SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
x
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
quarterly period ended
December
31, 2008
o
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
transition period from ________ to ________
COMMISSION
FILE NUMBER
000-52565
BALD
EAGLE ENERGY INC.
(Exact
name of registrant as specified in its charter)
|
NEVADA
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72-1619354
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|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
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21
Waterway Avenue, Suite 300
The
Woodlands, TX 77380
(Address
of principal executive offices)
(281)
362-2821
(Registrant’s
telephone number, including area code)
Not
Applicable
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes
x
No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
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
o
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Accelerated
filer
o
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Non-accelerated
filer
o
(Do
not check if a smaller reporting company)
|
Smaller
reporting company
þ
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes
o
No
x
Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: As of February 17, 2009, the issuer
had 72,960,267 shares of common stock outstanding.
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BALD
EAGLE ENERGY INC.
(An
Exploration Stage Company)
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(Unaudited)
December 31, 2008
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September 30, 2008
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ASSETS
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Current
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Cash
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$
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4,460
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$
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47,170
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Prepaid
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6,045
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—
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Total
current assets
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10,505
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47,170
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Oil & gas
rights
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621,608
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621,608
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Total
Assets
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$
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632,113
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$
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668,778
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LIABILITIES
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Current
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Accounts payable
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$
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341,583
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$
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234,994
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Loan payable – related
party
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—
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5,784
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Accrued
liabilities
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17,998
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9,027
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Total
current liabilities
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359,581
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249,805
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Total
Liabilities
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359,581
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249,805
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STOCKHOLDER'S
EQUITY
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Capital
Stock
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Authorized:
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400,000,000 common voting
stock, $0.001 par value
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100,000,000 preferred stock,
$0.001 par value
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Issued and
outstanding:
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72,960,267 and 71,898,600
common shares, respectively
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72,961
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71,899
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Additional
paid-in-capital
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1,198,710
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1,059,772
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Deficit
accumulated during the exploration stage
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(999,139
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)
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(712,698
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)
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Total
Stockholders’ Equity
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272,532
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418,973
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Total
Liabilities and Stockholders’ Equity
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$
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632,113
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$
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668,778
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The
accompanying notes form an integral part of these financial
statements.
BALD
EAGLE ENERGY INC.
(An
Exploration Stage Company)
For the
three months ended December 31, 2008 and 2007 and for the period
October
12, 2005 (Inception) to December 31, 2008
(Unaudited)
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Three
months ended
December 31, 2008
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Three
months ended
December 31, 2007
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October
12, 2005 (Inception) to
December 31, 2008
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Expenses
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General
and administrative
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$
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286,441
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$
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9,942
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$
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981,940
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Mineral
property acquisition
and
exploration costs
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—
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—
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17,199
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Net
loss
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$
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286,441
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$
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9,942
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$
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999,139
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Basic
loss per share
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$
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(0.00
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)
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$
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(0.00
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Weighted
average number of common shares outstanding
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72,292,115
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130,068,600
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The
accompanying notes form an integral part of these financial
statements.
BALD
EAGLE ENERGY INC.
(An
Exploration Stage Company)
For the
three months ended December 31, 2008 and 2007 and for the period
October
12, 2005 (Inception) to December 31, 2008
(Unaudited)
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Three
months ended
December 31, 2008
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Three
months ended
December 31, 2007
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October
12, 2005 (Inception) to
December 31, 2008
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Cash
provided by (used in)
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Operating
Activities:
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Net
loss
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$
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(286,441
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)
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$
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(9,942
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)
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$
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(999,139
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Add:
Impairment of mineral property
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—
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—
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9,699
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Change
in operating assets and liabilities:
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Prepaid expense
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(6,045
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(3,000
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(6,045
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Accounts payable and accrued
liabilities
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106,589
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(1,480
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341,583
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Accrued
liabilities
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8,971
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—
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17,998
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Cash
used in operating activities
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(176,926
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(14,422
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(635,904
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Investing
Activities:
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Mineral
property acquisition and exploration costs
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—
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—
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(9,699
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Lease
acquisitions
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—
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—
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(621,608
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)
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Cash
used in investing activities
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—
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—
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(631,307
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Financing
Activities:
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Payments
on loan payable – related party
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(5,784
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—
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Issuance
of common stock for cash
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140,000
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—
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1,271,671
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Cash
provided by financing activities
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134,216
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—
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1,271,671
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Net
increase (decrease) in cash
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(42,710
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)
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(14,422
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4,460
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Cash,
beginning of the period
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47,170
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14,504
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—
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Cash,
end of the period
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$
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4,460
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$
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82
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$
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4,460
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The
accompanying notes form an integral part of these financial
statements.
BALD
EAGLE ENERGY INC.
