x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
|
|
|
Nevada
|
|
33-0967648
|
(State
or other jurisdiction of
incorporation
or organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
370
Interlocken Boulevard, Suite
400
Broomfield,
Colorado 80021
(Address
of Principal Executive
Offices)
|
PART I. FINANCIAL INFORMATION | |
Item
1. Financial
Statements
|
|
June
30, 2005 (Unaudited)
|
3
|
4
|
|
Three
and Six Months Ended June 30, 2005 and 2004 (Unaudited)
|
|
5
|
|
Six
Months Ended June 30, 2005 and 2004 (Unaudited)
|
|
June
30, 2005
|
6-9
|
10
|
|
18
|
|
PART II. OTHER INFORMATION | |
19
|
|
19
|
|
19
|
|
20
|
|
20
|
|
20
|
|
Signatures |
21
|
Item 1.
|
Financial
Statements
|
|
|
June
30, 2005
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Cash
|
|
$
|
2,503,171
|
|
|
Interest
Receivable
|
130
|
||||
Prepaid
Expenses
|
71,378
|
||||
Total
current assets
|
|
|
2,574,679
|
|
|
|
|
|
|
|
|
Unproved
oil & gas property
|
|
|
5,295,030
|
|
|
|
|
|
|
|
|
Equipment,
net of $8,905 accumulated depreciation
|
|
|
22,240
|
|
|
|
|
|
|
|
|
Restricted
cash
|
|
|
235,000
|
|
|
Deferred
debt issue costs
|
459,868
|
||||
|
|
|
|
|
|
Total
assets
|
|
$
|
8,586,817
|
|
|
|
|
|
|
|
|
Liabilities
And Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
332,092
|
|
|
Notes
payable
|
|
|
—
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
332,092
|
|
|
|
|
|
|
|
|
Convertible
debenture
|
|
|
4,326,612
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
Preferred
stock, $.001 par value; 25,000,000 shares
|
|
|
|
|
|
authorized;
none outstanding
|
|
|
—
|
|
|
Common
stock, $.001 par value; 100,000,000 shares
|
|
|
|
|
|
authorized;
47,878,809 shares issued and outstanding
|
|
|
47,878
|
|
|
Additional
paid-in capital
|
|
|
7,365,696
|
|
|
Stock
issuance obligation
|
|
|
—
|
|
|
Accumulated
deficit
|
|
|
(3,485,461
|
)
|
|
|
|
|
|
|
|
Total
stockholders’ equity
|
|
|
3,928,113
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
8,586,817
|
|
|
|
Six
Months Ended
June
30,
|
Three
Months Ended
June
30,
|
|||||||||||
|
2005
|
2004
|
2005
|
2004
|
|||||||||
Revenue
|
$ |
—
|
$ |
—
|
$
|
—
|
$
|
—
|
|||||
|
|||||||||||||
Operating
expense
|
|||||||||||||
Exploration
|
243,768
|
63,234
|
31,277
|
—
|
|||||||||
General
and administrative
|
984,320
|
274,318
|
551,084
|
105,103
|
|||||||||
|
|||||||||||||
Operating
(loss)
|
(1,228,088
|
)
|
(337,552
|
)
|
(582,361
|
)
|
(105,103
|
)
|
|||||
|
|||||||||||||
Other
income (expense)
|
3,369
|
—
|
136
|
—
|
|||||||||
Interest
expense
|
(129,408
|
)
|
(21,529
|
)
|
(48,094
|
)
|
(15,090
|
)
|
|||||
Gain
on Sale of Property
|
1,442,674
|
—
|
5,393
|
—
|
|||||||||
Gain
on extinguishment of debt
|
383,531
|
—
|
383,531
|
—
|
|||||||||
|
|||||||||||||
Income
(loss) before income tax
|
472,078
|
(359,081
|
)
|
(241,395
|
)
|
(120,193
|
)
|
||||||
|
|||||||||||||
Income
tax expense
|
—
|
—
|
—
|
—
|
|||||||||
Deferred
tax benefit
|
—
|
—
|
—
|
—
|
|||||||||
|
|||||||||||||
Net
Income (loss)
|
$
|
472,078
|
$
|
(359,081
|
)
|
$
|
(241,395
|
)
|
$
|
(120,193
|
)
|
||
|
|||||||||||||
Basic
and diluted earnings (loss) per share
|
$
|
0.01
|
$
|
(0.01
|
)
|
$
|
-nil-
|
$
|
-nil-
|
||||
Basic
weighted average shares outstanding
|
44,484,056
|
42,512,051
|
47,164,723
|
41,493,150
|
|||||||||
|
|||||||||||||
Diluted
weighted average shares outstanding
|
63,572,133
|
42,512,051
|
66,252,800
|
41,493,150
|
|
Six
Months Ended June 30,
|
2005
|
2004
|
Cash
flow from operating activities
|
|||||||
Net
income (loss)
|
$
|
472,078
|
$
|
(359,081
|
)
|
||
Adjustments
to reconcile net income to net cash used in operating
activities:
|
|||||||
Gain
on sale of unproved oil and gas property
|
(1,442,674
|
)
|
---
|
||||
Gain
from extinguishment of debt
|
(383,531
|
)
|
---
|
||||
