As
filed with the Securities and Exchange Commission on December 14,
2006
Registration
No.: 333-137925
UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
AMENDMENT NO. 1
TO
FORM
SB-2
REGISTRATION
STATEMENT UNDER
THE SECURITIES ACT OF 1933
FOOTHILLS
RESOURCES, INC.
(Name
of Small Business Issuer in Its Charter)
|
Nevada
|
|
1311
|
|
98-0339560
|
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
|
(Primary
Standard Industrial
Classification
Code Number)
|
|
(I.R.S.
Employer Identification
No.)
|
4540
CALIFORNIA AVENUE, SUITE 550
BAKERSFIELD,
CALIFORNIA 93309
(661)
716-1320
(Address
and Telephone Number of Principal Executive Offices)
(Address
of Principal Place of Business or Intended Principal Place of
Business)
DENNIS
B. TOWER
CHIEF
EXECUTIVE OFFICER
4540
CALIFORNIA AVENUE, SUITE 550
BAKERSFIELD,
CALIFORNIA 93309
(661)
716-1320
(Name,
Address and Telephone Number of Agent for Service)
Copy
to:
LOUIS
W. ZEHIL, ESQ.
JOHN
DUER, ESQ.
McGUIREWOODS
LLP
1345
AVENUE OF THE AMERICAS, 7TH
FLOOR
NEW
YORK, NEW YORK 10105-0106
(212)
548-2100
Approximate
Date of Commencement of Proposed Sale to the Public: From time to time as
determined by the selling stockholders after the effective date of this
Registration Statement.
If
any of
the securities being registered on this Form are to be offered on a delayed
or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, please
check the following box. [X]
If
this
form is filed to register additional securities for an offering pursuant to
Rule
462(b) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [
]
If
this
form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. [
]
If
this
form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. [
]
If
delivery of the prospectus is expected to be made pursuant to Rule 434, please
check the following box. [
]
CALCULATION
OF REGISTRATION FEE
|
Title
Of Each Class Of Securities To
Be Registered
|
Amount
To Be Registered
(1)
|
Proposed
Maximum Offering Price Per
Share
|
Proposed
Maximum Aggregate Offering
Price
|
Amount
Of Registration
Fee
|
|||||||||
|
Shares
of common stock, par value $0.001 per share,
issued and outstanding |
30,281,247
(2
|
)
|
$
|
2.065
(3
|
)
|
$
|
62,530,775
|
$
|
6,690.79
|
* | |||
|
Shares
of common stock, par value $0.001 per share,
underlying warrants with $1.00 per share exercise price |
12,172,975
(4
|
)
|
$
|
2.065
(5
|
)
|
$
|
25,137,193
|
$
|
2,689.68
|
* | |||
|
Shares
of common stock, par value $0.001 per share, underlying warrants
with
$2.25 per share exercise price
|
473,233
(6
|
)
|
$
|
2.25
(5
|
)
|
$
|
1,064,774
|
$
|
113.93
|
* | |||
|
Shares
of common stock, par value $0.001 per share,
underlying warrants with $2.75 per share exercise price |
8,046,919
(7
|
)
|
$
|
2.75
(5
|
)
|
$
|
22,129,027
|
$
|
2,367.81
|
* | |||
|
Warrants
to acquire shares of common stock,
par value $0.001 per share |
20,693,127
(8
|
)
|
—
|
—
|
—
(9
|
)
|
|||||||
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Total
Registration Fee
|
$
|
11,862.21
|
* | ||||||||||
| * | Previously paid. |
| (1) |
Pursuant
to Rule 416 under the Securities Act of 1933, as amended, the number
of
shares of common stock registered hereby is subject to adjustment
to
prevent dilution resulting from stock splits, stock dividends or
similar
transactions.
|
| (2) |
Includes
30,281,247 issued and outstanding shares of common
stock.
|
| (3) |
Estimated
solely for the purpose of determining the amount of the registration
fee,
based on the average of the high and low sale price of the common
stock as
reported by the OTC Bulletin Board on October 6, 2006 in
accordance with Rule 457(c) under the Securities Act of
1933.
|
| (4) |
Includes
the shares of common stock underlying warrants to acquire 12,172,975
shares of common stock for an exercise price of $1.00 per share.
|
| (5) |
Pursuant
to Rule 457(g) under the Securities Act of 1933, as amended, the
proposed
maximum offering price is based upon the higher of the price at which
the
warrants may be exercised and the price of shares of common stock
as
determined in accordance with Rule
457(c).
|
| (6) |
Includes
the shares of common stock underlying warrants to acquire 473,233
shares
of common stock for an exercise price of $2.25 per
share.
|
| (7) |
Includes
the shares of common stock underlying warrants to acquire 8,046,919
shares
of common stock for an exercise price of $2.25 per
share.
|
| (8) |
Includes
the warrants to acquire 20,693,127 shares of the registrant’s common
stock, issued on April 7, 2006, April 20, 2006 and September 8, 2006.
|
| (9) |
Pursuant
to Rule 457(g) under the Securities Act of 1933, no registration
fee is
payable for warrants that are registered for distribution in the
same
registration statement as the securities to be offered pursuant thereto.
|
The
registrant hereby amends this registration statement on such date or dates
as
may be necessary to delay its effective date until the registrant shall file
a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the registration statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
The
information in this prospectus is not complete and may be changed. We may not
sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy these securities
in
any state where the offer or sale is not permitted.
Subject
to completion, dated December 14, 2006
Prospectus
Foothills
Resources, Inc.
50,974,374
shares of common stock, and
warrants
to acquire 20,693,127 shares of common stock
This
prospectus relates to the offering by the selling stockholders of Foothills
Resources, Inc. of up to 50,974,374 shares of our common stock, par value
$0.001
per share. Those shares of common stock include 30,281,247 shares of common
stock and 20,693,127 shares of common stock underlying warrants. In addition,
we
are registering the warrants to acquire 20,693,127 shares of common stock.
We
are registering the offer and sale of the common stock, including common
stock
underlying warrants, and the warrants, to satisfy registration rights we
have
granted to the selling stockholders.
We
will
not receive any proceeds from the sale of common stock or warrants by the
selling stockholders. We may receive proceeds from the exercise price of the
warrants if they are exercised by the holders thereof. We intend to use any
proceeds received from the exercise of the warrants for working capital and
general corporate purposes.
The
selling stockholders have advised us that they will sell the shares of common
stock and warrants from time to time in the open market, on the OTC Bulletin
Board, in privately negotiated transactions or a combination of these methods,
at market prices prevailing at the time of sale, at prices related to the
prevailing market prices, at negotiated prices, or otherwise as described under
the section of this prospectus titled “Plan of Distribution.”
Our
common stock is traded on the OTC Bulletin Board under the symbol “FTRS.OB”.
On December 12, 2006,
the
closing bid price of the common stock was $1.40 per share.
Investing
in our common stock involves risks. Before making any investment in our
securities, you should read and carefully consider risks described in the Risk
Factors beginning on page 5 of this prospectus.
You
should rely only on the information contained in this prospectus or any
prospectus supplement or amendment. We have not authorized anyone to provide
you
with different information.
Neither
the Securities and Exchange Commission nor any state securities commission
has
approved or disapproved of these securities or determined if this prospectus
is
truthful or complete. Any representation to the contrary is a criminal offense.
This
prospectus is
dated
, 2006
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F-1
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This
summary highlights information contained elsewhere in this prospectus but might
not contain all of the information that is important to you. Before investing
in
our common stock, you should read the entire prospectus carefully, including
the
“Risk Factors” section and our financial statements and the note thereto
included elsewhere in this prospectus.
For
purposes of this prospectus, unless otherwise indicated or the context otherwise
requires, all references herein to “Foothills,” “we,” “us,” “our,” and “the
Company” refer to Foothills Resources Inc., a Nevada corporation, and our
subsidiaries.
Our
Company
Foothills
Resources, Inc. is a growth-oriented independent energy company engaged in
the
acquisition, exploration, exploitation and development of oil and natural gas
properties. The Company currently holds interests in properties in the Eel
River
Basin, in northern California, the Goose Creek Field and Goose Creek East Field,
both in Harris County, Texas, the Cleveland Field, located in Liberty County,
Texas, and the Saratoga Field located in Hardin County, Texas, and is planning
to acquire interests in the Anadarko Basin in southwest Oklahoma.
Our
business strategy is to identify and exploit low to moderate risk resources
in
and adjacent to existing or indicated producing areas that can be quickly
developed and put on production at low cost, including the acquisition of
producing properties with exploitation and exploration potential. We also intend
to take advantage of our expertise to develop exploratory projects in focus
areas and to participate with other companies in those areas to explore for
oil
and natural gas using state-of-the-art 3D seismic technology. Our management
intends to use its extensive domestic and international oil and gas experience
to establish and grow the Company.
Foothills
Resources, Inc. took its present form on April 6, 2006, when our wholly-owned
subsidiary, Brasada Acquisition Corp. and Brasada California, Inc. executed
a
Merger Agreement and Plan of Reorganization. On April 6, 2006, Brasada
Acquisition Corp. merged with and into Brasada California, Inc., with Brasada
remaining as the surviving corporation and our wholly-owned subsidiary. The
holders of Brasada’s issued and outstanding capital stock before the merger
surrendered all of their issued and outstanding capital stock of Brasada and
received 17,375,000 shares of our common stock, par value $0.001 per share.
Our
stockholders before the merger retained 12,625,006 shares of common
stock.
Contemporaneously
with the closing of the Merger, we split-off another wholly-owned subsidiary,
Foothills Leaseco, Inc., a Nevada corporation, through the sale of all of the
outstanding capital stock of Foothills Leaseco, Inc. As a consequence of the
sale of Foothills Leaseco, Inc., we discontinued all of our business operations
which we conducted prior to the closing of the merger with Brasada, and spun
off
all material liabilities existing prior to that date, in any way related to
our
pre-closing business operations. As a result of these transactions, our business
and operations changed from a pre-exploration stage company prior to the merger
and split-off to a company engaged in the acquisition, exploration and
development of oil and natural gas properties following the merger.
Our
primary operations are now those formerly operated by Brasada California, Inc.,
as well as other business activities which we have developed since April, 2006,
as described in this Prospectus.
Recent
Developments
On
September 8, 2006, we consummated an acquisition of certain properties formerly
owned by TARH E&P Holdings, L.P. in Texas, pursuant to two purchase and sale
agreements executed with TARH E&P Holdings, L.P. on June 21, 2006. In this
acquisition, our wholly-owned subsidiary, Foothills Texas, Inc., acquired
four
producing properties in southeastern Texas, including the Goose Creek, Goose
Creek East, Saratoga and Cleveland Fields. The purchase and sale agreements
provided for the payment of aggregate cash consideration to TARH E&P
Holdings, L.P. of $57.5 million and the issuance of $4.5 million of our common
stock. Prior to the closing date, on June 22, 2006, August 14, 2006 and August
23, 2006, we made cash payments to TARH E&P Holdings, L.P. of $3,099,000,
$1,549,500 and $774,750 in accordance with the agreements. After adjustment
for
preliminary purchase price adjustments as provided in the purchase and sale
agreements, we paid cash consideration to TARH E&P Holdings, L.P. on
September 8, 2006 of $51,894,500 and issued 1,605,345 shares of our common
stock.
To
finance the above acquisition, we executed a Credit and Guaranty Agreement
with
J. Aron & Company on September 8, 2006, providing for a credit facility
under which we borrowed $42.5 million. The credit facility will terminate and
all amounts borrowed under the facility will be due and payable four years
following the closing date. The facility is secured by liens and security
interests on substantially all of our assets and those of our subsidiaries,
including 100% of the value of all oil and gas reserves of us and our
subsidiaries. On the closing date of the facility, we issued to Goldman, Sachs
& Co., an affiliate of J. Aron & Company, a warrant to purchase
3,000,000 shares of common stock for five years at an exercise price of $2.75
per share.
Further,
in order to raise additional funds to consummate the acquisition from TARH
E&P Holdings, L.P., we completed a private offering of units consisting of
shares of our common stock and warrants to acquire our common stock on September
8, 2006. Each unit we sold in the offering consisted of one share of common
stock and a warrant to acquire one-half share of common stock for five years
at
an exercise price of $2.75 per share. On the closing date of the offering,
we
received $22,500,000 in proceeds from the offering, through the sale of
10,000,000 units. Therefore, we issued to investors, on the closing date,
10,000,000 shares of our common stock and warrants to acquire 5,000,000 shares
of our common stock.
On
August
30, 2006, we announced that the Christiansen 3-15 well had flowed at a rate
in
excess of 1.9 million cubic feet of gas per day on a 16/64 inch choke. The
drilling and electric log evaluation on the well indicates multiple gas zones
between 3,600 feet and 3,900 feet.
In
September, 2006, we commenced commercial production from the Christiansen 3-15
well in the Grizzly Bluff Field in the Eel River Basin, in Humboldt County,
California. On September 19, 2006, we announced that production is expected
to
ramp up in stages to a target rate of about 1 million cubic feet of natural
gas
per day.
On
September 19, 2006, we also announced the Vicenus 1-3 well in the Grizzly Bluff
Field is expected to be placed on production within the next two weeks following
installation of production equipment that has been ordered. This well was
drilled to a total depth of 5,747 feet and has encountered natural gas in
multiple zones between 4,300 and 5,700 feet. We expect to acquire a 3D seismic
survey over the Grizzly Bluff Field during the fourth quarter of 2006, which
should assist the Company in identifying specific locations for future wells
and
is also expected to allow for the direct detection of natural gas, especially
in
shallower formations.
On
November 16, 2006, we announced that production from the Goose Creek oil
field
in Harris County, Texas had been increased by about 100 barrels of oil
per day
as a result of recompletions of previously inactive wells, and that we
are in
the design phase of planning for a 3D seismic survey that we expect to
acquire
in the first half of 2007, which is expected to identify deeper productive
intervals and significantly improve the mapping of the shallower oil productive
horizons.
On
April
6, 2006 and on April 20, 2006, we closed a prior private offering of an
aggregate of 17,142,857 units, each consisting of one share of our common stock
and a warrant to acquire three-quarters of a share
of
our
common stock for five years at a purchase price of $1.00 per whole share. The
total consideration we received in this offering was $12,000,000. Some of the
consideration for units sold in this April, 2006 offering was in the form of
convertible debentures, which converted into units on a dollar-for-dollar basis
upon the closing of the offering and the closing of the merger between our
wholly-owned subsidiary, Brasada Acquisition Co. and Brasada California,
Inc.
Corporate
Information
Foothills
Resources, Inc. was incorporated under the laws of the State of Nevada on
November 17, 2000. Our principal executive offices are located at 4540
California Avenue, Suite 550, Bakersfield, California 93309. The telephone
number at our principal executive offices is (661) 716-1320. Our website address
is www.foothills-resources.com. Information contained on our website is not
deemed part of this prospectus.
The
Offering
|
Common
Stock Offered (1)
|
50,974,374 shares
|
|
|
|
|
Warrants
Offered (2)
|
Warrants
to acquire 20,693,127 shares
|
|
|
|
|
Offering
Price
|
Market
price or privately negotiated prices.
|
|
|
|
|
Common
Stock Outstanding (3)
|
60,281,253
shares
|
|
|
|
|
Use
of Proceeds
|
We
will not receive any proceeds from the sale of the shares offered
by the
selling stockholders. Any proceeds we receive from the selling
stockholders upon their exercise of warrants to purchase the shares
included in the shares that are being offered by them hereunder
will be
used for general working capital purposes and capital
expenditures.
|
|
|
|
|
OTC
Bulletin Board Symbol
|
FTRS.OB
|
|
|
|
|
Risk
Factors
|
An
investment in our common stock involves a high degree of risk.
You should
carefully consider the risk factors set forth under “Risk Factors”
beginning on page 5 and the other information contained in this
prospectus
before making an investment decision regarding our common
stock.
|
| (1) |
Includes
30,281,247 shares of common stock currently issued and outstanding
and
20,693,127 shares of common stock issuable by us upon exercise
of
outstanding warrants to acquire our common stock.
|
| (2) |
We
anticipate registering the warrants under the Securities Exchange
Act of
1934, as amended, and seeking a separate listing of the warrants
on a
securities market or securities exchange to allow the holders of
our
warrants to trade the warrants separate from our common stock.
|
| (3) |
Includes
30,281,247
shares of common stock which will not be available to trade publicly
until
the registration statement of which this prospectus is a part is
declared
effective by the SEC. This number does not include shares of common
stock
underlying options outstanding under our equity incentive plan
or shares
of common stock issuable by us upon the exercise of our outstanding
warrants, under which our stockholders have the right to acquire
20,693,127 shares of common stock.
|
An
investment in us involves a high degree of risk. Investors should carefully
consider the risks below before making an investment decision. Our business,
financial condition or results of operations could be materially adversely
affected by any of these risks. In such case, the trading price of our common
stock could decline and investors could lose all or part of their investment.
RISKS
RELATED TO OUR BUSINESS
We
are a development stage company with limited operating history for you to
evaluate our business. We may never attain profitability.
We
are a
development stage company engaged in the business of oil and gas exploration
and
development, and have limited current oil or natural gas operations. The
business of acquiring, exploring for, developing and producing oil and natural
gas reserves is inherently risky. As an oil and gas acquisition, exploration
and
development company with limited operating history, it is difficult for
potential investors to evaluate our business. Our proposed operations are
therefore subject to all of the risks inherent in light of the expenses,
difficulties, complications and delays frequently encountered in connection
with
the formation of any new business, as well as those risks that are specific
to
the oil and gas industry. Investors should evaluate us in light of the delays,
expenses, problems and uncertainties frequently encountered by companies
developing markets for new products, services and technologies. We may never
overcome these obstacles.
Our
business is speculative and dependent upon the implementation of our business
plan and our ability to enter into agreements with third parties for the rights
to exploit potential oil and natural gas reserves on terms that will be
commercially viable for us.
Our
lack of diversification will increase the risk of an investment in Foothills,
and
our financial condition and results of operations may deteriorate if we fail
to
diversify.
Our
business focus is on the oil and gas industry in a limited number of properties,
initially in California, Oklahoma and Texas, with the intention of expanding
elsewhere. Larger companies have the ability to manage their risk by
diversification. However, we will lack diversification, in terms of both the
nature and geographic scope of our business. As a result, we will likely be
impacted more acutely by factors affecting our industry or the regions in which
we operate than we would if our business were more diversified, enhancing our
risk profile. If we cannot diversify our operations, our financial condition
and
results of operations could deteriorate.
Strategic
relationships upon which we may rely are subject to change, which may diminish
our ability to conduct our operations.
Our
ability to successfully acquire additional properties, to discover reserves,
to
participate in drilling opportunities and to identify and enter into commercial
arrangements with customers will depend on developing and maintaining close
working relationships with industry participants and on our ability to select
and evaluate suitable properties and to consummate transactions in a highly
competitive environment. These realities are subject to change and may impair
our ability to grow.
To
develop our business, we will endeavor to use the business relationships of
our
management to enter into strategic relationships, which may take the form of
joint ventures with other private parties and contractual arrangements with
other oil and gas companies, including those that supply equipment and other
resources that we will use in our business. We may not be able to establish
these strategic
relationships,
or if established, we may not be able to maintain them. In addition, the
dynamics of our relationships with strategic partners may require us to incur
expenses or undertake activities we would not otherwise be inclined to in order
to fulfill our obligations to these partners or maintain our relationships.
If
our strategic relationships are not established or maintained, our business
prospects may be limited, which could diminish our ability to conduct our
operations.
Competition
in obtaining rights to explore and develop oil and gas reserves and to market
our production may impair our business.
The
oil
and gas industry is highly competitive. Other oil and gas companies may seek
to
acquire oil and gas leases and other properties and services we will need to
operate our business in the areas in which we expect to operate. This
competition is increasingly intense as prices of oil and natural gas on the
commodities markets have risen in recent years. Additionally, other companies
engaged in our line of business may compete with us from time to time in
obtaining capital from investors. Competitors include larger companies, which,
in particular, may have access to greater resources, may be more successful
in
the recruitment and retention of qualified employees and may conduct their
own
refining and petroleum marketing operations, which may give them a competitive
advantage. In addition, actual or potential competitors may be strengthened
through the acquisition of additional assets and interests. If we are unable
to
compete effectively or adequately respond to competitive pressures, this
inability may materially adversely affect our results of operation and financial
condition.
We
may be unable to obtain additional capital that we will require to implement
our
business plan, which could restrict our ability to grow.
We
expect
that our current capital and our other existing resources will be sufficient
only to provide a limited amount of working capital, and the revenues generated
from our properties in Texas, California and Oklahoma alone will not be
sufficient to fund both our continuing operations and our planned growth. We
will require additional capital to continue to operate our business beyond
the
initial phase of our current properties, and to further expand our exploration
and development programs to additional properties. We may be unable to obtain
additional capital required.
Future
acquisitions and future exploration, development, production and marketing
activities, as well as our administrative requirements (such as salaries,
insurance expenses and general overhead expenses, as well as legal compliance
costs and accounting expenses) will require a substantial amount of additional
capital and cash flow.
We
may
pursue sources of additional capital through various financing transactions
or
arrangements, including joint venturing of projects, debt financing, equity
financing or other means. We may not be successful in locating suitable
financing transactions in the time period required or at all, and we may not
obtain the capital we require by other means. If we do not succeed in raising
additional capital, our resources may not be sufficient to fund our operations
going forward.
Any
additional capital raised through the sale of equity may dilute the ownership
percentage of our stockholders. This could also result in a decrease in the
fair
market value of our equity securities because our assets would be owned by
a
larger pool of outstanding equity. The terms of securities we issue in future
capital transactions may be more favorable to our new investors, and may include
preferences, superior voting rights and the issuance of warrants or other
derivative securities, and issuances of incentive awards under equity employee
incentive plans, which may have a further dilutive effect.
Our
ability to obtain needed financing may be impaired by such factors as the
capital markets (both generally and in the oil and gas industry in particular),
our status as a new enterprise without a significant
demonstrated
operating history, the location of our oil and natural gas properties and prices
of oil and natural gas on the commodities markets (which will impact the amount
of asset-based financing available to us) and/or the loss of key management.
Further, if oil and/or natural gas prices on the commodities markets decline,
our revenues will likely decrease and such decreased revenues may increase
our
requirements for capital. If the amount of capital we are able to raise from
financing activities, together with our revenues from operations, is not
sufficient to satisfy our capital needs (even to the extent that we reduce
our
operations), we may be required to cease our operations.
We
may
incur substantial costs in pursuing future capital financing, including
investment banking fees, legal fees, accounting fees, securities law compliance
fees, printing and distribution expenses and other costs. We may also be
required to recognize non-cash expenses in connection with certain securities
we
may issue, such as convertible notes and warrants, which may adversely impact
our financial condition.
We
may not be able to effectively manage our growth, which may harm our
profitability.
Our
strategy envisions expanding our business. If we fail to effectively manage
our
growth, our financial results could be adversely affected. Growth may place
a
strain on our management systems and resources. We must continue to refine
and
expand our business development capabilities, our systems and processes and
our
access to financing sources. As we grow, we must continue to hire, train,
supervise and manage new employees. We cannot assure you that we will be able
to:
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meet
our capital needs;
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expand
our systems effectively or efficiently or in a timely manner;
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allocate
our human resources optimally;
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identify
and hire qualified employees or retain valued employees; or
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incorporate
effectively the components of any business that we may acquire in
our
effort to achieve growth.
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If
we are
unable to manage our growth, our operations and our financial results could
be
adversely affected by inefficiency, which could diminish our profitability.
Our
business may suffer if we do not attract and retain talented
personnel.
Our
success will depend in large measure on the abilities, expertise, judgment,
discretion, integrity and good faith of our management and other personnel
in
conducting the business of the Company. We have a small management team, and
the
loss of a key individual or inability to attract suitably qualified staff could
materially adversely impact our business.
Our
success depends on the ability of our management and employees to interpret
market and geological data correctly and to interpret and respond to economic
market and other conditions in order to locate and adopt appropriate investment
opportunities, monitor such investments, and ultimately, if required, to
successfully divest such investments. Further, no assurance can be given that
our key personnel will continue their association or employment with us or
that
replacement personnel with comparable skills can be found. We have sought to
and
will continue to ensure that management and any key employees are appropriately
compensated; however, their services cannot be guaranteed. If we are unable
to
attract and retain key personnel, our business may be adversely affected.
Our
management team does not have extensive experience in public company matters,
which
could impair our ability to comply with legal and regulatory
requirements.
Our
management team has had limited U.S. public company management experience or
responsibilities, which could impair our ability to comply with legal and
regulatory requirements such as the Sarbanes-Oxley Act of 2002 and applicable
federal securities laws including filing required reports and other information
required on a timely basis. There can be no assurance that our management will
be able to implement and effect programs and policies in an effective and timely
manner that adequately respond to increased legal, regulatory compliance and
reporting requirements imposed by such laws and regulations. Our failure to
comply with such laws and regulations could lead to the imposition of fines
and
penalties and further result in the deterioration of our business.
Risks
related to our prior business may adversely affect our
business.
Our
business prior to the merger between our wholly-owned acquisition subsidiary
and
Foothills California, Inc. (formerly Brasada California, Inc.) in April, 2006
involved mineral exploration. In 2001, we acquired a mining lease on a total
of
five unpatented lode mineral claims property located in the State of Nevada.
Subsequent to our fiscal year ended December 31, 2004, we decided to abandon
the
property and terminate the claims and have since been in the process of
reviewing other potential resource and non-resource assets for acquisition.
We
determined not to pursue the mineral exploration line of business following
the
April, 2006 merger, but could still be subject to claims arising from our
former. These claims may arise from our operating activities (such as employee
and labor matters), financing and credit arrangements or other commercial
transactions. While no claims are pending and we have no actual knowledge of
any
threatened claims, it is possible that third parties may seek to make claims
against us based on our former business operations. Even if any such asserted
claims were without merit and we were ultimately found to have no liability
for
such claims, the defense costs and the distraction of management’s attention may
harm the growth and profitability of our business. While the relevant definitive
agreements executed in connection with the merger provided indemnities to us
for
liabilities arising from our prior business activities, these indemnities may
not be sufficient to fully protect us from all costs and expenses.
Our
hedging activities could result in financial losses or could reduce our net
income, which may adversely affect your investment in our common stock.
In
connection with our credit facility with J. Aron & Company, we are
contractually obligated to enter into hedging contracts with the purpose
and
effect of fixing oil and natural gas prices on no less than 80% of projected
oil
and gas production from our proved developed producing oil and gas reserves.
To
comply with the requirements of our credit facility, and in order to manage
our
exposure to price risks in the marketing of our oil and natural gas production,
we have entered into oil and natural gas price hedging arrangements with
respect
to a portion of our expected production. We may enter into additional hedging
transactions in the future.
While
intended to reduce the effects of volatile oil and natural gas prices, such
transactions may limit our potential gains and increase our potential losses
if
oil and natural gas prices were to rise substantially over the price established
by the hedge. In addition, such transactions may expose us to the risk of loss
in certain circumstances, including instances in which:
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our
production is less than
expected;
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there
is a widening of price differentials between delivery points for
our
production and the delivery point assumed in the hedge arrangement;
or
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the
counterparties to our hedging agreements fail to perform under the
contracts.
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RISKS
RELATED TO OUR INDUSTRY
Our
exploration for oil and gas is risky and may not be commercially successful,
and
the 3D seismic data and other advanced technologies we use cannot eliminate
exploration risk, which could impair our ability to generate revenues from
our
operations.
Our
future success will depend on the success of our exploratory drilling program.
Oil and gas exploration involves a high degree of risk. These risks are more
acute in the early stages of exploration. Our expenditures on exploration may
not result in new discoveries of oil or natural gas in commercially viable
quantities. It is difficult to project the costs of implementing an exploratory
drilling program due to the inherent uncertainties of drilling in unknown
formations, the costs associated with encountering various drilling conditions,
such as over-pressured zones and tools lost in the hole, and changes in drilling
plans and locations as a result of prior exploratory wells or additional seismic
data and interpretations thereof.
Even
when
used and properly interpreted, 3D seismic data and visualization techniques
only
assist geoscientists in identifying subsurface structures and hydrocarbon
indicators. They do not allow the interpreter to know conclusively if
hydrocarbons are present or economically producible. In addition, the use of
3D
seismic data becomes less reliable when used at increasing depths. We could
incur losses as a result of expenditures on unsuccessful wells. If exploration
costs exceed our estimates, or if our exploration efforts do not produce results
which meet our expectations, our exploration efforts may not be commercially
successful, which could adversely impact our ability to generate revenues from
our operations.
We
may not be able to develop oil and gas reserves on an economically viable basis,
and our reserves and production may decline as a result.
If
we
succeed in discovering oil and/or natural gas reserves, we cannot assure that
these reserves will be capable of production levels we project or in sufficient
quantities to be commercially viable. On a long-term basis, our viability
depends on our ability to find or acquire, develop and commercially produce
additional oil and natural gas reserves. Without the addition of reserves
through acquisition, exploration or development activities, our reserves and
production will decline over time as reserves are produced. Our future reserves
will depend not only on our ability to develop then-existing properties, but
also on our ability to identify and acquire additional suitable producing
properties or prospects, to find markets for the oil and natural gas we develop
and to effectively distribute our production into our markets.
Future
oil and gas exploration may involve unprofitable efforts, not only from dry
wells, but from wells that are productive but do not produce sufficient net
revenues to return a profit after drilling, operating and other costs.
Completion of a well does not assure a profit on the investment or recovery
of
drilling, completion and operating costs. In addition, drilling hazards or
environmental damage could greatly increase the cost of operations, and various
field operating conditions may adversely affect the production from successful
wells. These conditions include delays in obtaining governmental approvals
or
consents, shut-downs of connected wells resulting from extreme weather
conditions, problems in storage and distribution and adverse geological and
mechanical conditions. While we will endeavor to effectively manage these
conditions, we cannot be assured of doing so optimally, and we will not be
able
to eliminate them completely in any case. Therefore, these conditions could
diminish our revenue and cash flow levels and result in the impairment of our
oil and natural gas interests.
Estimates
of oil and natural gas reserves that we make may be inaccurate and our actual
revenues may be lower than our financial projections.
We
will
make estimates of oil and natural gas reserves, upon which we will base our
financial projections. We will make these reserve estimates using various
assumptions, including assumptions as to oil and natural gas prices, drilling
and operating expenses, capital expenditures, taxes and availability of funds.
Some of these assumptions are inherently subjective, and the accuracy of our
reserve estimates relies in part on the ability of our management team,
engineers and other advisors to make accurate assumptions. Economic factors
beyond our control, such as interest rates, will also impact the value of our
reserves. The process of estimating oil and natural gas reserves is complex,
and
will require us to use significant decisions and assumptions in the evaluation
of available geological, geophysical, engineering and economic data for each
property. As a result, our reserve estimates will be inherently imprecise.
Actual future production, oil and natural gas prices, revenues, taxes,
development expenditures, operating expenses and quantities of recoverable
oil
and natural gas reserves may vary substantially from those we estimate. If
actual production results vary substantially from our reserve estimates, this
could materially reduce our revenues and result in the impairment of our oil
and
natural gas interests.
Drilling
new wells could result in new liabilities, which could endanger our interests
in
our properties and assets.
There
are
risks associated with the drilling of oil and natural gas wells, including
encountering unexpected formations or pressures, premature declines of
reservoirs, blow-outs, craterings, sour gas releases, fires and spills, among
others. The occurrence of any of these events could significantly reduce our
revenues or cause substantial losses, impairing our future operating results.
We
may become subject to liability for pollution, blow-outs or other hazards.
We
intend to obtain insurance with respect to these hazards; however, such
insurance has limitations on liability that may not be sufficient to cover
the
full extent of such liabilities. The payment of such liabilities could reduce
the funds available to us or could, in an extreme case, result in a total loss
of our properties and assets. Moreover, we may not be able to maintain adequate
insurance in the future at rates that are considered reasonable. Oil and natural
gas production operations are also subject to all the risks typically associated
with such operations, including premature decline of reservoirs and the invasion
of water into producing formations.
Decommissioning
costs are unknown and may be substantial. Unplanned costs could divert resources
from other projects.
We
may
become responsible for costs associated with abandoning and reclaiming wells,
facilities and pipelines which we use for production of oil and natural gas
reserves. Abandonment and reclamation of these facilities and the costs
associated therewith is often referred to as “decommissioning.” We have not yet
determined whether we will establish a cash reserve account for these potential
costs in respect of any of our properties or facilities, or if we will satisfy
such costs of decommissioning from the proceeds of production in accordance
with
the practice generally employed in onshore and offshore oilfield operations.
If
decommissioning is required before economic depletion of our properties or
if
our estimates of the costs of decommissioning exceed the value of the reserves
remaining at any particular time to cover such decommissioning costs, we may
have to draw on funds from other sources to satisfy such costs. The use of
other
funds to satisfy such decommissioning costs could impair our ability to focus
capital investment in other areas of our business.
Our
inability to obtain necessary facilities could hamper our
operations.
Oil
and
gas exploration and development activities are dependent on the availability
of
drilling and related equipment, transportation, power and technical support
in
the particular areas where these
activities
will be conducted, and our access to these facilities may be limited. To the
extent that we conduct our activities in remote areas, needed facilities may
not
be proximate to our operations, which will increase our expenses. Demand for
such limited equipment and other facilities or access restrictions may affect
the availability of such equipment to us and may delay exploration and
development activities. The quality and reliability of necessary facilities
may
also be unpredictable and we may be required to make efforts to standardize
our
facilities, which may entail unanticipated costs and delays. Shortages and/or
the unavailability of necessary equipment or other facilities will impair our
activities, either by delaying our activities, increasing our costs or
otherwise.
We
may have difficulty distributing our production, which could harm our financial
condition.
In
order
to sell the oil and natural gas that we are able to produce, we will have to
make arrangements for storage and distribution to the market. We will rely
on
local infrastructure and the availability of transportation for storage and
shipment of our products, but infrastructure development and storage and
transportation facilities may be insufficient for our needs at commercially
acceptable terms in the localities in which we operate. This could be
particularly problematic to the extent that our operations are conducted in
remote areas that are difficult to access, such as areas that are distant from
shipping and/or pipeline facilities. These factors may affect our ability to
explore and develop properties and to store and transport our oil and natural
gas production and may increase our expenses. In the Eel River Basin in
California, we have contractual rights to access existing natural gas
transportation facilities. Depending on the success of our planned drilling,
it
is possible that we will be required to construct additional pipeline facilities
in the future in order to have sufficient capacity to transport all of our
natural gas production.
Furthermore,
weather conditions or natural disasters, actions by companies doing business
in
one or more of the areas in which we will operate, or labor disputes may impair
the distribution of oil and/or natural gas and in turn diminish our financial
condition or ability to maintain our operations.
Prices
and markets for oil and natural gas are unpredictable and tend to fluctuate
significantly, which could reduce profitability, growth and the value of our
business.