(An
Exploration Stage Company)
December
31, 2008
(Unaudited)
|
Note
1
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Interim
Reporting and Continuance of
Operations
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While the
information presented in the accompanying interim three month financial
statements is unaudited, it includes all adjustments which are, in the opinion
of management, necessary to present fairly the financial position, result of
operations and cash flows for the interim periods presented. In the opinion of
management, all adjustments considered necessary for a fair presentation of the
results of operations and financial position have been included and all such
adjustments are of a normal recurring nature. It is suggested that these
financial statements be read in conjunction with the Company’s September 30,
2008 annual financial statements.
Operating
results for the three-month period ended December 31, 2008 are not necessarily
indicative of the results that can be expected for the year ending September 30,
2009.
The
interim financial statements have been prepared in accordance with generally
accepted accounting principles applicable to a going concern, which assumes that
the Company will be able to meet its obligations and continue its operations for
its next twelve months. Realization values may be substantially different from
carrying values as shown and these financial statements do not give effect to
adjustments that would be necessary to the carrying values and classification of
assets and liabilities should the Company be unable to continue as a going
concern. However, at December 31, 2008, the Company had not yet
achieved profitable operations, had accumulated losses of $999,139 since its
inception and expected to incur further losses in the development of its
business, all of which raises substantial doubt about the Company’s ability to
continue as a going concern. The Company’s ability to continue as a going
concern is dependent upon its ability to generate future profitable operations
and/or to obtain the necessary financing to meet its obligations and repay its
liabilities arising from normal business operations when they come due.
Management has no formal plan in place to address this concern but believes that
the Company will be able to obtain additional funds through additional private
equity financing and/or related party advances; however, there is no assurance
that additional funding will be available.
|
Note
2
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Alaska
North Slope leases
|
On April
18, 2008, the Company entered into an agreement for the exclusive oil and gas
rights under certain leases in the State of Alaska. The total consideration was
$621,608, which was payable in stages beginning with an initial
payment on April 18, 2008. The lease assignments were exchanged on September 29,
2008, at which time the transaction was deemed to be closed. Upon
closing of the purchase agreement, the Company has been assigned the rights to a
100% working interest (representing a net revenue interest of 78.33%) under six
(6) separate oil and gas leases (the “North Slope Leases”) located in the State
of Alaska’s North Slope hydrocarbon province, which include the exclusive right
to drill for, extract, remove, process and dispose of oil and natural gas and
associated substances. The parcels subject to the North Slope Leases
acquired by the Company constitute an aggregate total of 18,418
acres. The initial primary term of each Lease begins on February 1,
2007 and expires on January 31, 2012, unless it is extended for production or as
otherwise provided under the terms of the Lease. The Company is still in the
process of completing the final actions related to the transfer of the North
Slope Leases by the State of Alaska, as discussed further below.
BALD
EAGLE ENERGY INC.
(An
Exploration Stage Company)
NOTES TO
THE INTERIM FINANCIAL STATEMENTS
December
31, 2008
(Unaudited)
As part
of the transfer, the sellers (Samuel H. Cade and Daniel K. Donkel) reserved an
overriding royalty interest equal to 5% of 8/8ths, in addition to the 16.67%
royalty interest reserved by the State of Alaska, which will apply to all
renewals and extensions of the North Slope Leases. The application
for assignment of the North Slope Leases to the Company was completed and
submitted to the State of Alaska Department of Natural Resources on November 14,
2008.
Our local
representatives in Alaska have been working closely with that state’s Department
of Natural Resources in order to complete the transfers of the North Slope
Leases since the November 14 closing. We were previously told that
our transfer application was effective and had been completed; however, on
January 29, 2009 we received a request from Alaska’s Department of Natural
Resources for detailed information regarding Bald Eagle’s ability to explore and
develop the North Slope Leases. Our local representatives have
continued working with the state on satisfying any requests for additional
information, which we understand is not unusual for the state to request from
companies that have not previously owned leasehold interests in the state, such
as our company. We believe that we have provided all the information
requested by the state, and that this process is primarily ministerial in nature
and will not adversely impact our ownership and development of the North Slope
Leases. We hope to complete the state’s review process within the
next quarter. In the meantime, Bald Eagle has paid the first annual
rental fees due under the North Slope Leases to the State of Alaska, which
provided Bald Eagle receipts for same in the first week of February, and we are
continuing our plans to raise capital to develop the North Slope
Leases.
The
Company must pay annual rental to the State of Alaska in accordance with the
following rental schedule:
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•
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for
the first year, $1.00 per acre or fraction of an acre, which results in
aggregate annual rent of $18,418;
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•
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for
the second year, $1.50 per acre or fraction of an acre, which results in
aggregate annual rent of $27,627;
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•
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for
the third year, $2.00 per acre or fraction of an acre, which results in
aggregate annual rent of $36,836;
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•
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for
the fourth year, $2.50 per acre or fraction of an acre, which results in
aggregate annual rent of $46,045;
and
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•
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for
the fifth year and following years, $3.00 per acre or fraction of an acre,
which results in aggregate annual rent of
$55,254.
