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, 2009
---------------------------
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____to _____
Commission File No. 0-32335
TX HOLDINGS, INC.
(Exact name of small business issuer as specified in its charter)
GEORGIA 58-2558702
------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification. No.)
incorporation or organization)
12080 Virginia Blvd.
Ashland, KY 41102
--------------------------
(Address of principal)
(606) 928-1131
--------------------------
Issuer's telephone number
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 issuer was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days. YES |X| NO |_|
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
Smaller reporting company |X|
Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) YES |_| NO |X|
Transitional Small Business Disclosure Format (check one): YES |_| NO |X|
TX Holdings, Inc.
Form 10-Q
For the Quarter Ended June 30, 2009
Table of Contents
PART 1-FINANCIAL INFORMATION
Item 1 Condensed Financial Statements
Unaudited Consolidated Condensed Balance Sheets as of June 30, 2009 and September 30, 2008 3
Unaudited Consolidated Condensed Statements of Operations for the Three Months and 4
Nine Months Ended June 30, 2009 and 2008, and for the Period From Inception of the
Development Stage, October 1, 2004, to June 30, 2009
Unaudited Consolidated Condensed Statement of Changes in Stockholders' Deficit for the 5
Nine Months Ended June 30, 2009
Unaudited Consolidated Condensed Statements of Cash Flows for the Nine Months Ended 6
June 30, 2009 and 2008, and for the Period From Inception of the Development Stage,
October 1, 2004, to June 30, 2009
Notes to Unaudited Consolidated Condensed Financial Statements 7
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 16
Item 4(T) Controls and Procedures 17
PART II-OTHER INFORMATION
Item 1 Legal Proceedings 19
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 19
Item 3 Defaults upon Senior Securities 19
Item 4 Submission of Matters to a Vote to Security Holders 19
Item 5 Other Information 19
Item 6 Exhibits 20
SIGNATURES 21
2
Part 1- FINANCIAL INFORMATION
ITEM 1 CONDENSED FINANCIAL STATEMENTS
TX HOLDINGS, INC,
A CORPORATION IN THE DEVELOPMENT STAGE
CONSOLIDATED CONDENSED BALANCE SHEETS
June 30,2009 and September 30,2008
--------------------------------------------------------------------------------
June 30, September 30,
2009 2008
Unaudited (See Note)
------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 6,737 $ 3,558
Accounts Receivable-(Net of Allowance for Doubtful
Account) - 1,281
------------- --------------
Total current assets 6,737 4,839
Property and Equipment, net 1,155,840 1,097,783
Other 50,000 50,000
------------- --------------
Total Assets $ 1,212,577 $ 1,152,622
============= ==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Notes payable to a stockholder $ 289,997 $ 170,000
Accounts payable and accrued liabilities 657,566 444,304
Accounts payable-related party 158,308 158,308
Advances from stockholder/officer 35,554 284,845
------------- --------------
Total current liabilities 1,141,425 1,057,457
Convertible debt to stockholder/officer 1,199,886 1,199,886
Asset Retirement Obligation 86,455 86,455
------------- --------------
Total Liabilities 2,427,766 2,343,798
Commitments and contingencies
Stockholders' deficit
Preferred stock: no par value, 1,000,000 shares
authorized no share outstanding as of June
30,2009 and September 30,2008 - -
Common stock:no par value, 250,000,000 shares
authorized, 47,286,897 and 43,705,824 shares
issued and outstanding at June 30, 2009 and
September 30, 2008, respectively 10,186,052 9,693,944
Additional paid-in capital 1,145,052 1,145,052
Accumulated deficit (1,803,507) (1,803,507)
Losses accumulated in the development stage (10,742,786) (10,226,665)
------------- --------------
Total stockholders' deficit (1,215,189) (1,191,176)
------------- --------------
Total liabilities and stockholders' deficit $ 1,212,577 $ 1,152,622
============= ==============
Note: The balance sheet at September 30, 2008 has been derived from the
audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted
accounting principles for complete financial statements.
The accompanying notes are an integral part of these unaudited consolidated
condensed financial statements
3
TX HOLDINGS, INC.
A CORPORATION IN THE DEVELOPMENT STAGE
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended June 30,2009 and 2008 and for the Period From
Inception of the Development Stage , October 1, 2004 to June 30, 2009
------------------------------------------------------------------------------------------------------------------------------------
Inception of
Development
Three Months Ended Nine Months Ended Stage to
------------------------- ------------------------- June 30,
6/30/2009 6/30/2008 6/30/2009 6/30/2008 2009
------------ ------------ ------------ ------------ ------------
Revenue $ 6,455 $ 739 $ 6,904 $ 5,501 16,212
------------ ------------ ------------ ------------ ------------
Operating expenses, except items shown
separately below $ 42,929 $ 81,948 $ 116,326 $ 337,954 1,934,072
Stock-based compensation - - 224,000 64,000 7,058,504
Professional fees 1,000 4,004 87,783 136,013 1,121,420
Lease expense - - - - 17,392
Depreciation expense - - - 508 3,146
Advertising expense - - - 83,265
------------ ------------ ------------ ------------ ------------
Total Operating Expenses 43,929 85,952 428,109 538,475 10,217,799
Loss from operations (37,474) (85,213) (421,205) (532,974) (10,201,587)
------------ ------------ ------------ ------------ ------------
Other income and (expense):
Legal settlement - - - - 204,000
Other income - - 4 - 714
Loss on disposal of equipment - - - (4,202) (11,202)
Forbearance agreement costs - - - - (211,098)
Interest expense (32,602) (28,683) (94,919) (87,614) (523,611)
------------ ------------ ------------ ------------ ------------
Total other income and (expenses), net (32,602) (28,683) (94,915) (91,816) (541,197)
------------ ------------------------- ------------ ------------
Net loss $ (70,076) $ (113,896) $ (516,120) $ (624,790) (10,742,784)
============ ============ ============ ============ ============
Net loss per common share $ - $ - $ (0.01) $ (0.01)
basic and diluted ============ ============ ============ ============
Weighted average number of common shares 47,286,897 43,360,824 45,562,290 36,139,278
outstanding-basic and diluted ============ ============ ============ ============
The accompanying notes are an integral part of these unaudited consolidated condensed financial statements
4
TX HOLDINGS INC.
