with its computer and office equipment, furniture and fixtures
and leasehold improvements for the three months ended June 30,
2008. The Company is depreciating these assets using the
straight-line method over useful lives from three to seven
years. The Company had depreciation expense of $
22,248
during the
same
period
in
.
|
·
|
Other
operating expenses
–
Other operating expenses are comprised primarily of travel and
entertainment, geological and geophysical costs of maps, logs and log
library memberships and licenses and fees. Other operating
expenses
de
creased from $
175,865
for the 2007 period to
$
105,028
for the 2008
period.
|
Other Income
(Expense)
During the
six
months ended June 30, 2008, the Company
received interest income of
$8,884
on its interest bearing checking
accounts and certificates of deposits.
During the
six
months ended June 30, 2008, the Company
incurred interest expense of
$1,962,653
related to its convertible
debt. This compares with $
1,175,709
for the
six
months ended June 30,
2007. The increase of
$786,944
or
257%
is due to the interest and related
discount amortization of convertible notes placed in May
2007.
The Company is required to measure the
fair value of the warrants and the embedded conversion features related to its
secured convertible notes on the date of each reporting period. The
effect of this re-measurement is to adjust the carrying value of the liabilities
related to the warrants and the embedded conversion
features. Accordingly, the Company recorded
$3,108,465 expense related to the change
in FV of derivatives
during
the
six
months ended June 30, 2008
. The Company recorded
non-cash other income of $476,522 in the six months ended June 30, 2007, related
to the change in the fair market value of the warrants and embedded derivative
liability.
Net Income (Loss)
The Company recorded net
loss
for the
six
months ended June 30, 2008, of
$
6,439,283
, or $0.
31
per share (basic and diluted), and a
net loss of $
3,005,923
or $0.
15
per share (basic and diluted), for the
six
months ended June 30,
2007.
Liquidity and Capital
Resources
As of June 30, 2008, the Company has a
working capital balance of $
631,744
(excluding the derivative liability of
$
5,385,202
) and cash balances in non-restrictive
accounts of $6
28
,
883
. The Company is required to obtain
additional funding to fully implement its development drilling program at its
Catfish Creek and North Cayuga prospects and development of its Welsh Field
acquisition and to continue to seek new acquisitions and drilling
opportunities. The funding the Company will be seeking will be either
through debt and/or equity financings and there can be no assurance that the
Company will be successful in raising such financing. The failure to
raise such financing would require the Company to scale back its current
operations and possibly forego future opportunities.
Net cash generated by operating
activities for the six months ended June 30, 2008, was
$(1,082,611). The Company recorded net loss of $6,43
9
,283 which was partially increased by
non-cash charges totaling $
702,901
.
The Company’s ability to continue as a
going concern will depend on management’s ability to successfully obtain
additional forms of debt and/or equity financing to execute its drilling and
exploration program. The Company is required in the future to obtain
additional funding to fully develop its current and future projects for which it
intends to participate and there can be no assurance that the Company will be
able to obtain funding on terms acceptable to it, or at all.
The Company believes it can obtain
additional funding to execute its drilling and exploration program, but it
cannot give any assurances that it will be successful in obtaining additional
funding on terms acceptable to it, if at all. These financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
Recent Accounting
Pronouncements
In February 2007, the FASB issued FASB
Statement No. 159,
Establishing the
Fair Value Option for Financial Assets and Liabilities
("SFAS 159"), to permit all entities to
choose to elect to measure eligible financial instruments at fair
value. SFAS 159 applies to fiscal years beginning after November 15,
2007, with early adoption permitted for an entity that has also elected to apply
the provisions of SFAS 157,
Fair Value
Measurements
. An entity is
prohibited from retrospectively applying SFAS 159, unless it chooses early
adoption. Management is currently evaluating the impact of SFAS 159
on the consolidated financial statements. In March 2008, the Financial
Accounting Standards Board issued SFAS No. 161, “Disclosures about
Derivative Instruments and Hedging Activities” (“SFAS 161”), and an amendment of
FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging
Activities” (“SFAS 133”). SFAS 161 requires entities to provide qualitative
disclosures about the objectives and strategies for using derivatives,
quantitative data about the fair value of and gains and losses on derivative
contracts, and details of credit-risk-related contingent features in their
hedged positions. The standard is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008, with
early application encouraged but not required. SFAS 161 also requires entities
to disclose more information about the location and amounts of derivative
instruments in financial statements, how derivatives and related hedges are
accounted for under SFAS 133, and how the hedges affect the entity’s financial
position, financial performance, and cash flows. The Company is currently
evaluating whether the adoption of SFAS 161 will have an impact on its financial
position or results of operations.