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Consequently,
the Company will incur significant expenses regardless of our success in
exploring for oil and gas on these leases. The State of Alaska may
increase the annual rental rate as provided by law if the North Slope Leases are
extended beyond the primary term.
BALD
EAGLE ENERGY INC.
(An
Exploration Stage Company)
NOTES TO
THE INTERIM FINANCIAL STATEMENTS
December
31, 2008
(Unaudited)
On
November 12, 2008, the Company issued 280,000 common shares at $0.25, along with
warrants for the purchase of 280,000 shares of common stock at an exercise price
of $0.45 each, exercisable at any time and which expire November 12, 2011, to
one non-affiliated non-U.S. person for total proceeds of $70,000.
On
December 3, 2008, the Company issued 466,667 common shares at $0.15, along with
warrants for the purchase of 466,667 shares of common stock at an exercise price
of $0.30 each, exercisable at any time and which expire December 3, 2011, to one
non-affiliated non-U.S. person for total proceeds of $70,000.
In the
first quarter of fiscal 2009, the Company caused its transfer agent to issue and
deliver certificates for 315,000 shares related to financings completed in
fiscal 2008 (September 29, 2008 and August 12, 2008). Although the Company
completed those transactions in fiscal 2008, due to an administrative error the
certificates were not issued and the shares were not included in the transfer
agent's final tally for the year ended September 30, 2008. The shares and
related warrants are being treated for legal purposes as being issued on the
respective closing dates of August 12, 2008 (115,000) and September 29, 2008
(200,000), in accordance with the relevant subscription documents.
There were 2,891,667 warrants outstanding and exercisable as of
December 31, 2008. These warrants had exercise prices ranging from $0.35 to
$1.00 per share, and an average remaining life of approximately 2.5 years.
A
consultant to the Company advanced $59,935 in prior periods, which has been paid
in full as of December 31, 2008.
|
Note
5
|
Contractual
Obligations
|
Rental of
the Company’s premises in The Woodlands, Texas is $2,500 per month pursuant to a
Services Agreement, which expires October 31, 2009. The Company rents a virtual
office at 2911 Turtle Creek Boulevard, Suite 300, Dallas, Texas, on a
month-to-month basis pursuant to an Office and Services Agreement that expires
March 31, 2009, at a cost of approximately $238 per
month. Additionally, the Company rents a virtual office in Anchorage,
Alaska on a month-to-month term, at a cost of approximately $224 per
month
On
January 29, 2009, the Company subscribed 500,000 common shares at $0.10, along
with warrants for the purchase of 500,000 shares of common stock at an exercise
price of $0.17 each, exercisable at any time and which expire January 29, 2012,
to one non-affiliated non-U.S. person for total proceeds of
$50,000.
Cautionary
Statement Regarding Forward-Looking Statements
Certain
statements contained in this Quarterly Report on Form 10-Q constitute
“forward-looking statements”. These statements, identified by words such as
“plan,” “anticipate,” “believe,” “estimate,” “should,” “expect” and similar
expressions include our expectations and objectives regarding our future
financial position, operating results and business strategy. These statements
reflect the current views of management with respect to future events and are
subject to risks, uncertainties and other factors that may cause our actual
results, performance or achievements, or industry results, to be materially
different from those described in the forward-looking statements. Such risks and
uncertainties include those set forth under the caption “Risk Factors” and
elsewhere in this Quarterly Report on Form 10-Q. We advise you to carefully
review the reports and documents we file from time to time with the United
States Securities and Exchange Commission (the “SEC”), particularly our periodic
reports filed with the SEC pursuant to the Securities Exchange Act of 1934 (the
“Exchange Act”).
As used
in this Quarterly Report, the terms “we,” “us,” “our,” “Bald Eagle” and “the
Company” mean Bald Eagle Energy Inc. and its subsidiaries unless otherwise
indicated. All dollar amounts in this Quarterly Report are in U.S. dollars
unless otherwise stated.
OVERVIEW
Our
company was incorporated under the laws of the state of Nevada on October 12,
2005 under the name "Columbus Ventures Inc." We amended our Articles
of Incorporation to change our name as of July 21, 2008 to "Bald Eagle Energy
Inc." in order to more accurately reflect our current principal business
activities, which are the acquisition, exploration and development of oil and
natural gas properties and prospects.
North
Slope Leases
We are an
exploration stage company engaged in the acquisition, exploration and
development of oil and natural gas properties and prospects. We
recently acquired the rights to a 100% working interest (representing a net
revenue interest of 78.33%) on an aggregate 18,418 acres located within the
State of Alaska's North Slope hydrocarbon province under six (6) separate leases
(the "North Slope Leases"). We acquired our interest in the North
Slope Leases under the terms of a purchase agreement we entered into on April
18, 2008 (the "Purchase Agreement"). We closed the purchase and sale
of the North Slope Leases on September 29, 2008; however, we are still in the
process of providing information to the states’ Department of Natural Resources
in order to complete the process of transferring title to the North Slope
Leases. We anticipate the State of Alaska completing its inquiry and
effecting the transfers within the next quarter.