A CORPORATION IN THE DEVELOPMENT STAGE
UNAUDITED CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
For the Nine Months Ended June 30, 2009
------------------------------------------------------------------------------------------------------------------------------------
Losses
Additional Accumulated
Preferred Stock Common Stock Paid in in the
---------------- ----------------------- ---------- Accumulated Development
Shares Amount Shares Amount Capital Deficit Stage Total
--------- ------ ----------- ----------- ---------- ------------ ------------- ------------
Balance at
September 30, 2008 - - 43,705,824 $ 9,693,944 $1,145,052 $(1,803,507) $(10,226,665) $(1,191,176)
Common stock issued
in Payment for
Shareholders' advances - - 2,581,073 258,108 - - - 258,108
Common stock issued
for professional
services - - 2,200,000 224,000 - - - 224,000
Common stock sold
to private investors - - 100,000 10,000 - - 10,000
Common stock returned
to treasury - - (1,300,000) - - - - -
Net Loss - - - - - - (516,120) (516,120)
Balance at ---------------- ----------------------- ---------- ------------ ------------- ------------
June 30, 2009 - - 47,286,897 $10,186,052 $1,145,052 $(1,803,507) $(10,742,786) $(1,215,189)
================ ======================= ========== ============ ============= ============
The accompanying notes are an integral part of these unaudited consolidated condensed financial statements
5
TX HOLDINGS, INC
A CORPORATION IN THE DEVELOPMENT STAGE
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
For the Nine Months Ended June 30, 2009 and 2008 and for the Period From
Inception of the Development Stage , October 1, 2004 to June 30, 2009
--------------------------------------------------------------------------------
Inception of
Nine Months Ended Development
----------------------- Stage to
6/30/2009 6/30/2008 6/30/2009
(See Note) (See Note)
----------- ----------- -------------
Cash flows used by operating activities:
Net loss $ (516,120) $ (624,790) $(10,742,785)
Adjustments to reconcile net loss to net
cash used in operating activities:
Warrants issued for forbearance
agreement - - 211,098
Loss on disposal of equipment - 4,202 11,202
Depreciation expense - 508 3,146
Bad Debt Expense 1,729 - 1,729
Common and preferred stock issued for
services 224,000 120,190 5,800,339
Accounting for warrants issued to
employees and a consultant - - 209,000
Warrants issued for services - - 376,605
Common stock issued to settle accounts
payable - - 251,308
Common stock issued in payment of
interest expense - - 196,666
Common stock issued by an
officer/stockholder to satisfy
expenses of the Company and increase
stockholder advances - - 616,750
Common stock issued in settlement of
legal claim - - 31,500
Accrued salary contributed by
stockholder/former officer - 125,000 125,000
Changes in operating assets and
liabilities:
Accrued stock-based compensation
reversal resulting from legal claim
settlement - - (231,000)
Prepaid expenses and other assets - (50,000) (49,750)
Accounts receivable (448) (739) (1,729)
Accounts payable and accrued
liabilities 213,261 102,482 1,562,762
----------- ----------- -------------
Net cash used by operating activities (77,578) (323,147) (1,628,159)
Cash flows from Investing Activities:
Deposits paid for oil and gas property
acquisitions - - (378,000)
Property and equipment additions (58,057) - (414,613)
----------- ----------- -------------
Net cash provided by investing activities (58,057) - (792,613)
Cash flows from financing activities:
Proceeds from stockholder/officer
contribution - 40,643 10,643
Repayment of note payable to a bank - - (20,598)
Proceeds from note payable to
stockholder - - 520,000
Proceeds from sale of common stock 10,000 43,000 1,247,997
Proceeds from exercise of warrants - - 78,404
Proceeds from stockholder/officer
advances 128,814 241,845 591,063
----------- ----------- -------------
Net cash provided by financing activities 138,814 325,488 2,427,509
Increase (Decrease) in cash and cash
equivalents 3,179 2,341 6,737
Cash and cash equivalents at beginning of
year 3,558 - -
----------- ----------- -------------
Cash and cash equivalent at June 30, 2009
and 2008 $ 6,737 $ 2,341 $ 6,737
=========== =========== =============
Non-cash investing and financing
activities:
Common stock issued in payment of
shareholders' loans $ - $ - $ 350,000
=========== =========== =============
Shareholders' advances converted to
Convertible debt $ - $ - $ 1,199,886
=========== =========== =============
Common stock issued in conversion of
preferred stock $ - $1,018,000 $ 1,018,000
=========== =========== =============
Common stock issued in payment of
shareholders' advances $ 258,108 $ - $ 258,108
=========== =========== =============
Shareholders' advances converted to notes
payable from stockholder $ 119,997 $ - $ 119,997
=========== =========== =============
Note
----
Certain prior period amounts have been reclassified to conform with the
presentation for the current year. Such reclassifications have no impact on net
income or shareholders' deficit as previously reported.
The accompanying notes are an integral part of these unaudited consolidated
condensed financial statements
6
TX HOLDINGS, INC
A CORPORATION IN THE DEVELOPMENT STAGE
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 1 - BACKGROUND AND CRITICAL ACCOUNTING POLICIES
INTERIM FINANCIAL STATEMENTS
The accompanying interim unaudited consolidated condensed financial statements
included herein have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. The financial statements
reflect all adjustments that are, in the opinion of management, necessary to
fairly present such information. All such adjustments are of a normal recurring
nature. Although the Company believes that the disclosures are adequate to make
the information presented not misleading, certain information and footnote
disclosures, including a description of significant accounting policies normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America ("US GAAP"), have
been condensed or omitted pursuant to such rules and regulations.