In December 2007, the FASB issued SFAS
No. 141(R), “Business Combinations” (“SFAS 141(R)”). SFAS 141(R) replaces
SFAS 141, “Business Combinations”; however it retains the fundamental
requirements that the acquisition method of accounting be used for all business
combinations and for an acquirer to be identified for each business combination.
SFAS 141(R) requires an acquirer to recognize the assets acquired, liabilities
assumed, and any noncontrolling interest in the acquiree at the acquisition
date, be measured at their fair values as of that date, with specified limited
exceptions. Changes subsequent to that date are to be recognized in earnings,
not goodwill. Additionally, SFAS 141 (R) requires costs incurred in
connection with an acquisition be expensed as incurred. Restructuring costs, if
any, are to be recognized separately from the acquisition. The acquirer in a
business combination achieved in stages must also recognize the identifiable
assets and liabilities, as well as the noncontrolling interests in the acquiree,
at the full amounts of their fair values. SFAS 141(R) is effective for business
combinations occurring in fiscal years beginning on or after December 15,
2008. The Company will apply the requirements of SFAS 141(R) upon its adoption
on January 1, 2009 and is currently evaluating whether SFAS 141(R) will
have an impact on its financial position and results of
operations.
In February 2007, the FASB issued SFAS
No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities” (“SFAS 159”). SFAS 159 permits companies to elect to measure many
financial instruments and certain other items at fair value. Upon adoption of
SFAS 159, a company may elect the fair value option for eligible items that
exist at the adoption date. Subsequent to the initial adoption, the election of
the fair value option should only be made at initial recognition of the asset or
liability or upon a remeasurement event that gives rise to new-basis accounting.
The decision about whether to elect the fair value option is applied on an
instrument-by-instrument basis is irrevocable and is applied only to an entire
instrument and not only to specified risks, cash flows or portions of that
instrument. SFAS No. 159 does not affect any existing accounting standards
that require certain assets and liabilities to be carried at fair value nor does
it eliminate disclosure requirements included in other accounting standards.
Baseline adopted SFAS No. 159 effective January 1, 2008 and did not
elect the fair value option for any existing eligible items.
In September 2006, the FASB issued SFAS
No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS No. 157 defines
fair value, establishes a framework for measuring fair value and expands
disclosures about fair value measurements. SFAS No. 157 does not impose
fair value measurements on items not already accounted for at fair value; rather
it applies, with certain exceptions, to other accounting pronouncements that
either require or permit fair value measurements. Under SFAS No. 157, fair
value refers to the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants in
the principal or most advantageous market. The standard clarifies that fair
value should be based on the assumptions market participants would use when
pricing the asset or liability. In February 2008, the FASB issued FASB Staff
Position No. 157-2, Effective Date of FASB Statement No. 157 (“FSP FAS
157-2”), which delays the effective date of SFAS 157 for all non-financial
assets and liabilities, except those that are recognized or disclosed at fair
value in the financial statements on a recurring basis, until fiscal years
beginning after November 15, 2008. These non-financial items include assets
and liabilities such as non-financial assets and liabilities assumed in a
business combination, reporting units measured at fair value in a goodwill
impairment test and asset retirement obligations initially measured at fair
value. Effective January 1, 2008, the Company adopted SFAS 157 for fair
value measurements not delayed by FSP FAS No. 157-2. The adoption resulted
in additional disclosures as required by the pronouncement (See Note 5 – Notes
Payable) related to our fair value measurements for oil and gas derivatives and
marketable securities but no change in our fair value calculation methodologies.