Oil
and
natural gas are commodities whose prices are determined based on world demand,
supply and other factors, all of which are beyond our control. World prices
for
oil and natural gas have fluctuated widely in recent years, and have risen
to
record levels on a nominal basis in 2006. The average price for West Texas
Intermediate oil in 1999 was $22 per barrel. In 2002 it was $27 per barrel.
In
2005, it was $57 per barrel. During 2006, through September 29, 2006, the daily
spot price of West Texas Intermediate oil, as reported by the Wall
Street Journal,
peaked
at $77.03, and as of September 29, 2006 was reported as $62.92. We expect that
prices will fluctuate in the future. Price fluctuations will have a significant
impact upon our revenue, the return from our reserves and on our financial
condition generally. Price fluctuations for oil and natural gas commodities
may
also impact the investment market for companies engaged in the oil and gas
industry. Prices may not remain at current levels. Future decreases in the
prices of oil and natural gas may have a material adverse effect on our
financial condition, the future results of our operations and quantities of
reserves recoverable on an economic basis.
Increases
in our operating expenses will impact our operating results and financial
condition.
Exploration,
development, production, marketing (including distribution costs) and regulatory
compliance costs (including taxes) will substantially impact the net revenues
we
derive from the oil and natural gas that we produce. These costs are subject
to
fluctuations and variation in different locales in which we will operate, and
we
may not be able to predict or control these costs. If these costs exceed our
expectations,
this
may
adversely affect our results of operations. In addition, we may not be able
to
earn net revenue at our predicted levels, which may impact our ability to
satisfy our obligations.
Penalties
we may incur could impair our business.
Failure
to comply with government regulations could subject us to civil and criminal
penalties, could require us to forfeit property rights, and may affect the
value
of our assets. We may also be required to take corrective actions, such as
installing additional equipment or taking other actions, each of which could
require us to make substantial capital expenditures. We could also be required
to indemnify our employees in connection with any expenses or liabilities that
they may incur individually in connection with regulatory action against them.
As a result, our future business prospects could deteriorate due to regulatory
constraints, and our profitability could be impaired by our obligation to
provide such indemnification to our employees.
Environmental
risks may adversely affect our business.
All
phases of the oil and gas business present environmental risks and hazards
and
are subject to environmental regulation pursuant to a variety of federal, state
and municipal laws and regulations. Environmental legislation provides for,
among other things, restrictions and prohibitions on spills, releases or
emissions of various substances produced in association with oil and gas
operations. The legislation also requires that wells and facility sites be
operated, maintained, abandoned and reclaimed to the satisfaction of applicable
regulatory authorities. Compliance with such legislation can require significant
expenditures and a breach may result in the imposition of fines and penalties,
some of which may be material. Environmental legislation is evolving in a manner
we expect may result in stricter standards and enforcement, larger fines and
liability and potentially increased capital expenditures and operating costs.
The discharge of oil, natural gas or other pollutants into the air, soil or
water may give rise to liabilities to governments and third parties and may
require us to incur costs to remedy such discharge. The application of
environmental laws to our business may cause us to curtail our production or
increase the costs of our production, development or exploration
activities.
Our
insurance may be inadequate to cover liabilities we may incur.
Our
involvement in the exploration for and development of oil and gas properties
may
result in our becoming subject to liability for pollution, blow-outs, property
damage, personal injury or other hazards. Although we expect to obtain insurance
in accordance with industry standards to address such risks, such insurance
has
limitations on liability that may not be sufficient to cover the full extent
of
such liabilities. In addition, such risks may not, in all circumstances, be
insurable or, in certain circumstances, we may choose not to obtain insurance
to
protect against specific risks due to the high premiums associated with such
insurance or for other reasons. The payment of such uninsured liabilities would
reduce the funds available to us. If we suffer a significant event or occurrence
that is not fully insured, or if the insurer of such event is not solvent,
we
could be required to divert funds from capital investment or other uses towards
covering our liability for such events.
Our
business will suffer if we cannot obtain or maintain necessary
licenses.
Our
operations will require licenses, permits and in some cases renewals of licenses
and permits from various governmental authorities. Our ability to obtain,
sustain or renew such licenses and permits on acceptable terms is subject to
change in regulations and policies and to the discretion of the applicable
governments, among other factors. Our inability to obtain, or our loss of or
denial of extension, to any of these licenses or permits could hamper our
ability to produce revenues from our operations.
Challenges
to our properties may impact our financial condition.
Title
to
oil and gas interests is often not capable of conclusive determination without
incurring substantial expense. While we intend to make appropriate inquiries
into the title of properties and other development rights we acquire, title
defects may exist. In addition, we may be unable to obtain adequate insurance
for title defects, on a commercially reasonable basis or at all. If title
defects do exist, it is possible that we may lose all or a portion of our right,
title and interests in and to the properties to which the title defects relate.
If
our
property rights are reduced, our ability to conduct our exploration, development
and production activities may be impaired.
We
will rely on technology to conduct our business and our technology could become
ineffective or obsolete.
We
rely
on technology, including geographic and seismic analysis techniques and economic
models, to develop our reserve estimates and to guide our exploration,
development and production activities. We will be required to continually
enhance and update our technology to maintain its efficacy and to avoid
obsolescence. The costs of doing so may be substantial, and may be higher than
the costs that we anticipate for technology maintenance and development. If
we
are unable to maintain the efficacy of our technology, our ability to manage
our
business and to compete may be impaired. Further, even if we are able to
maintain technical effectiveness, our technology may not be the most efficient
means of reaching our objectives, in which case we may incur higher operating
costs than we would were our technology more efficient.
RISKS
RELATED TO OUR COMMON STOCK
There
has been a limited trading market for our common stock and no market for our
warrants.
There
has
been a limited trading market for our common stock on the Over-the-Counter
Bulletin Board and no established market for the warrants. The lack of an
active
market may impair the ability of our investors to sell their shares of common
stock or their warrants at the time they wish to sell them or at a price
that
they consider reasonable. The lack of an active market may also reduce the
fair
market value of the shares of common stock and warrants to be sold under
this
prospectus. An inactive market may also impair our ability to raise capital
by
selling shares of capital stock and may impair our ability to acquire other
companies or technologies by using our common stock as
consideration.
You
may have difficulty trading and obtaining quotations for our common stock or
warrants.
Our
common stock is currently quoted on the Over-the-Counter Bulletin Board
under the symbol “FTRS.OB.” Our warrants do not currently trade on any exchange
or market. Our common stock has been actively traded for only a limited time,
and the bid and ask prices for our common stock have fluctuated widely. As
a
result, investors may find it difficult to dispose of, or to obtain accurate
quotations of the price of, our common stock and our warrants. This severely
limits the liquidity of our common stock and our warrants, and would likely
reduce the market price of our common stock and warrants, and hamper our
ability
to raise additional capital.
The
market price of our common stock is, and is likely to continue to be, highly
volatile and subject to wide fluctuations.
The
market price of our common stock is likely to continue to be highly volatile
and
could be subject to
wide
fluctuations in response to a number of factors that are beyond our control,
including:
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dilution
caused by our issuance of additional shares of common stock and other
forms of equity securities, which we expect to make in connection
with
future capital financings to fund our operations and growth, to attract
and retain valuable personnel and in connection with future strategic
partnerships with other companies;
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announcements
of new acquisitions, reserve discoveries or other business initiatives
by
our competitors;
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our
ability to take advantage of new acquisitions (such as our acquisition
of
certain properties of TARH E&P Holdings, L.P., reserve discoveries or
other business initiatives;
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fluctuations
in revenue from our oil and gas business as new reserves come to
market;
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changes
in the market for oil and natural gas commodities and/or in the capital
markets generally;
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changes
in the demand for oil and natural gas, including changes resulting
from
the introduction or expansion of alternative fuels;
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quarterly
variations in our revenues and operating
expenses;
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changes
in the valuation of similarly situated companies, both in our industry
and
in other industries;
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changes
in analysts’ estimates affecting our company, our competitors and/or our
industry;
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changes
in the accounting methods used in or otherwise affecting our
industry;
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additions
and departures of key personnel;
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announcements
of technological innovations or new products available to the oil
and gas
industry;
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announcements
by relevant governments pertaining to incentives for alternative
energy
development programs;
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fluctuations
in interest rates and the availability of capital in the capital
markets;
and
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significant
sales of our common stock or warrants, including sales by the investors
following registration of the shares under this prospectus.
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These
and
other factors are largely beyond our control, and the impact of these risks,
singly or in the aggregate, may result in material adverse changes to the market
price of our common stock and our warrants, and/or our results of operations
and
financial condition.
Our
operating results may fluctuate significantly, and these fluctuations may cause
the price of our common stock and our warrants to decline.
Our
operating results will likely vary in the future primarily as the result of
fluctuations in our revenues
and
operating expenses, including the coming to market of oil and natural gas
reserves that we are able to develop, expenses that we incur, the prices of
oil
and natural gas in the commodities markets and other factors. If our results
of
operations do not meet the expectations of current or potential investors,
the
price of our common stock and our warrants may decline.
We
do
not expect to pay dividends in the foreseeable future.
We
do not
intend to declare dividends for the foreseeable future, as we anticipate that
we
will reinvest any future earnings in the development and growth of our business.
Therefore, investors will not receive any funds unless they sell their common
stock or warrants, and stockholders may be unable to sell their shares and
warrants on favorable terms or at all. Investors cannot be assured of a positive
return on investment or that they will not lose the entire amount of their
investment in our common stock and warrants.
Stockholders
will experience dilution upon the exercise of warrants and
options.
As
of December 12,
2006,
there are 20,693,127
shares
of common stock underlying warrants issued and outstanding, which if exercised
or converted, could decrease the net tangible book value of our common stock.
In
addition, there are 2,000,000 shares of common stock underlying options that
may
be granted, of which options for 1,690,000 shares of common stock have already
been granted, pursuant to the Company’s 2006 Equity Incentive Plan. If the
holders of those options exercise those options, stockholders may experience
dilution in the net tangible book value of our common stock. Further, the
sale
or availability for sale of the underlying shares in the marketplace could
depress our stock price. We have registered or agreed to register for resale
the
above-described warrants all of the shares of common stock underlying such
warrants. Holders of registered underlying shares could resell the shares
immediately upon registration, resulting in significant downward pressure
on our
stock price.
Directors
and officers of the Company will have a high concentration of common stock
ownership.
Based
on
the 60,281,253 shares of common stock that are issued and outstanding as
of December 12,
2006,
our officers and directors beneficially own approximately 29.3% of our
outstanding common stock. Such a high level of ownership by such persons
may
have a significant effect in delaying, deferring or preventing any potential
change in control of Foothills. Additionally, as a result of their high level
of
ownership, our officers and directors might be able to strongly influence
the
actions of the Company’s board of directors and the outcome of actions brought
to our stockholders for approval. Such a high level of ownership may adversely
affect the voting and other rights of our stockholders.
Applicable
SEC rules governing the trading of “penny stocks” limit the trading and
liquidity of our common stock, which may affect the trading price of our common
stock.
Shares
of
our common stock may be considered a “penny stock” and be subject to SEC rules
and regulations which impose limitations upon the manner in which such shares
may be publicly traded and regulate broker-dealer practices in connection with
transactions in “penny stocks.” Penny stocks generally are equity securities
with a price of less than $5.00 (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 system). The penny stock rules require
a broker-dealer, prior to a transaction in a penny stock not otherwise exempt
from the rules, to deliver a standardized risk disclosure document that provides
information about penny stocks and the risks in the penny stock market. The
broker-dealer must also provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and monthly account statements showing the
market value of each penny
stock
held in the customer’s account. In addition, the penny stock rules generally
require that prior to a transaction in a penny stock, the broker-dealer make
a
special written determination that the penny stock is a suitable investment
for
the purchaser and receive the purchaser’s written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to
the
penny stock rules which may increase the difficulty investors may experience
in
attempting to liquidate an investment in our common stock or warrants.
This
prospectus contains forward-looking statements within the meaning of Section
27A
of the Securities Act of 1933, as amended (the “Securities Act”), and Section
21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
This prospectus includes statements regarding our plans, goals, strategies,
intent, beliefs or current expectations. These statements are expressed in
good
faith and based upon a reasonable basis when made, but there can be no assurance
that these expectations will be achieved or accomplished. These forward looking
statements can be identified by the use of terms and phrases such as “believe,”
“plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like,
and/or future-tense or conditional constructions “may,” “could,” “should,” etc.
Items contemplating or making assumptions about, actual or potential future
sales, market size, collaborations, and trends or operating results also
constitute such forward-looking statements.
Although
forward-looking statements in this prospectus reflect the good faith judgment
of
our management, forward-looking statements are inherently subject to known
and
unknown risks, business, economic and other risks and uncertainties that may
cause actual results to be materially different from those discussed in these
forward-looking statements. Readers are urged not to place undue reliance on
these forward-looking statements, which speak only as of the date of this
prospectus. We assume no obligation to update any forward-looking statements
in
order to reflect any event or circumstance that may arise after the date of
this
prospectus, other than as may be required by applicable law or regulation.
Readers are urged to carefully review and consider the various disclosures
made
by us in our reports filed with the Securities and Exchange Commission which
attempt to advise interested parties of the risks and factors that may affect
our business, financial condition, results of operation and cash flows. If
one
or more of these risks or uncertainties materialize, or if the underlying
assumptions prove incorrect, our actual results may vary materially from those
expected or projected.
This
prospectus covers warrants and shares of our common stock, including shares
underlying warrants, sold in our recent private equity offerings, in April,
2006
and September, 2006, to “accredited investors” as defined by Rule 501(a) under
the Securities Act pursuant to an exemption from registration provided in
Regulation D, Rule 506 under Section 4(2) of the Securities Act. The
selling stockholders may from time to time offer and sell under this prospectus
any or all of the warrants or shares of common stock listed opposite each
of
their names below. We are required, under a registration rights agreement,
to
register for resale the warrants and the shares of our common stock described
in
the tables below.
Common
Stock
The
following table sets forth information about the number of shares of our
common
stock beneficially owned by each selling stockholder that may be offered
from
time to time under this prospectus. Certain selling stockholders may be deemed
to be “underwriters” as defined in the Securities Act. Any profits realized by
such selling stockholders may be deemed to be underwriting
commissions.
The
table
below has been prepared based upon the information furnished to us by the
selling stockholders as of December 12,
2006.
The selling stockholders identified below may have sold, transferred or
otherwise disposed of some or all of their shares since the date on which
the
information in the following table is presented in transactions exempt
from or
not subject to the registration requirements of the Securities Act. Information
concerning the selling stockholders may change from time to time and, if
necessary, we will amend or supplement this prospectus accordingly. We
cannot
provide an exact amount, but have provided an estimate, of the number of
shares
of common stock that will be held by the selling stockholders upon termination
of this offering because the selling stockholders may offer some or all
of their
common stock under the offering contemplated by this prospectus. The total
number of shares that may be sold hereunder will not exceed the number
of shares
offered hereby. Please read the section entitled “Plan of Distribution” in this
prospectus.
We
have
been advised, as noted below in the footnotes to the table, 18 of the selling
stockholders are broker-dealers and 8 of the selling stockholders are
affiliates of broker-dealers. We have been advised that each of such selling
stockholders purchased our common stock and warrants in the ordinary course
of
business, not for resale, and that none of such selling stockholders had,
at the
time of purchase, any agreements or understandings, directly or indirectly,
with
any person to distribute the related common stock.
The
following table sets forth the name of each selling stockholder, the nature
of
any position, office, or other material relationship, if any, which the selling
stockholder has had, within the past three years, with us or with any of
our
predecessors or affiliates, and the number of shares of our common stock
beneficially owned by such stockholder before this offering. The number of
shares owned are those beneficially owned, as determined under the rules
of the
SEC, and such information is not necessarily indicative of beneficial ownership
for any other purpose. Under such rules, beneficial ownership includes any
shares of common stock as to which a person has sole or shared voting power
or
investment power and any shares of common stock which the person has the
right
to acquire within 60 days through the exercise of any option, warrant or
right,
through conversion of any security or pursuant to the automatic termination
of a
power of attorney or revocation of a trust, discretionary account or similar
arrangement.
Unless
otherwise indicated, the stockholders listed in the table below acquired
their
shares in our private offerings on April 6, 2006, April 20, 2006 or September
8,
2006. The percentage of common stock outstanding is based upon a total
of 60,281,253 issued and outstanding shares of our common stock
on December 12,
2006.
Shares underlying warrants or options exercisable within 60 days
of December 12,
2006
are considered for the purpose of determining the percent of the class
held by
the holder of such warrants or options, but not for the purpose of computing
the
percentages held by others. We have assumed all shares reflected on the
table
that were acquired in our private offerings will be sold from time to time.
Because the selling stockholders may offer all or any portion of the common
stock listed in the table below, no estimate can be given as to the amount
of
those shares of common stock acquired in our private offerings that will
be held
by the selling stockholders upon the termination of any sales of common
stock.
Beneficial
ownership is calculated based on 60,281,253 shares
of
our common stock outstanding as of December 12,
2006.
Beneficial ownership is determined in accordance with Rule 13d-3 of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage of ownership of that
person,
shares of common stock subject to options or warrants held by that person
that
are currently exercisable or become exercisable within 60 days of December
12,
2006
are deemed outstanding even if they have not actually been exercised. The
persons and entities named in the table have sole voting and sole investment
power with respect to the shares set forth opposite the stockholder’s name,
subject to community property laws, where applicable, unless otherwise
noted in
the footnotes to the table.
|
Shares
of Common Stock Owned Before the Offering
|
Shares
of Common Stock Being Offered
|
Shares
of Common Stock Owned Upon Completion of the Offering
(a)
|
Percentage
of Common Stock Outstanding Upon Completion of
Offering
|
|
|
0702119
BC Ltd.1
|
1,312,500
|
1,312,500
|
—
|
—
|
|
1087741
Alberta Ltd.2
|
80,000
|
80,000
|
—
|
—
|
|
719906
BC Ltd.3
|
250,000
|
250,000
|
—
|
—
|
|
Adam
S. Gottbetter4
|
125,001
|
125,001
|
—
|
—
|
|
A.H.
Investments5
|
22,500
|
22,500
|
—
|
—
|
|
AK
Asset Management6
|
262,501
|
262,501
|
—
|
—
|
|
Alec
Morrison & Sandra Morrison7
|
99,999
|
99,999
|
—
|
—
|
|
Alfred
Ricciardi8
|
16,667
|
16,667
|
—
|
—
|
|
All
Seasons Consulting Inc.9
|
49,999
|
49,999
|
—
|
—
|
|
Alvin
L. Gray10
|
133,200
|
133,200
|
—
|
—
|
|
Andrew
A. Schatte11
|
20,000
|
20,000
|
—
|
—
|
|
Andrew
Goodacre12
|
62,500
|
62,500
|
—
|
—
|
|
Anke
Zenze13
|
61,187
|
61,187
|
—
|
—
|
|
Anthony
Bobulinski14
|
125,001
|
125,001
|
—
|
—
|
|
Arn
E. Schoch15
|
124,962
|
124,962
|
—
|
—
|
|
Atlantis
Software Company Employee Profit Sharing Plan16‡
|
49,999
|
49,999
|
—
|
—
|
|
Centrum
Bank AG17
|
1,875,001
|
1,875,001
|
—
|
—
|
|
Avtar
Dhillon18
|
62,500
|
62,500
|
—
|
—
|
|
Baradaran
Revocable Trust, Sharyar Baradaran Trustee19
|
625,000
|
625,000
|
—
|
—
|
|
Barry
Davis20
|
250,000
|
250,000
|
—
|
—
|
|
Barry
Tucker21
|
62,500
|
62,500
|
—
|
—
|
|
Ben
T. Morris22†
|
146,248
|
146,248
|
—
|
—
|
|
Bentley
N. Kerfoot23
|
104,000
|
104,000
|
—
|
—
|
|
Bernard
Bonertz24
|
25,001
|
25,001
|
—
|
—
|
|
Besser
Kapital Fund LTD25
|
75,012
|
75,012
|
—
|
—
|
|
Bifrost
Fund LP26
|
225,000
|
225,000
|
—
|
—
|
|
Bill
Haak and Johnnie S Haak27
|
79,301
|
79,301
|
—
|
—
|
|
Blake
Selig28
|
52,500
|
52,500
|
—
|
—
|
|
Balanced
Natural Resource Fund29
|
66,666
|
66,666
|
—
|
—
|
|
Shares
of Common Stock Owned Before the Offering
|
Shares
of Common Stock Being Offered
|
Shares
of Common Stock Owned Upon Completion of the Offering
(a)
|
Percentage
of Common Stock Outstanding Upon Completion of
Offering
|
|
|
Bonner
S. Ball30
|
75,000
|
75,000
|
—
|
—
|
|
Brad
Deason31†
|
37,500
|
37,500
|
—
|
—
|
|
Brad
Gabel32
|
62,500
|
62,500
|
—
|
—
|
|
Brede
C. Klefos33†
|
87,500
|
87,500
|
—
|
—
|
|
Brian
Hicks34
|
125,001
|
125,001
|
—
|
—
|
|
Brian
Kuhn35
|
262,500
|
262,500
|
—
|
—
|
|
Bruce
C. Gibbs and Lou Ann Gibbs36
|
70,000
|
70,000
|
—
|
—
|
|
Bruce
Nurse37
|
191,250
|
191,250
|
—
|
—
|
|
Bruce
R. McMaken38
|
70,001
|
70,001
|
—
|
—
|
|
Brunella
Jacs LLC39
|
250,005
|
250,005
|
—
|
—
|
|
CamCap
Energy Offshore Master Fund, L.P.40
|
1,170,000
|
1,170,000
|
—
|
—
|
|
CamCap
Resources Offshore Master Fund, L.P.41
|
630,000
|
630,000
|
—
|
—
|
|
Carl
Pipes42
|
37,500
|
37,500
|
—
|
—
|
|
Carmen
Lanza43
|
62,512
|
62,512
|
—
|
—
|
|
Carol
C. Barbour44
|
37,500
|
37,500
|
—
|
—
|
|
Carter
D. Pope45
|
75,000
|
75,000
|
—
|
—
|
|
Champion
Construction Consultants, Inc.46
|
18,725
|
18,725
|
—
|
—
|
|
Charbonneau
Limited Partnership47
|
62,500
|
62,500
|
—
|
—
|
|
Chester
R. Cloudt48
|
49,999
|
49,999
|
—
|
—
|
|
Chester
R. Cloudt, Jr.49
|
25,001
|
25,001
|
—
|
—
|
|
Chestnut
Ridge Partners, L.P.50
|
200,000
|
200,000
|
—
|
—
|
|
Choregus
Master Trust, Plan I, Money Purchase51
|
29,750
|
29,750
|
—
|
—
|
|
Choregus
Master Trust, Plan II, Profit Sharing52
|
29,750
|
29,750
|
—
|
—
|
|
Christine
M. Sanders53
|
22,500
|
22,500
|
—
|
—
|
|
Christopher
Neal Todd54
|
16,667
|
16,667
|
—
|
—
|
|
Christopher
Powell55
|
6,249
|
6,249
|
—
|
—
|
|
Craig
Taylor56
|
25,001
|
25,001
|
—
|
—
|
|
Cranshire
Capital, L.P.57
|
1,025,000
|
1,025,000
|
—
|
—
|
|
Crimson
Group, LTD58
|
23,325
|
23,325
|
—
|
—
|
|
Curtis
Conway59
|
350,000
|
350,000
|
—
|
—
|
|
Curtis
E. Smith and Mary H. Cummins Trust60
|
52,500
|
52,500
|
—
|
—
|
|
Dan
Mechis61
|
20,001
|
20,001
|
—
|
—
|
|
Danich
Investments Ltd.62
|
62,500
|
62,500
|
—
|
—
|
|
David
A Melman63
|
87,500
|
87,500
|
—
|
—
|
|
David
B. Steffan, Jr.64
|
25,001
|
25,001
|
—
|
—
|
|
David
B. Steffan, Sr.65
|
5,250
|
5,250
|
—
|
—
|
|
David
Jensen66
|
32,933
|
32,933
|
—
|
—
|
|
David
Malm67
|
20,001
|
20,001
|
—
|
—
|
|
Dennis
B. Tower68
|
4,824,219
|
262,500
|
4,561,719
|
7.6%
|
|
Dennis
Bleackley69
|
62,500
|
62,500
|
—
|
—
|
|
Dennis
H. Lundy70
|
37,501
|
37,501
|
—
|
—
|
|
DNG
Capital Corp.71
|
49,999
|
49,999
|
—
|
—
|
|
Don
Sanders and Tanya Drury TTEES FBO Tanya Jo Drury Trust72
|
56,250
|
56,250
|
—
|
—
|
|
Don
Weir and Julie Ellen Weir73‡
|
239,995
|
239,995
|
—
|
—
|
|
Donald
V Weir TTEE Sanders 1998 Children's Trust DTD 12/01/199774‡
|
506,275
|
506,275
|
—
|
—
|
|
Douglas
Patterson75
|
3,375
|
3,375
|
—
|
—
|
|
Dr.
William Grose Agency76
|
26,666
|
26,666
|
—
|
—
|
|
Earl
Fawcett77
|
62,500
|
62,500
|
—
|
—
|
|
Shares
of Common Stock Owned Before the Offering
|
Shares
of Common Stock Being Offered
|
Shares
of Common Stock Owned Upon Completion of the Offering
(a)
|
Percentage
of Common Stock Outstanding Upon Completion of
Offering
|
|
|
Edmund
H. Melhado78
|
75,000
|
75,000
|
—
|
—
|
|
Edward
Antonsen79
|
80,000
|
80,000
|
—
|
—
|
|
Edward
C. Kash80
|
23,333
|
23,333
|
—
|
—
|
|
Edwin
Freedman81
|
199,994
|
199,994
|
—
|
—
|
|
Emily
H. Todd82
|
16,667
|
16,667
|
—
|
—
|
|
EPSILON
Management LTD.83
|
37,506
|
37,506
|
—
|
—
|
|
Evonne
Whelan84
|
37,501
|
37,501
|
—
|
—
|
|
Ewan
Downie85
|
80,000
|
80,000
|
—
|
—
|
|
Francis
P. Knuettel TTEE Francis P Knuettel Rev LVG TR UA DTD
3/7/0386
|
125,001
|
125,001
|
—
|
—
|
|
Frank
J. Metyko, Jr. and Mark J. Metyko and Kurt F. Metyko
TTEES Frank J. Metyko
Residuary Trust DTD 10/08/8487
|
26,666
|
26,666
|
—
|
—
|
|
Frank
Knuettel II Trustee, The Knuettel Family Trust88
|
43,750
|
43,750
|
—
|
—
|
|
Frank
Knuettel, II89
|
49,875
|
49,875
|
—
|
—
|
|
Fred
Hagans90
|
139,994
|
139,994
|
—
|
—
|
|
Friedrich
Brenckman91
|
75,000
|
75,000
|
||
|
G.
Marie Smith92
|
116,500
|
116,500
|
—
|
—
|
|
Gary
E. Mintz93
|
262,500
|
262,500
|
—
|
—
|
|
Gary
Friedland94
|
18,750
|
18,750
|
—
|
—
|
|
Gary
Maynard95
|
33,750
|
33,750
|
—
|
—
|
|
GEM
Advisors96†
|
500,000
|
500,000
|
—
|
—
|
|
George
L. Ball97†
|
177,494
|
177,494
|
—
|
—
|
|
Georges
Antoun and Martha Antoun Ten Com98
|
46,667
|
46,667
|
—
|
—
|
|
Gerald
K. Bogen99
|
18,000
|
18,000
|
—
|
—
|
|
Gloria
D. Kelley100
|
18,750
|
18,750
|
—
|
—
|
|
Goldman,
Sachs & Co.101†
|
8,000,000
|
8,000,000
|
—
|
—
|
|
Grant
E Sims and Patricia Sims JT TEN102
|
37,500
|
37,500
|
—
|
—
|
|
Gregg
Sedun103
|
250,000
|
250,000
|
—
|
—
|
|
Gregory
Selig Lewis104
|
62,501
|
62,501
|
—
|
—
|
|
H.
Alan Dill105
|
222,000
|
222,000
|
—
|
—
|
|
H.
Ben Taub106
|
45,000
|
45,000
|
—
|
—
|
|
Hammonds
Management Trust107
|
16,875
|
16,875
|
—
|
—
|
|
Harry
Edelson108
|
1,250,001
|
1,250,001
|
—
|
—
|
|
Harry
Gabel109
|
62,500
|
62,500
|
—
|
—
|
|
Hayden
McIlroy110
|
212,500
|
212,500
|
—
|
—
|
|
Hedge
Capital Partners LLC111
|
125,001
|
125,001
|
—
|
—
|
|
Heimbuck
Family Trust DTD 8/13/85112
|
104,168
|
104,168
|
—
|
—
|
|
Herbert
Lippin113
|
22,500
|
22,500
|
—
|
—
|
|
Hyman
Gildenhorn and Vivian Gildenhorn114
|
133,332
|
133,332
|
—
|
—
|
|
Hypo
Alpe-Adria-Bank115
|
612,500
|
612,500
|
—
|
—
|
|
Don
A. Sanders116†
|
506,275
|
506,275
|
—
|
—
|
|
Don
S. Cook117
|
26,666
|
26,666
|
—
|
—
|
|
Erik
Klefos118†
|
87,500
|
87,500
|
—
|
—
|
|
Humbert
B. Powell119†
|
110,179
|
110,179
|
—
|
—
|
|
Lewis
S. Rosen120
|
16,667
|
16,667
|
—
|
—
|
|
Scott
M. Marshall121
|
87,500
|
87,500
|
—
|
—
|
|
William
W. Sprague122
|
88,751
|
88,751
|
—
|
—
|
|
J.
Barrett Developments, Ltd.123
|
25,001
|
25,001
|
—
|
—
|
|
Shares
of Common Stock Owned Before the Offering
|
Shares
of Common Stock Being Offered
|
Shares
of Common Stock Owned Upon Completion of the Offering
(a)
|
Percentage
of Common Stock Outstanding Upon Completion of
Offering
|
|
|
Jack
Coldwell124
|
62,500
|
62,500
|
—
|
—
|
|
Jack
Sheng125
|
40,000
|
40,000
|
—
|
—
|
|
James
T. Dilella Trust126
|
33,000
|
33,000
|
—
|
—
|
|
Jamie
Gilkison127
|
75,000
|
75,000
|
—
|
—
|
|
Jan
Bartholomew128†
|
16,667
|
16,667
|
—
|
—
|
|
Jan
Rask129
|
217,500
|
217,500
|
—
|
—
|
|
Jason
M. Rimland130
|
75,287
|
75,287
|
—
|
—
|
|
Jeffrey
Scott131
|
250,000
|
250,000
|
—
|
—
|
|
Jerry
F. and Nina L. Christopherson132
|
62,500
|
62,500
|
—
|
—
|
|
JMC
Investments Ltd.133
|
62,500
|
62,500
|
—
|
—
|
|
Joe
& Iola Bots134
|
62,500
|
62,500
|
—
|
—
|
|
Joel
Stuart135
|
18,750
|
18,750
|
—
|
—
|
|
John
A. Cary136
|
30,000
|
30,000
|
—
|
—
|
|
John
H. Malanga and Jodi F. Malanga, JT Ten Malanga137†
|
77,501
|
77,501
|
—
|
—
|
|
John
M. Martineck138
|
137,500
|
137,500
|
—
|
—
|
|
John
N. Spiliotis139
|
16,667
|
16,667
|
—
|
—
|
|
John
Seaman140
|
80,000
|
80,000
|
—
|
—
|
|
John
W. Lodge, III141
|
33,333
|
33,333
|
—
|
—
|
|
Joseph
Benjamin Johnson142
|
84,166
|
84,166
|
—
|
—
|
|
Judy
Kay Hunnemuller143
|
10,001
|
10,001
|
—
|
—
|
|
Karl
Antonius144
|
62,500
|
62,500
|
—
|
—
|
|
Katherine
U. Sanders145‡
|
397,475
|
397,475
|
—
|
—
|
|
Kenneth
R. Hartley Jr.146
|
33,750
|
33,750
|
—
|
—
|
|
Kenneth
S. Goodwin147
|
26,250
|
26,250
|
—
|
—
|
|
Kevin
Shugars, Lori Shugars148
|
33,750
|
33,750
|
—
|
—
|
|
Knox
Family Partnership, Lee M. Knox General Partner149
|
20,000
|
20,000
|
—
|
—
|
|
LA
Hougue Financial Management Services Limited150
|
375,001
|
375,001
|
—
|
—
|
|
Ladasa
Investments Inc.151
|
250,000
|
250,000
|
—
|
—
|
|
Larry
Hunnemuller152
|
10,001
|
10,001
|
—
|
—
|
|
Lenny
Olim153
|
52,500
|
52,500
|
—
|
—
|
|
Leon
Frenkel154
|
225,000
|
225,000
|
—
|
—
|
|
Leonard
C. Atkins155
|
37,500
|
37,500
|
—
|
—
|
|
Lisa
Dawn Weir156
|
37,500
|
37,500
|
—
|
—
|
|
Louis
Gleckel157
|
18,750
|
18,750
|
—
|
—
|
|
Louis
Zehil158
|
66,666
|
66,666
|
—
|
—
|
|
M.
Paul Tompkins159
|
100,000
|
100,000
|
—
|
—
|
|
M.