These condensed financial statements should be read in conjunction with the
audited financial statements and the notes thereto included in the Company's
2008 Annual Report. The results of operations for interim periods are not
necessarily indicative of the results for any subsequent quarter or the entire
year ending September 30, 2009.
OVERVIEW OF BUSINESS
TX Holdings, Inc. ("TX Holdings" or the "Company"), formerly named R Wireless,
Inc. ("RWLS") and HOM Corporation ("HOM"), is a Georgia corporation incorporated
on May 4, 2000. In December 2004 the Company began to structure itself into an
oil and gas exploration and production company. The Company acquired oil and gas
leases and began development of a plan for oil and gas producing operations in
April 2006.
The Company is actively engaged in the exploration, development, and acquisition
of crude oil and natural gas in the counties of Callahan and Eastland, Texas. In
November 2006 The Company entered into a Purchase and Sale Agreement with Masada
Oil & Gas, Inc. ("Masada"). Masada has previously served as the operator on two
of the leases in which TX Holdings currently holds interest in the counties of
Callahan and Eastland, Texas. TX Holding's leases and the related working
interests are as follows:
a. Contract Area # 1, 8% Working Interest;
b. Park's Lease, 75% Working Interest;
c. Williams Lease, 100% Working Interest.
The Contract Area #1 leases include a total of 247 acres and a total of 36
wells. TX Holdings is the operator of record for 27 of the wells and Masada Oil
is the operator of record for the remaining 7 wells. The lease has eighteen
wells capable of production although production of the wells is minimal (from 1
to 2 bbls per day). The Company believes it may be able to achieve higher
production rates through the development of an effective water flood program.
The water flood program involves the injection of water into the field through
injection wells to force the oil to the production wells and thereby increase
the production rate.
The Parks lease covers 320 acres in which the company owns a 75% working
interest and Masada Oil and Gas owns the remaining 25%. The land owners of this
lease have a 12.5% royalty interest in the production. TX Holdings is the lease
operator of the lease and there are currently 22 wells with minimal production
rates. (1 to 2 bbls per day). During the third quarter of 2008, the Company
completed fracturing 6 wells and hopes thereby to increase the production rate.
Due to poor weather and lack of financial resources, the work on the wells will
again be initiated in the second half of 2009.
The Company owns a 100% working interest and is the operator of the 843 acre
Williams Lease. There are currently 56 wells on the lease which management
believes are presently capable of producing 1 to 2 bbls per day.
7
TX HOLDINGS, INC
A CORPORATION IN THE DEVELOPMENT STAGE
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 1 - BACKGROUND AND CRITICAL ACCOUNTING POLICIES - CONT'D
OVERVIEW OF BUSINESS - CONT'D
There is an on-going dispute with the land owner of the lease which has
prevented the Company from operating or reporting any production on this lease.
The Company plans to continue using a combination of debt and equity financing
to acquire additional fields and to develop those fields. Currently, management
cannot provide any assurance regarding the successful development of acquired
oil and gas fields, the completion of additional acquisitions or the continued
ability to raise funds, however, it is using its best efforts to complete field
work on the fields acquired, acquire additional fields and finance operations.
HISTORY AND CORPORATE STRUCTURE
TX Holdings formerly acted as a holding company whose operations were conducted
through two wholly-owned operating subsidiaries, Direct Lending Inc. and Homes
By Owners, Inc. The Company ceased its former operations in September 2004. In
December 2004, as a result of the Company's research, the Company announced that
it would pursue acquisition of producing oil and gas properties operating in the
oil and gas industry. In connection with this decision the Company effected its
name change to "TX Holdings, Inc" on September 1, 2005. October 1, 2004 was the
beginning day for the first quarter of the determination to pursue operations in
the oil and gas industry.
The CUSIP number changed to 873 11R 101 as of September 6, 2005 and the trading
symbol changed to TXHG as of September 19, 2005.
In April 2006 TX Holdings acquired a 75% working interest in the Parks Lease and
in August 2006 the Company acquired a 100% working interest on the Williams
Lease. Both leases are located in Callahan County, Texas. In February 2006 TX
Holdings entered into a Memorandum of Understanding with Masada Oil and Gas and
subsequently acquired an 8% working interest in an oil and gas lease known as
Contract Area #1 located in Texas.
On March 28, 2006, TX Holdings appointed to its Board of Directors, Bobby
Fellers, who worked in the oil and gas business for more than thirty years. Mr.
Fellers has assisted TX Holdings in the acquisition of the above referenced
leases and owns a ninety two percent working interest position in the Contract
Area #1 lease and a twenty-five percent working interest in the Parks Lease. In
addition Mr. Fellers is the sole owner of Masada Oil & Gas, a Texas corporation,
which is the current operator of record of certain wells in Contract Area #1 in
which TX Holdings has an 8% working interest.
In July through September 2006, the Company raised $1,240,000 in a Private
Placement offering. The funds raised were used to purchase interests in three
oil and gas fields located in Texas as described above. Development of the
fields began on November 1, 2006, by way of cleaning up the fields and preparing
the wells located in the fields for testing required by the State of Texas.
On or about May 7, 2007, the Company entered into a Strategic Alliance Agreement
with Hewitt Energy Group, LLC ("Hewitt"), a company owned by Douglas C. Hewitt,
a Director of TX Holdings, Inc. at the time of the transaction. The Strategic
Alliance Agreement provided that TX Holdings, Inc. would acquire a 50% Working
Interest in eight projects in Kansas and Oklahoma. The purchase and development
of all of the prospects were estimated at approximately $15,000,000 in cash and
stock to be paid over a six month period. Mr. Hewitt resigned as a director on
July 27, 2007. The Company and Hewitt mutually agreed to terminate the Strategic
Alliance Agreement and to negotiate the participation in individual projects.