Accordingly, the adoption had no impact on our financial condition or results of
operations.
Off-Balance Sheet
Arrangements
The Company does not have any
off-balance sheet arrangements.
ITEM
3.
CONTROLS AND
PROCEDURES
(a) Evaluation of disclosure controls
and procedures
The Company's management evaluated, with
the participation of its Chief Executive Officer (“CEO”) and Chief Financial
Officer (“CFO”), the effectiveness of the design/operation of its disclosure
controls and procedures (as defined in Rules 13a-15(c) and 15d-15(c) under the
Securities Exchange Act of 1934, as amended (“Exchange Act”)) as of June 30,
2008.
Disclosure controls and procedures refer
to controls and other procedures designed to ensure that information required to
be disclosed in the reports we file or submit under the Exchange Act, is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the SEC and that such information is accumulated and
communicated to our management, including our chief executive officer and chief
financial officer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating our disclosure controls and procedures,
management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and management is required to apply its judgment in
evaluating and implementing possible controls and
procedures.
Management conducted its evaluation of
disclosure controls and procedures under the supervision of our principal
executive officer and our principal financial officer. Based on that evaluation,
management concluded that our financial disclosure controls and procedures were
not effective related to the preparation of the Form 10-QSB/A filing as of June
30, 2008
In June 2008, the Company determined
that certain errors were made in the accounting for derivatives related to its
YA Global financing as follows:
The payment of principal due under the
YA Global financing during the fourth quarter of 2007 resulted in a change in
the fair value of associated derivative. The change should not have
been presented as a Gain on settlement of derivatives but included in the Change
in fair value of derivatives caption.
The discount associated with the YA
Global debt paid off in cash during the period should not have been recorded as
a reduction in Additional paid in capital, but as additional interest
expense.
The mark to market adjustment for the
derivative liability associated with the Company’s nonemployee stock options
should not have been recorded as a reduction in Additional paid in
capital. Pursuant to paragraph 9 of EITF 00-19, the adjustment should
have been reported in earnings as a Change in fair value of
derivatives.
These errors required the Company to
restate its consolidated financial statements for the year ended December 31,
2007 included in its 2007 Annual Report on Form 10-KSB and its condensed
consolidated financial statements for the three months ended March 31, 2008. The
decision to restate the consolidated financial statements was made by the
Company’s Audit Committee. The disclosure of the restatement and its
impact on the originally reported amounts is disclosed in Note 9 of the
Consolidated Financial Statements found in Part I, Item 1 of Form
10-QSB/A.
As a result of the errors noted above,
the Company identified a material weakness in internal control related to the
accounting for derivative instruments. The Company has engaged
outside accounting experts to advise it regarding the accounting for derivative
instruments to ensure accounting entries are properly recorded. The Company
believes this change to our system of disclosure and procedure controls will be
adequate to provide reasonable assurance that the information required to be
disclosed in our Exchange Act reports is recorded, processed, summarized and
reported correctly.
(b) Changes in internal control over
financial reporting
There have been no changes in internal
control over financial reporting during the three months ended June 30, 2008,
that has materially affected or is reasonably likely to materially affect the
Company’s internal control over financial reporting. As noted in 3(a)
above, we noted a material weakness in our financial disclosure controls at
March 31, 2008. We are in the process of updating our remediation process as
noted in Item 3(a).
PART
II.
OTHER INFORMATION
ITEM
1.