St. John Dinsmore160
|
37,500
|
37,500
|
—
|
—
|
|
Mark
Emalfarb Custodian for Hailey Emalfarb161
|
187,500
|
187,500
|
—
|
—
|
|
Mark
Emalfarb Guardian for Ashley Emalfarb162
|
187,500
|
187,500
|
—
|
—
|
|
Mark
Leszczynski163
|
21,000
|
21,000
|
—
|
—
|
|
Mark
Rousselot164
|
25,001
|
25,001
|
—
|
—
|
|
Mary
Harris Cooper165
|
26,666
|
26,666
|
—
|
—
|
|
Matthew
D. Myers166
|
17,250
|
17,250
|
—
|
—
|
|
Max
and Judy Poll Rev Trust167
|
33,333
|
33,333
|
—
|
—
|
|
Melton
Pipes168
|
22,500
|
22,500
|
—
|
—
|
|
Meteoric
L.P.169
|
120,000
|
120,000
|
—
|
—
|
|
MGK
Consulting Inc.170
|
80,000
|
80,000
|
—
|
—
|
|
Michael
J. Gaido, Jr.171
|
50,000
|
50,000
|
—
|
—
|
|
Shares
of Common Stock Owned Before the Offering
|
Shares
of Common Stock Being Offered
|
Shares
of Common Stock Owned Upon Completion of the Offering
(a)
|
Percentage
of Common Stock Outstanding Upon Completion of
Offering
|
|
|
Michael
John Fanti172
|
20,001
|
20,001
|
—
|
—
|
|
Michael
S. Chadwick173†
|
81,251
|
81,251
|
—
|
—
|
|
Morton
J. Weisberg174
|
16,650
|
16,650
|
—
|
—
|
|
Mosby
Lindsay Simmons III175
|
87,500
|
87,500
|
—
|
—
|
|
Nadine
C. Smith176
|
375,001
|
375,001
|
—
|
—
|
|
Natalie
Dull177
|
43,750
|
43,750
|
—
|
—
|
|
Nina
Holdings, LLC178‡
|
500,000
|
500,000
|
—
|
—
|
|
Nite
Capital LP179
|
666,667
|
666,667
|
—
|
—
|
|
Nunziata
Holdings Inc.180
|
200,001
|
200,001
|
—
|
—
|
|
NYBOR
Group Inc.181
|
93,749
|
93,749
|
—
|
—
|
|
Paula
L. Santoski182
|
59,999
|
59,999
|
—
|
—
|
|
Pauline
Tower183
|
26,250
|
26,250
|
—
|
—
|
|
Perfco
Investments Ltd.184
|
250,000
|
250,000
|
—
|
—
|
|
Philip
M. Garner and Carol P. Garner185
|
60,000
|
60,000
|
—
|
—
|
|
Professional
Trading Services SA186
|
1,250,001
|
1,250,001
|
—
|
—
|
|
Randall
W. Tower187
|
100,000
|
100,000
|
—
|
—
|
|
Richard
Lippin188
|
17,250
|
17,250
|
—
|
—
|
|
Richard
Macdermott189
|
62,500
|
62,500
|
—
|
—
|
|
Richard
W. Hodgman190
|
33,750
|
33,750
|
—
|
—
|
|
Rick
Berry191‡
|
16,667
|
16,667
|
—
|
—
|
|
RJS
JR/PLS 1992 Trust FBO Robert J Santoski Jr, Paula
Santoski
TTEE192
|
16,667
|
16,667
|
—
|
—
|
|
Rob
Anderson193†
|
375,001
|
375,001
|
—
|
—
|
|
Robert
Burschik194
|
262,425
|
262,425
|
—
|
—
|
|
Robert
F. Ruth Jr.195
|
108,000
|
108,000
|
—
|
—
|
|
Robert
J. Gonzales196
|
122,500
|
122,500
|
—
|
—
|
|
Robert
Pedlow197
|
87,500
|
87,500
|
—
|
—
|
|
Robert
Sarcher198
|
175,000
|
175,000
|
—
|
—
|
|
Robert
Schiesser199†
|
250,250
|
250,250
|
—
|
—
|
|
Robert
W. Bomengen200
|
21,506
|
21,506
|
—
|
—
|
|
Robert
Wilensky201
|
15,000
|
15,000
|
—
|
—
|
|
Rose
Anna Marshall202
|
70,000
|
70,000
|
—
|
—
|
|
Rosebury,
L.P.203
|
90,000
|
90,000
|
—
|
—
|
|
Roy
Alan Price204
|
30,000
|
30,000
|
—
|
—
|
|
Rune
Medhus & Elisa Medhus205†
|
147,494
|
147,494
|
—
|
—
|
|
Sam
Belzberg206
|
625,000
|
625,000
|
—
|
—
|
|
Samuel
Ginzburg207
|
25,008
|
25,008
|
—
|
—
|
|
Sanders
Morris Harris Inc.208†
|
667,431
|
667,431
|
—
|
—
|
|
Sanders
Opportunity Fund (Institutional) L.P.209†
|
1,209,353
|
1,209,353
|
—
|
—
|
|
Sanders
Opportunity Fund, L.P.210†
|
378,138
|
378,138
|
—
|
—
|
|
Sandra
L. Acosta211
|
49,999
|
49,999
|
—
|
—
|
|
Sanovest
Holdings Ltd.212
|
500,000
|
500,000
|
—
|
—
|
|
Scott
Rapfogel213
|
87,500
|
87,500
|
—
|
—
|
|
Leticia
Turullos214
|
16,667
|
16,667
|
—
|
—
|
|
Sierra
Madre Development, LLC215
|
18,725
|
18,725
|
—
|
—
|
|
Lawrence
R. Simonson216
|
62,500
|
62,500
|
—
|
—
|
|
Stanley
Katz217
|
250,005
|
250,005
|
—
|
—
|
|
SLS/PLS
1988 Trust FBO Samantha Leigh Santoski, Paula L
Santoski TTEE218
|
16,667
|
16,667
|
—
|
—
|
|
Stephen
Hanson219
|
300,001
|
300,001
|
—
|
—
|
|
Steve
Perry220
|
62,500
|
62,500
|
—
|
—
|
|
Shares
of Common Stock Owned Before the Offering
|
Shares
of Common Stock Being Offered
|
Shares
of Common Stock Owned Upon Completion of the
Offering
(a)
|
Percentage
of Common Stock Outstanding Upon Completion of
Offering
|
|
|
Steven
R. Hall221
|
22,500
|
22,500
|
—
|
—
|
|
Strong
Branch Ventures IV LLC222
|
1,750,000
|
1,750,000
|
—
|
—
|
|
Sue
M. Harris Separate Property223
|
33,333
|
33,333
|
—
|
—
|
|
Sue
Minton Harris TTEE Pinkye Lou Blair Estate Tr
u/w Dtd 6/15/91224
|
33,333
|
33,333
|
—
|
—
|
|
Susan
S. Lehrer225
|
16,667
|
16,667
|
—
|
—
|
|
T.
Scott O'Keefe226
|
162,499
|
162,499
|
—
|
—
|
|
Tanya
J. Drury227
|
56,250
|
56,250
|
—
|
—
|
|
The
Brewster Family Trust228
|
62,500
|
62,500
|
—
|
—
|
|
Thomas
Asarch and Barbara Asarch229
|
104,167
|
104,167
|
—
|
—
|
|
Thomas
E. Fish230
|
375,001
|
375,001
|
—
|
—
|
|
Titus
Harris, Jr.231‡
|
33,333
|
33,333
|
—
|
—
|
|
Tom
Juda and Nancy Juda232
|
124,994
|
124,994
|
—
|
—
|
|
Tom
Steffan233
|
12,500
|
12,500
|
—
|
—
|
|
US
Global Investors- Global Resources Fund234
|
1,900,001
|
1,900,001
|
—
|
—
|
|
V
MacLachlan Investments Corp.235‡
|
375,001
|
375,001
|
—
|
—
|
|
Vicki
T. Ruth236
|
105,900
|
105,900
|
—
|
—
|
|
Vincent
Vazquez237
|
174,000
|
174,000
|
—
|
—
|
|
W.
Kirk Bosché 238
|
3,331,212
|
126,000
|
3,205,212
|
5.3%
|
|
Wayne
C. Fox239
|
15,000
|
15,000
|
—
|
—
|
|
Wayne
Hucik240
|
62,500
|
62,500
|
—
|
—
|
|
Weitzman
Living Trust241
|
75,000
|
75,000
|
—
|
—
|
|
Whalehaven
Capital Fund Limited242
|
200,000
|
200,000
|
—
|
—
|
|
William
E. Grose243
|
26,666
|
26,666
|
—
|
—
|
|
William
F. Burkart244
|
63,000
|
63,000
|
—
|
—
|
|
William
L. Benson245
|
18,000
|
18,000
|
—
|
—
|
|
William
Lowe246
|
499,970
|
499,970
|
—
|
—
|
|
William
Sockman247
|
16,650
|
16,650
|
—
|
—
|
|
Y&S
Nazarian Revocable Trust248
|
1,249,999
|
1,249,999
|
—
|
—
|
|
Yarek
Bartosz249
|
62,500
|
62,500
|
—
|
—
|
|
Yellowstone
Limited Partnership250
|
75,000
|
75,000
|
—
|
—
|
|
Meridian
Global Energy & Resources Fund LT251
|
33,333
|
33,333
|
—
|
—
|
|
E.
Paul Jansen252
|
7,500
|
7,500
|
—
|
—
|
|
TARH
E&P Holdings, L.P.
|
1,605,345
|
1,605,345
|
—
|
—
|
† The
selling stockholder is a broker-dealer.
‡ The
selling stockholder is an affiliate of a broker-dealer.
*
Less
than
1.0%.
|
(a)
|
Assumes
all of the shares of common stock to be registered on this registration
statement, including all shares of common stock underlying warrants
held
by the selling stockholders, are sold in the offering by the selling
stockholders.
|
1
Includes
750,000 shares of common stock and warrants to acquire an additional 562,500
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Gary Korzenowski has the power to vote and
dispose
of the common shares being registered on behalf of 0702119 BC Ltd.
2 Includes
45,714 shares of common stock and warrants to acquire an additional 34,286
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Mr. Wade McBain has the power to vote and dispose
of the common shares being registered on behalf of 1087741 Alberta Ltd.
3 Includes
142,857 shares of common stock and warrants to acquire an additional 107,143
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Mr. Tom Kusumoto has the power to vote and
dispose
of the common shares being registered on behalf of 719906 BC Ltd.
4 Includes
71,429 shares of common stock and warrants to acquire an additional 53,572
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
5 Includes
15,000 shares of common stock and warrants to acquire an additional 7,500
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering. Mr. Bennett Altarman, President of A.H.
Investments, has the power to vote and dispose of the common shares being
registered on behalf of A.H. Investments.
6 Includes
150,000 shares of common stock and warrants to acquire an additional 112,501
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Mr. Kolbinger has the power to vote and dispose
of
the common shares being registered on behalf of AK Asset
Management.
7
Includes
66,666 shares of common stock and warrants to acquire an additional 33,333
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
8
Includes
11,111 shares of common stock and warrants to acquire an additional 5,556
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
9
Includes
28,571 shares of common stock and warrants to acquire an additional 21,428
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Negar Towfigh, President of All Seasons
Consulting, Inc. has the power to vote and dispose of the common shares being
registered on behalf of All Seasons Consulting, Inc.
10
Includes
88,800 shares of common stock and warrants to acquire an additional 44,400
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
11
Includes
13,333 shares of common stock and warrants to acquire an additional 6,667
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
12
Includes
35,714 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
13
Includes
34,964 shares of common stock and warrants to acquire an additional 26,223
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
14
Includes
71,429 shares of common stock and warrants to acquire an additional 53,572
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
15
Includes
71,407 shares of common stock and warrants to acquire an additional 53,555
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
16
Includes
28,571 shares of common stock and warrants to acquire an additional 21,428
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Rune Medhus has the power to vote and dispose
of
the common shares being registered on behalf of Atlantis Software Company
Employee Profit Sharing Plan.
17
Includes
1,071,429 shares of common stock and warrants to acquire an additional 803,572
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Gerhard Roosli has the power to vote and dispose
of the common shares being registered on behalf of Centrum Bank AG.
18
Includes
35,714 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
19
Includes
357,143 shares of common stock and warrants to acquire an additional 267,857
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
20
Includes
142,857 shares of common stock and warrants to acquire an additional 107,143
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
21
Includes
35,714 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
22
Includes
53,570 shares of common stock and warrants to acquire an additional 40,178
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 35,000 shares of common stock
and
warrants to acquire an additional 17,500 shares of common stock at an exercise
price of $2.75 per share, acquired in the April, 2006 private
offering.
23
Includes
69,333 shares of common stock and warrants to acquire an additional 34,667
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
24
Includes
14,286 shares of common stock and warrants to acquire an additional 10,715
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
25
Includes
50,008 shares of common stock and warrants to acquire an additional 25,004
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering. Oliver Chaponnier and M. Montanari have
the
power to vote and dispose of the common shares being registered on behalf
of
Besser Kapital Fund LTD.
26
Includes
150,000 shares of common stock and warrants to acquire an additional 75,000
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering. Peter Trapp, founding member of Bifrost
Fund
LP, has the power to vote and dispose of the common shares being registered
on
behalf of Bifrost Fund LP.
27
Includes
35,715 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 11,200 shares of common stock
and
warrants to acquire an additional 5,600 shares of common stock at an exercise
price of $2.75 per share, acquired in the April, 2006 private
offering.
28
Includes
30,000 shares of common stock and warrants to acquire an additional 22,500
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
29
Includes
44,444 shares of common stock and warrants to acquire an additional 22,222
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering. Ralph Aldis, portfolio manager, has the
power
to vote and dispose of the common shares being registered on behalf of Balanced
Natural Resource Fund.
30
Includes
50,000 shares of common stock and warrants to acquire an additional 25,000
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
31
Includes
25,000 shares of common stock and warrants to acquire an additional 12,500
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
32
Includes
35,714 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
33
Includes
50,000 shares of common stock and warrants to acquire an additional 37,500
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
34
Includes
71,429 shares of common stock and warrants to acquire an additional 53,572
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
35
Includes
150,000 shares of common stock and warrants to acquire an additional 112,500
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
36
Includes
40,000 shares of common stock and warrants to acquire an additional 30,000
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
37
Includes
75,000 shares of common stock and warrants to acquire an additional 56,250
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 40,000 shares of common stock
and
warrants to acquire an additional 20,000 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private offering.
38
Includes
35,715 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 40,000 shares of common stock
and
warrants to acquire an additional 20,000 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private offering.
39
Includes
142,860 shares of common stock and warrants to acquire an additional 107,145
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Stanley Katz has the power to vote and dispose
of
the common shares being registered on behalf of Brunella Jacs, LLC.
40
Includes
780,000 shares of common stock and warrants to acquire an additional 390,000
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering. Roland A. von Metzech, managing member
of
CamCap Energy Partners, the General Partner of CamCap Energy Offshore Master
Fund, L.P., has the power to vote and dispose of the common shares being
registered on behalf of CamCap Energy Offshore Master Fund, L.P.
41
Includes
420,000 shares of common stock and warrants to acquire an additional 210,000
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering. Roland A. von Metzech, managing member
of
CamCap Energy Partners, the General Partner of CamCap Resources Offshore
Master
Fund, L.P., has the power to vote and dispose of the common shares being
registered on behalf of CamCap Resources Offshore Master Fund, L.P.
42
Includes
25,000 shares of common stock and warrants to acquire an additional 12,500
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
43
Includes
35,721 shares of common stock and warrants to acquire an additional 26,791
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
44
Includes
25,000 shares of common stock and warrants to acquire an additional 12,500
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
45
Includes
50,000 shares of common stock and warrants to acquire an additional 25,000
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
46
Includes
10,700 shares of common stock and warrants to acquire an additional 8,025
shares
of common stock at an exercise price of $1.00 per share, acquired in the
April,
2006 private offering. Gary Huel has the power to vote and dispose of the
common
shares being registered on behalf of Champion Construction Consultants,
Inc.
47
Includes
35,714 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. A.J. Charbonneau and D. Davidson have the power
to
vote and dispose of the common shares being registered on behalf of Charbonneau
Limited Partnership.
48
Includes
28,571 shares of common stock and warrants to acquire an additional 21,428
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
49
Includes
14,286 shares of common stock and warrants to acquire an additional 10,715
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
50
Includes
133,333 shares of common stock and warrants to acquire an additional 66,667
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering. Kenneth Holz has the power to vote and
dispose
of the common shares being registered on behalf of Chestnut Ridge Partners,
L.P.
51
Includes
17,000 shares of common stock and warrants to acquire an additional 12,750
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Christopher Moyes has the power to vote and
dispose of the common shares being registered on behalf of Choregus Master
Trust, Plan I, Money Purchase.
52
Includes
17,000 shares of common stock and warrants to acquire an additional 12,750
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Christopher Moyes has the power to vote and
dispose of the common shares being registered on behalf of Choregus Master
Trust, Plan II, Profit Sharing.
53
Includes
15,000 shares of common stock and warrants to acquire an additional 7,500
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
54
Includes
11,111 shares of common stock and warrants to acquire an additional 5,556
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
55
Includes
3,571 shares of common stock and warrants to acquire an additional 2,678
shares
of common stock at an exercise price of $1.00 per share, acquired in the
April,
2006 private offering.
56
Includes
14,286 shares of common stock and warrants to acquire an additional 10,715
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
57
Includes
500,000 shares of common stock and warrants to acquire an additional 375,000
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 100,000 shares of common stock
and
warrants to acquire an additional 50,000 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private offering.
Mitchell P. Kopin, President of Downsview Capital, Inc., the General Partner
of
Cranshire Capital, L.P., has the power to vote and dispose of the common
shares
being registered on behalf of Cranshire Capital, L.P.
58
Includes
15,550 shares of common stock and warrants to acquire an additional 7,775
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering. C. Dean Patrineu, President of Gatol
Enterprises, Inc., the General Partner of Crimson Group, LTD, has the power
to
vote and dispose of the common shares being registered on behalf of Crimson
Group, LTD.
59
Includes
200,000 shares of common stock and warrants to acquire an additional 150,000
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
60
Includes
35,000 shares of common stock and warrants to acquire an additional 17,500
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
61
Includes
11,429 shares of common stock and warrants to acquire an additional 8,572
shares
of common stock at an exercise price of $1.00 per share, acquired in the
April,
2006 private offering.
62
Includes
35,714 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Danny Remenda has the power to vote and dispose
of
the common shares being registered on behalf of Danich Investments
Ltd.
63
Includes
50,000 shares of common stock and warrants to acquire an additional 37,500
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
64
Includes
14,286 shares of common stock and warrants to acquire an additional 10,715
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
65
Includes
3,000 shares of common stock and warrants to acquire an additional 2,250
shares
of common stock at an exercise price of $1.00 per share, acquired in the
April,
2006 private offering.
66
Includes
21,955 shares of common stock and warrants to acquire an additional 10,978
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
67
Includes
11,429 shares of common stock and warrants to acquire an additional 8,572
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
68 Shares
of Common Stock Owned Before the Offering includes 150,000 shares of common
stock to be registered hereunder, 4,561,719 shares of common stock not
being
registered in this prospectus, and warrants to acquire an additional 112,500
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Mr. Tower serves as our Chief Executive Officer
and a member of our board of directors.
69
Includes
35,714 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
70
Includes
21,429 shares of common stock and warrants to acquire an additional 16,072
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
71
Includes
28,571 shares of common stock and warrants to acquire an additional 21,428
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Nick Demare, President, has the power to vote
and
dispose of the common shares being registered on behalf of DNG Capital
Corp.
72
Includes
37,500 shares of common stock and warrants to acquire an additional 18,750
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
73
Includes
107,140 shares of common stock and warrants to acquire an additional 80,355
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 35,000 shares of common stock
and
warrants to acquire an additional 17,500 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private offering.
74
Includes
214,300 shares of common stock and warrants to acquire an additional 160,725
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 87,500 shares of common stock
and
warrants to acquire an additional 43,750 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private
offering
75
Includes
2,250 shares of common stock and warrants to acquire an additional 1,125
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
76
Includes
17,777 shares of common stock and warrants to acquire an additional 8,889
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
77
Includes
35,714 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
78
Includes
50,000 shares of common stock and warrants to acquire an additional 25,000
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
79
Includes
45,714 shares of common stock and warrants to acquire an additional 34,286
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
80
Includes
15,555 shares of common stock and warrants to acquire an additional 7,778
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
81
Includes
71,425 shares of common stock and warrants to acquire an additional 53,569
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 50,000 shares of common stock
and
warrants to acquire an additional 25,000 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private offering.
82
Includes
11,111 shares of common stock and warrants to acquire an additional 5,556
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
83
Includes
25,004 shares of common stock and warrants to acquire an additional 12,502
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering. Olivier Chaponnier, Director, has the power
to
vote and dispose of the common shares being registered on behalf of EPSILON
Management LTD.
84
Includes
21,429 shares of common stock and warrants to acquire an additional 16,072
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
85
Includes
45,714 shares of common stock and warrants to acquire an additional 34,286
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
86
Includes
71,429 shares of common stock and warrants to acquire an additional 53,572
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Mr. Knuettel serves on our board of
directors.
87
Includes
17,777 shares of common stock and warrants to acquire an additional 8,889
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
88
Includes
25,000 shares of common stock and warrants to acquire an additional 18,750
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
89
Includes
28,500 shares of common stock and warrants to acquire an additional 21,375
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
90
Includes
71,425 shares of common stock and warrants to acquire an additional 53,569
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 10,000 shares of common stock
and
warrants to acquire an additional 5,000 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private offering.
91
Includes
50,000 shares of common stock and warrants to acquire an additional 25,000
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
92
Includes
58,000 shares of common stock and warrants to acquire an additional 43,500
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 10,000 shares of common stock
and
warrants to acquire an additional 5,000 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private offering.
93
Includes
150,000 shares of common stock and warrants to acquire an additional 112,500
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
94
Includes
12,500 shares of common stock and warrants to acquire an additional 6,250
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
95
Includes
22,500 shares of common stock and warrants to acquire an additional 11,250
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
96
Includes
500,000 shares of common stock issued to GEM Advisors in April,
2006.
97
Includes
71,425 shares of common stock and warrants to acquire an additional 53,569
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 35,000 shares of common stock
and
warrants to acquire an additional 17,500 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private offering.
98
Includes
31,111 shares of common stock and warrants to acquire an additional 15,556
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
99
Includes
12,000 shares of common stock and warrants to acquire an additional 6,000
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
100
Includes
12,500 shares of common stock and warrants to acquire an additional 6,250
shares
of common stock at an exercise price of $2.75 per share, acquired in the
eptember, 2006 private offering.
101
Includes
3,333,333 shares of common stock and warrants to acquire an additional 4,666,667
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering. Colleen Foster, managing director, has the
power to vote and dispose of the common shares being registered on behalf
of
Goldman, Sachs & Co.
102
Includes
25,000 shares of common stock and warrants to acquire an additional 12,500
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
103
Includes
142,857 shares of common stock and warrants to acquire an additional 107,143
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
104
Includes
35,715 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
105
Includes
148,000 shares of common stock and warrants to acquire an additional 74,000
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
106
Includes
30,000 shares of common stock and warrants to acquire an additional 15,000
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
107
Includes
11,250 shares of common stock and warrants to acquire an additional 5,625
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering. Ronnie D. Hammonds has the power to vote
and
dispose of the common shares being registered on behalf of Hammonds Management
Trust.
108
Includes
714,286 shares of common stock and warrants to acquire an additional 535,715
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
109
Includes
35,714 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
110
Includes
100,000 shares of common stock and warrants to acquire an additional 75,000
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 25,000 shares of common stock
and
warrants to acquire an additional 12,500 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private offering.
111
Includes
71,429 shares of common stock and warrants to acquire an additional 53,572
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Allan Rothstein, managing member, has the power
to
vote and dispose of the common shares being registered on behalf of Hedge
Capital Partners.
112
Includes
50,000 shares of common stock and warrants to acquire an additional 37,500
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 11,112 shares of common stock
and
warrants to acquire an additional 5,556 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private offering.
Jeff
Heimbuck, trustee, has the power to vote and dispose of the common shares
being
registered on behalf of the Heimbuck Family Trust.
113
Includes
15,000 shares of common stock and warrants to acquire an additional 7,500
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
114
Includes
88,888 shares of common stock and warrants to acquire an additional 44,444
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
115
Includes
350,000 shares of common stock and warrants to acquire an additional 262,500
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. P. Mast and E. Beck have the power to vote
and
dispose of the common shares being registered on behalf of Hypo
Alpe-Adria-Bank.
116
Includes
214,300 shares of common stock and warrants to acquire an additional 160,725
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 87,500 shares of common stock
and
warrants to acquire an additional 43,750 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private offering.
117
Includes
17,777 shares of common stock and warrants to acquire an additional 8,889
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
118
Includes
50,000 shares of common stock and warrants to acquire an additional 37,500
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
119
Includes
35,715 shares of common stock and warrants to acquire an additional 48,214
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Includes 17,500 shares of common stock and
warrants to acquire an additional 8,750 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private
offering.
120
Includes
11,111 shares of common stock and warrants to acquire an additional 5,556
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
121
Includes
50,000 shares of common stock and warrants to acquire an additional 37,500
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
122
Includes
35,715 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 17,500 shares of common stock
and
warrants to acquire an additional 8,750 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private offering.
123
Includes
14,286 shares of common stock and warrants to acquire an additional 10,715
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Werner Henzler has the power to vote and dispose
of the common shares being registered on behalf of J. Barrett Developments
Ltd.
124
Includes
35,714 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
125
Includes
22,857 shares of common stock and warrants to acquire an additional 17,143
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
126
Includes
22,000 shares of common stock and warrants to acquire an additional 11,000
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
127
Includes
42,857 shares of common stock and warrants to acquire an additional 32,143
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
128
Includes
11,111 shares of common stock and warrants to acquire an additional 5,556
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
129
Includes
85,714 shares of common stock and warrants to acquire an additional 64,286
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Includes 45,000 shares of common stock and
warrants to acquire an additional 22,500 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private offering.
130
Includes
43,021 shares of common stock and warrants to acquire an additional 32,266
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
131
Includes
142,857 shares of common stock and warrants to acquire an additional 107,143
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
132
Includes
35,714 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
133
Includes
35,714 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Brian Carpenter, President, has the power to
vote
and dispose of the common shares being registered on behalf of JMC Investments,
Ltd.
134
Includes
35,714 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
135
Includes
12,500 shares of common stock and warrants to acquire an additional 6,250
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
136
Includes
20,000 shares of common stock and warrants to acquire an additional 10,000
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
137
Includes
35,715 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 10,000 shares of common stock
and
warrants to acquire an additional 5,000 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private offering.
138
Includes
21,429 shares of common stock and warrants to acquire an additional 16,072
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 66,666 shares of common stock
and
warrants to acquire an additional 44,444 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private offering.
139
Includes
11,111 shares of common stock and warrants to acquire an additional 5,556
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
140
Includes
45,714 shares of common stock and warrants to acquire an additional 34,286
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
141
Includes
22,222 shares of common stock and warrants to acquire an additional 11,111
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
142
Includes
21,429 shares of common stock and warrants to acquire an additional 16,072
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 31,110 shares of common stock
and
warrants to acquire an additional 15,555 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private offering.
143
Includes
6,667 shares of common stock and warrants to acquire an additional 3,334
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
144
Includes
35,714 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
145
Includes
160,700 shares of common stock and warrants to acquire an additional 120,525
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April 1, 2006 offering. Includes 77,500 shares of common stock and warrants
to
acquire an additional 38,750 shares of common stock at an exercise price
of
$2.75 per share, acquired in the September, 2006 private offering.
146
Includes
22,500 shares of common stock and warrants to acquire an additional 11,250
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
147
Includes
15,000 shares of common stock and warrants to acquire an additional 11,250
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
148
Includes
22,500 shares of common stock and warrants to acquire an additional 11,250
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
149
Includes
13,333 shares of common stock and warrants to acquire an additional 6,667
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
150
Includes
214,286 shares of common stock and warrants to acquire an additional 160,715
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. J B Rimeur has the power to vote and dispose
of
the common shares being registered on behalf of LA Hougue Financial Management
Services Limited.
151
Includes
142,857 shares of common stock and warrants to acquire an additional 107,143
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Gerald Wittenberg has the power to vote and
dispose of the shares being registered on behalf of Ladasa
Investments, Inc.
152
Includes
6,667 shares of common stock and warrants to acquire an additional 3,334
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
153
Includes
30,000 shares of common stock and warrants to acquire an additional 22,500
shares of common stock at an exercise price of $1.00 per share
154
Includes
150,000 shares of common stock and warrants to acquire an additional 75,000
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
155
Includes
25,000 shares of common stock and warrants to acquire an additional 12,500
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
156
Includes
25,000 shares of common stock and warrants to acquire an additional 12,500
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
157
Includes
12,500 shares of common stock and warrants to acquire an additional 6,250
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
158
Includes
44,444 shares of common stock and warrants to acquire an additional 22,222
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
159
Includes
57,143 shares of common stock and warrants to acquire an additional 42,857
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
160
Includes
25,000 shares of common stock and warrants to acquire an additional 12,500
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
161
Includes
107,143 shares of common stock and warrants to acquire an additional 80,357
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
162
Includes
107,143 shares of common stock and warrants to acquire an additional 80,357
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
163
Includes
14,000 shares of common stock and warrants to acquire an additional 7,000
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
164
Includes
14,286 shares of common stock and warrants to acquire an additional 10,715
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
165
Includes
17,777 shares of common stock and warrants to acquire an additional 8,889
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
166
Includes
11,500 shares of common stock and warrants to acquire an additional 5,750
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
167
Includes
22,222 shares of common stock and warrants to acquire an additional 11,111
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
168
Includes
15,000 shares of common stock and warrants to acquire an additional 7,500
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
169
Includes
80,000 shares of common stock and warrants to acquire an additional 40,000
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering. Montague Guild, Jr., CEO of Guild Investment
Management, Inc., the General Partner of Meteoric L.P., has the power to
vote
and dispose of the common shares being registered on behalf of Meteoric
L.P.
170
Includes
45,714 shares of common stock and warrants to acquire an additional 34,286
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Jason Gigliotti, President, has the power to
vote
and dispose of the common shares being registered on behalf of MGK Consulting,
Inc.
171
Includes
33,333 shares of common stock and warrants to acquire an additional 16,667
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
172
Includes
11,429 shares of common stock and warrants to acquire an additional 8,572
shares
of common stock at an exercise price of $1.00 per share, acquired in the
April,
2006 private offering.
173
Includes
35,715 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 12,500 shares of common stock
and
warrants to acquire an additional 6,250 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private offering.
174
Includes
11,100 shares of common stock and warrants to acquire an additional 5,550
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
175
Includes
50,000 shares of common stock and warrants to acquire an additional 37,500
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
176
Includes
214,286 shares of common stock and warrants to acquire an additional 160,715
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
177
Includes
25,000 shares of common stock and warrants to acquire an additional 18,750
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
178
Includes
285,714 shares of common stock and warrants to acquire an additional 214,286
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. William McCluskey has the power to vote and
dispose of the common shares being registered on behalf of Nina Holdings,
LLC.
179
Includes
285,714 shares of common stock and warrants to acquire an additional 214,286
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 111,111 shares of common stock
and
warrants to acquire an additional 55,556 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private offering.
Keith A. Goodman, Manager and General Partner, has the power to vote and
dispose
of the common shares being registered on behalf of Nite Capital LP.
180
Includes
114,286 shares of common stock and warrants to acquire an additional 85,715
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. David Craven has the power to vote and dispose
of
the common shares being registered on behalf of Nunziata Holdings Inc.
181
Includes
53,571 shares of common stock and warrants to acquire an additional 40,178
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Robyn Schreiber, President, has the power to
vote
and dispose of the common shares being registered on behalf of NYBOR Group
Inc.
182
Includes
39,999 shares of common stock and warrants to acquire an additional 20,000
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
183
Includes
15,000 shares of common stock and warrants to acquire an additional 11,250
shares of common stock at an exercise price of $1.00 per share, acquired
by
Dennis Tower in the April, 2006 private offering and transferred to Pauline
Tower.
184
Includes
142,857 shares of common stock and warrants to acquire an additional 107,143
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Walter Dawson has the power to vote and dispose
of
the common shares being registered on behalf of Perfco Investments
Ltd.
185
Includes
40,000 shares of common stock and warrants to acquire an additional 20,000
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
186
Includes
714,286 shares of common stock and warrants to acquire an additional 535,715
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Dr. Rene Simon has the power to vote and dispose
of the common shares being registered on behalf of Professional Trading Services
SA.
187
Includes
57,143 shares of common stock and warrants to acquire an additional 42,857
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
188
Includes
11,500 shares of common stock and warrants to acquire an additional 5,750
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
189
Includes
35,714 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
190
Includes
22,500 shares of common stock and warrants to acquire an additional 11,250
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
191
Includes
11,111 shares of common stock and warrants to acquire an additional 5,556
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
192
Includes
11,111 shares of common stock and warrants to acquire an additional 5,556
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
193
Includes
214,286 shares of common stock and warrants to acquire an additional 160,715
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
194
Includes
149,957 shares of common stock and warrants to acquire an additional 112,468
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
195
Includes
72,000 shares of common stock and warrants to acquire an additional 36,000
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
196
Includes
70,000 shares of common stock and warrants to acquire an additional 52,500
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
197
Includes
50,000 shares of common stock and warrants to acquire an additional 37,500
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
198
Includes
100,000 shares of common stock and warrants to acquire an additional 75,000
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
199
Includes
143,000 shares of common stock and warrants to acquire an additional 107,250
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
200
Includes
12,289 shares of common stock and warrants to acquire an additional 9,217
shares
of common stock at an exercise price of $1.00 per share, acquired in the
April,
2006 private offering.
201
Includes
10,000 shares of common stock and warrants to acquire an additional 5,000
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
202
Includes
40,000 shares of common stock and warrants to acquire an additional 30,000
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
203
Includes
60,000 shares of common stock and warrants to acquire an additional 30,000
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering. Anthony R. Danaher, the President of
Guild
Investment Management, Inc., the General Partner of Rosebury, L.P. has
the power
to vote and dispose of the common shares being registered on behalf of
Rosebury,
L.P.
204
Includes
20,000 shares of common stock and warrants to acquire an additional 10,000
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
205
Includes
71,425 shares of common stock and warrants to acquire an additional 53,569
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 15,000 shares of common stock
and
warrants to acquire an additional 7,500 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private
offering.
206
Includes
357,143 shares of common stock and warrants to acquire an additional 267,857
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
207
Includes
14,290 shares of common stock and warrants to acquire an additional 10,718
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
208
Includes
123,215 shares of common stock and warrants to acquire an additional 70,938
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes a warrant to purchase 466,666
shares
of common stock at an exercise price of $2.25 issued on September 8, 2006
and a
warrant to purchase 6,567 shares of common stock at an exercise price of
$2.25
issued on September 27, 2006, each of which was issued as consideration
for
services provided by Sanders Morris Harris Inc. in the September, 2006
private
offering of our securities. Ben T. Morris has the power to vote and dispose
of
the common shares being registered on behalf of Sanders Morris Harris
Inc.
209
Includes
544,140 shares of common stock and warrants to acquire an additional 408,105
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 171,405 shares of common stock
and
warrants to acquire an additional 85,703 shares of common stock at an exercise
price of $2.75 per
share, acquired in the September, 2006 private offering. Brad Sanders,
fund
administrator, has the power to vote and dispose of the common shares being
registered on behalf of Sanders Opportunity Fund (Institutional)
L.P.
210
Includes
170,140 shares of common stock and warrants to acquire an additional 127,605
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 53,595 shares of common stock
and
warrants to acquire an additional 26,798 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private offering.
Brad
Sanders, fund administrator, has the power to vote and dispose of the common
shares being registered on behalf of Sanders Opportunity Fund, L.P.
211
Includes
28,571 shares of common stock and warrants to acquire an additional 21,428
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
212
Includes
285,714 shares of common stock and warrants to acquire an additional 214,286
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Tom and Hydri Kusumoto have the power to
vote and
dispose of the common shares being registered on behalf of Sanovest Holdings
Ltd.
213
Includes
50,000 shares of common stock and warrants to acquire an additional 37,500
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
214
Includes
11,111 shares of common stock and warrants to acquire an additional 5,556
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
215
Includes
10,700 shares of common stock and warrants to acquire an additional 8,025
shares
of common stock at an exercise price of $1.00 per share, acquired in the
April,
2006 private offering. Joseph Barnett has the power to vote and dispose
of the
common shares being registered on behalf of Sierra Madre Development,
LLC.