8
TX HOLDINGS, INC
A CORPORATION IN THE DEVELOPMENT STAGE
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 1 - BACKGROUND AND CRITICAL ACCOUNTING POLICIES - CONT'D
HISTORY AND CORPORATE STRUCTURE - CONT'D
There is currently a dispute between the Company and Hewitt as to the extent of
the Company's performance and entitlement under the new agreement executed in
August of 2007.
On June 11, 2009, Richard "Rick" Novack was appointed to the Board of Directors
and elected president of the Company, replacing Rob Hutchings. Mr. Hutchings
will continue as a member of the Board of Directors. Rick Novack attended the
Indiana University of Pennsylvania where he majored in Business Administration.
Mr. Novack began his career in finance and subsequently started several business
enterprises, including entities in the printing, vending and real estate
industries.
GOING CONCERN CONSIDERATIONS
The Company, with its prior subsidiaries, has suffered recurring losses while
devoting substantially all of its efforts to raising capital and identifying and
pursuing advantageous businesses opportunities. Management currently believes
that its best opportunities lie in the oil and gas industry. The Company's total
liabilities exceed its total assets and the Company's liquidity has depended
excessively on raising new capital. As of March 31, 2008, the Company received
its first revenue from oil & gas operations. In addition, the Company has
obtained its Operators License for the State of Texas and is now able to produce
and sell its oil & gas production. Over time the Company will seek to increase
oil production and to move away from the dependency of raising additional
capital.
These factors raise substantial doubt about the Company's ability to continue as
a going concern. The accompanying unaudited consolidated condensed financial
statements have been prepared on a going concern basis, which contemplates
continuing operations, realization of assets and liquidation of liabilities in
the ordinary course of business. The Company's ability to continue as a going
concern is dependent upon its ability to raise sufficient capital and to
implement a successful business plan to generate profits sufficient to become
financially viable. The unaudited consolidated condensed financial statements do
not include adjustments relating to the recoverability of recorded assets nor
the implications of associated bankruptcy costs should the Company be unable to
continue as a going concern.
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. Generally
Accepted Accounting Principles requires management to make various assumptions
and calculated estimates that directly affect (a) certain reported amounts of
assets and liabilities, (b) disclosure of contingent assets and liabilities ,
and (c) the reported amounts of revenues and expenses during the reporting
periods. Significant items subject to such estimates and assumptions include
recoverability of long-lived and deferred tax assets, valuation of acquired
in-process research and development, measurement of stock-based compensation,
and the fair value of the Company's common stock. The Company bases its
estimates on historical experience and various other common assumptions that
management believes to be reasonable under the circumstances. Changes in
estimates are recorded in the period in which they become known. Actual results
could differ from those estimates.
PROPERTY AND EQUIPMENT
The Company uses the successful efforts method of accounting for oil and gas
producing activities. Under this method, acquisition costs for proved and
unproved properties are capitalized when incurred.
9
TX HOLDINGS, INC
A CORPORATION IN THE DEVELOPMENT STAGE
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 1 - BACKGROUND AND CRITICAL ACCOUNTING POLICIES - CONT'D
NOTE 1-PROPERTY AND EQUIPMENT - CONT'D
Exploration costs, including geological and geophysical costs, costs of carrying
and retaining unproved properties, and exploratory dry hole drilling costs, are
all expensed. Development costs, including the costs to drill and equip
development wells, and successful exploratory drilling costs to locate proved
reserves are capitalized. Exploratory drilling costs are capitalized when
incurred pending the determination of whether a well has found proved reserves.
A determination of whether a well has found proved reserves is made shortly
after drilling is completed. The determination is based on a process that relies
on interpretations of available geological, geophysical, and engineering data.
If a well is determined to be successful, the capitalized drilling costs will be
reclassified as part of the cost of the well. If a well is determined to be
unsuccessful, the capitalized drilling costs will be charged to expense in the
period in which the determination is made. If an exploratory well requires a
major capital expenditure before production can begin, the cost of drilling the
exploratory well will continue to be carried as an asset pending determination
of whether proved reserves have been found only as long as: i) the well has
found a sufficient quantity of reserves to justify its completion as a producing
well if the required capital expenditure is made and ii) drilling of the
additional exploratory wells is under way or firmly planned for the near future.
If drilling in the area is not under way or firmly planned, or if the well has
not found a commercially producible quantity of reserves, the exploratory well
is assumed to be impaired, and its costs are charged to expense.
In the absence of a determination as to whether the reserves that have been
found can be classified as proved, the costs of drilling such an exploratory
well are not carried as an asset for more than one year following completion of
drilling. If, after that year has passed, a determination that proved reserves
exist cannot be made, the well is assumed to be impaired, and its costs are
charged to expense. Its costs can, however, continue to be capitalized if
sufficient quantities of reserves are discovered in the well to justify its
completion as a producing well and sufficient progress is made in assessing the
reserves and the well's economic and operating feasibility.
The impairment of unamortized capital costs is measured at a lease level and is
reduced to fair value if it is determined that the sum of expected future net
cash flows is less than the net book value. The Company determines if impairment
has occurred through either adverse changes or as a result of the annual review
of all fields.
Development costs of proved oil and gas properties, including estimated
dismantlement, restoration and abandonment costs, and acquisition costs, are
depreciated and depleted on a field basis by the units-of-production method
using proved developed and proved reserves, respectively. The costs of unproved
oil and gas properties are generally combined and impaired over a period that is
based on the average holding period for such properties and the Company's
experience of successful drilling.