LEGAL PROCEEDINGS
Michael, Annette,
Christopher, and Travis Tripkovich v. Affiliated Holdings, Inc.,
No. 72217-F, 16th Judicial District
Court, St. Martin Parish, Louisiana was filed July 6, 2007, and served on
Affiliated Holdings, Inc. on July 26, 2007. The Petition alleges that
Michael Tripkovich was employed as a natural gas compression technician land
supervisor with American Warrior, when he was diagnosed with chronic myelogenous
leukemia in January of 2006. Prior to his employment with American
Warrior, Mr. Tripkovich was employed by Hanover Corporation, Energy Industries,
Fusion Plus, Inc., PMSI, Inc., and Southern Maintenance, Inc., and others for
approximately nineteen (19) years. At all of these places of
employment, his job duties included maintaining natural gas compressors at
onshore and offshore oil and gas production and collection facilities located
throughout Louisiana, Texas, Mississippi and Alabama. According to
the Petition, almost all of the sites inspected by Mr. Tripkovich housed glycol
units, which separated water from oil and which dried natural
gas.
The plaintiff contends that during the
course of his employment as a natural gas compression technician land
supervisor, he was exposed to radon, radon-emitting matter, benzene and
benzene-containing substances, including but not limited to, glycol, condensate,
toluene, xylene, natural gas, and crude oil. Specifically, he
contends that he worked at and/or near natural gas production sites and glycol
units, which emitted radon, radon-emitting matter, and benzene and
benzene-containing substances. Further, he alleges that he became
overwhelmed by radon and/or benzene fumes and was forced to inhale toxic fumes
emitted from the glycol units on a daily basis. In fact, the
plaintiff provides an extensive list of the glycol units on which he worked,
including serial number and location, one of which he contends was owned by
Affiliated Holdings, Inc. in Abbeville, Louisiana.
Mr. Tripkovich, his wife, and children
are suing for past, present, and future medical bills; past, present and future
physical pain and suffering; mental anguish and distress; past, present, and
future lost wages and loss of earning capacity; loss of enjoyment of life;
possibility and fear of death; loss of consortium and punitive
damages.
At the present time, the Company is
filing a formal motion for extension of time to file responsive
pleadings. The Company anticipates responding to the Petition by
filing Exceptions on a number of bases, including the dilatory exception
vagueness and ambiguity of the Petition, the peremptory exception of
prescription, and the peremptory exception of no cause of action on the issue of
punitive damages (or one that will seek to limit the time frame during which
punitive damages were available), among others. Additionally, the
Company will file a Motion for Summary Judgment on the basis that the
plaintiff’s sole remedy against Affiliated Holdings, Inc. is worker’s
compensation, if the appropriate facts are elicited during the Company’s
investigation of this matter. The Company was one of 113 companies
identified in the suit.
ITEM
2.
UNREGISTERED SALES OF EQUITY SECURITIES
AND USE OF PROCEEDS
|
Recent Sales of Unregistered
Securities
|
None.
ITEM
3.
EXHIBITS
Exhibit No.
|
Description
|
|
|
|
|
3.1
|
Articles of Incorporation of
Registrant, filed as an exhibit to the registration statement on Form S-2,
filed with the Securities and Exchange Commission on October 13, 1981 and
incorporated herein by reference.
|
|
|
3.2
|
Certificate of Amendment to
Articles of Incorporation of Registrant, filed as an exhibit to the annual
report on Form 10-KSB, filed with the Securities and Exchange Commission
on March 6, 1998 and incorporated herein by
reference.
|
|
|
3.3
|
Bylaws, as amended, filed as an
exhibit to the annual report on Form 10-KSB, filed with the Securities and
Exchange Commission on March 6, 1998 and incorporated herein by
reference.
|
|
|
4.1
|
Securities Purchase Agreement,
dated May 17, 2007, by and between Unicorp, Inc. and Cornell Capital
Partners L.P., filed as an exhibit to the Current Report on Form 8-K,
filed with the Commission on May 21, 2007 and incorporated herein by
reference.
|
|
|
4.2
|
Secured Convertible Debenture
issued to Cornell Capital Partners L.P., dated May 17, 2007, filed as an
exhibit to the Current Report on Form 8-K, filed with the Commission on
May 21, 2007 and incorporated herein by
reference.