See Note 2 to the Interim Financial
Statements.
The North
Slope Leases give the lessee the exclusive right to drill for, extract, remove,
process and dispose of oil and natural gas and associated substances in the
geographic areas covered by these leases, subject to their terms. The
initial primary term of each North Slope Lease begins on February 1, 2007 and
expires on January 31, 2012, unless it is extended for production or as
otherwise provided under the terms of that lease.
The
Company plans to act as a non-operator, which means the Company will not
directly engage in exploration, drilling or development operations, but instead
will exploit the Company's assets by seeking joint ventures with oil and natural
gas companies that have exploration, development and production
expertise.
We have
not earned any revenues to date. We are presently in the exploration
stage of our business and we can provide no assurance that we will discover
commercially exploitable levels of oil and natural gas resources on the North
Slope Leases or any other properties we may acquire, or if such deposits are
discovered, that we will enter into further substantial exploration
programs.
Plan
of Operation
Our plan
of operation for the next twelve months is to fully evaluate the
exploration potential of the six North Slope Leases in the Alaska North Slope
petroleum province and to plan and prepare for the first exploration field
operations on those leases, which would be new seismic data acquisition during
the winter season of 2010. In addition, we plan to evaluate further
new exploration opportunities in Alaska, focusing in the North Slope
area.
We
changed the Company's focus to oil and gas explorations and began the process of
acquiring the Alaska North Slope Leases on April 18, 2008 and, due to our
investments in this effort, we have experienced losses since that time. As at
December 31, 2008, we have a working capital deficit of
$349,076. During the fiscal quarter ended December 31, 2008, we
completed two separate financings in which an aggregate 746,667 shares and
warrants for an equal number of shares were sold for proceeds of
$140,000.
We
currently do not have sufficient funds to execute our plan of operation for the
next twelve months and we will therefore require additional funds. We have
relied principally on the issuance of common stock by private placements to
raise funds to finance our business. There is no assurance that
market conditions will continue to permit us to raise funds when
required. If possible, we will issue more common stock at prices we
find to be acceptable, which may dilute the value of our common
stock.
Our
business model is to utilize the services of oil industry expert consultants,
and we do not expect any significant increases in the number of employees in the
near future.
We are an
exploration stage company with limited operations and have not yet received
revenues from operations, generated profitability or experienced positive cash
flow from operations. We currently have no properties with any known
deposits of oil or gas. Andrew S. Harper, our Chief Executive Officer
and President, has extensive experience in the oil and gas industry with
specific industry experience in exploration operations and new ventures
evaluation.
If we are
successful in securing further exploration interests in Alaska leases, we will
be obliged to pay rentals and complete work programs to maintain our interests
in good standing. There can be no certainty as to the costs of future
lease acquisitions and exploration work programs; however, we will require
additional funds to discharge our obligations and exploration work programs
whether the interests are acquired through joint venture or through competitive
lease sales. We do not have sufficient capital to satisfy potential
future exploration expenditures and we will rely principally on the issuance of
common stock to raise funds to finance the expenditures that we expect to incur
should we secure exploration interests. Failure to raise additional
funds will result in the failure to meet our obligations and the relinquishment
of our interest in any future leases acquired. We have relied
principally on the issuance of common stock in private placements to raise funds
to support our business but there can be no assurance that we will be successful
in raising additional funds through the issuance of additional
equity.
We do not
expect any significant purchases of plants and equipment or any increase in the
number of employees in the near future.
RISK
FACTORS
If
we do not obtain additional financing, our business will fail.
Our
operating funds are not sufficient to meet the anticipated costs of completing
our exploration program on the North Slope Leases. Therefore, we will need
to obtain additional financing in order to complete our full business
plan. As of December 31, 2008, we had cash on hand in the amount of
$4,460. We have not earned any income since our inception. Our plan of
operation calls for significant expenses in connection with the exploration of
our oil and natural gas leases.
We
currently do not have any arrangements for financing and we may not be able to
obtain financing when required. Obtaining additional financing would be subject
to a number of factors outside of our control, including the results from our
exploration program, and any unanticipated problems relating to our oil and
natural gas exploration activities, including environmental assessments and
additional costs and expenses that may exceed our current estimates. These
factors may make the timing, amount, terms or conditions of additional financing
unavailable to us, in which case our business will fail.