Other property and equipment are stated at their historical cost. Major renewals
and betterments are capitalized, while maintenance and repairs that do not
materially improve or extend the useful lives of the assets are charged to
expense as incurred. Costs relating to the initial design and implementation of
the Internet web page have been capitalized while the costs of web page
maintenance are expensed as incurred. Assets are depreciated over their
estimated useful lives using the straight-line method. The Company records
impairment losses on long-lived assets used in operations when events and
circumstances indicate that the assets might be impaired and the undiscounted
cash flows estimated to be generated by those assets are less than the carrying
amounts of those assets.
10
TX HOLDINGS, INC
A CORPORATION IN THE DEVELOPMENT STAGE
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 1 - BACKGROUND AND CRITICAL ACCOUNTING POLICIES, CONT'D
RECENTLY ISSUED ACCOUNTING STANDARDS
REVENUE RECOGNITION
Currently the Company has limited revenue from oil and gas operations. If and
when the Company begins to receive higher revenue from oil and gas operations it
will be recognized upon the delivery of the oil or gas to the purchaser of the
oil or gas.
In December 2007, the FASB issued Statement of Financial Accounting Standard No.
160, "Noncontrolling Interests in Consolidated Financial Statements--an
amendment of ARB No. 51." ("SFAS "). SFAS 160 requires all entities to report
noncontrolling (minority) interests in subsidiaries as equity in the
consolidated financial statements. Its intention is to eliminate the diversity
in practice regarding the accounting for transactions between an entity and
noncontrolling interests. This Statement is effective for fiscal years, and
interim periods within those fiscal years, beginning on or after December 15,
2008. Earlier adoption is prohibited. The Company is currently evaluating the
impact of the adoption of SFAS 160 but does not expect the adoption of this
statement to have a material impact on the Company's financial condition,
results of operations or cash flows.
In December 2007, the FASB issued SFAS No. 141(R), a revised version of SFAS No.
141, "Business Combinations." The revision is intended to simplify existing
guidance and converge rulemaking and financial reporting under U.S. GAAP with
international accounting rules. This statement applies prospectively to business
combinations where the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008, and may
affect the release of our valuation allowance against prior acquisition
intangibles. An entity may not apply it before that date.
The Company is currently evaluating the impact the adoption of this statement
could have on its financial condition, results of operations and cash flows,
however, it does not expect to have a material impact on our financial
statements.
Effective January 1, 2008, the Company adopted the Financial Accounting
Standards Board's Interpretation No. 48 ("FIN 48"), Accounting for Uncertainty
in Income Taxes, an Interpretation of FASB Statement No. 109, which creates a
simple model to address uncertainty in income tax positions and prescribes the
minimum recognition threshold a taxation is required to meet before recognized
in the financial statements. Effective for fiscal years beginning after December
15, 2007, FIN 48 also provides guidance on the derecognition, measurement,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition. The adoption of FIN 48 did not have a material
impact on the Company's results of operations, financial position or cash flows
and the Company did not recognize any interest or penalties related to any
unrecognized tax positions.
The Company files a separate federal income tax return in the United States and
state tax returns where applicable. With few exceptions, the Company is no
longer subject to Unites States federal income tax examinations for years before
fiscal 2005, and is no longer subject t state and local income tax examinations
for years before fiscal 2004.
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to conform with the
presentation for the current year. Such reclassifications have no impact on the
net income or shareholders' deficit as previously reported.
11
TX HOLDINGS, INC
A CORPORATION IN THE DEVELOPMENT STAGE
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 2 - INCOME TAXES
Following is an analysis of deferred taxes at June 30, 2009:
Deferred tax assets:
Net operating losses $ 1,357,544
Accrued expenses 277,397
----------------
Valuation allowance (1,634,491)
----------------
Total deferred tax assets $ -
----------------
The Company has tax net operating loss carryforwards totaling approximately
$3,993,000, expiring in 2018 through 2028. Approximately $1,200,000 of net
operating losses were incurred prior to December 12, 2002 at which date MA&N
acquired 51% of the Company and are consequently subject to certain limitation
described in section 382 of the Internal Revenue Code. The Company estimates
that, due to the limitations and expiration dates, only $424,000 of the net
operating losses incurred prior to December 12, 2002 will be available to offset
future taxable income.
Net operating losses after December 12, 2002 through June 30, 2009 were
approximately $3,569,000. The total net operating losses available to the
Company to offset future taxable income is approximately $2,793.000. Following
is a reconciliation of the tax benefit at the federal statutory rate to the
amount reported in the statement of operations for the three months ended June
30, 2009 and 2008:
Three Months Ended June 30, Six Months Ended June 30, 2009
--------------------------------- -------------------------------------
2009 2008 2009 2008
-------------- --------------- --------------- ---------------
Benefit for income tax at federal
statutory rate $ 23,826 $ 38,725 $ 175,481 $ 212,429
Change in valuation allowance (23,826) (38,725) (99,321) (190,669)
Non-deductible stock-based
compensation - - (76,160) (21,760)
-------------- --------------- --------------- ---------------
$ - $ - $ - $ -
============== =============== =============== ===============
NOTE 3 - STOCKHOLDERS' EQUITY
PREFERRED STOCK
Mark Neuhaus, former President, CEO and Chairman of the Board, has represented
that in May 2006 the Company entered into an employment agreement with him. Mr.
Neuhaus claims that the agreement provided that he was to be compensated at the
rate of $25,000 per month plus bonus based on oil and gas production.