216
Includes
35,714 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
217
Includes
142,860 shares of common stock and warrants to acquire an additional 107,145
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
218
Includes
11,111 shares of common stock and warrants to acquire an additional 5,556
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
219
Includes
171,429 shares of common stock and warrants to acquire an additional 128,572
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
220
Includes
35,714 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
221
Includes
15,000 shares of common stock and warrants to acquire an additional 7,500
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
222
Includes
1,750,000 shares of common stock. Joseph F. Floccari has the power to vote
and
dispose of the common shares being registered on behalf of Strong Branch
Ventures IV, LLC.
223
Includes
22,222 shares of common stock and warrants to acquire an additional 11,111
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
224
Includes
22,222 shares of common stock and warrants to acquire an additional 11,111
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
225
Includes
11,111 shares of common stock and warrants to acquire an additional 5,556
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
226
Includes
71,428 shares of common stock and warrants to acquire an additional 53,571
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 25,000 shares of common stock
and
warrants to acquire an additional 12,500 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private offering.
227
Includes
37,500 shares of common stock and warrants to acquire an additional 18,750
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
228
Includes
35,714 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Jim Brewster has the power to vote and dispose
of
the common shares being registered on behalf of the Brewster Family
Trust.
229
Includes
50,000 shares of common stock and warrants to acquire an additional 37,500
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Also includes 11,111 shares of common stock
and
warrants to acquire an additional 5,556 shares of common stock at an exercise
price of $2.75 per share, acquired in the September, 2006 private offering.
230
Includes
214,286 shares of common stock and warrants to acquire an additional 160,715
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
231
Includes
22,222 shares of common stock and warrants to acquire an additional 11,111
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
232
Includes
71,425 shares of common stock and warrants to acquire an additional 53,569
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
233
Includes
7,143 shares of common stock and warrants to acquire an additional 5,357
shares
of common stock at an exercise price of $1.00 per share, acquired in the
April,
2006 private offering.
234
Includes
1,266,667 shares of common stock and warrants to acquire an additional
633,334
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering. Ralph Aldis, portfolio manager, has the
power
to vote and dispose of the common shares being registered on behalf of
US Global
Investors - Global Resources Fund.
235
Includes
214,286 shares of common stock and warrants to acquire an additional 160,715
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Peter M. Brown, President, has the power
to vote
and dispose of the common shares being registered on behalf of V Maclachlan
Investments Corp.
236
Includes
70,600 shares of common stock and warrants to acquire an additional 35,300
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
237
Includes
16,000 shares of common stock and warrants to acquire an additional 8,000
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering. Also includes 85,714 shares of common
stock
and warrants to acquire an additional 64,286 shares of common stock at
an
exercise price of $1.00 per share, acquired in the April, 2006 private
offering.
238
Includes
72,000 shares of common stock to be registered hereunder, 3,205,212 shares
of
common stock not being registered in this prospectus, and warrants to acquire
an
additional 54,000 shares of common stock at an exercise price of $1.00
per
share, acquired in the April, 2006 private offering. Mr. Bosché serves as our
Chief Financial Officer.
239
Includes
10,000 shares of common stock and warrants to acquire an additional 5,000
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
240
Includes
35,714 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
241
Includes
50,000 shares of common stock and warrants to acquire an additional 25,000
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering.
242
Includes
133,333 shares of common stock and warrants to acquire an additional 66,667
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering. Evan Schemenauer, CFO, has the power
to vote
and dispose of the common shares being registered on behalf of Whalehaven
Capital Fund Limited.
243
Includes
17,777 shares of common stock and warrants to acquire an additional 8,889
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
244
Includes
36,000 shares of common stock and warrants to acquire an additional 27,000
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
245
Includes
12,000 shares of common stock and warrants to acquire an additional 6,000
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
246
Includes
285,697 shares of common stock and warrants to acquire an additional 214,273
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
247
Includes
11,100 shares of common stock and warrants to acquire an additional 5,550
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
248
Includes
714,285 shares of common stock and warrants to acquire an additional 535,714
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering. Younes Nazarian has the power to vote and
dispose
of the common shares being registered on behalf of Y&S Nazarian Revocable
Trust.
249
Includes
35,714 shares of common stock and warrants to acquire an additional 26,786
shares of common stock at an exercise price of $1.00 per share, acquired
in the
April, 2006 private offering.
250
Includes
50,000 shares of common stock and warrants to acquire an additional 25,000
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering. Gary E. Mintz, General Partner, has the
power
to vote and dispose of the common shares being registered on behalf of
Yellowstone Limited Partnership.
251
Includes
22,222 shares of common stock and warrants to acquire an additional 11,111
shares of common stock at an exercise price of $2.75 per share, acquired
in the
September, 2006 private offering. Ralph Aldis, portfolio manager, has the
power
to vote and dispose of the common shares being registered on behalf of
Meridian
Global Energy & Resources Fund.
252
Includes
5,000 shares of common stock and warrants to acquire an additional 2,500
shares
of common stock at an exercise price of $2.75 per share, acquired in the
September, 2006 private offering.
Warrants
The
following table sets forth information about the number of shares of common
stock underlying the warrants which are beneficially owned by each selling
stockholder and which may be offered from time to time under this prospectus.
Certain selling stockholders may be deemed to be “underwriters” as defined in
the Securities Act. Any profits realized by the selling stockholder may be
deemed to be underwriting commissions.
The
table
below has been prepared based upon information provided to us by the selling
stockholders, as well as our books and records, including our warrant ledger,
as
of December 12,
2006.
The selling stockholders identified below may have sold, transferred or
otherwise disposed of some or all of their warrants since the date on which
the
information in the following table is presented, in transactions exempt from
or
not subject to the registration requirements of the Securities Act. Information
concerning the selling stockholders may change from time to time and, if
necessary, we will amend or supplement this prospectus accordingly. We cannot
give an estimate as to whether the selling stockholders will exercise or
sell
the warrants that will be held by the selling stockholders upon termination
of
this offering because the selling stockholders may sell or exercise their
warrants, in whole or in part, under the offering contemplated by this
prospectus. The total number of shares underlying warrants that may be sold
hereunder will not exceed the shares of common stock underlying warrants
listed
in the table below. Please read the section entitled “Plan of Distribution” in
this prospectus.
We
have
been advised, as noted below in the footnotes to the table, 18 of the selling
stockholders are broker-dealers and 8 of the selling stockholders are
affiliates of broker-dealers. We have been advised that each of such selling
stockholders purchased our warrants in the ordinary course of business, not
for
resale, and that none of such selling stockholders had, at the time of purchase,
any agreements or understandings, directly or indirectly, with any person to
distribute the related warrants.
The
following table sets forth the name of each selling stockholder, the nature
of
any position, office, or other material relationship, if any, which the selling
stockholder has had, within the past three years, with us or with any of our
predecessors or affiliates, and the number of shares of our common stock
underlying the warrants beneficially owned by such stockholder before this
offering. The warrants owned for the purposes of this table are those that
are
beneficially owned, as determined under the rules of the SEC, and such
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rules, beneficial ownership includes any warrants as to
which a person has sole or shared voting power or investment power and any
warrants which the person has the right to acquire within 60 days through the
conversion of any security or pursuant to the automatic termination of a power
of attorney or revocation of a trust, discretionary account or similar
arrangement.
Unless
otherwise indicated, the stockholders listed in the table below acquired their
warrants in the private offerings of our securities in April, 2006 and
September, 2006. The percentage of common stock underlying outstanding warrants
is based upon a total of 20,693,127 shares of common stock underlying
outstanding warrants. We have assumed all warrants reflected in the following
table will be exercised or sold from time to time by the selling stockholders.
Because the selling stockholders may offer all of their warrants, in whole
or in
part, listed in the table below, no estimate can be given as to the number
of
shares of common stock underlying warrants that will be held by the selling
stockholders upon the termination of any sales of their warrants.
|
Shares
Underlying Warrants for Common Stock Owned Before the
Offering
|
Shares
Underlying Warrants for Common Stock Being
Offered
|
Warrants
for Common Stock Owned Upon Completion of the Offering
(a)
|
Percentage
of Common Stock Outstanding Upon Completion of
Offering
|
|
|
0702119
BC Ltd.1
|
562,500
|
562,500
|
—
|
—
|
|
1087741
Alberta Ltd.2
|
34,286
|
34,286
|
—
|
—
|
|
719906
BC Ltd.3
|
107,143
|
107,143
|
—
|
—
|
|
Adam
S. Gottbetter4
|
53,572
|
53,572
|
—
|
—
|
|
A.H.
Investments5
|
7,500
|
7,500
|
—
|
—
|
|
AK
Asset Management6
|
112,501
|
112,501
|
—
|
—
|
|
Alec
Morrison & Sandra Morrison7
|
33,333
|
33,333
|
—
|
—
|
|
Alfred
Ricciardi8
|
5,556
|
5,556
|
—
|
—
|
|
All
Seasons Consulting Inc.9
|
21,428
|
21,428
|
—
|
—
|
|
Alvin
L. Gray10
|
44,400
|
44,400
|
—
|
—
|
|
Andrew
A. Schatte11
|
6,667
|
6,667
|
—
|
—
|
|
Andrew
Goodacre12
|
26,786
|
26,786
|
—
|
—
|
|
Anke
Zenze13
|
26,223
|
26,223
|
—
|
—
|
|
Anthony
Bobulinski14
|
53,572
|
53,572
|
—
|
—
|
|
Arn
E. Schoch15
|
53,555
|
53,555
|
—
|
—
|
|
Atlantis
Software Company Employee Profit Sharing Plan16‡
|
21,428
|
21,428
|
—
|
—
|
|
Centrum
Bank AG17
|
803,571
|
803,571
|
—
|
—
|
|
Avtar
Dhillon18
|
26,786
|
26,786
|
—
|
—
|
|
Baradaran
Revocable Trust, Sharyar Baradaran Trustee19
|
267,857
|
267,857
|
—
|
—
|
|
Barry
Davis20
|
107,143
|
107,143
|
—
|
—
|
|
Barry
Tucker21
|
26,786
|
26,786
|
—
|
—
|
|
Ben
T. Morris22†
|
57,678
|
57,678
|
—
|
—
|
|
Bentley
N. Kerfoot23
|
34,667
|
34,667
|
—
|
—
|
|
Bernard
Bonertz24
|
10,715
|
10,715
|
—
|
—
|
|
Besser
Kapital Fund LTD25
|
25,004
|
25,004
|
—
|
—
|
|
Bifrost
Fund LP26
|
75,000
|
75,000
|
—
|
—
|
|
Bill
Haak and Johnnie S Haak27
|
32,386
|
32,386
|
—
|
—
|
|
Blake
Selig28
|
22,500
|
22,500
|
—
|
—
|
|
BMO
Nesbitt Burns I/T/F Balanced Natural Resource Fund29
|
22,222
|
22,222
|
—
|
—
|
|
Bonner
S. Ball30
|
25,000
|
25,000
|
—
|
—
|
|
Brad
Deason31†
|
12,500
|
12,500
|
—
|
—
|
|
Brad
Gabel32
|
26,786
|
26,786
|
—
|
—
|
|
Brede
C. Klefos33†
|
37,500
|
37,500
|
—
|
—
|
|
Brian
Hicks34
|
53,572
|
53,572
|
—
|
—
|
|
Brian
Kuhn35
|
112,500
|
112,500
|
—
|
—
|
|
Bruce
C. Gibbs and Lou Ann Gibbs36
|
30,000
|
30,000
|
—
|
—
|
|
Bruce
Nurse37
|
76,250
|
76,250
|
—
|
—
|
|
Bruce
R. McMaken38
|
29,286
|
29,286
|
—
|
—
|
|
Brunella
Jacs LLC39
|
107,145
|
107,145
|
—
|
—
|
|
CamCap
Energy Offshore Master Fund, L.P.40
|
390,000
|
390,000
|
—
|
—
|
|
CamCap
Resources Offshore Master Fund, L.P.41
|
210,000
|
210,000
|
—
|
—
|
|
Shares
Underlying Warrants for Common Stock Owned Before the
Offering
|
Shares
Underlying Warrants for Common Stock Being
Offered
|
Warrants
for Common Stock Owned Upon Completion of the Offering
(a)
|
Percentage
of Common Stock Outstanding Upon Completion of
Offering
|
|
|
Carl
Pipes42
|
12,500
|
12,500
|
—
|
—
|
|
Carmen
Lanza43
|
26,791
|
26,791
|
—
|
—
|
|
Carol
C. Barbour44
|
12,500
|
12,500
|
—
|
—
|
|
Carter
D. Pope45
|
25,000
|
25,000
|
—
|
—
|
|
Champion
Construction Consultants, Inc.46
|
8,025
|
8,025
|
—
|
—
|
|
Charbonneau
Limited Partnership47
|
26,786
|
26,786
|
—
|
—
|
|
Chester
R. Cloudt48
|
21,428
|
21,428
|
—
|
—
|
|
Chester
R. Cloudt, Jr.49
|
10,715
|
10,715
|
—
|
—
|
|
Chestnut
Ridge Partners, L.P.50
|
66,667
|
66,667
|
—
|
—
|
|
Choregus
Master Trust, Plan I, Money Purchase51
|
12,750
|
12,750
|
—
|
—
|
|
Choregus
Master Trust, Plan II, Profit Sharing52
|
12,750
|
12,750
|
—
|
—
|
|
Christine
M. Sanders53
|
7,500
|
7,500
|
—
|
—
|
|
Christopher
Neal Todd54
|
5,556
|
5,556
|
—
|
—
|
|
Christopher
Powell55
|
2,678
|
2,678
|
—
|
—
|
|
Craig
Taylor56
|
10,715
|
10,715
|
—
|
—
|
|
Cranshire
Capital, L.P.57
|
425,000
|
425,000
|
—
|
—
|
|
Crimson
Group, LTD58
|
7,775
|
7,775
|
—
|
—
|
|
Curtis
Conway59
|
150,000
|
150,000
|
—
|
—
|
|
Curtis
E. Smith and Mary H. Cummins Trust60
|
17,500
|
17,500
|
—
|
—
|
|
Dan
Mechis61
|
8,572
|
8,572
|
—
|
—
|
|
Danich
Investments Ltd.62
|
26,786
|
26,786
|
—
|
—
|
|
David
A Melman63
|
37,500
|
37,500
|
—
|
—
|
|
David
B. Steffan, Jr.64
|
10,715
|
10,715
|
—
|
—
|
|
David
B. Steffan, Sr.65
|
2,250
|
2,250
|
—
|
—
|
|
David
Jensen66
|
10,978
|
10,978
|
—
|
—
|
|
David
Malm67
|
8,572
|
8,572
|
—
|
—
|
|
Dennis
B. Tower68
|
112,500
|
112,500
|
—
|
—
|
|
Dennis
Bleackley69
|
26,786
|
26,786
|
—
|
—
|
|
Dennis
H. Lundy70
|
16,072
|
16,072
|
—
|
—
|
|
DNG
Capital Corp.71
|
21,428
|
21,428
|
—
|
—
|
|
Don
Sanders and Tanya Drury TTEES FBO72
|
18,750
|
18,750
|
—
|
—
|
|
Don
Weir and Julie Ellen Weir73‡
|
97,855
|
97,855
|
—
|
—
|
|
Donald
V Weir TTEE Sanders 1998 Children's Trust DTD 12/01/9774‡
|
204,475
|
204,475
|
—
|
—
|
|
Douglas
Patterson75
|
1,125
|
1,125
|
—
|
—
|
|
Dr.
William Grose Agency76
|
8,889
|
8,889
|
—
|
—
|
|
Earl
Fawcett77
|
26,786
|
26,786
|
—
|
—
|
|
Edmund
H. Melhado78
|
25,000
|
25,000
|
—
|
—
|
|
Edward
Antonsen79
|
34,286
|
34,286
|
—
|
—
|
|
Edward
C. Kash80
|
7,778
|
7,778
|
—
|
—
|
|
Edwin
Freedman81
|
78,569
|
78,569
|
—
|
—
|
|
Emily
H. Todd82
|
5,556
|
5,556
|
—
|
—
|
|
EPSILON
Management LTD.83
|
12,502
|
12,502
|
—
|
—
|
|
Evonne
Whelan84
|
16,072
|
16,072
|
—
|
—
|
|
Ewan
Downie85
|
34,286
|
34,286
|
—
|
—
|
|
Francis
P. Knuettel TTEE Francis P Knuettel Rev LVG TR UA DTD 3/7/0386
|
53,572
|
53,572
|
—
|
—
|
|
Frank
J. Metyko, Jr. and Mark J. Metyko and Kurt F. Metyko TTEES
Frank J. Metyko
Residuary Trust DTD 10/08/8487
|
8,889
|
8,889
|
—
|
—
|
|
Shares
Underlying Warrants for Common Stock Owned Before the
Offering
|
Shares
Underlying Warrants for Common Stock Being
Offered
|
Warrants
for Common Stock Owned Upon Completion of the Offering
(a)
|
Percentage
of Common Stock Outstanding Upon Completion of
Offering
|
|
|
Frank
Knuettel II Trustee The Knuettel Family Trust88
|
18,750
|
18,750
|
—
|
—
|
|
Frank
Knuettel, II89
|
21,375
|
21,375
|
—
|
—
|
|
Fred
Hagans90
|
58,569
|
58,569
|
—
|
—
|
|
Friedrich
Brenckman91
|
25,000
|
25,000
|
—
|
—
|
|
G.
Marie Smith92
|
5,000
|
5,000
|
—
|
—
|
|
Gary
E. Mintz93
|
112,500
|
112,500
|
—
|
—
|
|
Gary
Friedland94
|
6,250
|
6,250
|
—
|
—
|
|
Gary
Maynard95
|
11,250
|
11,250
|
—
|
—
|
|
George
L. Ball96†
|
71,069
|
71,069
|
—
|
—
|
|
Georges
Antoun and Martha Antoun97
|
15,556
|
15,556
|
—
|
—
|
|
Gerald
K. Bogen98
|
6,000
|
6,000
|
—
|
—
|
|
Gloria
D. Kelley99
|
6,250
|
6,250
|
—
|
—
|
|
Goldman,
Sachs & Co.100†
|
4,666,667
|
4,666,667
|
—
|
—
|
|
Grant
E Sims and Patricia Sims101
|
12,500
|
12,500
|
—
|
—
|
|
Gregg
Sedun102
|
107,143
|
107,143
|
—
|
—
|
|
Gregory
Selig Lewis103
|
26,786
|
26,786
|
—
|
—
|
|
H.
Alan Dill104
|
74,000
|
74,000
|
—
|
—
|
|
H.
Ben Taub105
|
15,000
|
15,000
|
—
|
—
|
|
Hammonds
Management Trust106
|
5,625
|
5,625
|
—
|
—
|
|
Harry
Edelson107
|
535,715
|
535,715
|
—
|
—
|
|
Harry
Gabel108
|
26,786
|
26,786
|
—
|
—
|
|
Hayden
McIlroy109
|
87,500
|
87,500
|
—
|
—
|
|
Hedge
Capital Partners LLC110
|
53,572
|
53,572
|
—
|
—
|
|
Heimbuck
Family Trust DTD 8/13/85111
|
43,056
|
43,056
|
—
|
—
|
|
Herbert
Lippin112
|
7,500
|
7,500
|
—
|
—
|
|
Hyman
Gildenhorn and Vivian Gildenhorn113
|
44,444
|
44,444
|
—
|
—
|
|
Hypo
Alpe-Adria-Bank114
|
262,500
|
262,500
|
—
|
—
|
|
Don
A. Sanders115†
|
204,475
|
204,475
|
—
|
—
|
|
Don
S. Cook116
|
8,889
|
8,889
|
—
|
—
|
|
Erik
Klefos117†
|
37,500
|
37,500
|
—
|
—
|
|
Humbert
B. Powell118†
|
56,964
|
56,964
|
—
|
—
|
|
Lewis
S. Rosen Pershing119
|
5,556
|
5,556
|
—
|
—
|
|
Scott
M. Marshall120
|
37,500
|
37,500
|
—
|
—
|
|
William
W. Sprague121‡
|
35,536
|
35,536
|
—
|
—
|
|
J.
Barrett Developments, Ltd.122
|
10,715
|
10,715
|
—
|
—
|
|
Jack
Coldwell123
|
26,786
|
26,786
|
—
|
—
|
|
Jack
Sheng124
|
17,143
|
17,143
|
—
|
—
|
|
James
T. Dilella Trust125
|
11,000
|
11,000
|
—
|
—
|
|
Jamie
Gilkison126
|
32,143
|
32,143
|
—
|
—
|
|
Jan
Bartholomew127†
|
5,556
|
5,556
|
—
|
—
|
|
Jan
Rask128
|
86,786
|
86,786
|
—
|
—
|
|
Jason
M. Rimland129
|
32,266
|
32,266
|
—
|
—
|
|
Jeffrey
Scott130
|
107,143
|
107,143
|
—
|
—
|
|
Jerry
F. and Nina L. Christopherson131
|
26,786
|
26,786
|
—
|
—
|
|
JMC
Investments Ltd.132
|
26,786
|
26,786
|
—
|
—
|
|
Joe
& Iola Bots133
|
26,786
|
26,786
|
—
|
—
|
|
Joel
Stuart134
|
6,250
|
6,250
|
—
|
—
|
|
John
A. Cary135
|
10,000
|
10,000
|
—
|
—
|
|
Shares
Underlying Warrants for Common Stock Owned Before the
Offering
|
Shares
Underlying Warrants for Common Stock Being
Offered
|
Warrants
for Common Stock Owned Upon Completion of the Offering
(a)
|
Percentage
of Common Stock Outstanding Upon Completion of
Offering
|
|
|
John
H. Malanga and Jodi F. Malanga, JT Ten Malanga136†
|
31,786
|
31,786
|
—
|
—
|
|
John
M. Martineck137
|
49,405
|
49,405
|
—
|
—
|
|
John
N. Spiliotis138
|
5,556
|
5,556
|
—
|
—
|
|
John
Seaman139
|
34,286
|
34,286
|
—
|
—
|
|
John
W. Lodge, III140
|
11,111
|
11,111
|
—
|
—
|
|
Joseph
Benjamin Johnson141
|
31,627
|
31,627
|
—
|
—
|
|
Judy
Kay Hunnemuller142
|
3,334
|
3,334
|
—
|
—
|
|
Karl
Antonius143
|
26,786
|
26,786
|
—
|
—
|
|
Katherine
U. Sanders144‡
|
159,275
|
159,275
|
—
|
—
|
|
Kenneth
R. Hartley Jr.145
|
11,250
|
11,250
|
—
|
—
|
|
Kenneth
S. Goodwin146
|
11,250
|
11,250
|
—
|
—
|
|
Kevin
Shugars, Lori Shugars147
|
11,250
|
11,250
|
—
|
—
|
|
Knox
Family Partnership, Lee M. Knox General Partner148
|
6,667
|
6,667
|
—
|
—
|
|
LA
Hougue Financial Management Services Limited149
|
160,715
|
160,715
|
—
|
—
|
|
Ladasa
Investments Inc.150
|
107,143
|
107,143
|
—
|
—
|
|
Larry
Hunnemuller151
|
3,334
|
3,334
|
—
|
—
|
|
Lenny
Olim152
|
22,500
|
22,500
|
—
|
—
|
|
Leon
Frenkel153
|
75,000
|
75,000
|
—
|
—
|
|
Leonard
C. Atkins154
|
12,500
|
12,500
|
—
|
—
|
|
Lisa
Dawn Weir155
|
12,500
|
12,500
|
—
|
—
|
|
Louis
Gleckel156
|
6,250
|
6,250
|
—
|
—
|
|
Louis
Zehil157
|
22,222
|
22,222
|
—
|
—
|
|
M.
Paul Tompkins158
|
42,857
|
42,857
|
—
|
—
|
|
M.
St. John Dinsmore159
|
12,500
|
12,500
|
—
|
—
|
|
Mark
Emalfarb Custodian for Hailey Emalfarb160
|
80,357
|
80,357
|
—
|
—
|
|
Mark
Emalfarb Guardian for Ashley Emalfarb161
|
80,357
|
80,357
|
—
|
—
|
|
Mark
Leszczynski162
|
7,000
|
7,000
|
—
|
—
|
|
Mark
Rousselot163
|
10,715
|
10,715
|
—
|
—
|
|
Mary
Harris Cooper164
|
8,889
|
8,889
|
—
|
—
|
|
Matthew
D. Myers165
|
5,750
|
5,750
|
—
|
—
|
|
Max
and Judy Poll Rev Trust166
|
11,111
|
11,111
|
—
|
—
|
|
Melton
Pipes167
|
7,500
|
7,500
|
—
|
—
|
|
Meteoric
L.P.168
|
40,000
|
40,000
|
—
|
—
|
|
MGK
Consulting Inc.169
|
34,286
|
34,286
|
—
|
—
|
|
Michael
J. Gaido, Jr.170
|
16,667
|
16,667
|
—
|
—
|
|
Michael
John Fanti171
|
8,572
|
8,572
|
—
|
—
|
|
Michael
S. Chadwick172†
|
33,036
|
33,036
|
—
|
—
|
|
Morton
J. Weisberg173
|
5,550
|
5,550
|
—
|
—
|
|
Mosby
Lindsay Simmons III174
|
37,500
|
37,500
|
—
|
—
|
|
Nadine
C. Smith175
|
160,715
|
160,715
|
—
|
—
|
|
Natalie
Dull176
|
18,750
|
18,750
|
—
|
—
|
|
Nina
Holdings, LLC177‡
|
214,286
|
214,286
|
—
|
—
|
|
Nite
Capital LP178
|
269,842
|
269,842
|
—
|
—
|
|
Nunziata
Holdings Inc.179
|
85,715
|
85,715
|
—
|
—
|
|
NYBOR
Group Inc.180
|
40,178
|
40,178
|
—
|
—
|
|
Paula
L. Santoski181
|
20,000
|
20,000
|
—
|
—
|
|
Pauline
Tower182
|
11,250
|
11,250
|
—
|
—
|
|
Perfco
Investments Ltd.183
|
107,143
|
107,143
|
—
|
—
|
|
Shares
Underlying Warrants for Common Stock Owned Before the
Offering
|
Shares
Underlying Warrants for Common Stock Being
Offered
|
Warrants
for Common Stock Owned Upon Completion of the Offering
(a)
|
Percentage
of Common Stock Outstanding Upon Completion of
Offering
|
|
|
Philip
M. Garner and Carol P. Garner184
|
20,000
|
20,000
|
—
|
—
|
|
Professional
Trading Services SA185
|
535,715
|
535,715
|
—
|
—
|
|
Randall
W. Tower186
|
42,857
|
42,857
|
—
|
—
|
|
Richard
Lippin187
|
5,750
|
5,750
|
—
|
—
|
|
Richard
Macdermott188
|
26,786
|
26,786
|
—
|
—
|
|
Richard
W. Hodgman189
|
11,250
|
11,250
|
—
|
—
|
|
Rick
Berry190‡
|
5,556
|
5,556
|
—
|
—
|
|
RJS
JR/PLS 1992 Trust FBO Robert J Santoski Jr, Paula Santoski
TTEE191
|
5,556
|
5,556
|
—
|
—
|
|
Rob
Anderson192†
|
160,715
|
160,715
|
—
|
—
|
|
Robert
Burschik193
|
112,468
|
112,468
|
—
|
—
|
|
Robert
F. Ruth Jr.194
|
36,000
|
36,000
|
—
|
—
|
|
Robert
J. Gonzales195
|
52,500
|
52,500
|
—
|
—
|
|
Robert
Pedlow196
|
37,500
|
37,500
|
—
|
—
|
|
Robert
Sarcher197
|
75,000
|
75,000
|
—
|
—
|
|
Robert
Schiesser198†
|
107,250
|
107,250
|
—
|
—
|
|
Robert
W. Bomengen199
|
9,217
|
9,217
|
—
|
—
|
|
Robert
Wilensky200
|
5,000
|
5,000
|
—
|
—
|
|
Rose
Anna Marshall201
|
30,000
|
30,000
|
—
|
—
|
|
Rosebury,
L.P.202
|
30,000
|
30,000
|
—
|
—
|
|
Roy
Alan Price203
|
10,000
|
10,000
|
—
|
—
|
|
Rune
Medhus & Elisa Medhus204†
|
61,069
|
61,069
|
—
|
—
|
|
Sam
Belzberg205
|
267,857
|
267,857
|
—
|
—
|
|
Samuel
Ginzburg206
|
10,718
|
10,718
|
—
|
—
|
|
Sanders
Morris Harris Inc.207†
|
544,216
|
544,216
|
—
|
—
|
|
Sanders
Opportunity Fund (Institutional) L.P.208†
|
493,808
|
493,808
|
—
|
—
|
|
Sanders
Opportunity Fund, L.P.209†
|
154,403
|
154,403
|
—
|
—
|
|
Sandra
L. Acosta210
|
21,428
|
21,428
|
—
|
—
|
|
Sanovest
Holdings Ltd.211
|
214,286
|
214,286
|
—
|
—
|
|
Scott
Rapfogel212
|
37,500
|
37,500
|
—
|
—
|
|
Leticia
Turullos213
|
5,556
|
5,556
|
—
|
—
|
|
Sierra
Madre Development, LLC214
|
8,025
|
8,025
|
—
|
—
|
|
Simonson,
Lawrence R. TTEE of the Lawrence R. Simonson Revocable
Trust U/T/A
12/18/02215
|
26,786
|
26,786
|
—
|
—
|
|
Stanley
Katz216
|
107,145
|
107,145
|
—
|
—
|
|
Samantha
Leigh Santoski217
|
5,556
|
5,556
|
—
|
—
|
|
Stephen
Hanson218
|
128,572
|
128,572
|
—
|
—
|
|
Steve
Perry219
|
26,786
|
26,786
|
—
|
—
|
|
Steven
R. Hall220
|
7,500
|
7,500
|
—
|
—
|
|
Sue
M. Harris Separate Property221
|
11,111
|
11,111
|
—
|
—
|
|
Sue
Minton Harris TTEE Pinkye Lou Blair Estate Tr u/w Dtd
6/15/91222
|
11,111
|
11,111
|
—
|
—
|
|
Susan
S. Lehrer223
|
5,556
|
5,556
|
—
|
—
|
|
T.
Scott O'Keefe224
|
66,071
|
66,071
|
—
|
—
|
|
Tanya
J. Drury225
|
18,750
|
18,750
|
—
|
—
|
|
The
Brewster Family Trust226
|
26,786
|
26,786
|
—
|
—
|
|
Thomas
Asarch and Barbara Asarch Ten Com227
|
43,056
|
43,056
|
—
|
—
|
|
Thomas
E. Fish228
|
160,715
|
160,715
|
—
|
—
|
|
Titus
Harris, Jr.229‡
|
11,111
|
11,111
|
—
|
—
|
|
Tom
Juda and Nancy Juda Co-Trustees Tom Juda and Nancy Juda
Living Trust DTD
5/3/95230
|
53,569
|
53,569
|
—
|
—
|
|
Tom
Steffan231
|
5,357
|
5,357
|
—
|
—
|
|
Shares
Underlying Warrants for Common Stock Owned Before the
Offering
|
Shares
Underlying Warrants for Common Stock Being
Offered
|
Warrants
for Common Stock Owned Upon Completion of the Offering
(a)
|
Percentage
of Common Stock Outstanding Upon Completion of
Offering
|
|
|
US
Global Investors- Global Resources Fund232
|
633,334
|
633,334
|
—
|
—
|
|
V
MacLachlan Investments Corp.233‡
|
160,715
|
160,715
|
—
|
—
|
|
Vicki
T. Ruth234
|
35,300
|
35,300
|
—
|
—
|
|
Vincent
Vazquez235
|
72,286
|
72,286
|
—
|
—
|
|
W.
Kirk Bosché 236
|
54,000
|
54,000
|
—
|
—
|
|
Wayne
C. Fox237
|
5,000
|
5,000
|
—
|
—
|
|
Wayne
Hucik238
|
26,786
|
26,786
|
—
|
—
|
|
Weitzman
Living Trust239
|
25,000
|
25,000
|
—
|
—
|
|
Whalehaven
Capital Fund Limited240
|
66,667
|
66,667
|
—
|
—
|
|
William
E. Grose241
|
8,889
|
8,889
|
—
|
—
|
|
William
F. Burkart242
|
27,000
|
27,000
|
—
|
—
|
|
William
L. Benson243
|
6,000
|
6,000
|
—
|
—
|
|
William
Lowe244
|
214,273
|
214,273
|
—
|
—
|
|
William
Sockman245
|
5,550
|
5,550
|
—
|
—
|
|
Y&S
Nazarian Revocable Trust246
|
535,714
|
535,714
|
—
|
—
|
|
Yarek
Bartosz247
|
26,786
|
26,786
|
—
|
—
|
|
Yellowstone
Limited Partnership248
|
25,000
|
25,000
|
—
|
—
|
|
Meridian
Global Energy & Resources Fund LT249
|
11,111
|
11,111
|
—
|
—
|
|
E.
Paul Jansen250
|
2,500
|
2,500
|
—
|
—
|
† The
selling stockholder is a broker-dealer.
‡ The
selling stockholder is an affiliate of a broker-dealer.
*
Less
than
1.0%.
|
(a)
|
Assumes
all of the warrants to be registered on this registration statement
are
sold in the offering by the selling
stockholders.
|
1
Includes
warrants to acquire 562,500 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Gary Korzenowski has
the power to vote and dispose of the common shares being registered on behalf
of
0702119 BC Ltd.
2
Includes
warrants to acquire 34,286 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Wade McBain has
the
power to vote and dispose of the common shares being registered on behalf
of
1087741 Alberta Ltd.
3
Includes
warrants to acquire 107,143 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Tom Kusumoto has
the
power to vote and dispose of the common shares being registered on behalf
of
719906 BC Ltd.
4
Includes
warrants to acquire 53,572 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
5
Includes
warrants to acquire 7,500 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering. Bennett Altarman,
President of A.H. Investments, has the power to vote and dispose of the common
shares being registered on behalf of A.H. Investments.
6
Includes
warrants to acquire 112,501 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Mr. Kolbinger has
the
power to vote and dispose of the common shares being registered on behalf
of AK
Asset Management.
7
Includes
warrants to acquire 33,333 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
8
Includes
warrants to acquire 5,556 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
9
Includes
warrants to acquire 21,428 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Negar Towfigh,
President of All Seasons Consulting, Inc. has the power to vote and dispose
of
the common shares being registered on behalf of All Seasons Consulting,
Inc.
10
Includes
warrants to acquire 44,400 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
11
Includes
warrants to acquire 6,667 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
12
Includes
warrants to acquire 26,786 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
13
Includes
warrants to acquire 26,223 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
14
Includes
warrants to acquire 53,572 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
15
Includes
warrants to acquire 53,555 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
16
Includes
warrants to acquire 21,428 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Rune
Medhus has the power to vote and dispose of the common shares being registered
on behalf of Atlantis Software Company Employee Profit Sharing
Plan.
17
Includes
warrants to acquire 803,572 shares of common stock at an exercise price of
$1.00 per share, acquired in the April, 2006 private offering. Gerhard
Roosli has the power to vote and dispose of the common shares being registered
on behalf of Centrum Bank AG.