Debt
issue costs and discount amortization
|
102,928
|
||||||
Depreciation
|
3,878
|
2,152
|
|||||
Expenses
paid with stock issuance
|
264,500
|
—
|
|||||
Interest
paid with stock issuance
|
44,711
|
||||||
Changes
in operating assets and liabilities
|
|||||||
Interest
receivable
|
(130
|
)
|
—
|
||||
Prepaid
expense
|
(71,378
|
)
|
(5,000
|
)
|
|||
Deferred
debt issue costs
|
(459,868
|
)
|
---
|
||||
Accounts
payable
|
(102,319
|
)
|
38,263
|
||||
Net
cash provided by (used in) operating activities
|
(1,571,805
|
)
|
(323,666
|
)
|
|||
Cash
flow from investing activities:
|
|||||||
Proceeds
on sale of oil and gas property
|
1,930,083
|
---
|
|||||
Unproved
oil and gas property additions
|
(1,493,792
|
)
|
(3,097,257
|
||||
Restricted
Cash
|
(100,000
|
)
|
(135,000
|
)
|
|||
Purchase
of equipment
|
(9,555
|
)
|
(12,912
|
||||
Net
cash provided by (used in) investing activities
|
326,736
|
(3,245,169
|
)
|
||||
Cash
flow from financing activities
|
|||||||
Proceeds
from issuance of convertible debenture
|
3,849,685
|
1,000,000
|
|||||
Issuance
of common stock
|
922,376
|
2,648,092
|
|||||
Borrowings
on note payable
|
80,000
|
425,000
|
|||||
Payments
on notes payable
|
(1,252,848
|
)
|
---
|
||||
Net
cash provided by financing activities
|
3,599,213
|
4,073,092
|
|||||
|
|||||||
Net
increase in cash and equivalents
|
2,354,144
|
504,257
|
|||||
Cash
and equivalents at beginning of period
|
149,027
|
291,445
|
|||||
Cash
and equivalents at end of period
|
$
|
2,503,171
|
$
|
795,702
|
|||
Supplemental
Disclosure of Cash Floe and Noncash Investing and Financing
Activity
|
|||||||
Income
tax paid
|
$
|
---
|
$
|
---
|
|||
Interest
paid
|
$
|
81,750
|
$
|
---
|
|||
Non
cash:
|
|||||||
Conversion
of $350,000 convertible note into common stock
|
$
|
394,711
|
$
|
---
|
|||
Acquisition
of oil & gas interest in exchange for common stock
|
$
|
600,000
|
$
|
1,050,000
|
|
|
Six
Months
Ended
|
|
Six
Months Ended
|
|
||
|
|
June
30, 2005
|
|
June
30, 2004
|
|
||
|
|
|
|
|
|
||
Net
Income (loss) as reported
|
|
$
|
472,078
|
$
|
(359,081
|
)
|
|
Deduct:
Total stock based employee compensation expense
|
|
|
|
|
|
|
|
determined
under fair value based method for all awards
|
|
|
(51,100
|
) |
|
—
|
|
|
|
|
|
|
|
|
|
Pro
forma net income (loss)
|
|
$
|
420,978
|
$
|
(359,081
|
)
|
|
|
|
|
|
|
|
|
|
Basic
and diluted earnings per share—as reported
|
|
$
|
-nil-
|
$
|
-nil-
|
||
|
|
|
|
|
|
|
|
Pro
forma basic and diluted gain per share
|
|
$
|
-nil-
|
$
|
-nil-
|
a)
|
Evaluation
of Disclosure Controls and Procedures:
As
of June 30, 2005, our management carried out an evaluation, under
the
supervision of our Chief Executive Officer and Chief Financial Officer
of
the effectiveness of the design and operation of our system of disclosure
controls and procedures pursuant to the Securities and Exchange Act,
Rule
13a-15(e) and 15d-15(e) under the Exchange Act). Based on
that
evaluation, our chief executive officer and chief financial officer
concluded that our disclosure controls and procedures are effective
to
provide reasonable assurance that information we are required to
disclose
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, as appropriate,
to allow timely decisions regarding required
disclosure.
|
b)
|
Changes
in internal controls:
There were no changes in internal controls over financial reporting
that
occurred during the period covered by this report that have materially
affected, or are reasonably likely to materially effect, our internal
control over financial reporting.
|
FELLOWS ENERGY LTD. | ||
|
|
|
Date: August 22, 2005 | By: | /s/ GEORGE S. YOUNG |
George S. Young |
||
Chief Executive Officer (Principal Executive Officer Principal Accounting Officer and Principal Financial Officer) |