12
TX HOLDINGS, INC
A CORPORATION IN THE DEVELOPMENT STAGE
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 3 - STOCKHOLDERS' EQUITY - CONT'D
PREFERRED STOCK - CONT'D
In addition he claims that the employment agreement granted to Mr. Neuhaus 1,000
shares of preferred stock. The preferred stock which Mr. Neuhaus caused to be
issued to himself had the following rights and privileges:
1. Super voting rights: The preferred stock has the right to vote on any
item of business submitted to the common shareholders for a vote the
equivalent number of votes representing 50% of the outstanding common
shares then issued by the Company.
2. No other rights: The preferred shares have no other rights, including
but not limited to no conversion rights; no dividend rights; and no
liquidation priority rights.
During the fiscal year 2006, Mr. Neuhaus waived his salary. However, Mr. Neuhaus
obtained a letter from Baron Capital Group, Inc. stating that value of the
preferred stock was no greater than at $1,018,000. On December 24, 2007, and in
connection with Mr. Neuhaus' resignation, the 1,000 preferred shares were
exchanged for 10,715,789 common shares, which exchange assumed that the
preferred stock had a value of $1,018,000. Current management of the Company has
not seen documentation establishing that an employment agreement existed between
Mr. Neuhaus and the Company; that any such agreement was authorized in
accordance with Georgia law or that the preferred stock was duly authorized or
validly issued in accordance with law.
COMMON STOCK
As of June 30, 2009, TX Holdings has issued and outstanding 47,286,897 shares of
common stock.
Of the total 47,286,697 shares outstanding as of June 30, 2009, 25,347,222
shares were deemed "restricted securities," as defined by the Securities Act of
1933 (the "Act") when issued to their registered owner and continue to have
their restricted status noted on the books of Company's transfer agent.
Certificates representing such shares bear an appropriate restrictive legend and
their sale is subject to Rule 144 under the Act.
On January 17, 2008, the Secretary of State of Georgia accepted an amendment
from the Company increasing authorized common stock for the Company from
50,000,000 to 250,000,000 shares.
On October 6, 2008, the Company issued a total of 200,000 shares for services.
The shares were issued to several contract personnel and were valued at $24,000
based on the quoted market price of the Company's common stock on the date of
issuance.
On January 9, 2009, the Company issued a total of 1,250,000 shares for services.
The shares were issued to several contract personnel and were valued at $125,000
based on the quoted market price of the Company's common stock on the date of
issuance.
On February 5, 2009, Darren Bloom returned 1,300,000 shares to the Company in
settlement of legal dispute over compensation.
13
TX HOLDINGS, INC
A CORPORATION IN THE DEVELOPMENT STAGE
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 3 - STOCKHOLDERS' EQUITY - CONT'D
COMMON STOCK - CONT'D
On February 27, 2009, the Company issued 2,581,073 shares to two shareholders in
payment for outstanding cash advances to the Company. The shares were valued at
$258,108 based on the quoted market price of the Company's common stock on the
date of issuance.
On February 27, 2009, the Company issued a total of 750,000 shares for services.
The shares were issued to several contract personnel and were valued at $75,000
based on the quoted market price of the Company's common stock on the date of
issuance.
On February 27, 2009, the Company sold 100,000 shares to private investors for
cash proceeds of $10,000.
POTENTIALLY DILUTIVE OPTIONS AND WARRANTS
At June 30, 2009 the Company has outstanding 3,350,000 warrants which were not
included in the calculation of diluted net loss per share since their inclusion
would be anti-dilutive. These warrants have exercise prices ranging from $0.28
to $0.50 per share and expire at various dates through September 2011.
NOTE 4 - RELATED PARTY TRANSACTIONS
Beginning with the quarter ended March 31, 2008 to the present, the Company
recognized crude oil sales from a lease for which the operator is a Company
owned by a stockholder/director of the Company. These sales account for 100% of
our oil and gas revenue for the nine months ended June 30, 2009. Management
believes that the agreements were entered at arms length and upon terms that
would be common for the industry and location of the fields.
As of June 30, 2009 the Company has an outstanding note payable to Mr.
Shrewsbury, the Company's Chairman and CEO, for the amount of $289,997, the note
bears a 10% interest ans is payable on demand.
Included in the financial statements at June 30, 2009 are advances from
stockholder/officer of $35,554. Interest has been accrued on the these advances
at rates ranging from 8% to 10%. In 2009 interest expense of $90,804, in the
accompanying statement of operations, relates to those advances and the
promissory note.
In June 2007, the Company entered into a strategic alliance agreement with
Hewitt Energy Group, LLC ("Hewitt Energy") to identify reserves and prospects,
and to establish production from the projects mutually owned or contemplated to
be jointly owned by the entities in states of Texas, Kansas and Oklahoma. Hewitt
Energy is controlled by a former member of the Company's board of directors.
During 2007, the Company's former Chief Executive Officer, who is a major
stockholder, claimed that he transferred stock on behalf of the Company with a
market value of $352,560 to Hewitt Energy Group, LLC to acquire an interest in
the Perth field in Kansas. There is currently a dispute as to the extent of the
Company's performance under the leases and agreement with Hewitt Energy.
On November 11, 2008, the Company entered into a settlement agreement with Mark
Neuhaus and Nicole Neuhaus. The agreement was subject to the Company finalizing
a transaction with a third party involving certain oil and gas properties within
90 days of November 11, 2008 ("Third Party Closing"). If the third party
transaction closes, the agreement provides for mutual general releases between
the Company, Mark Neuhaus and Nicole Neuhaus. In connection with the agreement,
seven million shares of the common stock of the Company previously issued to
14
TX HOLDINGS, INC
A CORPORATION IN THE DEVELOPMENT STAGE
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 4 - RELATED PARTY TRANSACTIONS - CONT'D
Mark Neuhaus were delivered to the Company to be held pending the Third Party
Closing. If the Third Party Closing occurs within the 90 day period, (1) four
million five hundred thousand of the deposited shares will be cancelled and
returned to authorized but unissued shares of the Company,(2) two million five
hundred thousand of the deposited shares will be delivered to Nicole Neuhaus and
(3) certain alleged claims of Mark Neuhaus against the Company for compensation
and reimbursement for advances in the aggregate amount of $178,862 and a
purported indebtedness of the Company to Mark Neuhaus in the amount of
$1,343,741,including interest accrued through March 31, 2009 and represented by
a convertible note dated as of September 28, 2007 will be cancelled. If the
Third Party Closing does not occur within 90 days of November 11, 2008, the
settlement agreement will be void and of no force and effect and the deposited
shares will be returned. On February 6, 2009, an amendment to the settlement
agreement was signed by all parties. The amendment extends the period of time
provided in paragraph 10 of the settlement agreement by an additional 30 days so
that the agreement would remain in full force and effect until March 11, 2009.