We
anticipate that we will incur the following expenses over the next twelve
months:
|
Category
|
|
Planned
Expenditures Over
The
Next 12 Months (US $)
|
|
|
General
& Administrative
|
|
$
|
530,000
|
|
|
Geological
& Geophysical
|
|
$
|
2,492,688
|
|
|
TOTAL
|
|
$
|
3,022,688
|
|
If our
forecast regarding anticipated expenses is inaccurate, we may need to raise
additional funds beyond what we have forecasted. There can be no
assurance that additional financing will be available when needed on favorable
terms, or at all.
We
have yet to earn revenue and our ability to sustain our operations is dependent
on our ability to raise financing. As a result, our accountants
believe there is substantial doubt about our ability to continue as a going
concern.
We have
accrued net losses of $999,139 for the period from our inception on October 12,
2005 to December 31, 2008, and have no revenues to date. Our future is
dependent upon our ability to obtain financing and upon future profitable
operations from the development of oil and natural gas leases.
These
factors raise substantial doubt that we will be able to continue as a going
concern. LBB & Associates Ltd., LLP, Certified Public Accountants, our
independent auditors, have expressed substantial doubt about our ability to
continue as a going concern. This opinion could materially limit our
ability to raise additional funds by issuing new debt or equity securities or
otherwise. If we fail to raise sufficient capital when needed, we
will not be able to complete our business plan. As a result we may
have to liquidate our business and investors may lose their investment.
Investors should consider our auditor's comments when determining if an
investment in Bald Eagle is suitable.
Our
only assets consist of our rights in the North Slope Leases, and the success of
our business depends solely on our ability to commercially develop our interests
in the North Slope Leases. If we lose our interests in the North
Slope Leases or are unable to develop those interests to a sufficient degree,
our business may fail.
Currently,
our principal assets consist of our rights to the North Slope Leases, and we
have allocated substantially all of our available working capital to the
acquisition of those rights under the purchase agreement we entered into in
April 2008. Because we have no other source of revenues at this time,
our ability to generate revenues depends entirely on our successful development
of the North Slope Leases. If we are unable to explore and develop
those properties in commercial quantities, or if our interests in those leases
are
revoked or limited in any significant way,
then our business is likely to
fail.
On
January 29, 2009 we received a request from Alaska’s Department of Natural
Resources for detailed information regarding Bald Eagle’s ability to explore and
develop the North Slope Leases. Although we have completed the
acquisition of the North Slope Leases under the related purchase agreement, the
State of Alaska has the power to invalidate the transfer of the North Slope
Leases to the Company, if it is not satisfied with the information provided
during this recent inquiry. We believe that the state has been
provided sufficient information to satisfy its request and that the review by
the state will not adversely impact the Company’s ownership and development of
the North Slope Leases. However, if the state were to revoke the
transfer of the North Slope Leases or in any other manner limit the Company’s
ability to explore or develop those properties, then it would have a material
adverse impact on the Company and the Company’s stockholders could lose the
value of their investment in the Company. In addition, the Company is
required to make annual rental payments in order to maintain the effectiveness
of the North Slope Leases. If the Company is unable to generate
sufficient funds through operations or future investments to make those minimum
rental payments, then it could lose its interest in some or all of the North
Slope Leases, which could have a material adverse impact on the Company and the
Company’s stockholders could lose the value of their investment in the
Company.
Because
of the unique difficulties and uncertainties inherent in oil and natural gas
exploration ventures, we face a high risk of business failure.
Investors
should be aware of the difficulties normally encountered by new oil and natural
gas exploration companies and the high rate of failure of such
enterprises. The likelihood of success must be considered in light of the
problems, expenses, difficulties, complications and delays encountered in
connection with the exploration of the oil and natural gas properties that we
plan to undertake. These potential problems include, but are not limited
to, unanticipated problems relating to exploration, and additional costs and
expenses that may exceed current estimates. The North Slope Leases do
not contain known oil and natural gas deposits and, therefore, any program
conducted on the North Slope Leases would be an exploratory search for oil and
natural gas. There is no certainty that any expenditures made in the
exploration of the North Slope Leases will result in discoveries of commercial
quantities of oil and natural gas. Most exploration projects do not result
in the discovery of commercially producible oil and natural gas deposits.
Problems such as unusual or unexpected geological conditions or
operational difficulties are common to oil and natural gas exploration
activities and often result in unsuccessful exploration efforts. If the results
of our exploration program do not reveal viable commercial oil and natural gas
deposits, we may decide to abandon the North Slope Leases and acquire new leases
for new exploration. Our ability to acquire additional leases will be
dependent upon our possessing adequate capital resources when needed. If
no funding is available, we may be forced to abandon our
operations.
Geological
conditions are variable and unpredictable and heighten exploration
risk.
Oil and
gas exploration and development involves a higher degree of risk and few
properties that are explored are ultimately developed into producing properties.
Even if production is commenced from a well, the production will inevitably
decline and may be affected or terminated by changes in geological conditions
that cannot be foreseen or remedied. A change in geological conditions may
render a discovery uneconomic.