|
|
|
4.3
|
Registration Rights Agreement,
dated May 17, 2007, by and between Unicorp, Inc. and Cornell Capital
Partners L.P., filed as an exhibit to the Current Report on Form 8-K,
filed with the Commission on May 21, 2007 and incorporated herein by
reference.
|
|
|
4.4
|
Form of Warrant, dated May 17,
2007, issued by Unicorp, Inc. to Cornell Capital Partners L.P., filed as
an exhibit to the Current Report on Form 8-K, filed with the Commission on
May 21, 2007 and incorporated herein by
reference.
|
|
|
4.5
|
Security Agreement, dated May 17,
2007, by and between Unicorp, Inc. and Cornell Capital Partners L.P.,
filed as an exhibit to the Current Report on Form 8-K, filed with the
Commission on May 21, 2007 and incorporated herein by
reference.
|
|
|
|
|
10.1
|
Agreement and Plan of
Reorganization dated December 15, 1997 by and between Unicorp, Inc., The
Laissez-Faire Group, Inc., and L. Mychal Jefferson II with respect to the
exchange of all of the shares owned by L. Mychal Jefferson II in The
Laissez-Faire Group, Inc. for an amount of shares of Unicorp, Inc. equal
to 94 percent of the issued and outstanding shares of its capital stock,
filed as an exhibit to the current report on Form 8-K, filed with the
Securities and Exchange Commission on February 18, 1998 and incorporated
herein by reference.
|
|
|
10.2
|
Agreement of Purchase and Sale of
Assets effective as of January 1, 1998 by and between Unicorp, Inc. and
Equitable Assets Incorporated with respect to purchase of 58,285.71 tons
of Zeolite, filed as an exhibit to the current report on Form 8-K, filed
with the Securities and Exchange Commission on April 9, 1998 and
incorporated herein by reference.
|
|
|
10.3
|
Option to Acquire the Outstanding
Stock of Whitsitt Oil Company, Inc. effective as of January 1, 1998 by and
between Unicorp, Inc. and AZ Capital, Inc., filed as an exhibit to the
current report on Form 8-K, filed with the Securities and Exchange
Commission on April 9, 1998 and incorporated herein by
reference.
|
|
|
10.4
|
Agreement and Plan of
Reorganization dated March 1, 1999 by and between Unicorp, Inc., The Auto
Axzpt.com Group, Inc. and R. Noel Rodriguez with respect to the exchange
of all of ‘the shares owned by the shareholders in The Auto Axzpt.com,
Inc. for shares of Unicorp, Inc., filed as an exhibit to the current
report on Form 8-K, filed with the Securities and Exchange Commission on
April 7, 1999 and incorporated herein by
reference.
|
|
|
10.5
|
Agreement dated as of March 23,
2001, between Unicorp, Inc., Equitable Assets, Incorporated, Texas Nevada
Oil & Gas Co. and Opportunity Acquisition Company, filed as an exhibit
to the quarterly report on Form 10-QSB, filed with the Securities and
Exchange Commission on April 16, 2002 and incorporated herein by
reference.
|
|
|
10.6
|
July 31, 2001 First Amendment of
Agreement dated March 23, 2001, between Unicorp, Inc., Equitable Assets,
Incorporated, Texas Nevada Oil & Gas Co. and Houston American Energy
Corp., filed as an exhibit to the quarterly report on Form 10-QSB, filed
with the Securities and Exchange Commission on April 16, 2002 and
incorporated herein by reference.
|
|
|
10.7
|
Exchange Agreement dated July 29,
2004, between Unicorp, Inc. and Affiliated Holdings, Inc., filed as an
exhibit to the quarterly report on Form 10-QSB, filed with the Securities
and Exchange Commission on August 5, 2004 and incorporated herein by
reference.
|
|
|
10.8
|
2004 Stock Option Plan, filed as
an exhibit to the definitive information statement on Schedule 14C, filed
with the Securities and Exchange Commission on September 1, 2004 and
incorporated herein by reference.
|
|
|
10.9
|
Employment Agreement with Kevan
Casey, filed as an exhibit to the current report on Form 8-K, filed with
the Securities and Exchange Commission on January 26, 2007 and
incorporated herein by reference.
|
|
|
10.10
|
Employment Agreement with Carl A.