The Company was not successful in finalizing the transaction with the third
party within the stipulated period resulting in the cancellation of the
settlement agreement between the Company and Mark Neuhaus and Nicole Neuhaus
NOTE 5 - FAIR VALUE MEASUREMENTS
The Company adopted Statement of Financial Accounting Standards No. 157 "Fair
Value Measurements" ("SFAS 157") on October 1, 2008. SFAS 157, among other
things, defines fair value, establishes a consistent framework for measuring
fair value and expands disclosure for each major asset and liability category
measured at fair value on either a recurring or nonrecurring basis. SFAS 157
clarifies that fair value is an exit price, representing the amount that would
be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants. As such, fair value is a market-based
measurement that should be determined based on assumptions that market
participants would use in pricing an asset or liability. As a basis for
considering such assumptions, SFAS 157 establishes a three-tier fair value
hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1. Observable inputs such as quoted prices in active markets for
identical assets or liabilities;
Level 2. Inputs, other than quoted prices included within Level 1,
that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data,
which require the reporting entity to develop its own assumptions.
As of June 30, 2009, the Company had no assets or liabilities that were marked
to fair value under SFAS 157.
NOTE 6- SUBSEQUENT EVENTS
On August 4, 2009 Mr. Rob Hutchings submitted his resignation from the Board of
Directors.
15
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
INTRODUCTION
The following discussion is intended to facilitate an understanding of our
business and results of operations and includes forward-looking statements that
reflect our plans, estimates, and beliefs. It should be read in conjunction with
our financial statements and the accompanying notes to the financial statements
included herein. Our actual results could differ materially from those discussed
in these forward-looking statements.
The Company has never earned a profit, and has incurred an accumulated deficit
of $12,546,293 as of June 30,, 2009. The acquisition of a controlling interest
in the Company by MA&N provided the Company access to additional funds directly
from MA&N, and the business plan developed by MA&N has enabled the Company to
raise additional funds from third parties as well. The Company has used the
funds to purchase three oil and gas fields to begin its operations as an oil and
gas exploration and production company. The Company began oil production in
March 2008 by placing into production 3 wells located in the Parks' leases. The
Company has also begun development of the Contract Area 1 leases. If our
development plan is successful, and sufficient funds are raised to pay for the
development, it is estimated that it will take approximately one year to reach
production levels to sufficiently capitalize the Company on an ongoing basis.
During this initial ramp up period, the Company believes that it will need to
raise additional funds to fully develop its fields, purchase equipment, and meet
general administrative expenses. The Company may seek both debt and equity
financing. The Company currently has in excess of seventy wells located on the
three fields located in Texas. Each of the wells will need to be reworked in
order to establish production at a cost of approximately $7,000 to $10,000 per
well. Initial production from each well is estimated to be between two to five
barrels per day. Once initial production has been established, the Company will
begin a water flood program that injects water into the oil producing zone
through injector wells. The water then forces the oil towards the producing well
and may increase production of each well up to an estimated four to seven
barrels per day per well. If the Company is able to produce its wells upon the
recompletion, the Company will be profitable if 40 barrels of oil are produced
and the price of oil remains above $55.00 per barrel. The Company's success is
dependent on if and how quickly it can reach these levels of production. The
Company plans to use all revenues for general corporate purposes and future
expansion of its current oil producing properties. There is no certainty that
the Company can achieve profitable levels of production or that it will be able
to raise additional capital through any means.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30,,2009 COMPARED TO THREE MONTHS ENDED JUNE 30, 2008
REVENUES FROM OPERATIONS
Revenues for the three months ended June 30, 2009 and 2008 were $6,455 and $739
respectively. On December 5, 2004, the Company began to structure itself into an
oil and gas production and exploration company. The Company has acquired three
oil and gas leases in the counties of Eastland and Callahan, Texas and has begun
development of oil and gas. The Company received its first revenues from oil and
gas operations in March 2008. The Company believes that it will place additional
wells into operation during the current fiscal year. Since it ceased its former
business operations, the Company has devoted its efforts to research prospective
leases and business combinations and secure financing.
EXPENSES FROM CONTINUING OPERATIONS
The Company's operating expenses for the three months ended June 30, 2009 were
$43,929. The current quarter operating expenses represent a favorable variance
of $42,023 when compared to operating expenses of $85,952 for the quarter ended
June 30, 2008. The favorable variance results primarily from lower well related
expenses of $13,947. The remaining favorable variance resulted from lower legal
fees, $1,446; lower filing fees $5,046; lower auditing fees, $8,750; lower
travel expenses, $5,109 and, lower outside consultant fee, $4,950.
16
NET LOSS
For the quarter ended June 30, 2009, the Company had a net loss of $70,076
representing a positive variance of $43,820 when compared to a net loss of
$113,896 for the quarter ended June 30, 2008. The positive variance results from
lower expenses in all major expense categories including, lower well related
expenses of $13,497.