The
market price for oil and natural gas is volatile and determined by factors
beyond our control. Failure to accurately forecast prices may result
in financial losses.
Market
prices for oil and natural gas may fluctuate widely from time to time depending
on international demand, production and other factors that cannot be foreseen. A
decline in price may render a discovery uneconomic resulting in unforeseen
losses. If a discovery becomes uneconomic due to declining prices, funds spent
to develop the discovery might not be recoverable, leading to financial
losses.
We
have no known oil and natural gas reserves and if we cannot find any, we may
have to cease operations.
We have
no oil and natural gas reserves. If we do not find any commercially exploitable
oil and natural gas reserves or if we cannot complete the exploration of any oil
and natural gas reserves, either because we do not have the money to do so or
because it is not economically feasible to do so, we may have to cease
operations and our investors may lose their investments. Oil and natural gas
exploration is highly speculative. It involves many risks and is often
non-productive. Even if we are able to find oil and natural gas reserves on the
North Slope Leases, our production capability will be subject to further risks
including:
|
·
|
the
costs of bringing the property into production, including exploration
work, preparation of production feasibility studies, and construction of
production facilities, all of which we have not budgeted
for;
|
|
·
|
the
availability and costs of
financing;
|
|
·
|
the
ongoing costs of production; and
|
|
·
|
environmental
compliance regulations and
restraints.
|
The
marketability of any oil and natural gas acquired or discovered may be affected
by numerous factors which are beyond our control and which cannot be accurately
predicted, such as market fluctuations, the lack of adequate facilities and
processing equipment near the North Slope Leases, and other factors such as
government regulations, including regulations relating to allowable production,
the importing and exporting of oil and natural gas, and environmental
protection.
Given the
above-noted risks, the chances of our finding and commercially exploiting
reserves on our oil and natural gas leases are remote and funds expended on
exploration are subject to the risk of being lost.
Because
of the inherent dangers involved in oil and natural gas exploration, there is a
risk that we may incur liability or damages as we conduct our
business.
The
search for valuable oil and natural gas deposits involves numerous hazards.
As a result, we may become subject to liability for such hazards,
including pollution, hydrocarbon spills and other hazards against which we
cannot insure or against which we may elect not to insure. At the present
time we have no insurance to cover against these hazards. The payment of
such liabilities may result in our inability to complete our planned exploration
program and/or obtain additional financing to fund our exploration
program.
As
we undertake exploration of our oil and natural gas leases, we will be subject
to compliance with government regulation that may increase the anticipated cost
of our exploration program.
There are
several governmental regulations that materially restrict oil and natural gas
exploration. We will be subject to state and federal laws of the State of
Alaska and the United States of America as we carry out our exploration program
on the North Slope Leases. We may be required to obtain work permits, post
bonds and perform remediation work for any physical disturbance to the land in
order to comply with these laws. If we enter the development and production
phase, the cost of complying with permit and regulatory environment laws will be
greater because the impact on the project area is greater. Permits and
regulations will control all aspects of the development and production program
if the project continues to that stage.
We
may conduct further offerings in the future in which case investors'
shareholdings will be diluted.
Since our
inception, we have relied on sales of our common stock to fund our operations.
We may conduct further equity offerings in the future to finance our
current projects or to finance subsequent projects that we decide to
undertake. If common stock is issued in return for additional funds, the
price per share could be lower than that paid by our current
stockholders. We anticipate continuing to rely on equity sales of our
common stock in order to fund our business operations. If we issue
additional stock shares, then our existing investors' percentage ownership of
our common stock will be diluted. The result of this could reduce the value of
current investors' stock.
Because
our stock is a penny stock, shareholders will be more limited in their ability
to sell their stock.
The SEC
has adopted rules that regulate broker-dealer practices in connection with
transactions in penny stocks. Penny stocks are generally equity securities with
a price of less than $5.00 per share, other than securities registered on
certain national securities exchanges or quoted on the Nasdaq system, provided
that current price and volume information with respect to transactions in such
securities is provided by the exchange or quotation system. Because our
securities constitute "penny stocks" within the meaning of the rules, the rules
apply to us and to our securities. The rules may further affect the
ability of owners of shares to sell our securities in any market that might
develop for them. As long as the quotation price of our common stock is
less than $5.00 per share, the common stock will be subject to penny stock
rules. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock, to deliver a standardized risk disclosure document
prepared by the SEC, that:
|
·
|
contains
a description of the nature and level of risk in the market for penny
stocks in both public offerings and secondary
trading;
|
|
·
|
contains
a description of the broker's or dealer's duties to the customer and of
the rights and remedies available to the customer with respect to a
violation to such duties or other requirements of securities
laws;
|
|
·
|
contains
a brief, clear, narrative description of a dealer market, including bid
and ask prices for penny stocks and the significance of the spread between
the bid and ask price;
|
|
·
|
contains
a toll-free telephone number for inquiries on disciplinary
actions;
|
|
·
|
defines
significant terms in the disclosure document or in the conduct of trading
in penny stocks; and
|
|
·
|
contains
such other information and is in such form, including language, type, size
and format, as the SEC shall require by rule or
regulation.