18
Includes
warrants to acquire 26,786 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
19
Includes
warrants to acquire 267,857 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
20
Includes
warrants to acquire 107,143 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
21
Includes
warrants to acquire 26,786 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
22
Includes
warrants to acquire 40,178 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Also includes
warrants
to acquire 17,500 shares of common stock at an exercise price of $2.75
per
share, acquired in the April, 2006 private offering.
23
Includes
warrants to acquire 34,667 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
24
Includes
warrants to acquire 10,715 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
25
Includes
warrants to acquire 25,004 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering. Oliver Chaponnier
and M. Montanari have the power to vote and dispose of the common shares
being
registered on behalf of Besser Kapital Fund LTD.
26
Includes
warrants to acquire 75,000 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering. Peter Trapp,
founding member of Bifrost Fund LP, has the power to vote and dispose of
the
common shares being registered on behalf of Bifrost Fund LP.
27
Includes
warrants to acquire 26,786 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Also includes
warrants
to acquire 5,600 shares of common stock at an exercise price of $2.75 per
share,
acquired in the April, 2006 private offering.
28
Includes
warrants to acquire 22,500 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
29
Includes
warrants to acquire 22,222 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering. Ralph Aldis,
portfolio manager, has the power to vote and dispose of the common shares
being
registered on behalf of Balanced Natural Resource Fund.
30
Includes
warrants to acquire 25,000 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
31
Includes
warrants to acquire 12,500 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
32
Includes
warrants to acquire 26,786 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
33
Includes
warrants to acquire 37,500 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
34
Includes
warrants to acquire 53,572 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
35
Includes
warrants to acquire 112,500 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
36
Includes
warrants to acquire 30,000 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
37
Includes
warrants to acquire 56,250 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Also includes
warrants
to acquire 20,000 shares of common stock at an exercise price of $2.75
per
share, acquired in the September, 2006 private offering.
38
Includes
warrants to acquire 26,786 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Also includes
warrants
to acquire 20,000 shares of common stock at an exercise price of $2.75
per
share, acquired in the September, 2006 private offering.
39
Includes
warrants to acquire 107,145 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Stanley
Katz has the power to vote and dispose of the common shares being registered
on
behalf of Brunella Jacs LLC.
40
Includes
warrants to acquire 390,000 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering. Roland A. von
Metzech, managing member of CamCap Energy Partners, the General Partner of
CamCap Energy Offshore Master Fund, L.P., has the power to vote and dispose
of
the common shares being registered on behalf of CamCap Energy Offshore Master
Fund, L.P.
41
Includes
warrants to acquire 210,000 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering. Roland A. von
Metzech, managing member of CamCap Energy Partners, the General Partner of
CamCap Resources Offshore Master Fund, L.P., has the power to vote and dispose
of the common shares being registered on behalf of CamCap Resources Offshore
Master Fund, L.P.
42
Includes
warrants to acquire 12,500 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
43
Includes
warrants to acquire 26,791 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
44
Includes
warrants to acquire 12,500 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
45
Includes
warrants to acquire 25,000 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
46
Includes
warrants to acquire 8,025 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Gary Huel has the
power
to vote and dispose of the common shares being registered on behalf of Champion
Construction Consultants, Inc.
47
Includes
warrants to acquire 26,786 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. A.J. Charbonneau
and D.
Davidson have the power to vote and dispose of the common shares being
registered on behalf of Charbonneau Limited Partnership.
48
Includes
warrants to acquire 21,428 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
49
Includes
warrants to acquire 10,715 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
50
Includes
warrants to acquire 66,667 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering. Kenneth Holz
has
the power to vote and dispose of the common shares being registered on behalf
of
Chestnut Ridge Partners, L.P.
51
Includes
warrants to acquire 12,750 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Christopher Moyes
has
the power to vote and dispose of the common shares being registered on behalf
of
Choregus Master Trust, Plan I, Money Purchase.
52
Includes
warrants to acquire 12,750 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Christopher Moyes
has
the power to vote and dispose of the common shares being registered on behalf
of
Choregus Master Trust, Plan II, Profit Sharing.
53
Includes
warrants to acquire 7,500 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
54
Includes
warrants to acquire 5,556 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
55
Includes
warrants to acquire 2,678 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
56
Includes
warrants to acquire 10,715 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
57
Includes
warrants to acquire 375,000 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Also includes
warrants
to acquire 50,000 shares of common stock at an exercise price of $2.75
per
share, acquired in the September, 2006 private offering. Mitchell P. Kopin,
President of Downsview Capital, Inc., the General Partner of Cranshire
Capital,
L.P., has the power to vote and dispose of the common shares being registered
on
behalf of Cranshire Capital, L.P.
58
Includes
warrants to acquire 7,775 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering. C. Dean Patrineu,
President of Gatol Enterprises, Inc., the General Partner of Crimson Group,
LTD,
has the power to vote and dispose of the common shares being registered on
behalf of Crimson Group, LTD.
59
Includes
warrants to acquire 150,000 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
60
Includes
warrants to acquire 17,500 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
61
Includes
warrants to acquire 8,572 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
62
Includes
warrants to acquire 26,786 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Danny Remenda has
the
power to vote and dispose of the common shares being registered on behalf
of
Danich Investments Ltd.
63
Includes
warrants to acquire 37,500 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
64
Includes
warrants to acquire 10,715 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
65
Includes
warrants to acquire 2,250 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
66
Includes
warrants to acquire 10,978 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
67
Includes
warrants to acquire 8,572 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
68
Includes
warrants to acquire 112,500 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Mr. Tower serves
as our
Chief Executive Officer and a member of our board of directors.
69
Includes
warrants to acquire 26,786 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
70
Includes
warrants to acquire 16,072 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
71
Includes
warrants to acquire 21,428 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Nick Demare, President,
has the power to vote and dispose of the common shares being registered on
behalf of DNG Capital Corp.
72
Includes
warrants to acquire 18,750 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
73
Includes
warrants to acquire 80,355 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Also includes
warrants
to acquire 17,500 shares of common stock at an exercise price of $2.75
per
share, acquired in the September, 2006 private offering.
74
Includes
warrants to acquire 160,725 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Also includes
warrants
to acquire 43,750 shares of common stock at an exercise price of $2.75
per
share, acquired in the September, 2006 private offering.
75
Includes
warrants to acquire 1,125 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
76
Includes
warrants to acquire 8,889 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
77
Includes
warrants to acquire 26,786 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
78
Includes
warrants to acquire 25,000 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
79
Includes
warrants to acquire 34,286 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
80
Includes
warrants to acquire 7,778 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
81
Includes
warrants to acquire 53,569 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Also includes
warrants
to acquire 25,000 shares of common stock at an exercise price of $2.75
per
share, acquired in the September, 2006 private offering.
82
Includes
warrants to acquire 5,556 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
83
Includes
warrants to acquire 12,502 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering. Olivier Chaponnier,
Director, has the power to vote and dispose of the common shares being
registered on behalf of EPSILON Management LTD.
84
Includes
warrants to acquire 16,072 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
85
Includes
warrants to acquire 34,286 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
86
Includes
warrants to acquire 53,572 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Mr. Knuettel serves
on
our board of directors.
87
Includes
warrants to acquire 8,889 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
88
Includes
warrants to acquire 18,750 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
89
Includes
warrants to acquire 21,375 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
90
Includes
warrants to acquire 53,569 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Also includes
warrants
to acquire 5,000 shares of common stock at an exercise price of $2.75 per
share,
acquired in the September, 2006 private offering.
91
Includes
warrants to acquire 25,000 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
92
Includes
warrants to acquire 5,000 shares of common stock at an exercise price of $2.75
per share, acquired in the September, 2006 private offering.
93
Includes
warrants to acquire 112,500 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
94
Includes
warrants to acquire 6,250 shares of common stock at an exercise price of $2.75
per share, acquired in the September, 2006 private offering.
95
Includes
warrants to acquire 11,250 shares of common stock at an exercise price of $2.75
per share, acquired in the September, 2006 private offering.
96
Includes
warrants to acquire 53,569 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Also includes
warrants
to acquire 17,500 shares of common stock at an exercise price of $2.75
per
share, acquired in the September, 2006 private offering.
97
Includes
warrants to acquire 15,556 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
98
Includes
warrants to acquire 6,000 shares of common stock at an exercise price of $2.75
per share, acquired in the September, 2006 private offering.
99
Includes
warrants to acquire 6,250 shares of common stock at an exercise price of $2.75
per share, acquired in the September, 2006 private offering.
100
Includes
warrants to acquire 4,666,667 shares of common stock at an exercise price of
$2.75 per share, acquired in the September, 2006 private offering. Colleen
Foster, managing director, has the power to vote and dispose of the common
shares being registered on behalf of Goldman, Sachs & Co.
101
Includes
warrants to acquire 12,500 shares of common stock at an exercise price of $2.75
per share, acquired in the September, 2006 private offering.
102
Includes
warrants to acquire 107,143 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
103
Includes
warrants to acquire 26,786 shares of common stock at an exercise price of $1.00
per share, acquired in the April, 2006 private offering.
104
Includes
warrants to acquire 74,000 shares of common stock at an exercise price of $2.75
per share, acquired in the September, 2006 private offering.
105
Includes
warrants to acquire 15,000 shares of common stock at an exercise price of $2.75
per share, acquired in the September, 2006 private offering.
106
Includes
warrants to acquire 5,625 shares of common stock at an exercise price of $2.75
per share, acquired in the September, 2006 private offering. Ronnie
D.
Hammonds has the power to vote and dispose of the common shares being registered
on behalf of Hammonds Management Trust.
107
Includes
warrants to acquire 535,715 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
108
Includes
warrants to acquire 26,786 shares of common stock at an exercise price of $1.00
per share, acquired in the April, 2006 private offering.
109
Includes
warrants to acquire 75,000 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Also includes warrants
to acquire 12,500 shares of common stock at an exercise price of $2.75 per
share, acquired in the September, 2006 private offering.
110
Includes
warrants to acquire 53,572 shares of common stock at an exercise price of $1.00
per share, acquired in the April, 2006 private offering. Allan Rothstein,
managing member, has the power to vote and dispose of the common shares being
registered on behalf of Hedge Capital Partners.
111
Includes
warrants to acquire 37,500 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Also includes warrants
to acquire 5,556 shares of common stock at an exercise price of $2.75 per
share,
acquired in the September, 2006 private offering. Jeff Heimbuck, trustee,
has
the power to vote and dispose of the common shares being registered on behalf
of
the Heimbuck Family Trust.
112
Includes
warrants to acquire 7,500 shares of common stock at an exercise price of $2.75
per share, acquired in the September, 2006 private offering.
113
Includes
warrants to acquire 44,444 shares of common stock at an exercise price of $2.75
per share, acquired in the September, 2006 private offering.
114
Includes
warrants to acquire 262,500 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. P. Mast and E. Beck
have the power to vote and dispose of the common shares being registered on
behalf of Hypo Alpe-Adria-Bank.
115
Includes
warrants to acquire 160,725 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Also includes warrants
to acquire 43,750 shares of common stock at an exercise price of $2.75 per
share, acquired in the September, 2006 private offering.
116
Includes
warrants to acquire 8,889 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
117
Includes
warrants to acquire 37,500 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
118
Includes
warrants to acquire 48,214 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Also includes warrants
to acquire 8,750 shares of common stock at an exercise price of $2.75 per
share,
acquired in the September, 2006 private offering.
119
Includes
warrants to acquire 5,556 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
120
Includes
warrants to acquire 37,500 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
121
Includes
warrants to acquire 26,786 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Also includes
warrants
to acquire 8,750 shares of common stock at an exercise price of $2.75 per
share,
acquired in the September, 2006 private offering.
122
Includes
warrants to acquire 10,715 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Werner Henzler has
the
power to vote and dispose of the common shares being registered on behalf
of J.
Barrett Developments Ltd.
123
Includes
warrants to acquire 26,786 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
124
Includes
warrants to acquire 17,143 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
125
Includes
warrants to acquire 11,000 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
126
Includes
warrants to acquire 32,143 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
127
Includes
warrants to acquire 5,556 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
128
Includes
warrants to acquire 64,286 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Includes warrants
to
acquire 22,500 shares of common stock at an exercise price of $2.75 per share,
acquired in the September, 2006 private offering.
129
Includes
warrants to acquire 32,266 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
130
Includes
warrants to acquire 107,143 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
131
Includes
warrants to acquire 26,786 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
132
Includes
warrants to acquire 26,786 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Brian Carpenter,
President, has the power to vote and dispose of the common shares being
registered on behalf of JMC Investments, Ltd.
133
Includes
warrants to acquire 26,786 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
134
Includes
warrants to acquire 6,250 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
135
Includes
warrants to acquire 10,000 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
136
Includes
warrants to acquire 26,786 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Also includes
warrants
to acquire 5,000 shares of common stock at an exercise price of $2.75 per
share,
acquired in the September, 2006 private offering.
137
Includes
warrants to acquire 16,072 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Also includes
warrants
to acquire 33,333 shares of common stock at an exercise price of $2.75
per
share, acquired in the September, 2006 private offering.
138
Includes
warrants to acquire 5,556 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
139
Includes
warrants to acquire 34,286 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
140
Includes
warrants to acquire 11,111 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
141
Includes
warrants to acquire 16,072 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Also includes
warrants
to acquire 15,555 shares of common stock at an exercise price of $2.75
per
share, acquired in the September, 2006 private offering.
142
Includes
warrants to acquire 3,334 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
143
Includes
warrants to acquire 26,786 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
144
Includes
warrants to acquire 120,525 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Includes warrants
to
acquire 38,750 shares of common stock at an exercise price of $2.75 per share,
acquired in the September, 2006 private offering.
145
Includes
warrants to acquire 11,250 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
146
Includes
warrants to acquire 11,250 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
147
Includes
warrants to acquire 11,250 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
148
Includes
warrants to acquire 6,667 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
149
Includes
warrants to acquire 160,715 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. J B Rimeur has the
power to vote and dispose of the common shares being registered on behalf
of LA
Hougue Financial Management Services Limited.
150
Includes
warrants to acquire 107,143 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Gerald Wittenberg
has
the power to vote and dispose of the common shares being
registered on behalf of Ladasa Investments, Inc.
151
Includes
warrants to acquire 3,334 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
152
Includes
warrants to acquire 22,500 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
153
Includes
warrants to acquire 75,000 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
154
Includes
warrants to acquire 12,500 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
155
Includes
warrants to acquire 12,500 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
156
Includes
warrants to acquire 6,250 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
157
Includes
warrants to acquire 22,222 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
158
Includes
warrants to acquire 42,857 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
159
Includes
warrants to acquire 12,500 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
160
Includes
warrants to acquire 80,357 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
161
Includes
warrants to acquire 80,357 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
162
Includes
warrants to acquire 7,000 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
163
Includes
warrants to acquire 10,715 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
164
Includes
warrants to acquire 8,889 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
165
Includes
warrants to acquire 5,750 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
166
Includes
warrants to acquire 11,111 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
167
Includes
warrants to acquire 7,500 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
168
Includes
warrants to acquire 40,000 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering. Montague Guild,
Jr., CEO of Guild Investment Management, Inc., the General Partner of Meteoric
L.P. has the power to vote and dispose of the common shares being registered
on
behalf of Meteoric L.P.
169
Includes
warrants to acquire 34,286 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Jason
Gigliotti has the power to vote and dispose of the common
shares being registered on behalf of MGK Consulting,
Inc.
170
Includes
warrants to acquire 16,667 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
171Includes
warrants to acquire 8,572 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
172
Includes
warrants to acquire 26,786 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Also includes
warrants
to acquire 6,250 shares of common stock at an exercise price of $2.75 per
share,
acquired in the September, 2006 private offering.
173
Includes
warrants to acquire 5,550 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
174
Includes
warrants to acquire 37,500 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
175
Includes
warrants to acquire 160,715 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
176
Includes
warrants to acquire 18,750 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
177
Includes
warrants to acquire 214,286 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. William McCluskey
has
the power to vote and dispose of the common shares being registered on behalf
of
Nina Holdings, LLC.
178
Includes
warrants to acquire 214,286 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Also includes
warrants
to acquire 55,556 shares of common stock at an exercise price of $2.75
per
share, acquired in the September, 2006 private offering. Keith A. Goodman,
Manager and General Partner, has the power to vote and dispose of the common
shares being registered on behalf of Nite Capital LP.
179
Includes
warrants to acquire 85,715 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. David Craven has
the
power to vote and dispose of the common shares being registered on behalf
of
Nunziata Holdings Inc.
180
Includes
warrants to acquire 40,178 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Robyn Schreiber,
President, has the power to vote and dispose of the common shares being
registered on behalf of NYBOR Group Inc.
181
Includes
warrants to acquire 20,000 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
182
Includes
warrants to acquire 11,250 shares of common stock at an exercise price
of $1.00
per share, acquired by Dennis Tower in the April, 2006 private offering
and
transferred to Pauline Tower.
183
Includes
warrants to acquire 107,143 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Walter Dawson has
the
power to vote and dispose of the common shares being registered on behalf
of
Perfco Investments Ltd.
184
Includes
warrants to acquire 20,000 shares of common stock at an exercise price
of $2.75
per share, acquired in the September, 2006 private offering.
185
Includes
warrants to acquire 535,715 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Dr. Rene Simon has
the
power to vote and dispose of the common shares being registered on behalf
of
Professional Trading Services SA.
186
Includes
warrants to acquire 42,857 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering.
187
Includes
warrants to acquire 5,750 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
188
Includes
warrants to acquire 26,786 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering.
189
Includes
warrants to acquire 11,250 shares of common stock at an exercise price
of $2.75
per share, acquired in the September, 2006 private offering.
190
Includes
warrants to acquire 5,556 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
191
Includes
warrants to acquire 5,556 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
192
Includes
warrants to acquire 160,715 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering.
193
Includes
warrants to acquire 112,468 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering.
194
Includes
warrants to acquire 36,000 shares of common stock at an exercise price
of $2.75
per share, acquired in the September, 2006 private offering.
195
Includes
warrants to acquire 52,500 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering.
196
Includes
warrants to acquire 37,500 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering.
197
Includes
warrants to acquire 75,000 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering.
198
Includes
warrants to acquire 107,250 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering.
199
Includes
warrants to acquire 9,217 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
200
Includes
warrants to acquire 5,000 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
201
Includes
warrants to acquire 30,000 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering.
202
Includes
warrants to acquire 30,000 shares of common stock at an exercise price
of $2.75
per share, acquired in the September, 2006 private offering. Anthony R.
Danaher,
the President of Guild Investment Management, Inc., the General Partner
of
Rosebury, L.P. has the power to vote and dispose of the common shares being
registered on behalf of Rosebury, L.P.
203
Includes
warrants to acquire 10,000 shares of common stock at an exercise price
of $2.75
per share, acquired in the September, 2006 private offering.
204
Includes
warrants to acquire 53,569 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Also includes
warrants
to acquire 7,500 shares of common stock at an exercise price of $2.75 per
share,
acquired in the September, 2006 private offering.
205
Includes
warrants to acquire 267,857 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering.
206
Includes
warrants to acquire 10,718 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering.
207
Includes
warrants to acquire 70,983 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Also includes
a warrant
to purchase 466,666 shares of common stock at an exercise price of $2.25
issued
on September 8, 2006 and a warrant to purchase 6,567 shares of common stock
at
an exercise price of $2.25 issued on September 27, 2006, each of which
was
issued as consideration for services provided by Sanders Morris Harris
Inc. in
the September, 2006 private offering of our securities. Ben T. Morris has
the
power to vote and dispose of the common shares being registered on behalf
of
Sanders Morris Harris Inc.
208
Includes
warrants to acquire 408,105 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Also includes warrants
to acquire 85,703 shares of common stock at an exercise price of $2.75 per
share, acquired in the September, 2006 private offering.
210
Includes
warrants to acquire 21,428 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
211
Includes
warrants to acquire 214,286 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Tom and Hydri Kusumoto
have the power to vote and dispose of the common shares being registered
on
behalf of Sanovest Holdings Ltd.
212
Includes
warrants to acquire 37,500 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
213
Includes
warrants to acquire 5,556 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
214
Includes
warrants to acquire 8,025 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Joseph Barnett has
the
power to vote and dispose of the common shares being registered on behalf
of
Sierra Madre Development, LLC.
215
Includes
warrants to acquire 26,786 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
216
Includes
warrants to acquire 107,145 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
217
Includes
warrants to acquire 5,556 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
218
Includes
warrants to acquire 128,572 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
219
Includes
warrants to acquire 26,786 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
220
Includes
warrants to acquire 7,500 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
221
Includes
warrants to acquire 11,111 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
222
Includes
warrants to acquire 11,111 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
223
Includes
warrants to acquire 5,556 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
224
Includes
warrants to acquire 53,571 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Also includes
warrants
to acquire 12,500 shares of common stock at an exercise price of $2.75
per
share, acquired in the September, 2006 private offering.
225
Includes
warrants to acquire 18,750 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
226
Includes
warrants to acquire 26,786 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Jim Brewster has
the
power to vote and dispose of the common shares being registered on behalf
of the
Brewster Family Trust.
227
Includes
warrants to acquire 37,500 shares of common stock at an exercise price
of $1.00
per share, acquired in the April, 2006 private offering. Also includes
warrants
to acquire 5,556 shares of common stock at an exercise price of $2.75 per
share,
acquired in the September, 2006 private offering.
228
Includes
warrants to acquire 160,715 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
229
Includes
warrants to acquire 11,111 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
230
Includes
warrants to acquire 53,569 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
231
Includes
warrants to acquire 5,357 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
232
Includes
warrants to acquire 633,334 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering. Ralph Aldis,
portfolio manager, has the power to vote and dispose of the common shares
being
registered on behalf of US Global Investors - Global Resources
Fund.
233
Includes
warrants to acquire 160,715 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Peter M. Brown,
President, has the power to vote and dispose of the common shares being
registered on behalf of V Maclachlan Investments Corp.
234
Includes
warrants to acquire 35,300 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
235
Includes
warrants to acquire 8,000 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering. Also includes
warrants to acquire 64,286 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
236
Includes
warrants to acquire 54,000 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Mr. Bosché serves as
our Chief Financial Officer.
237
Includes
warrants to acquire 5,000 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
238
Includes
warrants to acquire 26,786 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
239
Includes
warrants to acquire 25,000 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
240
Includes
warrants to acquire 66,667 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering. Evan Schemenauer,
CFO, has the power to vote and dispose of the common shares being registered
on
behalf of Whalehaven Capital Fund Limited.
241
Includes
warrants to acquire 8,889 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
242
Includes
warrants to acquire 27,000 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
243
Includes
warrants to acquire 6,000 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
244
Includes
warrants to acquire 214,273 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
245
Includes
warrants to acquire 5,550 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
246
Includes
warrants to acquire 535,714 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering. Younes Nazarian
has the
power to vote and dispose of the common shares being registered on behalf
of
Y&S Nazarian Revocable Trust.
247
Includes
warrants to acquire 26,786 shares of common stock at an exercise price of
$1.00
per share, acquired in the April, 2006 private offering.
248
Includes
warrants to acquire 25,000 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering. Gary E. Mintz,
General Partner, has the power to vote and dispose of the common shares being
registered on behalf of Yellowstone Limited Partnership.
249
Includes
warrants to acquire 11,111 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering.
250
Includes
warrants to acquire 2,500 shares of common stock at an exercise price of
$2.75
per share, acquired in the September, 2006 private offering. Ralph Aldis,
portfolio manager, has the power to vote and dispose of the common shares
being
registered on behalf of Meridian Global Energy & Resources
Fund.
We
will
not receive proceeds from the sale of common stock or warrants under this
prospectus. We will receive approximately $35,867,661 from the selling
stockholders if they exercise their warrants in full. The selling stockholders
who hold warrants may exercise their warrants at any time until their
expiration, as further described in the “Description of Securities.” Because the
warrant holders may sell the warrants or exercise the warrants in their own
discretion, we cannot plan on specific uses of proceeds beyond application
of
proceeds to general corporate purposes. We have agreed to bear the expenses
in
connection with the registration of the common stock and warrants being offered
hereby by the selling stockholders.
The
selling stockholders will determine at what price they may sell the offered
shares and warrants, and such sales may be made at prevailing market prices,
or
at privately negotiated prices.
Our
common stock has been quoted on the Over-the-Counter Bulletin Board under
the symbol “FTRS.OB” since December 23, 2004, but has only been actively traded
since April 7, 2006. The following table shows, for the periods indicated
since
April 7, 2006, the high and low closing sales prices of our common stock:
|
HIGH
|
LOW
|
||||||
|
FISCAL
YEAR 2006
|
|||||||
|
Second
Quarter (from April 7, 2006)
|
$
|
4.16
|
$
|
1.67
|
|||
|
Third
Quarter
|
$
|
3.88
|
$
|
2.08
|
|||
|
Fourth
Quarter (through December 12, 2006)
|
$
|
2.41
|
$
|
1.15
|
|||
As
of December 12, 2006, there were 60,281,253 shares
of
our common stock issued and outstanding.
As
of December 12, 2006, there were approximately 320 holders of record of
shares of our common stock.
Equity
Compensation Plan
Securities
authorized for issuance under equity compensation plans as of December 12,
2006 are as follows:
|
Plan
category
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
|
Weighted-average
exercise price of outstanding options, warrants and
rights
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
|||||||
|
|
(a)
|
(b)
|
(c)
|
|||||||
|
Equity
compensation plans approved by security holders
|
1,690,000
|
$
|
1.57
|
310,000
|
||||||
|
Equity
compensation plans not approved by security
holders
|
—
|
—
|
—
|
|||||||
|
Total
|
1,690,000
|
$
|
1.57
|
310,000
|
||||||
Equity
compensation plans approved by our stockholders include our 2006 Equity
Incentive Plan, under which our board of directors is authorized to issue
options or other rights to acquire up to 2,000,000 shares of our common stock.
The shares of common stock underlying awards granted under the 2006 Equity
Incentive Plan include options to acquire 1,690,000 shares of common stock.
Options
granted under the 2006 Equity Incentive Plan entitle the grantee, upon exercise,
to purchase a specified number of shares from us at a specified exercise price
per share. The exercise price for shares of common stock covered by an option
cannot be less than the fair market value of the common stock on the date of
grant unless we agree otherwise at the time of the grant.
The
board of directors will determine the period of time during which an option
may
be exercised, except that no option may be exercised more than ten years after
the date of grant.
We
have
never declared or paid dividends on shares of our common stock and we intend
to
retain future earnings, if any, to support the development of our business
and
therefore do not anticipate paying cash dividends for the foreseeable future.
Payment of future dividends, if any, will be at the discretion of our board
of
directors after taking into account various factors, including current financial
condition, operating results and current and anticipated cash needs.
A
discussion of our past financial results is not pertinent to the business plan
of the Company on a going forward basis, as the result of the change in our
business and operations from a pre-exploration stage company early in 2006
to a
company engaged in the acquisition, exploration and development of oil and
natural gas properties following the merger with Foothills California and the
TARH Acquisition.
Our
cash
balance as of September 30, 2006 was $10.7 million, representing net proceeds
received from the private placements of our securities in April and September,
2006, less amounts expended to date for (i) capital expenditures, (ii)
general operating expenses, and (iii) our acquisition of properties from
TARH E&P Holdings, L.P. in September, 2006. This amount, together with
anticipated cash flows from operations, is expected to be sufficient to conduct
our planned activities during the next 12 months.
The
following describes our current business plan, including a summary of planned
acquisition, exploration and development opportunities, our ability to satisfy
our cash requirements, and our need to raise additional funds over the next
year.
|
·
|
We
have fulfilled our obligations under Phase I of the Eel River Project,
in
which we had an obligation to pay 100% of the costs of drilling two
wells,
acquiring additional leasehold acres, and certain other activities.
We
have also initiated a leasing program to significantly expand the
joint
venture’s leasehold position in the basin. We plan to proceed to Phase II,
in which we will have an obligation to pay 100% of the costs of drilling
another well to be commenced by the end of 2006 and of conducting
a 3D
seismic survey covering not less than 15 square miles. Subject
to
|
the
completion of permitting and regulatory requirements, we expect to conduct
the
3D seismic survey in the fall of 2006 and to commence the drilling of the Phase
II well in late 2006 or early 2007. Our financial resources are expected to
be
adequate to complete the Phase II activities.
|
·
|
Following
the acquisition of properties from TARH E&P Holdings, Inc., we have
been applying our technical expertise to recompletions, workovers,
and
other operations at the four fields acquired. We have also begun
planning
and permitting for a 3D seismic survey at the Goose Creek and Goose
Creek
East oil fields, which is expected to provide a much more accurate
mapping
of the reservoirs and lead to the identification of undeveloped
opportunities and deeper oil and gas prospects at the fields. We
plan to
conduct development and exploration drilling, and to evaluate the
technical and economic viability of improved recovery operations,
such as
water floods.
|
|
·
|
On
the Anadarko Project, TeTra Ex., Inc. (owned by John Moran, our President)
has reprocessed the 3D data and completed preliminary geological
and
geophysical interpretations of that data. We plan to acquire TeTra’s
rights to the data and finalize the interpretations, identify drillable
prospects, acquire oil and gas leases over those prospects, and negotiate
joint ventures with other companies, who will be able to earn interests
in
the leases by paying some or all of the costs of drilling one or
more
exploratory wells on the prospects. Our financial resources are expected
to be adequate to conduct these activities.
|
|
·
|
We
plan to continue to evaluate exploration and development opportunities
and
appropriate acquisitions. If we successfully complete acquisitions,
such
acquisitions may provide additional cash flow which may allow us
to expand
our activities and capabilities, and advance exploration and development
opportunities.
|
|
·
|
We
expect an increase in general and administrative expenses to approximately
$250,000 per month in 2007. We expect to expand our staff to
thirteen employees with additions in the areas of geoscience,
engineering and accounting.
|
Off-Balance
Sheet Arrangements
We
have
no off-balance sheet arrangements.
Hedging
Transactions
In
connection with our credit facility with J. Aron & Company, we are
contractually obligated to enter into hedging contracts with the purpose
and
effect of fixing oil and natural gas prices on no less than 80% of projected
oil
and gas production from our proved developed producing oil and gas reserves.
To
fulfill our hedging obligation, we have entered into swap agreements with
J.
Aron & Company. We have entered into the swaps with J. Aron & Company to
hedge the price risks associated with a portion of our anticipated future
oil
and gas production through September 30, 2010, mitigating a portion of
our
exposure to adverse market changes and allowing us to predict with greater
certainty the effective oil and natural gas prices to be received for our
hedged
production. Our swap agreements have not been entered into for trading
purposes
and we have the ability and intent to hold these instruments to maturity.
J.
Aron & Company, the counterparty to the swap agreements, is also our lender
under a credit facility. We believe that the terms of the swap agreements
are at
least as favorable as we could have achieved in swap agreements with third
parties who are not our lenders.
By
removing a significant portion of the price volatility from our future
oil and
gas revenues through the swap agreements, we have mitigated, but not eliminated,
the potential effects of changing oil and gas prices on our cash flows
from
operations through September 30, 2010. While these and other hedging
transactions we may enter into in the future will mitigate our risk of
declining
prices for oil and gas, they will also limit the potential gains that we
would
experience if prices in the market were to rise. We have not obtained collateral
to support the agreements but monitor the financial viability of our
counterparty and believe our credit risk is minimal on these transactions.
Under
these arrangements, payments are received or made based on the differential
between fixed product prices in the swap agreements and a variable product
price
representing the average of the closing settlement price(s) on the New
York
Mercantile Exchange for futures contracts for the applicable trading months.
These agreements are settled in cash at monthly expiration dates. In the
event
of nonperformance, we would be exposed again to price risk. We have some
risk of
financial loss because the price received for the oil or gas production
at the
actual physical delivery point may differ from the prevailing price at
the
delivery point required for settlement of the hedging transaction. We could
also
suffer financial losses if our actual oil and gas production is less than
the
hedged production volumes during periods when the variable product price
exceeds
the fixed product price. Moreover, our hedge arrangements generally do
not apply
to all of our production and thus provide only partial price protection
against
declines in commodity prices. Hedge effectiveness is measured at least
quarterly
based on the relative changes in fair value between the derivative contract
and
the hedged item over time, and any ineffectiveness is immediately reported
in
the consolidated statement of operations.
Our
current hedging transactions are designated as cash flow hedges, and we
record
the costs and any benefits derived from these transactions as a reduction
or
increase, as applicable, in natural gas and oil sales revenue. We may enter
into
additional hedging transactions in the future.
Company
Overview
Foothills
is an oil and gas exploration company engaged in the acquisition, exploration
and development of oil and natural gas properties. The Company’s operations are
primarily those of Foothills California, Inc., Foothills Texas, Inc. and
Foothills Oklahoma, Inc., our wholly-owned subsidiaries. Foothills California,
Inc., a Delaware corporation, was formed on December 29, 2005 as Brasada
Resources LLC, a Delaware limited liability company, and converted to Brasada
California, Inc., a Delaware corporation, on February 28, 2006. On April 6,
2006, Brasada California, Inc. merged with our wholly-owned acquisition
subsidiary, leaving Brasada California, Inc. the surviving corporation and
our
wholly-owned subsidiary. Brasada California, Inc. later changed its name to
Foothills California, Inc. following the merger. Foothills Oklahoma, Inc. was
formed on May 10, 2006 to conduct our operations in Oklahoma. Foothills Texas,
Inc. was formed in August, 2006 for the purpose of acquiring certain assets
from
TARH E&P Holdings, L.P. and operating those properties following the
September 8, 2006 consummation of this acquisition. We currently conduct our
operations primarily through these subsidiaries.
Prior
to
our identification of the acquisition of the properties of TARH E&P
Holdings, L.P. in Texas, our primary focus was on oil and natural gas properties
located in the Eel River Basin, California, and the Anadarko Basin, Oklahoma.
On
June 22, 2006, we announced that Foothills Texas, Inc. had entered into
definitive agreements with TARH E&P Holdings, L.P., an affiliate of Texas
American Resources Company, for the acquisition of certain properties in Texas.
This acquisition expanded our operations into Texas, though we will continue
to
operate and expand our operations in California and Oklahoma.
Our
business strategy is to identify and exploit low-to-moderate risk resources
in
and adjacent to existing or indicated producing areas that can be quickly
developed and put on production at low cost, including the acquisition of
producing properties with exploitation and exploration potential in these areas.
We will also take advantage of our expertise to develop exploratory projects
in
focus areas and to participate with other companies in those areas to explore
for oil and natural gas using state-of-the-art 3D seismic technology.
We
have
entered into an agreement with Moyes & Co., Inc. to identify potential
acquisition, development, exploitation and exploration opportunities that
fit
with our strategy. Moyes & Co., Inc. is expected to screen opportunities and
perform detailed evaluation of those opportunities that we decide to pursue,
as
well as assist with due diligence and negotiations with respect to such
opportunities. Christopher P. Moyes is the beneficial owner of 7.3% of our
common stock as of December 12,
2006,
and is a member of our board of directors. Mr. Moyes is a major shareholder
and
the President of Moyes & Co., Inc. However, Moyes & Co., Inc. is being
compensated for identifying opportunities and assisting us in pursuing those
opportunities; therefore the interests of Moyes & Co., Inc. are not the same
as our interests. We are responsible for evaluating any opportunities presented
to us by Moyes & Co., Inc. to determine if those opportunities are
consistent with our business strategy.