Chase, filed as an exhibit to the current report on Form 8-K, filed with
the Securities and Exchange Commission on January 26, 2007 and
incorporated herein by reference.
|
|
|
10.11
|
Standby Equity Agreement dated as
of February 3, 2006, by and between Unicorp, Inc. and Cornell Capital
Partners, L.P., filed as an exhibit to the registration statement on Form
SB-2, filed with the Securities and Exchange Commission on November 16,
2005 and incorporated herein by reference.
|
|
|
10.12
|
Registration Rights Agreement
dated as of February 3, 2006, by and between Unicorp, Inc. and Cornell
Capital Partners, LP, filed as an exhibit to the registration statement on
Form SB-2, filed with the Securities and Exchange Commission on November
16, 2005 and incorporated herein by reference.
|
|
|
10.13
|
Assignment and Bill of Sale
effective June 1, 2005 between Affiliated Holdings, Inc. and Jordan Oil
Company, Inc., filed as an exhibit to the registration statement on Form
SB-2, filed with the Securities and Exchange Commission on November 16,
2005 and incorporated herein by reference.
|
|
|
10.14
|
Assignment and Bill of Sale
effective August 1, 2005 between Affiliated Holdings, Inc. and Walter
Johnson, filed as an exhibit to the registration statement on Form SB-2,
filed with the Securities and Exchange Commission on November 16, 2005 and
incorporated herein by reference.
|
|
|
10.15
|
Participation Letter Agreement
dated June 2, 2005 between Affiliated Holdings, Inc. and Jordan Oil
Company, Inc., filed as an exhibit to the registration statement on Form
SB-2, filed with the Securities and Exchange Commission on November 16,
2005 and incorporated herein by reference.
|
|
|
10.16
|
Participation Letter Agreement
dated July 21, 2005 between Affiliated Holdings, Inc. and Jordan Oil
Company, Inc., filed as an exhibit to the registration statement on Form
SB-2, filed with the Securities and Exchange Commission on November 16,
2005 and incorporated herein by reference.
|
|
|
10.17
|
Farmout Agreement dated April 12,
2005 between Affiliated Holdings, Inc. and La Mesa Partners, L.C, filed as
an exhibit to the registration statement on Form SB-2, filed with the
Securities and Exchange Commission on November 16, 2005 and incorporated
herein by reference.
|
|
|
14.1
|
Code of Ethics, filed as an
exhibit to the annual report on Form 10-KSB, filed with the Securities and
Exchange Commission on April 15, 2005 and incorporated herein by
reference.
|
|
|
21.1
|
List of subsidiaries, filed as an
exhibit to the quarterly report on Form 10-QSB, filed with the Securities
and Exchange Commission on November 22, 2004 and incorporated herein by
reference.
|
31.1
|
Certification of Kevan
Casey
|
31.2
|
Certification of Steven M.
Plumb
|
32.1
|
Certification for Sarbanes-Oxley
Act of Kevan Casey
|
32.2
|
Certification for Sarbanes-Oxley
Act of Steven Plumb
|
* Indicates management contract or
compensatory plan or arrangement.
SIGNATURES
In accordance with the requirements of
the Exchange Act, the registrant caused this report to be signed on its behalf
by the undersigned, thereto duly authorized.
Signature
Title
Date
/s/ Kevan
Casey
Chief Executive Officer and
Director
August 19, 2008
Kevan Casey
/s/ Steven M.