|
The
broker-dealer also must provide the customer, prior to effecting any transaction
in a penny stock, with: (a) bid and offer quotations for the penny stock; (b)
the amount of compensation of the broker-dealer and its salesperson in the
transaction; (c) the number of shares to which such bid and ask prices apply, or
other comparable information relating to the depth and liquidity of the market
for such stock; and (d) monthly account statements showing the market value of
each penny stock held in the customer's account. In addition, the penny stock
rules require that, prior to a transaction in a penny stock not otherwise exempt
from those rules, the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchaser's written acknowledgment of the receipt of a risk disclosure
statement, a written agreement to transactions involving penny stocks, and a
signed and dated copy of a suitably written statement. These disclosure
requirements may have the effect of reducing the trading activity in the
secondary market for our stock.
RESULTS
OF OPERATIONS
Three
Months Ended December 31, 2008 and 2007
The
following table presents certain items included in the Company’s consolidated
statements of operations for the three months ended December 31, 2008 and 2007,
a copy of which are included in this Quarterly Report on Form 10-Q, and the
percentage change from the prior period. All such data should be read
only in conjunction with, and are qualified in their entirety by reference to,
our consolidated financial statements and accompanying notes:
|
|
|
December
31
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Percentage
Increase / Decrease
|
|
|
Expenses
|
|
|
(286,441
|
)
|
|
|
(9,942
|
)
|
|
|
2,781
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
(286,441
|
)
|
|
|
(9,942
|
)
|
|
|
2,781
|
%
|
Revenues
We have
not earned any revenues to date. We do not anticipate earning revenues from our
oil and gas exploration activities in the near future.
Operating
Expenses
Our
operating expenses for the relevant periods consisted of the
following:
|
|
|
December
31
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Percentage
Increase / Decrease
|
|
|
General
& Administrative
|
|
$
|
286,441
|
|
|
$
|
9,942
|
|
|
|
2,781
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses
|
|
$
|
286,441
|
|
|
$
|
9,942
|
|
|
|
2,781
|
%
|
We
anticipate our operating expenses will increase as we undertake our exploration
program for the North Slope Leases. We anticipate our accounting and
legal expenses will also increase as a result of our ongoing reporting
requirements under the Exchange Act.
LIQUIDITY
AND CAPITAL RESOURCES
|
Working
Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
September 30, 2008
|
|
|
Percentage
Increase / (Decrease)
|
|
|
Current
Assets
|
|
$
|
10,505
|
|
|
$
|
47,170
|
|
|
|
(77
|
)%
|
|
Current
Liabilities
|
|
|
(359,581
|
)
|
|
|
(249,805
|
)
|
|
|
44
|
%
|
|
Working
Capital (Deficit)
|
|
$
|
(349,076
|
)
|
|
$
|
(202,635
|
)
|
|
|
72
|
%
|
|
Cash
Flows
|
|
Three
Months Ended
|
|
|
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
Cash
Flows Used In Operating Activities
|
|
$
|
(176,926
|
)
|
|
$
|
(14,422
|
)
|
|
Cash
Flows Used in Investing Activities
|
|
|
—
|
|
|
|
—
|
|
|
Cash
Flows Provided By Financing Activities
|
|
|
134,216
|
|
|
|
—
|
|
|
Net
Decrease In Cash During Period
|
|
$
|
(42,710
|
)
|
|
$
|
(14,422
|
)
|
The
decrease in our working capital at December 31, 2008 from September 30, 2008,
and the increase in our cash used during the three months ended December 31,
2008, from the comparable period ended December 31, 2007 are primarily
attributable to: (i) expenses incurred in connection with increased general
& administrative from hiring a full-time CEO, associated rental of premises,
and consulting expenses associated with the preliminary work related to our
development of the North Slope Leases, as well as increased requirements of
legal, accounting and investor relations services; and (ii) from the fact that
we had no revenue during the three months ended December 31, 2008.
During
the three months ended December 31, 2008, our sole source of financing came in
the form of two private placements of the Company’s shares in the amount of
$70,000 each, which were completed on November 12 and December 3,
2008.
The
Company received certain marketing services from a media marketing consulting
agency as part of the development of the Company's initial marketing
campaign. The amount was accrued for as of December 31, 2008. As of
February 19, 2009, the Company still owes this vendor $169,000. The
Company has agreed to pay the vendor $10,000 on January 16, 2009,
and $22,714 on each of February 10, March 10, April 10, May 10, June 10, July 10
and August 10, 2009.