California
We
believe that the oil and gas industry has in effect overlooked California in
recent years because of the perceived difficulties of conducting operations
in
the state. We believe this situation creates opportunities.
California
has abundant and long-lived oil and gas resources with prolific hydrocarbon
basins. Infrastructure supporting oil and gas exploration, development and
production activities is in place, consisting of contractors, suppliers,
pipelines and refineries. Most oil and gas basins in the state are
significantly
under-explored even near large fields, with operators concentrating on a few,
large, heavy oil resources. Offset exploration in and near fields has frequently
been ignored. There is a dramatic lack of use of 3D seismic and other latest
seismic technologies in many of the basins, and in some areas (such as the
Eel
River Basin) we believe there has been insufficient attention to drilling and
drilling fluid engineering. Through the experience and relationships of
management, we have strong ties to other significant oil and gas companies
operating in California.
Texas
On
September 8, 2006, Foothills Texas, Inc. consummated the acquisition of TARH
E&P Holdings, L.P.’s interests in four oilfields in southeastern Texas. We
paid aggregate consideration of $62 million for the properties, comprised of
a
cash payment of approximately $57.5 million and the issuance of 1,605,345 shares
of common stock to TARH E&P Holdings, L.P.
In
the
acquisition, Foothills Texas acquired interests in four fields: the Goose
Creek
Field and Goose Creek East Field, both in Harris County, Texas, the Cleveland
Field, located in Liberty County, Texas, and the Saratoga Field located in
Hardin County, Texas. These interests represent working interests ranging
from
95% to 100% in the four fields.
Oklahoma
The
Anadarko Basin in western Oklahoma and the Texas panhandle is one of the
most
prolific oil and natural gas producing basins in the United States. Most
of the
shallow shelf portion of the basin can be characterized as very mature. We
believe that much promise remains in the deeper portion of the basin
that is characterized by stratigraphic traps in the Pennsylvanian Morrow
formation and structural traps in the Ordovician Hunton formation, two of
the
formations targeted by the Company. However, to produce oil and natural
gas from these deeper formations, drilling is more expensive and the 3-D
seismic
data is less reliable than drilling costs and 3-D seismic data in the shallow
shelf portion of the basin.
Project
Status
Eel
River Basin
The
Eel
River Basin is the northernmost of the California sedimentary basins. Most
of
the basin exists offshore of northern California and southern Oregon. However,
a
portion of the basin is present onshore in Humboldt County, California.
Hydrocarbons generated in the deeper offshore part of the basin have migrated
updip into the Miocene and Pliocene rocks present in this area. The onshore
portion of the basin contains the Tompkins Hill natural gas field that was
discovered by Texaco in 1937. It is now owned and operated by Occidental, has
produced in excess of 120 billion cubic feet (“BCF) of natural gas, and is
continuing to produce.
The
Grizzly Bluff area, approximately five miles south of the Tompkins Hill Field,
was initially proven to contain natural gas in three wells drilled by Zephyr
in
the mid-1960s. In the early 1970s, Chevron drilled a deep well seeking oil
but
found strong indications of natural gas. In the late 1980s and early 1990s,
ARCO
drilled several wells and found natural gas in the shallow zones. These wells
were successfully tested at rates of up to 2.2 million cubic feet (“MMCF”) of
gas per day, but the wells were never put into production due to the lack of
a
natural gas market and pipeline connection, and were subsequently
abandoned.
In
the
past decade, we believe the industry has overlooked the hydrocarbon potential
and production within the Eel River Basin due to its relatively isolated
position in California. INNEX Energy, L.L.C. recognized this overlooked
potential in the form of multiple low resistivity, low contrast sands
that
possibly
define part of a widespread, basin-centered natural gas play. INNEX Energy,
L.L.C. began acquiring oil and gas leases in the area in 2000 to test this
concept and entered into a joint venture with Forexco, Inc. in 2002. A
subsequent 10-well drilling program in 2003 by Forexco, Inc. encountered
drilling and completion problems, but established production from four wells
in
the Grizzly Bluff area that are now producing approximately 500 thousand cubic
feet of gas per day. This field was brought on line in late 2003 with the
completion of a natural gas gathering system and a new pipeline that connects
to
the PG&E Corporation backbone grid for northern California. INNEX Energy,
L.L.C. and Forexco, Inc. terminated their joint venture in 2004.
The
Tompkins Hill Field is the analog field in the basin for the Eel River Project.
The distance between the Tompkins Hill Field and the Grizzly Bluff Field
is
approximately five miles. This production is from similar age rocks at similar
depths as the Grizzly Bluff Prospect, the first prospect that we drilled
in the
Eel River Project. Our mapping indicates that substantial natural gas reserves
occur above the lowest tested gas in the Grizzly Bluff Field in multiple
stacked
Pliocene sandstone reservoirs.
On
January 3, 2006, Foothills California, Inc. entered into a Farmout and
Participation Agreement with INNEX California, Inc., a subsidiary of INNEX
Energy, L.L.C., to acquire, explore and develop oil and natural gas properties
located in the Eel River Basin, the material terms of which are as follows:
|
·
|
We
serve as operator of a joint venture with INNEX California, Inc.,
and have
the right to earn an interest in approximately 3,500 existing leasehold
acres held by INNEX California, Inc. in the basin, and to participate
as
operator with INNEX California, Inc. in oil and gas acquisition,
exploration and development activities within an area of mutual interest
consisting of the entire Eel River
Basin.
|
|
·
|
The
agreement provides for “drill-to-earn” terms, and consists of three
phases.
|
|
·
|
In
Phase I, we were obligated to pay 100% of the costs of drilling two
wells,
acquiring 1,000 acres of new leases, and certain other activities.
We have
fulfilled our obligations under Phase I, and will receive an assignment
from INNEX California, Inc. of a 75% working interest (representing
an
approximate 56.3% net revenue interest) in the leases held by INNEX
California, Inc. in the two drilling units to the deepest depth drilled
in
the two Phase I obligation wells.
|
|
·
|
We
then had the option, but not the obligation, to proceed into Phase
II. We
plan to proceed into Phase II, and will pay 100% of the costs of
drilling
one well and conducting a 3D seismic survey covering not less than
15
square miles. Upon completion of Phase II, we will receive an assignment
from INNEX California, Inc. of a 75% working interest (representing
an
approximate 56.3% net revenue interest) in the leases held by INNEX
California, Inc. in the drilling unit and a 75% working interest
(representing an approximate 59.3% net revenue interest) in all remaining
leases held by INNEX California, Inc. to the deepest depth drilled
in the
three Phase I and II obligation
wells.
|
|
·
|
We
will then have the option, but not the obligation, to proceed into
Phase
III. In Phase III, we will pay 100% of the costs of drilling one
deep
well. Upon completion of Phase III, we will receive an assignment
from
INNEX California, Inc. of a 75% working interest (representing an
approximate 56.3% net revenue interest) in the leases held by INNEX
California, Inc. in the drilling unit and a 75% working interest
(representing an approximate 59.3% net revenue interest) in all remaining
leases held by INNEX California, Inc. with no depth
limitation.
|
|
·
|
After
completion of Phase III, the two parties will each be responsible
for
funding their working interest share of the joint venture’s costs and
expenses. We will generally have a 75%
working
|
interest
in activities conducted on specified prospects existing at the time of execution
of the agreement, and a 70% working interest in other activities. Each party
will be able to elect not to participate in exploratory wells on a
prospect-by-prospect basis, and a non-participating party will lose the
opportunity to participate in development activities and all rights to
production relating to that prospect.
|
·
|
We
are also entitled to a proportionate assignment from INNEX California,
Inc. of its rights to existing permits, drill pads, roads, rights-of-way,
and other infrastructure, as well as its pipeline access and marketing
arrangements.
|
|
·
|
INNEX
California, Inc. has an option to participate for a 25% working interest
in certain producing property acquisitions by us in the area of mutual
interest.
|
During
the period from June through August, 2006, we drilled the Christiansen 3-15
well
and the Vicenus 1-3 well in the Grizzly Bluff Field to total depths of 4,815
feet and 5,747 feet, respectively. In September, 2006, we commenced commercial
production from the Christiansen 3-15 well and on September 19, 2006 announced
that production is expected to ramp up in stages to a target rate of about
1
million cubic feet of natural gas per day. On September 19, 2006, we also
announced that the Vicenus 1-3 well is expected to be placed on production
within the next two weeks following installation of production equipment that
has been ordered. As of September 29, 2006, we had not completed the evaluation
of the drilling results and production information from these two wells that
will be required to estimate proved reserves, if any, that we may have
discovered in the Grizzly Bluff Field. We expect to acquire a 3D seismic survey
over the Grizzly Bluff Field during the fourth quarter of 2006, which should
assist us in identifying specific locations for future wells and is also
expected to allow for the direct detection of natural gas, especially in
shallower formations.
The
Eel
River Project is the centerpiece of a large exploitation-exploration
opportunity. There is presently minimal competition in the basin, providing
us
with an opportunity to effectively control the entire basin.
Texas
Properties
We
have
established and initiated an ongoing recompletion program that is expected
to
increase daily production from the fields in Texas. A 3D seismic survey,
which
has been proven to be an effective exploration tool in the area, is presently
being planned to identify the upside potential at the Goose Creek Field and
Goose Creek East Field. The 3D seismic survey is expected to result in much
more
accurate mapping of the reservoirs and lead to the identification of undeveloped
opportunities and deeper oil prospects at the fields. In addition, the seismic
surveys in these areas show a strong gas signature over gas reservoirs, a
Direct
Hydrocarbon Indicator (“DHI”). This “DHI” effect directly contributed to the
discovery of two nearby natural gas fields from the Vicksburg reservoirs.
However, a seismic DHI signature cannot reliably identify reservoirs that
are
economically productive of hydrocarbons. The Company believes that the deeper
Vicksburg reservoirs offer significant upside potential in the Goose Creek
Field, where old wellbores encountered gas in the Vicksburg reservoirs which
was
not produced at the time of discovery. A gas pipeline runs through the eastern
part of the property, allowing for early monetization of this
gas.
Anadarko
Basin
The
initial focus of our activities within the Anadarko Basin has been the area
covered by a 75 square mile 3D seismic survey in Roger Mills County, Oklahoma.
Through a license held by TeTra Ex., Inc. (which is owned by our President,
John
Moran), the Company is planning to acquire non-exclusive access
to
this
survey, which was shot in 1998. The 3D seismic survey was initially shot by
a
major oil company to define stratigraphic traps in the Pennsylvanian sedimentary
section in an area of substantial Pennsylvanian natural gas production. That
company drilled only one well using the 3D seismic data set. The well
encountered wet Morrow sand and was plugged and abandoned. That company
subsequently exited oil and gas exploration activity in the MidContinent region
and no further activity has been conducted in the area using this data. Numerous
exploratory ideas remain to be exploited on this data set, both in the
Pennsylvanian section as well as the deeper Ordovician section. The best wells
completed in these rocks typically flow in excess of 10 MMCF of natural gas
per
day and contain reserves in the 20 to 50 BCF range.
We
have
completed preliminary geological and geophysical interpretations of the 3D
seismic data, and have reprocessed the 3D data. We plan to finalize the
interpretations, identify drillable prospects, acquire oil and gas leases over
those prospects, and negotiate joint ventures with other companies, who will
be
able to earn interests in the leases by drilling one or more exploratory wells
on the prospects.
Markets
and Customers
The
market for oil and natural gas that we will produce depends on factors beyond
our control, including the extent of domestic production and imports of oil
and
natural gas, the proximity and capacity of natural gas pipelines and other
transportation facilities, demand for oil and natural gas, the marketing of
competitive fuels and the effects of state and federal regulation. The oil
and
gas industry also competes with other industries in supplying the energy and
fuel requirements of industrial, commercial and individual
consumers.
Our
oil
production is expected to be sold at prices tied to the spot oil markets. Our
natural gas production is expected to be sold under short-term contracts and
priced based on first of the month index prices or on daily spot market prices.
Regulations
General
Our
business is affected by numerous laws and regulations, including energy,
environmental, conservation, tax and other laws and regulations relating to
the
energy industry. Most of our drilling operations will require permit or
authorizations from federal, state or local agencies. Changes in any of these
laws and regulations or the denial or vacating of permits could have a material
adverse effect on our business. In view of the many uncertainties with respect
to current and future laws and regulations, including their applicability to
us,
we cannot predict the overall effect of such laws and regulations on our future
operations.
We
believe that our operations comply in all material respects with applicable
laws
and regulations. There are no pending or threatened enforcement actions related
to any such laws or regulations. We believe that the existence and enforcement
of such laws and regulations will have no more restrictive an effect on our
operations than on other similar companies in the energy industry.
Proposals
and proceedings that might affect the oil and gas industry are pending before
Congress, the Federal Energy Regulatory Commission (“FERC”), state legislatures
and commissions and the courts. We cannot predict when or whether any such
proposals may become effective. In the past, the natural gas industry has been
heavily regulated. There is no assurance that the regulatory approach currently
pursued by various agencies will continue indefinitely. Notwithstanding the
foregoing, we do not anticipate that
compliance
with existing federal, state and local laws, rules and regulations will have
a
material adverse effect upon our capital expenditures, earnings or competitive
position.
Federal
Regulation of Sales and Transportation of Natural Gas
Historically,
the transportation and sale of natural gas and its component parts in interstate
commerce has been regulated under several laws enacted by Congress and the
regulations passed under these laws by FERC. Our sales of natural gas, including
condensate and liquids, may be affected by the availability, terms and cost
of
transportation. The price and terms of access to pipeline transportation are
subject to extensive federal and state regulation. From 1985 to the present,
several major regulatory changes have been implemented by Congress and FERC
that
affect the economics of natural gas production, transportation and sales. In
addition, FERC is continually proposing and implementing new rules and
regulations affecting those segments of the natural gas industry, most notably
interstate natural gas transmission companies that remain subject to FERC’s
jurisdiction. These initiatives may also affect the intrastate transportation
of
gas under certain circumstances. The stated purpose of many of these regulatory
changes is to promote competition among the various sectors of the natural
gas
industry.
The
ultimate impact of the complex rules and regulations issued by FERC cannot
be
predicted. In addition, many aspects of these regulatory developments have
not
become final but are still pending judicial and final FERC decisions. We cannot
predict what further action FERC will take on these matters. Some of FERC’s more
recent proposals may, however, adversely affect the availability and reliability
of interruptible transportation service on interstate pipelines. We do not
believe that we will be affected by any action taken materially differently
than
other natural gas producers, gatherers and marketers with whom we
compete.
State
Regulation
Our
operations are also subject to regulation at the state and in some cases,
county, municipal and local governmental levels. Such regulation includes
requiring permits for the drilling of wells, maintaining bonding requirements
in
order to drill or operate wells and regulating the location of wells, the method
of drilling and casing wells, the surface use and restoration of properties
upon
which wells are drilled, the plugging and abandonment of wells and the disposal
of fluids used and produced in connection with operations. Our operations are
also subject to various conservation laws and regulations pertaining to the
size
of drilling and spacing units or proration units and the unitization or pooling
of oil and gas properties.
In
addition, state conservation laws, which frequently establish maximum rates
of
production from oil and gas wells, generally prohibit the venting or flaring
of
gas and impose certain requirements regarding the rates of production. State
regulation of gathering facilities generally includes various safety,
environmental and, in some circumstances, nondiscriminatory take requirements,
but, except as noted above, does not generally entail rate regulation. These
regulatory burdens may affect profitability, but we are unable to predict the
future cost or impact of complying with such regulations.
Environmental
Matters
We
are
subject to extensive federal, state and local environmental laws and regulations
relating to water, air, hazardous substances and wastes, and threatened or
endangered species that restrict or limit our business activities for purposes
of protecting human health and the environment. Compliance with the multitude
of
regulations issued by federal, state, and local administrative agencies can
be
burdensome and costly. State environmental regulatory programs are generally
very similar to the corresponding federal environmental regulatory programs,
and
federal environmental regulatory programs are often delegated to the
states.
Our
oil
and gas exploration and production operations are subject to state and/or
federal solid waste regulations that govern the storage, treatment and disposal
of solid and hazardous wastes. However, much of the solid waste that will be
generated by our oil and gas exploration and production activities is exempt
from regulation under federal, and many state, regulatory programs. To the
extent our operations generate solid waste, such waste is generally subject
to
state regulations. We will comply with solid waste regulations in the normal
course of business.
In
addition to solid and hazardous waste, our production operations may generate
produced water as a waste material. This water can sometimes be disposed of
by
discharging it to surface waters under discharge permits issued pursuant to
the
Clean Water Act, or an equivalent state program. Another common method of
produced water disposal is subsurface injection in disposal wells. Such disposal
wells are permitted under the Safe Drinking Water Act, or an equivalent state
regulatory program. The drilling, completion, and operation of produced water
disposal wells are integral to oil and gas operations.
Air
emissions and exhaust from gas-fired generators and from other equipment, such
as gas compressors, are potentially subject to regulations under the Clean
Air
Act, or equivalent state regulatory programs. To the extent that our air
emissions are regulated, they are generally regulated by permits issued by
state
regulatory agencies. We will obtain air permits, where needed, in the normal
course of business.
In
the
event that spills or releases of crude oil or produced water occur, we would
be
subject to spill notification and response regulations under the Clean Water
Act, or equivalent state regulatory programs. Depending on the nature and
location of our operations, we may also be required to prepare spill prevention,
control and countermeasure response plans under the Clean Water Act, or
equivalent state regulatory programs. Response costs could be high and may
have
a material adverse effect on our operations. We may not be fully insured for
these costs.
Failure
to comply with environmental regulations may result in the imposition of
substantial administrative, civil, or criminal penalties, or restrict or
prohibit our desired business activities. Environmental laws and regulations
impose liability, sometimes strict liability, for environmental cleanup costs
and other damages. Other environmental laws and regulations may delay or
prohibit exploration and production activities in environmentally sensitive
areas or impose additional costs on these activities.
Costs
associated with responding to a major spill of crude oil or produced water,
or
costs associated with remediation of environmental contamination, are the most
likely occurrences that could result in a material adverse effect on our
business, financial condition and results of operations. In addition, changes
in
applicable federal, state and local environmental laws and regulations
potentially could have a material adverse effect on our business, financial
condition and results of operations.
Competition
The
oil
and gas industry is highly competitive. Competitors include major oil companies,
other independent energy companies and individual producers and operators,
many
of which have financial resources, personnel and facilities substantially
greater than we have. We face intense competition for the acquisition of oil
and
gas leases and properties. For a more thorough discussion of how competition
could impact our ability to successfully complete our business strategy, see
“Risk Factors — Competition in obtaining rights to explore and develop oil and
gas reserves and to market our production may impair our business.”
Employees
As
of December 12,
2006
the Company had eleven full-time employees. None of our employees is
represented by a labor union, and we consider our employee relations to be
good.
Description
of Property
We
commenced our present business activities in April, 2006. All
of
the Company’s oil and gas exploration, development and production activities are
located in the United States. We do not yet have sufficient information to
make
any estimates of our proved oil and gas reserves as of September 30, 2006.
Productive
Wells
|
Productive
Wells
September
30, 2006
|
|||||||||||||||||||
|
(Number
of wells)
|
Oil
|
Natural
Gas
|
Total
|
||||||||||||||||
|
|
Gross(1)
|
Net(2)
|
Gross(1)
|
Net(2)
|
Gross(1)
|
Net(2)
|
|||||||||||||
|
California
|
-
|
-
|
1
|
0.8
|
1
|
0.8
|
|||||||||||||
|
Texas
|
85
|
84.9
|
-
|
-
|
85
|
84.9
|
|||||||||||||
|
Total
|
85
|
84.9
|
1
|
0.8
|
86
|
85.7
|
|||||||||||||
(1)
Represents the total number of wells at each property.
(2)
Represents our interest in the total number of wells at each
property.
Developed
and Undeveloped Acreage
|
Acreage
September
30, 2006
|
|||||||||||||||||||
|
(Acres)
|
Developed
|
Undeveloped
|
Total
|
||||||||||||||||
|
|
Gross(1)
|
Net(2)
|
Gross(1)
|
Net(2)
|
Gross(1)
|
Net(2)
|
|||||||||||||
|
California
|
264
|
198
|
4,979
|
4,979
|
5,243
|
5,177
|
|||||||||||||
|
Texas
|
2,722
|
2,694
|
1,210
|
1,210
|
3,932
|
3,904
|
|||||||||||||
|
Total
|
2,986
|
2,892
|
6,189
|
6,189
|
9,175
|
9,081
|
|||||||||||||
(1)
Represents the total acreage at each property.
(2)
Represents our interest in the total acreage at each property.
Drilling
Activity
|
Drilling
Activity
Period
from Commencement of Present Business Activities
in
April, 2006 through September 30, 2006
|
|||||||||||||||||||
|
(Number
of wells)
|
Productive
|
Dry
|
Total
|
||||||||||||||||
|
|
Gross(1)
|
Net(2)
|
Gross(1)
|
Net(2)
|
Gross(1)
|
Net(2)
|
|||||||||||||
|
Exploration
|
1
|
0.8
|
-
|
-
|
1
|
0.8
|
|||||||||||||
|
Development
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||
|
Total
|
1
|
0.8
|
-
|
-
|
1
|
0.8
|
|||||||||||||
(1)
Represents the total number of wells for which there was drilling
activity.
(2)
Represents our interest in the total number of wells for which there is
drilling
activity.
Present
Activities
As
of
September 30, 2006, one gross (0.8 net) exploratory well in California had
been
drilled with indications of productivity, but was awaiting the installation
of
production equipment to complete final testing.
Our
principal executive offices are located at 4540 California Avenue, Suite 550,
Bakersfield, California 93309 and our phone number is (661) 716-1320. We
currently lease approximately 4,500 square feet of office space and believe
that
suitable additional space to accommodate our anticipated growth will be
available in the future on commercially reasonable terms.
Legal
Proceedings
From
time
to time we may become a party to litigation or other legal proceedings that,
in
the opinion of our management are part of the ordinary course of our business.
Currently, no legal proceedings or claims are pending against or involve us
that, in the opinion of our management, could reasonably be expected to have
a
material adverse effect on our business, prospects, financial condition or
results of operations.
The
following table sets forth the executive officers and directors, their ages
and
position(s) with the Company.
|
Name
|
|
Age
|
|
Position
|
|
Dennis
B. Tower
|
|
60
|
|
Chief
Executive Officer; Director
|
|
John
L. Moran
|
|
61
|
|
President;
Director
|
|
W.
Kirk Bosché
|
|
56
|
|
Chief
Financial Officer
|
|
James
H. Drennan
|
|
60
|
|
Vice
President, Land and Legal
|
| Michael L. Moustakis |
48
|
Vice President, Engineering | ||
|
Christopher
P. Moyes
|
|
59
|
|
Director
|
|
Frank P.
Knuettel
|
|
65
|
|
Director
|
|
John
A. Brock
|
76
|
Director
|
Our
directors and officers hold office until the earlier of their death,
resignation, or removal or until their successors have been duly elected and
qualified.
Dennis
B. Tower, Chief Executive Officer and Director. Before
joining Foothills as its Chief Executive Officer in 2006, Mr. Tower had
extensive involvement in all phases of new venture exploration, appraisal,
project evaluation and development, asset acquisition and disposal, strategic
goals setting and human resource evaluation. During 2005, Mr. Tower,
together with Messrs. Moran and Bosché, evaluated opportunities that would
be appropriate for launching a new oil and gas exploration and development
company, which ultimately led to the formation of Foothills California at the
end of 2005. From 2000 through 2004, Mr. Tower served as President and
Chief Executive Officer at First International Oil Corporation, a privately
held
independent oil company with extensive holdings in Kazakhstan, where he led
the
company to a successful sale with a major Chinese oil company. Previously,
Mr. Tower held several Vice President, Manager, Director and Geologist
positions at Atlantic Richfield Company (“ARCO”), where he was responsible for
the company’s Mozambique drilling operations, managed the company’s exploration
licenses in Myanmar and the Philippines, coordinated exploration efforts in
other Asian countries and evaluated field redevelopment and asset acquisition
opportunities. Mr. Tower led ARCO’s North Sea exploration activities for a
nine-year period during which ARCO made numerous new oil and natural gas
discoveries in the United Kingdom, Norway and the Netherlands. During the course
of his career, Mr. Tower has been directly involved in the discovery of 35
oil and gas fields in 11 different countries. Mr. Tower holds both
Bachelor’s and Master’s degrees in Geology from Oregon State
University.
John
L. Moran, President and Director.
Prior to
joining Foothills in 2006, Mr. Moran, together with Messrs. Tower and
Bosché, evaluated opportunities during 2005 that would be appropriate for
launching a new oil and gas exploration and development company, which
ultimately led to the formation of Foothills California at the end of 2005.
In
May of 2000, Mr. Moran formed and later served as President and Exploration
Manager of Carneros Energy, Inc., a private oil and gas exploration company
with
exploration and acquisition emphasis in the San Joaquin and Sacramento Basins
of
California, where he was responsible for obtaining $75 million in equity
funding. From 1997 through 1998, Mr. Moran founded and acted as President
of Integrated Petroleum Exploration (“IPX”) which merged with and into Prime
Natural Resources (“Prime”) in 1998, where he served as Vice President of
Exploration. Prior to his time at IPX and Prime, Mr. Moran served as both
Vice President Exploration/Chief Geologist and Exploration Manager/MidContinent
Region for Apache Corporation. In 1995 Mr. Moran left Apache to
found
TeTra Ex., Inc., an oil and gas exploration and development company using 3D
seismic to explore for oil and gas in the Anadarko Basin in Oklahoma. He was
responsible for the acquisition of the right to use 13,000 miles of 2D seismic
for exploration purposes and was instrumental in using this to develop a 75
square-mile 3D seismic project that was later sold to a major oil and gas
company. Mr. Moran holds both Bachelor’s and Master’s degrees in Geology
with a major in Stratigraphy and a minor in Petrology from Oregon State
University.
W.
Kirk Bosché, Chief Financial Officer. Mr. Bosché
has diversified experience as a financial and accounting executive officer
in
public and private oil and gas exploration and production organizations.
Mr. Bosché joined Foothills in 2006 as its Chief Financial Officer. During
2005, Mr. Bosché, together with Messrs. Tower and Moran, evaluated
opportunities that would be appropriate for launching a new oil and gas
exploration and development company, which ultimately led to the formation
of
Foothills California at the end of 2005. Mr. Bosché served as Chief
Financial Officer of First International Oil Corporation from 1997 through
2004.
From 1986 through 1997, Mr. Bosché was Vice President and Treasurer for
Garnet Resources Corporation, a publicly traded independent oil and gas
exploration and production company with activities in seven foreign countries.
He began his career with Price Waterhouse & Co., and has been a Certified
Public Accountant since 1975. Mr. Bosché holds a BBA in Accounting from the
University of Houston.
James
H. Drennan, Vice President, Land and Legal.
Prior
to joining Foothills in 2006, Mr. Drennan was Land Manager at Vaquero Energy
Inc. From 2002 through 2005, he served as General Counsel and Land Manager
of
Carneros Energy, Inc. From 1990 through 2002, Mr. Drennan practiced law with
the
firms of Jones & Beardsley and Noriega and Bradshaw, where his practice
areas included oil and gas, real estate, estate planning, probate, corporate,
general business and litigation. From 1978 to 1990, he was Land Manager for
Buttes Resources, Depco, Inc., Ferguson & Bosworth, and Bosworth Oil Co. Mr.
Drennan started his career in the oil and gas industry in 1974 as land agent
with Gulf Oil Corporation. He holds a JD from California Pacific School of
Law,
and a BA in Economics from San Diego State University.
Michael
L. Moustakis, Vice President, Engineering.
Mr.
Moustakis joined Foothills as Vice President, Engineering in 2006. He was
Engineering Manager at Rockwell Petroleum, Inc. from 2005 through 2006,
and held
the same position at OXY Resources California LLC from 2001 through 2005.
Mr.
Moustakis was Lead Petroleum Engineer with Preussag Energie GmbH from 2000
to
2001, and Director of Reservoir Engineering for Anglo-Albanian Petroleum
Ltd.
from 1994 to 2000. He began his career with Union Oil of California in
1984, and
subsequently served in various engineering positions at several companies,
including Shell Western E&P, Northern Digital Inc. and Eastern Petroleum
Services Ltd. He holds a Bachelor’s degree in Petroleum Engineering from
the University of Alaska.
Christopher
P. Moyes, Director. Mr.
Moyes
became a director of Foothills in 2006. He has been active in the international
and domestic oil and gas business since 1968. Mr. Moyes is President of Moyes
& Co., Inc., a private energy advisory firm headquartered in Dallas, Texas.
Moyes & Co., Inc. provides advice on oil and gas exploration, appraisal,
project and portfolio evaluation, asset acquisitions and disposals and maintains
a proprietary database covering upstream oil and gas. Moyes & Co., Inc. has
through 2005 evaluated opportunities for launching a new oil and gas exploration
and production company, which led to the formation of Foothills California
at
the end of 2005. Previously Mr. Moyes was President of Gaffney Cline &
Associates (GCA), based in Dallas, Texas. Before coming to Dallas in 1976,
Mr.
Moyes was based in Singapore and London for GCA, holding various management
functions. Mr. Moyes started his career with West Australian Petroleum Pty.
Ltd., in Perth Australia. Mr. Moyes holds a Bachelor of Science in Geology
from
the University of Western Australia and a Master of Science in Geology &
Petroleum Engineering from the Royal School of Mines, Imperial College,
London.
Frank
P. Knuettel, Director.
Mr.
Knuettel became a director of Foothills in 2006. He is an Adjunct Faculty member
at The Mason School of Business at the College of William and Mary where he
teaches securities analysis and Investment Banking. Prior to retiring in 2000,
he was a Managing Director of PaineWebber, Inc., since acquired by UBS
Securities, where he specialized in the analysis of energy and energy-related
securities, as well as working in investment banking on energy transactions.
His
career spanned nearly 35 years, during which he was associated with an energy
sector fund for 14 years and was in the securities industry for 21 years. Mr.
Knuettel is a Chartered Financial Analyst, and a member of the National
Association of Petroleum Investment Analysts and the CFA Institute. He holds
a
Bachelor of Science in Accounting from La Salle University and a Master of
Business Administration (Finance) from St. John’s University.
John
A. Brock, Director.
Mr.
Brock
became a director of Foothills in 2006. Mr. Brock served as Chairman of
Brighton Energy, LLC until its recent sale. He is a director of Fabtec,
Inc.
(ReRoof America), Lifeguard America, LLC and the AGOS Group, LLC, and is
an
advisory director of Ward Petroleum, Inc. Mr. Brock is a member of nine
petroleum industry associations. During his distinguished career, he has
formed
exploration departments and instituted and supervised exploration programs
for
four successful companies. Mr. Brock is a Founder and Director of the Sarkeys
Energy Center at the University of Oklahoma, is a Director of the Oklahoma
Nature Conservancy and the Sutton Avian Research Center, and is active
in
numerous other civic and community groups. He has also organized and is
currently Chairman of Oklahomans for Lawsuit Reform and co-chairman of
Oklahomans for Workers Compensation Reform. Mr. Brock holds a BSc in Geological
Engineering from the University of Oklahoma.
Our
above-listed officers and directors have neither been convicted in any criminal
proceeding during the past five years nor parties to any judicial or
administrative proceeding during the past five years that resulted in a
judgment, decree or final order enjoining them from future violations of, or
prohibiting activities subject to, federal or state securities laws or a finding
of any violation of federal or state securities law or commodities law.
Similarly, no bankruptcy petitions
have been filed by or against any business or property of any of our directors
or officers, nor has any bankruptcy petition been filed against a partnership
or
business association in which these persons were general partners or executive
officers.
Board
Committees
The
Board
intends to appoint such persons and form such committees as are required to
meet
the corporate governance requirements imposed by the national securities
exchanges. Therefore, we intend that a majority of our directors will eventually
be independent directors and at least one director will qualify as an “audit
committee financial expert.” Additionally, the Board is expected to
appoint an audit committee, nominating committee and compensation committee,
and
to adopt charters relative to each such committee. Until further determination
by the Board, the full Board will undertake the duties of the audit committee,
compensation committee and nominating committee. We do not currently have an
“audit committee financial expert” since we currently do not have an audit
committee in place.
BENEFICIAL
OWNERS AND MANAGEMENT
The
following table sets forth certain information regarding the beneficial
ownership of our common stock as of December 12,
2006.
The table sets forth the beneficial ownership of (i) each person who, to
our knowledge, beneficially owns more than 5% of the outstanding shares of
common stock; (ii) each of our directors and executive officers; and (iii)
all
of our executive officers and directors as a group.
The
number of shares owned includes all shares beneficially owned by such persons,
as calculated
in accordance with Rule 13d-3 promulgated under the Securities Exchange Act
of
1934, as amended (the “Exchange Act”),
and
such information is not necessarily indicative of beneficial ownership for
any
other purpose. Under such rules, beneficial ownership includes any shares
of our
common stock as to which a person has sole or shared voting power or investment
power and any shares of common stock which the person has the right to acquire
within 60 days of December 12,
2006
through the exercise of any option, warrant or right, through conversion
of any
security or pursuant to the automatic termination of a power of attorney
or
revocation of a trust, discretionary account or similar arrangement. The
address
of each executive officer and director is c/o Foothills Resources, Inc.,
4540
California Avenue, Suite 550, Bakersfield, California 93309.
|
Name
of Beneficial Owner
|
Number
|
Percentage(1)
|
|||||
|
John
L. Moran (2)
|
4,961,719
|
8.2
|
%
|
||||
|
Dennis
B. Tower (3)
|
4,899,219
|
8.1
|
%
|
||||
|
Christopher
P. Moyes (4)
|
4,369,250
|
7.3
|
%
|
||||
|
W.