NINE MONTHS ENDED JUNE 30, 2009 COMPARED TO NINE MONTHS ENDED JUNE 30, 2008
REVENUES FROM OPERATIONS
Revenues for the nine months ended June 30, 2009 and 2008 were $6,904 and $5,501
respectively. On December 5, 2004, the Company began to structure itself into an
oil and gas production and exploration company. The Company has acquired three
oil and gas leases in the counties of Eastland and Callahan, Texas and has begun
development of oil and gas. The Company received its first revenues from oil and
gas operations in March 2008. The Company believes that it will place additional
wells into operation during the current fiscal year. Since it ceased its former
business operations, the Company has devoted its efforts to research prospective
leases and business combinations and secure financing.
EXPENSES FROM CONTINUING OPERATIONS
For the nine months ended June 30, 2009 the Company had operating expenses of
$428,109 representing a positive variance of $110,366 when compared to a net
loss of $428,109 for the nine months ended June 30, The positive variance
results from lower payroll cost of $97,781. The lower payroll cost is the result
of having the Company substituting lower cost contract labor in lieu of staff
and a reduction in the Chief Executive Officer's compensation. During the nine
month period the Company realized well related expenses of $1,813, representing
a favorable variance of $28,775 when compared to $30,538 for the nine month
period ended June 30, 2008.
NET LOSS
The Company incurred a net loss of $516,120 for the nine months ended June 30,
2009. The current nine months net loss represents a favorable variance of
$108,670 when compared to a net loss of $624,790 for the nine months ended June
30, 2008. The favorable variance results primarily from lower payroll related
expenses of $97,781. Payroll related expenses were reduced to $84,336 for the
current nine months as compared to $182,117 for the same period in the prior
year. Lower well related expenses contributed an additional favorable variance
of $28,775 as compared with the same period in the prior year.
ITEM 4(T) CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. We maintain "disclosure
controls and procedures," as such term is defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934, or the Exchange Act, that are designed to
ensure that information required to be disclosed by us in reports that we file
or submit under the Exchange Act is recorded, processed, summarized, and
reported within the time periods specified in Securities and Exchange Commission
rules and forms, and that such information is accumulated and communicated to
our management, including our Chief Executive Officer and Chief Financial
Officer, or persons performing similar functions, as appropriate, to allow
timely decisions regarding required disclosure. In designing and evaluating our
disclosure controls and procedures, management recognized that disclosure
controls and procedures, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the disclosure
controls and procedures are met. Our disclosure controls and procedures have
been designed to meet reasonable assurance standards. Additionally, in designing
disclosure controls and procedures, our management necessarily was required to
apply its judgment in evaluating the cost-benefit relationship of possible
disclosure controls and procedures. The design of any disclosure controls and
procedures also is based in part upon certain assumptions about the likelihood
of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions.
17
Our independent registered public accounting firm, Ham, Langston & Brezina,
L.L.P. ("HLB") conducted an audit of our financial statements for the year ended
September 30, 2008. In connection with the issuance of its report to the Board
of Directors, HLB reported one material weakness under standards established by
the Public Company Accounting Oversight Board regarding the number and magnitude
of the year end adjusting entries.
To address the weakness, we will seek outside accounting assistance on any
further complex accounting issues.
Based on their evaluation as of the end of the period covered by this Quarterly
Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer, or
persons performing similar functions, have concluded that, as of that date, our
disclosure controls and procedures were not effective at the reasonable
assurance level. The determination was made partially due to the small size of
the Company and lack of segregation of duties.
(b) Changes in internal control over financial reporting. There was no change in
our internal control over financial reporting (as defined in Rule 13a-15(f)
under the Exchange Act) identified in connection with management's evaluation
during our last fiscal quarter that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
18
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
TX Holdings had filed an action in Dade County, Florida in District Circuit #11,
case number 06-14396CA04 entitled TX Holdings, Inc vs. Darren Bloom. The Company
had brought an action against Mr. Bloom for breach of contract, damages and for
the cancellation of common stock issued to Mr. Bloom pursuant to a three year
employment contract. Mr. Bloom resigned from the Company on March 17, 2006,
after serving only 9 months and having received 2,000,000 shares of TX Holdings
common stock. On February 5, 2009, Mr. Bloom reached an agreement with the
Company whereby he retained 700,000 shares and returned 1,300,000 shares to the
Company.
Except as disclosed above, the Company has no material legal proceedings in
which any director, officer or affiliate of the Company, any owner of record or
beneficially of more than 5% of any class of voting securities of the Company,
or security holder is a party adverse to the Company or has a material interest
adverse to the Company.
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE TO SECURITY HOLDERS
None.
ITEM 5 OTHER INFORMATION
None.
19
ITEM 6 EXHIBITS
Exhibit 31.1 Section 302 Certification of Chief Executive Officer
Exhibit 31.2 Section 302 Certification of Chief Financial Officer
Exhibit 32.1 Section 906 Certification of Chief Executive Officer
Exhibit 32.2 Section 906 Certification of Chief Financial Officer
20
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
TX HOLDINGS, INC.
By: /s/ William "Buck" Shrewsbury
William "Buck" Shrewsbury
Chief Executive Officer
Dated: August 6, 2009
In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
/s/ William "Buck" Shrewsbury Chairman of the Board of Directors
------------------------- and Chief Executive Officer
William "Buck" Shrewsbury
August 6, 2009
/s/ Richard (Rick) Novack President and Director
-------------------------
Richard "Rick" Novack
August 6, 2009
/s/ Jose Fuentes Chief Financial Officer
-------------------------
Jose Fuentes
August 6, 2009
/s/ Bobby S. Fellers Director
-------------------------
Bobby S. Fellers
August 6, 2009
/s/ Martin Lipper Director
-------------------------
Martin Lipper
August 6, 2009
/s/ Rob Hutchings Director
--------------------------
Rob Hutchings
August 6, 2009
21