Future
Financings
As of the
date of this Quarterly Report, we had cash on hand in the amount of
$4,460. We will require additional financing to sustain our business
operations if we are not successful in exploring and developing our leased
properties and earning revenues. We currently do not have any
arrangements for financing and we may not be able to obtain financing when
required. Obtaining additional financing would be subject to a number
of factors, including the various items referenced in “Risk Factors”
above. These factors may make the timing, amount, terms or conditions
of additional financing unavailable to us.
There are
no assurances that we will be able to obtain sufficient financing if and when
required.
OFF-BALANCE
SHEET ARRANGEMENTS
We have
no significant off-balance sheet arrangements that have or are reasonably likely
to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures or capital resources.
CRITICAL
ACCOUNTING POLICIES
The
financial statements presented with this Quarterly Report on Form 10-Q have been
prepared in accordance with generally accepted accounting principles in the
United States of America for interim financial information. These
financial statements do not include all information and footnote disclosures
required for an annual set of financial statements prepared under United States
generally accepted accounting principles. In the opinion of our
management, all adjustments (consisting solely of normal recurring accruals)
considered necessary for a fair presentation of the financial position, results
of operations and cash flows as at December 31, 2008 and for all periods
presented in the attached financial statements, have been
included. Interim results for the three month period ended December
31, 2008 are not necessarily indicative of the results that may be expected for
the fiscal year as a whole.
Our
significant accounting policies are disclosed in the notes to our audited
financial statements for the year ended September 30, 2008 included in our
Annual Report on Form 10-K filed with the SEC on January 13, 2009.
Not
Applicable.
Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we have evaluated
the effectiveness of our disclosure controls and procedures as defined in
Exchange Act Rule 13a-15(e) and as required by Exchange Act Rule 13a-15(b) as of
the end of the period covered by this report. Based on that
evaluation, our principal executive officer and principal financial officer have
concluded that these disclosure controls and procedures are
effective.
There
were no changes in our internal control over financial reporting during the last
fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
None.
On
November 12, 2008, we completed a private placement to one investor of 280,000
units at a price of $0.25 per post-split unit for total proceeds of
$70,000. Each unit is comprised of one share of our common stock and
one share purchase warrant. Each share purchase warrant will entitle
the holder to purchase one additional post-split share of our common stock at a
price of $0.45 per share for a period ending November 12, 2011. This
private placement was completed pursuant to the provisions of Regulation S
promulgated under the Securities Act. We did not engage in a
distribution of this offering in the United States. The investor
represented that it was not a US person as defined in Regulation S, and has
provided representations indicating that it was acquiring our securities for
investment purposes only and not with a view towards distribution.
On
December 3, 2008, we completed a private placement to one investor of 466,667
units at a price of $0.15 per post-split unit for total proceeds of
$70,000. Each unit is comprised of one share of our common stock and
one share purchase warrant. Each share purchase warrant will entitle
the holder to purchase one additional post-split share of our common stock at a
price of $0.30 per share for a period ending December 3, 2011. This
private placement was completed pursuant to the provisions of Regulation S
promulgated under the Securities Act. We did not engage in a
distribution of this offering in the United States. The investor
represented that it was not a US person as defined in Regulation S, and has
provided representations indicating that it was acquiring our securities for
investment purposes only and not with a view towards distribution.
None.
None.
None.
|
Exhibit Number
|
|
Description
of Exhibits
|
|
3.1
|
|
Articles
of Incorporation.
(1)
|
|
3.2
|
|
Bylaws,
as amended.
(1)
|
|
10.1
|
|
Purchase
Agreement - North Slope Leases.
(2)
|
|
10.2
|
|
Independent
Contractor Agreement, dated as of October 26, 2008, between the Registrant
and Alvaro Vollmers.
(3)
|
|
10.3
|
|
Amendment
to Independent Contractor Agreement, dated as of December 29, 2008,
between the Registrant and Alvaro Vollmers.
(3)
|
|
|
|
Certification
of Chief Executive Officer as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
Certification
of Chief Financial Officer as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
Certification
of Chief Executive Officer and Chief Financial Officer as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
(1)
|
|
Previously
filed as an exhibit to our Registration Statement on Form SB-2, as filed
with the Securities and Exchange Commission on November 21,
2006.
|
|
(2)
|
|
Previously
filed as an exhibit to our Form 8-K, as filed with the Securities and
Exchange Commission on April 24, 2008.
|
|
(3)
|
|
Previously
filed as an exhibit to our Form 10-K for the year ended September 30,
2008, as filed with the Securities and Exchange Commission on January 13,
2009.
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Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
BALD
EAGLE ENERGY INC.
Date:
February 23, 2009
ANDREW S.
HARPER
Chief
Executive Officer, President
Director
(Principal
Executive Officer)
Date:
February 23, 2009
ALVARO
VOLLMERS
Chief
Financial Officer, Secretary and Treasurer
Director
(Principal
Financial Officer and
Principal
Accounting Officer)