Kirk Bosché (5)
|
3,331,212
|
5.5
|
%
|
||||
|
Michael
L. Moustakis (6)
|
50,000
|
*
|
|||||
|
James
H. Drennan (7)
|
25,000
|
*
|
|||||
|
Frank
P. Knuettel (8)
|
150,001
|
*
|
|||||
|
John
A. Brock (7)
|
25,000
|
*
|
|||||
| Goldman, Sachs & Co. (9) | 8,000,000 | 12.3 | % | ||||
|
Executive
Officers and Directors as Group
|
17,812,651
|
29.3
|
%
|
||||
| * |
Denotes
less than 1%
|
Notes:
|
(1)
|
Beneficial
ownership percentages are calculated based on 60,281,253 shares
of common
stock issued and outstanding as of December 12,
2006. Beneficial ownership is determined in accordance with Rule
13d-3 of
the Exchange Act. The number of shares beneficially owned by a
person
includes shares of common stock underlying options or warrants
held by
that person that are currently exercisable or exercisable within
60 days
of December 12, 2006. The shares issuable pursuant to the exercise
of
those options or warrants are deemed outstanding for computing
the
percentage ownership of the person holding those options and warrants
but
are not deemed outstanding for the purposes of computing the percentage
ownership of any other person. The persons and entities named in
the table
have sole voting and sole investment power with respect to the
shares set
forth opposite that person’s name, subject to community property laws,
where applicable, unless otherwise noted in the applicable footnote.
|
|
(2)
|
Includes
options exercisable within 60 days to acquire 75,000 shares of common
stock, granted under our 2006 Equity Incentive
Plan.
|
|
(3)
|
Includes
warrants to acquire 112,500 shares of common stock purchased in
the April,
2006 offering and exercisable within 60 days. Includes options
exercisable
within 60 days to acquire 75,000 shares of common stock, granted
under our
2006 Equity Incentive Plan.
|
|
(4)
|
Includes
4,309,750 shares of common stock distributed to MMP LLP and affiliates
of
MMP LLP, a former Foothills California, Inc. stockholder, the holders
of
which have executed an irrevocable proxy giving Mr. Moyes sole voting
power over the shares through April 6, 2007. Also includes 34,000
shares
of common stock and warrants to acquire 25,500 shares of common stock
exercisable within 60 days, which shares and warrants were purchased
by
Choregus Master Trust, Plan I, Money Purchase and Choregus Master
Trust,
Plan II, Profit Sharing in the April, 2006 offering, and of which
shares
and warrants Mr. Moyes is deemed to be the beneficial owner.
|
|
(5)
|
Includes
warrants to acquire 54,000 shares of common stock purchased in the
April,
2006 offering and exercisable within 60 days. Includes options exercisable
within 60 days to acquire 50,000 shares of common stock, granted
under our
2006 Equity Incentive Plan.
|
|
(6)
|
Includes
options exercisable within 60 days to acquire 50,000 shares of
common
stock, granted under our 2006 Equity Incentive
Plan.
|
|
(7)
|
Includes
options exercisable within 60 days to acquire 25,000 shares of common
stock, granted under our 2006 Equity Incentive
Plan.
|
|
(8)
|
Includes
options exercisable within 60 days to acquire 25,000 shares of common
stock, granted under our 2006 Equity Incentive Plan. Includes 71,429
shares of common stock and warrants to acquire 53,572 shares of common
stock exercisable within 60 days, which shares and warrants were
purchased
by Francis P. Knuettel as Trustee of the Francis P. Knuettel Rev
LVG TR UA
DTD 3/7/03.
|
|
(9)
|
Includes
warrants to acquire 4,666,667 shares of common stock acquired
in the
September, 2006 offering and exercisable within 60
days.
|
J.
Earl
Terris was the only officer and director of the Company prior to the merger
with
Foothills California (then Brasada California, Inc.) and our acquisition
subsidiary, and
Mr.
Terris did not accrue and did not receive any compensation for his services.
The
Company’s current executive officers did not receive a salary or any options
from the Company or Foothills California during fiscal year 2005.
Employment
Contracts and Termination of Employment and Change in Control
Agreements
We
have
entered into executive employment agreements with Dennis B. Tower, our Chief
Executive Officer, John L. Moran, our President, and W. Kirk Bosché, our Chief
Financial Officer.
Dennis
B. Tower - Chief Executive Officer
On
April
6, 2006, we entered into an executive employment agreement with Mr. Tower which
provides for an initial annual base salary of $190,000 and for unspecified
annual bonuses as warranted. Under the agreement, Mr. Tower received options
to
purchase up to 300,000 shares of common stock under our 2006 Equity Incentive
Plan, which options vest as follows: 25% of the shares of common stock
underlying such option vested on the date of grant, and the remaining 75% of
the
shares of common stock underlying the option will vest in equal annual
installments on the first, second and third anniversaries of the date of grant.
Subsequent grants of stock options will vest and be exercisable pursuant to
the
terms and conditions of the 2006 Equity Incentive Plan.
Mr.
Tower’s employment agreement has an unspecified term of service subject to
termination for cause and without cause, and provides for severance payments
to
Mr. Tower, in the event he is terminated without cause or he terminates the
agreement for good reason, in the amount of two times total compensation for
the
prior year. “Good reason” includes an adverse change in the executive’s
position, title, duties or responsibilities, or any failure to re-elect him
to
such position (except for termination for cause). Mr. Tower’s employment
agreement includes standard indemnity, insurance, non-competition and
confidentiality provisions.
John
L. Moran - President
On
April
6, 2006, we entered into an executive employment agreement with Mr. Moran which
provides for an initial annual base salary of $190,000 and for unspecified
annual bonuses as warranted. Under the agreement, Mr. Moran received options
to
purchase up to 300,000 shares of common stock under the 2006 Equity Incentive
Plan, which options vest as follows: 25% of the shares of common stock
underlying such option vested on the date of grant, and the remaining 75% of
the
shares of common stock underlying the option will vest in equal annual
installments on the first, second and third anniversaries of the date of grant.
Subsequent grants of stock options will vest and be exercisable pursuant to
the
terms and conditions of the 2006 Equity Incentive Plan.
Mr.
Moran’s employment agreement has an unspecified term of service subject to
termination for cause and without cause, and provides for severance payments
to
Mr. Moran, in the event he is terminated without cause or he terminates the
agreement for good reason, in the amount of two times total compensation for
the
prior year. “Good reason” includes an adverse change in the executive’s
position, title, duties or responsibilities, or any failure to re-elect him
to
such position (except for termination for cause). Mr. Moran’s employment
agreement includes standard indemnity, insurance, non-competition and
confidentiality provisions.
W.
Kirk Bosché - Chief Financial Officer
On
April
6, 2006, we entered into an executive employment agreement with Mr. Bosché which
provides for an initial annual base salary of $175,000 and for unspecified
annual bonuses as warranted. Under the agreement, Mr. Bosché received options to
purchase up to 200,000 shares of common stock under our 2006 Equity Incentive
Plan, which options vest as follows: 25% of the shares of common stock
underlying such option vested on the date of grant, and the remaining 75% of
the
shares of common stock underlying the option will vest in equal annual
installments on the first, second and third anniversaries of the date of grant.
Subsequent grants of stock options will vest and be exercisable pursuant to
the
terms and conditions of the 2006 Equity Incentive Plan.
Mr.
Bosché’s employment agreement has an unspecified term of service subject to
termination for cause and without cause, and provides for severance payments
to
Mr. Bosché, in the event he is terminated
without
cause or he terminates the agreement for good reason, in the amount of two
times
total compensation for the prior year. “Good reason” includes an adverse change
in the executive’s position, title, duties or responsibilities, or any failure
to re-elect him to such position (except for termination for cause). Mr.
Bosché’s employment agreement includes standard indemnity, insurance,
non-competition and confidentiality provisions.
2006
Equity Incentive Plan
Our
2006
Equity Incentive Plan enables our board of directors to provide equity-based
incentives through grants or awards of incentive awards to our present and
future employees, directors, consultants and other third party service
providers. As of December 12,
2006,
we had eleven employees, five executive officers, five directors, and two
consultants and other third party service providers eligible to participate
in
the equity incentive plan.
The
board
of directors reserved a total of 2,000,000 shares of our common stock for
issuance under the equity incentive plan, of which options for the purchase
of
1,690,000 shares have been granted and 310,000 shares remain reserved for
issuance. Shares issued under the plan through the settlement, assumption
or
substitution of outstanding awards or obligations to grant future awards
as a
condition of acquiring another entity will not reduce the maximum number
of
shares available under the plan. In addition, the number of shares of our
common
stock issuable under the plan, any number of shares subject to any numerical
limit in the plan, and the number of shares and terms of any incentive award
will be adjusted in the event of any change in our outstanding common stock
by
reason of any stock dividend, spin-off, split-up, stock split, reverse stock
split, recapitalization, reclassification, merger, consolidation, liquidation,
business combination or exchange of shares or similar
transaction.
The
compensation committee of our board of directors (or the entire board of
directors in the absence of such a committee), administers the plan. Subject
to
the terms of the plan, the compensation committee will have complete authority
and discretion to determine the terms of awards under the plan.
The
plan
authorizes the grant, to participants, of nonqualified stock options, incentive
stock options, restricted stock awards, restricted stock units, performance
grants intended to comply with Section 162(m) of the Internal Revenue Code,
and
stock appreciation rights, as described below:
|
·
|
Options
granted under the plan entitle the grantee, upon exercise, to purchase
a
specified number of shares from us at a specified exercise price
per
share. The exercise price for shares of common stock covered by an
option
cannot be less than the fair market value of the common stock on
the date
of grant unless we agree otherwise at the time of the grant.
|
|
·
|
Restricted
stock awards and restricted stock units may be awarded on terms and
conditions established by the compensation committee, which may include
performance conditions for restricted stock awards and the lapse
of
restrictions on the achievement of one or more performance goals
for
restricted stock units.
|
|
·
|
The
compensation committee may make performance grants, each of which
will
contain performance goals for the award, including the performance
criteria, the target and maximum amounts payable, and other terms
and
conditions.
|
|
·
|
The
plan authorizes the granting of stock awards. The compensation committee
will establish the number of shares of common stock to be awarded
and the
terms applicable to each award, including performance restrictions.
|
| · |
Stock
appreciation rights entitle the participant to receive a distribution
in
an amount not to exceed the number of shares of common stock subject
to
the portion of the stock appreciation right exercised multiplied
by the
difference between the market price of a share of common stock on the date
of exercise of the stock appreciation right and the market price
of a
share of common stock on the date of grant of the stock appreciation
right.
|
The
board
of directors may suspend or terminate the plan without stockholder approval
or
ratification at any time or from time to time. Unless sooner terminated, the
plan will terminate 10 years after it was adopted. The board of directors may
also amend the plan at any time. No change may be made that increases the total
number of shares of common stock reserved for issuance pursuant to incentive
awards or reduces the minimum exercise price for options or exchange of options
for other incentive awards, unless such change is authorized by our
stockholders.
Compensation
of Directors
Directors
who are not also executive officers of the Company receive a standard fee of
$5,000 for each non-telephonic meeting of the Board that such directors attend.
Additionally, for such meetings, the Company reimburses the non-management
directors for reasonable travel expenses. The directors do not receive a
per-meeting fee for telephonic meetings of the Board.
In
consideration of their service to the Company, options were issued to each
of
our directors under the Company’s 2006 Equity Incentive Plan, with the exception
of Mr. Moyes. Directors are also eligible to receive additional awards at the
discretion of the Board under the 2006 Equity Incentive Plan.
Mr.
Tower
and Mr. Moran have entered into employment agreements with the Company, which
are explained in detail above. Neither Mr. Tower nor Mr. Moran receives the
$5,000 fee for attending non-telephonic meeting of the Board. Additionally,
options granted to each of Mr. Tower and Mr. Moran to date under the 2006 Equity
Incentive Plan have been granted pursuant to their employment agreements with
the Company, though there is no prohibition on further grants by the Board
under
the 2006 Equity Incentive Plan on the basis of Mr. Tower’s and Mr. Moran’s
service on the Board.
Christopher
Moyes has foregone the compensation described above, pursuant to the terms
of
our retainer agreement with Moyes & Co., Inc., dated April 7, 2006. Under
our retainer agreement, we will pay Moyes & Co., Inc. a monthly retainer of
$17,500 for a period of one year, and reimburse normal business travel expenses,
in exchange for Moyes & Co., Inc.’s services to us. Moyes & Co., Inc.
identifies potential acquisition, development, exploitation and exploration
opportunities which fit with our operating strategy. Additionally, Moyes &
Co., Inc. initially screens such opportunities, performs detailed evaluations
of
each potential opportunity, and assists with due diligence and negotiations
of
those opportunities we decide to pursue.
On
April
7, 2006, we entered into an agreement with Moyes & Co., Inc. to identify
potential acquisition, development, exploitation and exploration opportunities
that fit with our strategy. Moyes & Co., Inc. screens opportunities and
performs detailed evaluation of those opportunities that we decide to pursue,
and assists with due diligence and negotiations with respect to such
opportunities. Christopher P. Moyes is the beneficial owner of 7.3% of our
common stock as of December 12,
2006,
and is a member of our board of directors. Mr. Moyes is a major shareholder
and
the President of Moyes & Co., Inc. However, Moyes & Co., Inc. is being
compensated for identifying opportunities and assisting us in pursuing those
opportunities, and therefore the interests of Moyes & Co., Inc. are not the
same as our interests. We are
responsible
for evaluating any opportunities presented to us by Moyes & Co., Inc. to
determine if those opportunities are consistent with our business
strategy.
Christopher
Moyes has foregone his compensation as a director, pursuant to the terms of
our
agreement with Moyes & Co., Inc., dated April 7, 2006. Under the agreement,
we will pay Moyes & Co., Inc. a monthly retainer of $17,500 for a period of
one year, and reimburse normal business travel expenses, in exchange for Moyes
& Co., Inc.’s services to us.
Pursuant
to our business plan with respect to the Anadarko Basin in southwest Oklahoma,
we anticipate acquiring non-exclusive rights, from TeTra Ex., Inc., to a 3D
seismic survey in Roger Mills County, Oklahoma. TeTra Ex., Inc. is a company
that is owned by John Moran, our President. TeTra Ex., Inc. has reprocessed
the
3D survey and completed preliminary geological and geophysical interpretations
of the survey data. Upon our acquisition of rights to the survey from TeTra
Ex.,
Inc., we plan to finalize the interpretations, identify drillable prospects,
acquire oil and gas leases over those prospects, and negotiate joint ventures
with other companies.
The
selling stockholders and any of their pledgees, donees, transferees, assignees
and successors-in-interest may, from time to time, sell any or all of their
shares of common stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These sales may be
at
fixed or negotiated prices. The selling stockholders may use any one or more
of
the following methods when selling shares:
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits Investors;
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
to
cover short sales made after the date that this registration statement
is
declared effective by the Securities and Exchange Commission;
|
|
·
|
broker-dealers
may agree with the selling stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
|
·
|
a
combination of any such methods of sale;
and
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
selling stockholders may also sell shares under Rule 144 under the Securities
Act, if available, rather than under this prospectus.
Broker-dealers
engaged by the selling stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the selling stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
selling stockholders do not expect these commissions and discounts to exceed
what is customary in the types of transactions involved.
The
selling stockholders may from time to time pledge or grant a security interest
in some or all of the shares of common stock owned by them and, if they default
in the performance of their secured obligations, the pledgees or secured parties
may offer and sell shares of common stock from time to time under this
prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus.
Upon
a
selling stockholder’s notification of the Company that any material arrangement
has been entered into with a broker-dealer for the sale of such stockholder’s
common stock through a block trade, special offering, exchange distribution
or
secondary distribution or a purchase by a broker or dealer, a supplement to
this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act disclosing (i) the name of each such selling stockholder and
of
the participating broker-dealer(s), (ii) the number of shares involved, (iii)
the price at which such shares of common stock were sold, (iv) the commissions
paid or discounts or concessions allowed to such broker-dealer(s), where
applicable, (v) that such broker-dealer(s) did not conduct any investigation
to
verify the information set out or incorporated by reference in this prospectus,
and (vi) other facts material to the transaction. In addition, upon the Company
being notified in writing by a Selling Stockholder that a donee or pledgee
intends to sell more than 500 shares of common stock, a supplement to this
prospectus will be filed if then required in accordance with applicable
securities law.
The
selling stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors
in
interest will be the selling beneficial owners for purposes of this
prospectus.
The
selling stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act, in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Discounts, concessions, commissions and
similar selling expenses, if any, that can be attributed to the sale of
Securities will be paid by the selling stockholder and/or the purchasers. Each
selling stockholder has represented and warranted to the Company that it
acquired the securities subject to this registration statement in the ordinary
course of such selling stockholder’s business and, at the time of its purchase
of such securities such selling stockholder had no agreements or understandings,
directly or indirectly, with any person to distribute any such securities.
The
Company has advised each selling stockholder that it may not use shares
registered on this registration statement to cover short sales of common stock
made prior to the date on which this registration statement shall have been
declared effective by the Securities and Exchange Commission. If a selling
stockholder uses this prospectus for any sale of the common stock, it will
be
subject to the prospectus delivery requirements of the Securities Act. The
selling stockholders will be responsible to comply with the applicable
provisions of the Securities Act and the Securities Exchange Act, and the rules
and regulations thereunder promulgated, including, without limitation,
Regulation M, as applicable to such selling stockholders in connection with
resales of their respective shares under this registration
statement.
The
Company is required to pay all fees and expenses incident to the registration
of
the shares, but the Company will not receive any proceeds from the sale of
the
common stock. The Company has agreed to indemnify the selling stockholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.
Authorized
Capital Stock
As
of the
date of this prospectus, we are authorized to issue 100,000,000 shares of common
stock and 10,000,000 shares of preferred stock, each with a par value $0.001
per
share.
Capital
Stock Issued and Outstanding
As
of December 12,
2006,
there were issued and outstanding 60,281,253 shares of common stock and no
shares of preferred stock. In addition, there were issued and outstanding
warrants to acquire 20,693,127 shares of our common stock.
The
following description of Foothills capital stock is derived from the provisions
of Foothills’ articles of incorporation and by-laws, the terms of the warrants,
registration rights agreements and option agreements executed by Foothills,
as
well
as provisions of applicable law. Such description is not intended to be
complete
and is qualified in its entirely by reference to the relevant provisions
of
Foothills’ articles of incorporation and by-laws, which have been publicly filed
as exhibits to the registration statement on Form SB-2/A filed with the
SEC on
June 18, 2001.
Description
of Common Stock
Foothills
is authorized to issue 100,000,000 shares of common stock, par value $0.001
per
share, 60,381,253 of which were issued and outstanding on December
12,
2006.
Holders of our common stock are entitled to one vote for each share held
on all
matters submitted to a stockholder vote. Holders of our common stock do not
have
cumulative voting rights. Therefore, holders of a majority of the shares
of
common stock voting for the election of directors can elect all of the
directors. Holders of the common stock representing a majority of the voting
power of the capital stock issued, outstanding and entitled to vote, represented
in person or by proxy, are necessary to constitute a quorum at any meeting
of
stockholders. A vote by the holders of a majority of the outstanding shares
of
common stock is required to effectuate certain fundamental corporate changes
such as liquidation, merger or an amendment to the articles of incorporation.
Holders
of common stock are entitled to share in all dividends that our board of
directors, in its discretion, declares from legally available funds. In the
event of our liquidation, dissolution or winding up, each outstanding share
of
common stock entitles its holder to participate pro rata in all assets that
remain after payment of liabilities and after providing for each class of stock,
if any, having preference over the common stock. Holders of the common stock
have no pre-emptive rights, no conversion rights and there are no redemption
provisions applicable to the common stock.
Description
of Preferred Stock
Foothills
is authorized to issue 10,000,000 shares of “blank check” preferred stock, par
value $0.001 per share, none of which are issued and outstanding as
of December 12,
2006.
Our board of directors is vested with authority to divide the shares of
preferred stock into series and fix and determine the relative rights and
preferences of the shares of any such series. Once authorized, the dividend
or
interest rates, conversion rates, voting rights, redemption prices, maturity
dates and similar characteristics of the preferred stock will be determined
by
our board of directors, without the necessity of obtaining approval of the
stockholders.
Description
of Warrants
We
have
issued, and there are currently outstanding, warrants to purchase 20,693,127
shares of our common stock. Of this total, warrants to acquire 12,172,975 shares
of common stock were issued at an exercise price of $1.00 per share. Of these
outstanding warrants, warrants to acquire 10,958,065 shares of common stock
will
expire on April 6, 2011 and warrants to acquire 1,214,910 shares of common
stock
will expire on April 20, 2011. These warrants were issued in the private
offering of our securities which closed on April 6, 2006 and April 20, 2006.
Warrants
to acquire 8,046,919 shares of our common stock were issued at an exercise
price
of $2.75 per share. Of this number, warrants to acquire 8,000,017 shares of
common stock will expire on September 8, 2011 and warrants to acquire 46,902
shares of common stock will expire on September 27, 2006. These warrants were
issued in the private offering of our securities which closed on September
8,
2006 and September 27, 2006. In this September private offering of our
securities, we issued the placement agent in the offering a warrant to acquire
473,233 shares of common stock at an exercise price of $2.25 per share.
Warrants
issued in the April, 2006 Offering
In
our
private offering of securities during April, 2006, we issued warrants to acquire
12,172,975 shares of our common stock at an exercise price of $1.00 per share.
These warrants are exercisable for five years from the date of their issuance,
and if they are not exercised by the fifth anniversary of their issuance, they
will expire and become void and of no value.
The
exercise price and number of shares issuable upon exercise of the warrants
will
be adjusted to reflect any subdivision or combination of our common stock,
any
stock dividends or similar rearrangements of the common stock, or any
reorganization, reclassification, consolidation, merger or sale of Foothills
Resources, Inc. The warrants and the shares of common stock underlying the
warrants issued to investors in the April, 2006 private offering are being
registered for resale by their holders under this prospectus.
Warrants
Issued in the September, 2006 Offering
In
our
private offering of securities during September, 2006, we issued warrants to
acquire 8,046,919 shares of our common stock at an exercise price of $2.75
per
share. These warrants are exercisable for five years from the date of their
issuance, and if they are not exercised by the fifth anniversary of their
issuance, they will expire and become void and of no value.
The
warrants are subject to mandatory exercise, at the Company’s option, if
(i) the shares underlying the warrant are registered pursuant to a
registration statement that has remained effective at least 45 consecutive
days
prior to the mandatory exercise date, (ii) our common stock is listed on
the New York Stock Exchange, American Stock Exchange or NASDAQ Global Market,
and (iii) the closing price of the common stock is at least $5.50 per share
for at least 20 consecutive trading days prior to the date we exercise our
mandatory exercise right. The exercise price and number of shares issuable
upon
exercise of the warrants will be adjusted to reflect any subdivision or
combination of our common stock, any stock dividends or similar rearrangements
of the common stock, or any reorganization, reclassification, consolidation,
merger or sale of Foothills Resources, Inc.
The
warrants and the shares of common stock underlying the warrants issued to
investors in the September, 2006 private offering are being registered for
resale by their holders under this prospectus.
Warrant
Issued to Goldman, Sachs & Co.
In
connection with our September 8, 2006 execution of a credit and guaranty
agreement with J. Aron & Company, an affiliate of Goldman, Sachs & Co.,
we issued to Goldman, Sachs & Co. a warrant to purchase 3,000,000 shares of
our common stock at an exercise price of $2.75 per share. This warrant will
be
exercisable for five years from the date of issuance, and if not exercised
by
the fifth anniversary of its issuance will expire and become void and of no
value. The warrant issued to the Goldman, Sachs & Co. had substantially the
same provision for mandatory exercise by the company, and the same registration
rights, as the warrants issued to investors in the September, 2006 offering
of
our securities, as described above.
The
Placement Agent Warrant
Upon
the
September 8, 2006 and September 27, 2006 closings of our September, 2006 private
offering of our securities, we issued warrants to acquire shares of our common
stock to Sanders Morris Harris Inc., our placement agent in the offering. On
September 8, 2006, we issued a warrant to acquire 466,666 shares of our common
stock, and on September 27, 2006, we issued a warrant to acquire 6,567 shares
of
our common stock. Each warrant had an exercise price of $2.25 per share. The
warrants were issued to Sanders Morris Harris Inc. as consideration for its
services as the placement agent in the September, 2006 offering. The warrants
each have a five-year exercise term and the same registration rights as the
warrants issued to investors in the offering and the warrant issued to Goldman,
Sachs & Co. in connection with our credit and guaranty agreement with J.
Aron & Company.
Description
of Options
The
Company has issued stock options under the 2006 Plan to plan participants
to
purchase a total of 1,690,000 shares of common stock at a weighted average
exercise price of $1.57. Under the terms of the 2006 Plan, we may issue
incentive awards that may include the issuance of up to 2,000,000 shares
of
common stock (inclusive of the 1,690,000 shares with respect to previously
granted options). The 2006 Plan was adopted by our board of directors prior
to
the merger between our wholly-owned subsidiary and Foothills California,
Inc. on
April 6, 2006.
Registration
Rights Agreements
| · |
September
8, 2006 Registration Rights
Agreement
|
Pursuant
to the registration rights agreement among the Company and the investors
in the
offering, dated as of September 8, 2006, we agreed to file a registration
statement covering the shares of our common stock, including shares underlying
warrants, issued in connection with the private offering of our securities
in
September 2006, within 30 calendar days from September 8, 2006. We agreed
to use
reasonable efforts to cause the registration statement to become effective
no
later than 120 days after the date it is filed, unless the registration
statement is subject to review by the SEC, in which case the Company will
have
150 days from the filing date in which to have the registration statement
declared effective. We will be required to maintain the effectiveness of
the
registration statement until all shares registered thereunder have been
sold or
until the holding period of Rule 144(k) under the Securities Act has been
satisfied with respect to all of the shares of Common Stock (including
the
shares underlying the warrants) issued in the September 2006 offering,
whichever
is earlier. In the event that the registration statement is not declared
effective by the SEC by the mandatory effective date, we will be obligated
to
pay each investor liquidated damages of one percent (1%) of the purchase
price
set forth in the securities purchase agreement, each month for such time
period
beyond the mandatory effective date that such registration statement is
not
effective or beyond any applicable suspension period, provided that the
total of
such liquidated damages shall not exceed 10% of the purchase price. The
securities issued in the September 2006 offering were granted “piggyback”
registration rights by the holders of prior registration rights and will
be
registered on the same registration statement.
| · |
TARH
E&P Holdings, L.P. Registration Rights
Agreement
|
We
agreed
to file a registration statement to register for resale the common stock
of the
Company that was issued to TARH E&P Holdings, LP (“TARH”) as consideration
in our acquisition of certain properties from TARH. Pursuant to the terms
of our
registration rights agreement, dated as of September 8, 2006, by and between
the
Company and TARH (the “TARH Registration Agreement”). We agreed to file a
registration statement for the common stock issued to TARH no later than
90
calendar days from September 8, 2006. Under the TARH Registration Agreement,
agreed to use reasonable efforts to cause the registration statement to
be
declared effective by the SEC no later than 120 calendar days after the
filing
date unless such registration statement is reviewed by the SEC, in which
case we
will have 150 calendar days in which to cause the registration statement
to be
declared effective by the SEC. We are obligated under the TARH Registration
Agreement to maintain the effectiveness of the registration statement until
all
shares registered thereunder are sold by the holders or until the two-year
holding period of Rule 144(k) under the Securities Act is satisfied, whichever
is earlier.
| · |
April
6, 2006 Registration Rights
Agreement
|
Pursuant
to the registration rights agreement entered
into by the Company and the investors in our April 2006 private offering
of
securities, dated April 6, 2006, we were obligated, within 120 days of
April 6,
2006, to file a registration statement with the SEC registering for resale
all
of the shares of common stock, including shares underlying warrants, sold
to
investors in the April 2006 offering, as well as certain shares of our
common
stock issued as a finder fee in connection with the April 2006 merger.
If the
shares are not registered according to the terms of the registration rights
agreement, then the Company will make payments to each investor at a rate
equal
to 1% of the purchase price per share of registrable securities then held
by an
investor monthly, for each calendar month of the registration default period.
On
August 16, 2006, the majority holders of our common stock approved the
extension
of the registration filing date from August 4, 2006 to August 31, 2006,
and
later approved to further extend the registration filing date to September
30,
2006. The terms of the April 2006 registration rights agreement stated
that the
Company may not file or request acceleration of any other registration
statement
until the registration statement covering the registrable securities issued
to
investors in the April 2006 offering has been declared effective by the
SEC. The
majority of the holders of our common stock agreed to waive this provision
and
allow for the registration of additional shares from issued in the private
offering of our securities in September 2006 and in the acquisition of
properties from TARH E&P Holdings, L.P.
Indemnification;
Limitation of Liability
Nevada
Revised Statutes (“NRS”) Sections 78.7502 and 78.751 provide us with the power
to indemnify any of our directors and officers. The director or officer must
have conducted himself/herself in good faith and reasonably believe that his/her
conduct was in, or not opposed to our best interests. In a criminal action,
the
director, officer, employee or agent must not have had reasonable cause to
believe his/her conduct was unlawful.
Under
NRS
Section 78.751, advances for expenses may be made by agreement if the director
or officer affirms in writing that he/she believes he/she has met the standards
and will personally repay the expenses if it is determined such officer or
director did not meet the standards.
Our
bylaws include an indemnification provision under which we have the power to
indemnify our directors, officers and former directors and officers (including
heirs and personal representatives) against all costs, charges and expenses
actually and reasonably incurred, including an amount paid to settle an action
or satisfy a judgment to which the director or officer is made a party by reason
of being or having been a director or officer of Foothills or any of our
subsidiaries.
Our
bylaws also provide that the directors may cause Foothills to purchase and
maintain insurance for the benefit of a person who is or was serving as a
director, officer, employee or agent of Foothills or any of our subsidiaries
(including heirs and personal representatives) against a liability incurred
by
him/her as a director, officer, employee or agent.
Our
articles of incorporation provide a limitation of liability in that no director
or officer shall be personally liable to Foothills or any of our stockholders
for damages for breach of fiduciary duty as director or officer involving any
act or omission of any such director or officer, provided there was no
intentional misconduct, fraud or a knowing violation of the law, or payment
of
dividends in violation of NRS Section 78.300.
Our
employment and indemnification agreements with certain of our executive officers
contain provisions which require us to indemnify them for costs, charges and
expenses incurred in connection with (i) civil, criminal or administrative
actions resulting from the executive officers service as such and (ii) actions
by us or on our behalf to which the executive officer is made a party. We are
required to provide such indemnification if (i) the executive officer acted
honestly and in good faith with a view to our best interests, and (ii) in the
case of a criminal or administrative proceeding or proceeding that is enforced
by a monetary policy, the executive officer had reasonable grounds for believing
that his conduct was lawful.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted for our directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion
of
the SEC such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
Anti-Takeover
Effects of Provisions of Nevada State Law
We
may be
or in the future we may become subject to Nevada's control share law. A
corporation is subject to Nevada's control share law if it has more than 200
stockholders, at least 100 of whom are stockholders of record and residents
of
Nevada, and if the corporation does business in Nevada or through an affiliated
corporation.
The
law
focuses on the acquisition of a “controlling interest” which means the ownership
of outstanding voting shares is sufficient, but for the control share law,
to
enable the acquiring person to exercise the following proportions of the voting
power of the corporation in the election of directors: (1) one-fifth or more
but
less than one-third, (2) one-third or more but less than a majority, or (3)
a
majority or more. The ability to exercise such voting power may be direct or
indirect, as well as individual or in association with others.
The
effect of the control share law is that the acquiring person, and those acting
in association with it, obtain only such voting rights in the control shares
as
are conferred by a resolution of the stockholders of the corporation, approved
at a special or annual meeting of stockholders. The control share law
contemplates that voting rights will be considered only once by the other
stockholders. Thus, there is no authority to take away voting rights from the
control shares of an acquiring person once those rights have been approved.
If
the stockholders do not grant voting rights to the control shares acquired
by an
acquiring person, those shares do not become permanent non-voting shares. The
acquiring person is free to sell its shares to others. If the buyers of those
shares themselves do not acquire a controlling interest, their shares do not
become governed by the control share law.
If
control shares are accorded full voting rights and the acquiring person has
acquired control shares with a majority or more of the voting power, any
stockholder of record, other than an acquiring person, who has not voted in
favor of approval of voting rights is entitled to demand fair value for such
stockholder's
shares.
Nevada's
control share law may have the effect of discouraging corporate
takeovers.
In
addition to the control share law, Nevada has a business combination law, which
prohibits certain business combinations between Nevada corporations and
"interested stockholders" for three years after the "interested stockholder"
first becomes an "interested stockholder" unless the corporation's board of
directors approves the combination in advance. For purposes of Nevada law,
an
"interested stockholder" is any person who is (1) the beneficial owner, directly
or indirectly, of ten percent or more of the voting power of the outstanding
voting shares of the corporation, or (2) an affiliate or associate of the
corporation and at any time within the three previous years was the beneficial
owner, directly or indirectly, of ten percent or more of the voting power of
the
then outstanding shares of the corporation. The definition of the term "business
combination" is sufficiently broad to cover virtually any kind of transaction
that would allow a potential acquirer to use the corporation's assets to finance
the acquisition or otherwise to benefit its own interests rather than the
interests of the corporation and its other stockholders.
The
effect of Nevada's business combination law is to potentially discourage parties
interested in taking control of Foothills from doing so if it cannot obtain
the
approval of our board of directors.
The
validity of the common stock being offered hereby will be passed upon by
McGuireWoods LLP, New York, New York.
Brown,
Armstrong, Paulden, McCown, Starbuck, Thornburgh & Keeter Accountancy
Corporation,
an
independent registered public accounting firm, has audited our financial
statements for the year ended December 31, 2005, as stated in their report
appearing herein, and have been so included in reliance upon the report of
such
firm given upon their authority as experts in accounting and auditing.
We
are
required to comply with the informational requirements of the Securities
Exchange Act of 1934, as amended, and accordingly we file annual reports,
quarterly reports, current reports, proxy statements and other information
with
the SEC. You may read or obtain a copy of these reports at the SEC’s public
reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You
may
obtain information on the operation of the public reference room and their
copy
charges by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that
contains registration statements, reports, proxy information statements and
other information regarding registrants that file electronically with the SEC.
The address of the website is http://www.sec.gov.
We
have
filed with the SEC a registration statement on Form SB-2 under the Securities
Act of 1933, as amended, to register the shares and warrants offered by this
prospectus. The term “registration statement” means the original registration
statement and any and all amendments thereto, including the schedules and
exhibits to the original registration statement or any amendment. This
prospectus is part of that registration statement. This prospectus does not
contain all of the information set forth in the registration statement or the
exhibits to the registration statement. For further information with respect
to
us and the shares we are offering pursuant to this prospectus, you should refer
to the registration statement and its
exhibits.
Statements contained in this prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete, and you
should refer to the copy of that contract or other documents filed as an exhibit
to the registration statement. You may read or obtain a copy of the registration
statement at the SEC’s public reference facilities and Internet site referred to
above.
Upon
the
merger between our wholly-owned subsidiary and Foothills California, Inc.
(formerly Brasada California, Inc.), Foothills California, Inc. became our
wholly-owned subsidiary. Following the merger, our management and business
operations became substantially the management and business operations of
Foothills California, Inc. prior to the merger.
Prior
to
the merger, the independent registered public accounting firm for the Registrant
was Amisano Hanson Chartered Accountants, and the independent registered public
accounting firm for Foothills California, Inc. was Brown, Armstrong, Paulden,
McCown, Starbuck, Thornburgh & Keeter Accountancy Corporation. Because the
merger was treated as a reverse acquisition for accounting purposes, our
historical financial reports filed after the merger will be those of Foothills
California, Inc., the accounting acquirer, prior to the merger. Accordingly,
our
board of directors changed our independent registered public accounting firm
from Amisano Hanson to Brown Armstrong. Amisano Hanson was formally dismissed
as
our independent registered public accounting firm on April 12, 2006, effective
as of April 6, 2006, and Brown Armstrong was engaged as our independent
registered public accounting firm on April 6, 2006. As a result of its role
as
the auditor of Foothills California, Inc. prior to the Merger, Brown Armstrong
consulted with us regarding the merger.