Plumb
Chief Financial and Accounting Officer
and
Director
August 19, 2008
Steven M. Plumb
EXHIBIT
31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, Kevan Casey, Chief Executive Officer
of Striker Oil and Gas, Inc. (the “Company”), certify that:
1.
|
I have reviewed this quarterly
report on Form 10-QSB of the Company for the quarterly period ended June
30, 2008;
|
2.
|
Based on my knowledge, this 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
report;
|
3.
|
Based on my knowledge, the
financial statements, and other financial information included in this
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
report;
|
4.
|
The registrant’s other certifying
officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the registrant and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) and
have:
|
a.
|
Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, 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 report is being
prepared;
|
b.
|
Designed such internal control
over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance
with generally accepted accounting
principles;
|
c.
|
Designed such internal control
over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance
with generally accepted accounting
principles;
|
d.
|
Evaluated the effectiveness of the
registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based
on such evaluation; and
|
e.
|
Disclosed in this report any
change in the registrant’s internal control over financial reporting that
occurred during the registrant’s fiscal quarter ended
June 30, 2008
that has materially affected, or
is reasonably likely to materially affect, the registrant’s internal
control over financial reporting;
and
|
5.
|
The registrant’s other certifying
officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, 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 and
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
registrant’s ability to record, process, summarize and report financial
information; and
|
b.
|
Any fraud, whether or not
material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial
reporting.
|
Date:
August 20,
2008
Signature:
/s/ Kevan Casey
Name:
Kevan Casey
Title:
Chief Executive
Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I,
Steven M. Plumb
, Chief
Financial
Officer of Striker Oil and Gas, Inc.
(the “Company”), certify that:
6.
|
I have reviewed this quarterly
report on Form 10-QSB of the Company for the quarterly period ended June
30, 2008;
|
7.
|
Based on my knowledge, this 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
report;
|
8.
|
Based on my knowledge, the
financial statements, and other financial information included in this
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
report;
|
9.
|
The registrant’s other certifying
officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the registrant and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) and
have:
|
a.
|
Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, 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 report is being
prepared;
|
b.
|
Designed such internal control
over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance
with generally accepted accounting
principles;
|
c.
|
Designed such internal control
over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance
with generally accepted accounting
principles;
|
d.
|
Evaluated the effectiveness of the
registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based
on such evaluation; and
|
e.
|
Disclosed in this report any
change in the registrant’s internal control over financial reporting that
occurred during the registrant’s fiscal quarter ended
June 30, 2008
that has materially affected, or
is reasonably likely to materially affect, the registrant’s internal
control over financial reporting;
and
|
10.
|
The registrant’s other certifying
officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, 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 and
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
registrant’s ability to record, process, summarize and report financial
information; and
|
b.
|
Any fraud, whether or not
material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial
reporting.
|
Date:
August 20,
2008
Signature:
/s/ Steven M. Plumb
Name:
Steven M. Plumb
Title:
Chief Financial
Officer
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
The undersigned, the Chief Executive
Officer of Striker Oil and Gas, Inc. (the “Company”), does hereby certify under
the standards set forth and solely for the purposes of 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the
Quarterly Report on Form 10-QSB of the Company for the quarterly period ended
June 30, 2008 fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 and information contained in that
Form 10-QSB fairly presents, in all material respects, the financial condition
and results of operations of the Company.
Date:
August 20,
2008
Signature:
/s/ Kevan Casey
Name:
Kevan Casey
Title:
Chief Executive
Officer
A signed original of this written
statement required by Section 906 has been provided to the Company and will
be retained by the Company and furnished to the Securities and Exchange
Commission or its staff upon request.
EXHIBIT 32.2
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
The undersigned, the Chief Financial
Officer of Striker Oil and Gas, Inc. (the “Company”), does hereby certify under
the standards set forth and solely for the purposes of 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the
Quarterly Report on Form
10-QSB
of the Company for
the quarterly period ended June 30, 2008 fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and
information contained in that Form 10-QSB fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
Date:
August 20,
2008
Signature:
/s/ Steven M. Plumb
Name:
Steven M. Plumb
Title:
Chief Financial
Officer
A signed original of this written
statement required by Section 906 has been provided to the Company and will
be retained by the Company and furnished to the Securities and Exchange
Commission or its staff upon request.
STRIKER OIL & GAS, INC. AND
SUBSIDIARIES
Notes to Unaudited Consolidated
Financial Statements
June 30, 2008