The
reports of Amisano Hanson on our financial statements for fiscal years ended
December 31, 2005 and 2004 did not contain an adverse opinion or a disclaimer
of
opinion and were not qualified or modified as to uncertainty, audit scope,
or
accounting principles, but did include an explanatory paragraph relating to
our
ability to continue as a “going concern.”
In
connection with the audit of our financial statements for the fiscal years
ended
December 31, 2005 and 2004, and through the date of the dismissal (and including
the period from April 6, 2006 through April 12, 2006), there were no
disagreements with Amisano Hanson on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which, if not resolved to the satisfaction of Amisano Hanson, would have caused
Amisano Hanson to make reference to the matter in its reports.
During
fiscal year 2006, through the date of the dismissal of Amisano Hanson, no
information is required to be reported under Item 304(a)(1)(iv)(B) of Regulation
S-B. This change in accountants was disclosed in Amendment 1 to Foothills’
Current Report on Form 8-K/A, filed with the SEC on May 5, 2006.
FOOTHILLS
RESOURCES, INC.
|
Page
|
|
|
Consolidated
Financial Statements (Unaudited) for the nine month period
ended September 30, 2006:
|
|
|
Consolidated
Balance Sheet
|
F-2
|
|
Consolidated
Statements of Operations
|
F-4
|
|
Consolidated
Statements of Cash Flows
|
F-5
|
|
Consolidated
Statement of Stockholders’ Equity
|
F-6
|
|
Notes
to Consolidated Financial Statements
|
F-7
|
|
|
|
|
Consolidated
Financial Statements (Audited) for the fiscal year ended December
31,
2005:
|
|
|
Report
of Independent Registered Public Accounting Firm
|
F-13
|
|
Balance
Sheet as of December 31, 2005
|
F-14
|
|
Statement
of Operations for the year ended December 31, 2005
|
F-15
|
|
Statement
of Members’ Capital for the period from Inception (December
29, 2005) through December 31, 2005
|
F-15
|
|
Statement
of Cash Flows for the period from Inception (December
29, 2005) through December 31, 2005
|
F-16
|
|
Notes
to Financial Statements
|
F-17
|
|
Supplemental
Oil and Gas Information (Unaudited)
|
F-20
|
|
Financial
Statements of Acquired Oil and Gas
Properties:
|
|
|
Report of
Independent Registered Public Accounting Firm
|
F-21
|
|
Statements
of Revenues and Direct Operating Expenses
|
F-22
|
|
Notes
to Statements of Revenues and Direct Operating
Expenses
|
F-23
|
|
Pro
Forma Financial Statements as of June 30, 2006 and
for
the six months ended June 30,
2006:
|
|
|
Unaudited
Pro Forma Combined Balance Sheet
|
F-25 |
|
Unaudited
Pro Forma Combined Statements of Operations
|
F-26 |
|
Notes
to Pro Forma Financial Statements
|
F-27
|
FOOTHILLS
RESOURCES, INC.
(A
Development Stage Company)
CONSOLIDATED
BALANCE SHEETS
(dollars
in thousands, except per share amounts)
|
|
September
|
|
December
|
|
|||
|
|
|
30,
2006
|
|
31,
2005
|
|
||
|
|
|
(unaudited)
|
|
||||
|
ASSETS
|
|
|
|||||
|
Current
assets:
|
|
|
|||||
|
Cash
and cash equivalents
|
$
|
10,710
|
$
|
-
|
|||
|
Accounts
receivable
|
1,356
|
-
|
|||||
|
Prepaid
expenses
|
191
|
-
|
|||||
|
Fair
value of derivative financial instruments
|
467
|
-
|
|||||
|
|
12,724
|
-
|
|||||
|
|
|||||||
|
Property
and equipment, at cost:
|
|||||||
|
Oil
and gas properties, using full-cost accounting -
|
|||||||
|
Proved
properties
|
63,045
|
-
|
|||||
|
Unproved
properties not being amortized
|
160
|
55
|
|||||
|
Other
property and equipment
|
163
|
-
|
|||||
|
|
63,368
|
55
|
|||||
|
Less
accumulated depreciation, depletion and amortization
|
(280
|
)
|
-
|
||||
|
|
63,088
|
55
|
|||||
|
|
|||||||
|
Other
assets
|
1,513
|
-
|
|||||
|
|
|||||||
|
|
$
|
77,325
|
$
|
55
|
|||
The
accompanying notes are an integral part of these consolidated financial
statements.
F-2
FOOTHILLS
RESOURCES, INC.
(A
Development Stage Company)
CONSOLIDATED
BALANCE SHEETS
(dollars
in thousands, except per share amounts)
|
|
September
|
|
December
|
|
|||
|
|
|
30,
2006
|
|
31,
2005
|
|
||
|
|
|
(unaudited)
|
|
||||
|
LIABILITIES,
MEMBERS’ CAPITAL AND STOCKHOLDERS’ EQUITY
|
|
|
|||||
|
Current
liabilities:
|
|
|
|||||
|
Current
portion of long-term debt
|
$
|
2,385
|
$
|
-
|
|||
|
Accounts
payable and accrued liabilities
|
1,665
|
5
|
|||||
|
Current
portion of asset retirement obligations
|
117
|
-
|
|||||
|
|
4,167
|
5
|
|||||
|
|
|||||||
|
Long-term
debt
|
28,913
|
-
|
|||||
|
|
|||||||
|
Asset
retirement obligations
|
1,022
|
-
|
|||||
|
|
|||||||
|
Members’
capital
|
-
|
50
|
|||||
|
|
|||||||
|
Stockholders’
equity:
|
|||||||
|
Preferred
stock, $0.001 par value
1,000,000
shares authorized, none outstanding
|
-
|
-
|
|||||
|
Common
stock, $0.001 par value -
100,000,000
shares authorized
60,281,263
shares outstanding
|
60
|
-
|
|||||
|
Additional
paid-in capital
|
44,171
|
-
|
|||||
|
Deficit
accumulated during the development stage
|
(2,201
|
)
|
-
|
||||
|
Accumulated
other comprehensive income
|
1,193
|
-
|
|||||
|
|
43,223
|
-
|
|||||
|
|
|||||||
|
|
$
|
77,325
|
$
|
55
|
|||
The
accompanying notes are an integral part of these consolidated financial
statements.
F-3
FOOTHILLS
RESOURCES, INC.
(A
Development Stage Company)
CONSOLIDATED
STATEMENTS OF OPERATIONS
(dollars
in thousands, except per share amounts)
(unaudited)
|
|
Three
Months Ended September 30, 2006
|
|
Nine
Months
Ended September 30, 2006
|
|
Inception
(December 29, 2005) through September 30, 2006
|
|||||
|
Income:
|
|
|
|
|||||||
|
Oil
and gas revenues
|
$
|
1,105
|
$
|
1,105
|
$
|
1,105
|
||||
|
Interest
income
|
49
|
130
|
130
|
|||||||
|
|
1,154
|
1,235
|
1,235
|
|||||||
|
|
||||||||||
|
Expenses:
|
||||||||||
|
Production
costs
|
219
|
219
|
219
|
|||||||
|
General
and administrative
|
695
|
2,347
|
2,347
|
|||||||
|
Interest
|
583
|
583
|
583
|
|||||||
|
Depreciation,
depletion and amortization
|
282
|
287
|
287
|
|||||||
|
|
1,779
|
3,436
|
3,436
|
|||||||
|
|
||||||||||
|
Net
loss
|
$
|
(625
|
)
|
$
|
(2,201
|
)
|
$
|
(2,201
|
)
|
|
|
|
||||||||||
|
Basic
and diluted net loss per share
|
$
|
(0.01
|
)
|
$
|
(0.06
|
)
|
$
|
(0.06
|
)
|
|
|
|
||||||||||
|
Weighted
average number of common
shares
outstanding - basic and diluted
|
51,350,897
|
38,436,302
|
38,627,236
|
|||||||
The
accompanying notes are an integral part of these consolidated financial
statements.
F-4
FOOTHILLS
RESOURCES, INC.
(A
Development Stage Company)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(dollars
in thousands)
(unaudited)
|
|
Nine
Months
Ended September 30, 2006
|
|
Inception
(December 29, 2005) through September 30, 2006
|
||||
|
Cash
flows from operating activities:
|
|
|
|||||
|
Net
loss
|
$
|
(2,201
|
)
|
$
|
(2,201
|
)
|
|
|
Adjustments
to reconcile net loss to
net
cash used for operating activities -
|
|||||||
|
Stock-based
compensation
|
259
|
259
|
|||||
|
Depreciation,
depletion and amortization
|
280
|
280
|
|||||
|
Accretion
of asset retirement obligation
|
7
|
7
|
|||||
|
Amortization
of discount on long-term debt
|
224
|
224
|
|||||
|
Amortization
of debt issue costs
|
13
|
13
|
|||||
|
Changes
in assets and liabilities -
|
|||||||
|
Accounts
receivable
|
(1,129
|
)
|
(1,129
|
)
|
|||
|
Prepaid
expenses
|
(191
|
)
|
(191
|
)
|
|||
|
Accounts
payable and accrued liabilities
|
645
|
645
|
|||||
|
|
|||||||
|
Net
cash used for operating activities
|
(2,093
|
)
|
(2,093
|
)
|
|||
|
|
|||||||
|
Cash
flows from investing activities:
|
|||||||
|
Additions
to oil and gas properties
|
(62,401
|
)
|
(62,451
|
)
|
|||
|
Additions
to other property and equipment
|
(163
|
)
|
(163
|
)
|
|||
|
Increase
in other assets
|
(119
|
)
|
(119
|
)
|
|||
|
|
|||||||
|
Net
cash used for investing activities
|
(62,683
|
)
|
(62,733
|
)
|
|||
|
|
|||||||
|
Cash
flows from financing activities:
|
|||||||
|
Proceeds
of borrowings
|
42,500
|
42,500
|
|||||
|
Debt
issuance costs
|
(669
|
)
|
(669
|
)
|
|||
|
Members’
capital contributions
|
50
|
100
|
|||||
|
Proceeds
from issuance of common stock and warrants
|
35,521
|
35,521
|
|||||
|
Stock
issuance costs
|
(1,916
|
)
|
(1,916
|
)
|
|||
|
|
|||||||
|
Net
cash provided by financing activities
|
75,486
|
75,536
|
|||||
|
|
|||||||
|
Net
increase in cash and cash equivalents
|
10,710
|
10,710
|
|||||
|
Cash
and cash equivalents at beginning of the period
|
-
|
-
|
|||||
|
|
|||||||
|
Cash
and cash equivalents at end of the period
|
$
|
10,710
|
$
|
10,710
|
|||
|
|
|||||||
|
Supplemental
disclosures of cash flow information:
|
|||||||
|
Cash
paid for -
|
|||||||
|
Interest
|
$
|
-
|
$
|
-
|
|||
|
Income
taxes
|
$
|
-
|
$
|
-
|
|||
The
accompanying notes are an integral part of these consolidated financial
statements.
F-5
FOOTHILLS
RESOURCES, INC.
(A
Development Stage Company)
CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY
(dollars
in thousands, except per share amounts)
|
Common
Stock
|
Addi-
tional
|
|
|
Mem-
|
|
|
Deficit
Accum-
ulated
during
the
Develop-
|
|
|
Accum-
ulated
Other
Compre-
|
|
|
|
|
||||||||
|
|
|
|
Number
|
|
|
Par
Value
|
|
|
Paid-in
Capital
|
|
|
bers’
Capital
|
|
|
ment
Stage
|
|
|
hensive
Income
|
|
|
Total
|
|
|
Balance,
December 29, 2005 (date of inception)
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||||||
|
|
||||||||||||||||||||||
|
Contributions
|
-
|
-
|
-
|
50
|
-
|
-
|
50
|
|||||||||||||||
|
|
||||||||||||||||||||||
|
Balance,
December 31, 2005
|
-
|
-
|
-
|
50
|
-
|
-
|
50
|
|||||||||||||||
|
|
||||||||||||||||||||||
|
Contributions
(unaudited)
|
-
|
-
|
-
|
50
|
-
|
-
|
50
|
|||||||||||||||
|
|
||||||||||||||||||||||
|
Exchange
of members’ capital for common shares and conversion from limited
liability company to corporation (unaudited)
|
17,375,000
|
17
|
83
|
(100
|
)
|
-
|
-
|
-
|
||||||||||||||
|
|
||||||||||||||||||||||
|
Issuance
of common stock and warrants (unaudited)
|
42,112,763
|
42
|
43,036
|
-
|
-
|
-
|
43,078
|
|||||||||||||||
|
|
||||||||||||||||||||||
|
Exercise
of warrants (unaudited)
|
793,500
|
1
|
793
|
-
|
-
|
-
|
794
|
|||||||||||||||
|
|
||||||||||||||||||||||
|
Stock-based
compensation (unaudited)
|
-
|
-
|
259
|
-
|
-
|
-
|
259
|
|||||||||||||||
|
|
||||||||||||||||||||||
|
Change
in fair value of derivative financial instruments
(unaudited)
|
-
|
-
|
-
|
-
|
-
|
1,193
|
1,193
|
|||||||||||||||
|
|
||||||||||||||||||||||
|
Net
loss (unaudited)
|
-
|
-
|
-
|
-
|
(2,201
|
)
|
-
|
(2,201
|
)
|
|||||||||||||
|
|
||||||||||||||||||||||
|
Balance,
September 30, 2006 (unaudited)
|
60,281,263
|
$
|
60
|
$
|
44,171
|
$
|
-
|
$
|
(2,201
|
)
|
$
|
1,193
|
$
|
43,223
|
||||||||
The
accompanying notes are an integral part of these consolidated financial
statements.
F-6
FOOTHILLS
RESOURCES, INC.
(A
Development Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2006
(unaudited)
Note
1 - Summary of Operations and Going Concern
Foothills
Resources, Inc. (“Foothills”), a Nevada corporation, and its subsidiaries are
collectively referred to herein as the “Company.” The Company is a
growth-oriented independent energy company engaged in the acquisition,
exploration, exploitation and development of oil and natural gas properties.
The
Company currently holds interests in properties in the Eel River Basin,
in
northern California, in the Anadarko Basin in southwest Oklahoma, and
in the
Texas Gulf Coast area. In accordance with Statement of Financial Accounting
Standards (“SFAS”) No. 7, Accounting and Reporting by Development Stage
Enterprises, the Company is considered to be a development stage
company.
Foothills
took its current form on April 6, 2006, when Brasada California, Inc.
(“Brasada”) merged with and into an acquisition subsidiary of Foothills. Brasada
was formed on December 29, 2005 as Brasada Resources LLC, a Delaware
limited
liability company, and converted to a Delaware corporation on February
28, 2006.
Following the merger, Brasada changed its name to Foothills California,
Inc.
(“Foothills California”) and is now a wholly owned operating subsidiary of
Foothills. The Company adopted the assets, management, business operations
and
business plan of Foothills California. The financial statements of the
Company
prior to the merger were eliminated at consolidation. This transaction
was
accounted for as a reverse takeover of the Company by Foothills
California.
The
Company’s ability to continue as a going concern is dependent upon obtaining
the
necessary financing to acquire, explore and develop oil and gas interests
and to
generate profitable operations from its oil and gas interests in the
future. To
address these matters, management intends to raise additional capital
through
the sale and issuance of equity and/or the utilization of debt. The Company
recently completed a private placement of common shares and warrants
and
arranged a credit facility in connection with an acquisition of oil and
gas
properties (see Note 4).
Should
the going concern assumptions not be appropriate and the Company not
be able to
realize its assets and settle its liabilities in the normal course of
operations, these financial statements would require adjustments to the
amounts
and classifications of assets and liabilities.
Note
2 - Significant Accounting Policies
These
financial statements have been prepared by the Company without audit,
and
include all adjustments (which consist solely of normal recurring adjustments)
which, in the opinion of management, are necessary for a fair presentation
of
financial position and results of operations. Certain information and
footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or
omitted,
although the Company believes that the disclosures are adequate to make
the
information presented not misleading. It is suggested that these financial
statements be read in conjunction with the Company’s audited financial
statements and the notes thereto for the year ended December 31,
2005.
Principles
of consolidation
The
consolidated financial statements include the accounts of Foothills and
its
wholly owned subsidiaries. All material intercompany accounts and transactions
have been eliminated in consolidation. The Company accounts for its investments
in oil and gas joint ventures using the proportionate consolidation method,
whereby the Company’s proportionate share of each entity’s assets, liabilities,
revenues and expenses is included in the appropriate classification in
the
financial statements.
F-7
Use
of estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management
to make
estimates and assumptions that affect the amounts reported in the financial
statements. Actual results could differ from such estimates. Changes in such
estimates may affect amounts reported in future periods.
Oil
and gas properties
The
Company follows the full-cost method of accounting for oil and gas properties.
Under this method, all productive and nonproductive costs incurred in
connection
with the acquisition, exploration and development of oil and gas reserves
are
capitalized in separate cost centers for each country in which the Company
has
operations. Such capitalized costs include leasehold acquisition, geological,
geophysical and other exploration work, drilling, completing and equipping
oil
and gas wells, asset retirement costs, internal costs directly attributable
to
property acquisition, exploration and development, and other related
costs. The
Company also capitalizes interest costs related to unevaluated oil and
gas
properties.
The
capitalized costs of oil and gas properties in each cost center are amortized
using the unit-of-production method. Sales or other dispositions of oil
and gas
properties are normally accounted for as adjustments of capitalized costs.
Gains
or losses are not recognized in income unless a significant portion of
a cost
center’s reserves is involved. Capitalized costs associated with the acquisition
and evaluation of unproved properties are excluded from amortization
until it is
determined whether proved reserves can be assigned to such properties
or until
the value of the properties is impaired. Unproved properties are assessed
at
least annually to determine whether any impairment has occurred. If the
net
capitalized costs of oil and gas properties in a cost center exceed an
amount
equal to the sum of the present value of estimated future net revenues
from
proved oil and gas reserves in the cost center and the costs of properties
not
being amortized, both adjusted for income tax effects, such excess is
charged to
expense.
Asset
retirement obligations
The
fair
value of an asset retirement obligation is recognized in the period in
which it
is incurred if a reasonable estimate can be made. The Company’s asset retirement
obligations primarily relate to the abandonment of oil and gas wells
and
producing facilities.
Revenue
recognition
Oil
and
gas revenues from producing wells are recognized when title and risk
of loss is
transferred to the purchaser of the oil or gas.
Derivative
instruments and hedging activities
The
Company has entered into derivative contracts to manage its exposure
to
commodity price risk. These derivative contracts, which are placed with
a major
financial institution that the Company believes is a minimal credit risk,
currently consist only of swaps. The oil prices upon which the commodity
derivative contracts are based reflect various market indices that have
a high
degree of historical correlation with actual prices received by the Company
for
its oil production.
The
Company accounts for its derivative instruments in accordance with SFAS
No. 133,
“Accounting for Derivative Instruments and Hedging Activities,” as amended
(“SFAS 133”). SFAS 133 establishes accounting and reporting standards requiring
that all derivative instruments, other than those that meet the normal
purchases
and sales exception, be recorded on the balance sheet as either an asset
or
liability measured at fair value (which is generally based on information
obtained from independent parties). SFAS 133 also requires that changes
in fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Hedge accounting treatment allows unrealized gains
and losses
on cash flow hedges to be deferred in other comprehensive income. Realized
gains
and losses from the Company’s oil and gas cash flow hedges, including terminated
contracts, are generally recognized in oil and gas production revenues
when the
forecasted transaction occurs. Gains and losses from the change in fair
value of
derivative instruments that do not qualify for hedge accounting are reported
in
current period income. If at any time the likelihood of occurrence of
a hedged
forecasted transaction ceases to be “probable,” hedge accounting under SFAS 133
will cease on a prospective basis and all future changes in the fair
value of
the derivative will be recognized directly in earnings. Amounts recorded
in
other comprehensive income prior to the change in the likelihood of occurrence
of the forecasted transaction will remain in other comprehensive income
until
such time as the forecasted transaction impacts earnings. If it becomes
probable
that the original forecasted production will not occur, then the derivative
gain
or loss would be reclassified from accumulated other comprehensive income
into
earnings immediately. Hedge effectiveness is measured at least quarterly
based
on the relative changes in fair value between the derivative contract
and the
hedged item over time, and any ineffectiveness is immediately reported
in the
consolidated statement of operations.
F-8
New
accounting pronouncements
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
No. 157 “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value,
establishes a framework for measuring fair value, and expands disclosures
about
fair value measurements. This statement is effective for financial statements
issued for fiscal years beginning after November 15, 2007. The Company
is
continuing to assess the potential impacts this statement might have
on its
consolidated financial statements and related footnotes.
In
September 2006, the FASB issued SFAS No. 158 “Employers’ Accounting for Defined
Benefit Plans and Other Postretirement Plans” (“SFAS 158”). The statement
requires employers to recognize any overfunded or underfunded status
of a
defined benefit postretirement plan as an asset or liability in their
financial
statements. Unrealized components of net periodic benefit costs are reflected
in
other comprehensive income, net of tax. SFAS 158 requires recognition
of the
funded status and related disclosures as of the end of the fiscal year
ending
after December 15, 2006. Adoption of this statement is expected to have
no
impact on the Company’s financial position or results of
operations.
In
July
2006, the FASB issued Financial Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement No.
109,” to
clarify certain aspects of accounting for uncertain tax positions, including
issues related to the recognition and measurement of those tax positions.
This
interpretation is effective for fiscal years beginning after December
15, 2006.
The Company is in the process of evaluating the impact of the adoption
of this
interpretation on its consolidated financial position, results of operations
or
cash flows.
In
March
2006, the FASB issued SFAS No.156, “Accounting for Servicing of Financial
Assets” (“SFAS 156”), which requires all separately recognized servicing assets
and servicing liabilities be initially measured at fair value. SFAS 156
permits,
but does not require, the subsequent measurement of servicing assets
and
servicing liabilities at fair value. Adoption is required as of the beginning
of
the first fiscal year that begins after September 15, 2006. The adoption
of SFAS
156 is not expected to have a material effect on the Company’s consolidated
financial position, results of operations or cash flows.
In
February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid
Financial Instruments, an amendment of FASB Statements No. 133 and 140” (“SFAS
155”). SFAS 155 clarifies certain issues relating to embedded derivatives
and
beneficial interests in securitized financial assets. The provisions
of SFAS 155
are effective for all financial instruments acquired or issued after
fiscal
years beginning after September 15, 2006. Adoption of this statement
is expected
to have no impact on the Company’s financial position or results of
operations.
In
December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based
Payment” (“SFAS 123R”), replacing SFAS No. 123, “Accounting for Stock-Based
Compensation,” and superseding Accounting Principles Board (“APB”) Opinion No.
25, “ Accounting for Stock Issued to Employees ” (“APB 25”). SFAS 123R requires
recognition of share-based compensation in the financial statements.
SFAS 123R
was effective as of the first annual reporting period that began after
June 15,
2005 and was adopted on January 1, 2006. See Note 5 for further
details.
F-9
Note
3 - Acquisition
In
September 2006, the Company completed the acquisition of certain producing
properties in the Texas Gulf Coast area (the “TARH Acquisition”) from TARH
E&P Holdings, L.P. (“TARH”). The aggregate consideration was $61,492,000,
comprised of a cash payment of approximately $57,318,000 and the issuance
of
1,605,345 shares of Foothills common stock to TARH with a deemed value
of
$4,174,000, based on a per-share average closing price of Foothills’ common
stock as reported with on the Over-the-Counter Bulletin Board for the
twenty 20
trading days prior to the date of the public announcement of the TARH
Acquisition.
The
Company acquired TARH’s interests in four fields: the Goose Creek Field and
Goose Creek East Field, both in Harris County, Texas, the Cleveland Field,
located in Liberty County, Texas, and the Saratoga Field located in Hardin
County, Texas. These interests represent working interests ranging from
95% to
100% of the four fields, which contain approximately 4,000 gross acres
of
leasehold or fee interests. The TARH Acquisition was funded primarily
by debt
financing (see Note 4) as well as a portion of the proceeds from a $22,500,000
private placement of common stock and warrants completed concurrently.
Note
4 - Long-term Debt
To
finance the TARH Acquisition, the Company executed a credit agreement
with a
financial institution (the “Lender”) dated as of September 8, 2006 (the “Credit
Agreement”), whereby the Company may borrow funds under a credit facility in an
amount not to exceed $42,500,000 (the “Facility”). As of September 30, 2006,
$42,500,000 was outstanding under the Facility.
The
Facility will terminate and all amounts borrowed under the Facility will
be due
and payable on September 7, 2010. The Facility bears interest at a rate
of LIBOR
plus 700 basis points, subject to increases of 100 basis points each
on
September 22, 2006, October 23, 2006 and November 22, 2006 if the Company
does
not raise an additional $5,000,000 in equity capital on or before those
dates.
The interest rate at September 30, 2006 was 13.4%. The Company is required
to
make quarterly interest and principal payments on the Facility equal
to the
adjusted net cash flow attributable to the TARH Properties. The Facility
is
secured by liens and security interests on substantially all of the assets
of
the Company and its subsidiaries, including 100% of the Company’s oil and gas
reserves.
The
Company issued to an affiliate of the Lender a warrant to purchase 3,000,000
shares of its common stock for five years at an exercise price of $2.75
per
share. In addition, the Company conveyed to the Lender a 5% overriding
royalty
interest in all oil and gas leases associated with the TARH properties,
but
excluding new exploration projects of other formations on the TARH properties,
to the extent they are distinct from operations included in the Lender’s
approved plan of development and the related engineering report for the
TARH
Acquisition and are funded through equity capital. The fair values of
the
warrant and the overriding royalty interest amounted to an aggregate
of
$11,426,000. This amount was recorded as debt issue discount, which is
being
amortized using the interest method.
Note
5 - Stock-Based Compensation
Share-Based
Employee Compensation Plans
Foothills’
2006 Equity Incentive Plan (the “2006 Plan”) enables the Company to provide
equity-based incentives through grants or awards of incentive awards
to present
and future employees, directors, consultants and other third party service
providers.
Foothills’
Board of Directors reserved a total of 2,000,000 shares of Foothills’ common
stock for issuance under the 2006 Plan. Shares issued under the 2006
Plan
through the settlement, assumption or substitution of outstanding awards
or
obligations to grant future awards as a condition of acquiring another
entity
will not reduce the maximum number of shares available under the 2006
Plan. In
addition, the number of shares of common stock subject to the 2006 Plan,
any
number of shares subject to any numerical limit in the 2006 Plan, and
the number
of shares and terms of any incentive award will be adjusted in the event
of any
change in outstanding common stock by reason of any stock dividend, spin-off,
split-up, stock split, reverse stock split, recapitalization, reclassification,
merger, consolidation, liquidation, business combination or exchange
of shares
or similar transaction.
F-10
The
compensation committee of the Board (or the Board in the absence of such
a
committee), administers the 2006 Plan. Subject to the terms of the 2006
Plan,
the compensation committee has complete authority and discretion to determine
the terms of awards under the 2006 Plan.
The
2006
Plan authorizes the grant, to participants, of nonqualified stock options,
incentive stock options, restricted stock awards, restricted stock units,
performance grants intended to comply with Section 162(m) of the Internal
Revenue Code, and stock appreciation rights, as described below:
|
|
·
|
Options
granted under the 2006 Plan entitle the grantee, upon exercise,
to
purchase a specified number of shares at a specified exercise
price per
share. The exercise price for shares of common stock covered
by an option
cannot be less than the fair market value of the common stock
on the date
of grant unless the compensation committee agrees otherwise
at the time of
the grant.
|
|
|
·
|
Restricted
stock awards and restricted stock units may be awarded on terms
and
conditions established by the compensation committee, which
may include
performance conditions for restricted stock awards and the
lapse of
restrictions on the achievement of one or more performance
goals for
restricted stock units.
|
|
|
·
|
The
compensation committee may make performance grants, each of
which will
contain performance goals for the award, including the performance
criteria, the target and maximum amounts payable, and other
terms and
conditions.
|
|
|
·
|
The
2006 Plan authorizes the granting of stock awards. The compensation
committee establishes the number of shares of common stock
to be awarded
and the terms applicable to each award, including performance
restrictions.
|
|
|
·
|
Stock
appreciation rights (“SARs”) entitle the participant to receive a
distribution in an amount not to exceed the number of shares
of common
stock subject to the portion of the SAR exercised multiplied
by the
difference between the market price of a share of common stock
on the date
of exercise of the SAR and the market price of a share of common
stock on
the date of grant of the SAR.
|
The
Board
may suspend or terminate the 2006 Plan without stockholder approval or
ratification at any time or from time to time. Unless sooner terminated,
the
2006 Plan will terminate 10 years after it is adopted. The Board may
also amend
the 2006 Plan at any time. No change may be made that increases the total
number
of shares of common stock reserved for issuance pursuant to incentive
awards or
reduces the minimum exercise price for options or exchange of options
for other
incentive awards, unless such change is authorized by Foothills’ stockholders.
Adoption
of New Accounting Pronouncement
Stock-based
compensation for the three and nine months ended September 30, 2006 totaling
$146,000 and $259,000, respectively, has been recognized as a component
of
general and administrative expenses in the accompanying consolidated
financial
statements.
Effective
January 1, 2006 the Company adopted SFAS 123R, which requires it to measure
the
cost of stock-based compensation granted, including stock options and
restricted
stock, based on the fair market value of the award as of the grant date,
net of
estimated forfeitures. SFAS 123R supersedes SFAS 123 and APB 25. The
Company had
no stock-based compensation grants prior to January 1, 2006.
The
estimated fair value of the options granted during 2006 was calculated
using a
Black Scholes Merton option pricing model (“Black Scholes”). The following
schedule reflects the various assumptions included in this model as it
relates
to the valuation of options:
F-11
|
|
|
|
|
|
|
|
|
September
30,
2006
|
|
|
|
Risk
free interest rate
|
|
|
4.80
- 4.98
|
%
|
|
Weighted
average volatility
|
|
|
79
- 138
|
%
|
|
Dividend
yield
|
|
|
0
|
%
|
|
Expected
years until exercise
|
|
|
.5
- 3
|
|
The
Black
Scholes model incorporates assumptions to value stock-based awards. The
risk-free rate of interest for periods within the expected term of the
option
was based on a zero-coupon U.S. government instrument over the expected
term of
the equity instrument. Because Foothills’ common stock has limited trading
history, expected volatility was based on the historical volatility of
a
representative stock with characteristics similar to the Company. The Company
has no historical experience upon which to base estimates of employee option
exercise timing (“expected term”) within the valuation model, and utilized
estimates for the expected term based on criteria required by SFAS 123R.
As
of
September 30, 2006, $653,000 of total unrecognized compensation cost related
to
stock options is expected to be recognized over a weighted average period
of
approximately three years.
Option
activity under the 2006 Plan as of September 30, 2006 and changes during
the
nine months ended September 30, 2006 were as follows:
|
|
Shares
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Term
In
Years
|
|
Aggregate
Intrinsic
Value
|
|||||||
|
Outstanding
at January 1, 2006
|
-
|
$
|
-
|
||||||||||
|
Granted
|
1,260,000
|
1.45
|
|||||||||||
|
Exercised
|
-
|
-
|
|||||||||||
|
Forfeited
|
-
|
-
|
|||||||||||
|
|
|||||||||||||
|
Outstanding
at September 30, 2006
|
1,260,000
|
$
|
1.45
|
9.5
|
$
|
1,565,000
|
|||||||
|
|
|||||||||||||
|
Exercisable
at September 30, 2006
|
352,500
|
$
|
1.88
|
9.5
|
$
|
360,000
|
|||||||
The
aggregate intrinsic value in the table above represents the total pre-tax
intrinsic value (the difference between the closing stock price on the
last
trading day of the third quarter of 2006 and the exercise price, multiplied
by
the number of in-the-money options) that would have been received by the
option
holders had all option holders exercised their options on September 30,
2006.
The amount of aggregate intrinsic value will change based on the fair market
value of the Company’s stock. No stock options were exercised during the nine
months ended September 30, 2006.
To
the
Audit Committee
Brasada
California, Inc.
Successor
in interest Brasada Resources, LLC
Houston,
Texas
We
have
audited the balance sheet of Brasada Resources, LLC, a development stage
company, as of December 31, 2005, and the related statements of operations,
member’s capital and cash flows for the period from inception on December 29,
2005 through December 31, 2005. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an
opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our
audits provide a reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly in all
material respects the financial position of Brasada Resources, LLC, a
development stage company, at December 31, 2005, and the results of its
operations and its cash flows for the period from inception on December 29,
2005
through December 31, 2005, in conformity with accounting principles generally
accepted in the United States of America.
BROWN
ARMSTRONG PAULDEN
McCOWN
STARBUCK THORNBURGH & KEETER
ACCOUNTANCY
CORPORATION
Bakersfield,
California
FINANCIAL
STATEMENTS
Set
forth
below are the audited financial statements of Brasada Resources LLC, the
predecessor company to Brasada, as of December 31, 2005. The business operations
of Brasada will be the business operations of Foothills following the Merger.
BRASADA
RESOURCES, LLC
(A
DEVELOPMENT STAGE COMPANY)
DECEMBER
31, 2005
|
Assets
|
|
|||
|
|
|
|||
|
Property
and equipment, at cost:
|
|
|||
|
Oil
and gas properties, using full cost accounting -
|
|
|||
|
Unproved
properties not being amortized
|
$
|
54,856
|
||
|
Total
assets
|
$
|
54,856
|
||
|
|
||||
|
Liabilities
and Members' Capital
|
||||
|
|
||||
|
Accounts
payable
|
$
|
4,856
|
||
|
|
||||
|
Members'
capital:
|
||||
|
Members'
capital
|
50,000
|
|||
|
Total
liabilities and members' capital
|
$
|
54,856
|
||
|
|
||||
The
accompanying notes are an integral part of these financial statements
BRASADA RESOURCES, LLC
BRASADA RESOURCES, LLC
(A
DEVELOPMENT STAGE COMPANY)
FOR
THE PERIOD FROM INCEPTION
(DECEMBER
29, 2005) THROUGH DECEMBER 31, 2005
|
Income
|
|
$
|
—
|
|
|
Costs
and expenses
|
|
|
—
|
|
|
Net
income (loss)
|
|
$
|
—
|
|
BRASADA
RESOURCES, LLC
(A
DEVELOPMENT STAGE COMPANY)
FOR
THE PERIOD FROM INCEPTION
(DECEMBER
29, 2005) THROUGH DECEMBER 31, 2005
|
Contributions
|
|
$
|
50,000
|
|
|
Net
income (loss) for the period from inception
|
|
|
|
|
|
(December
29, 2005) through December 31, 2005
|
|
|
—
|
|
|
Balance,
December 31, 2005
|
|
$
|
50,000
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these financial statements
BRASADA RESOURCES, LLC
BRASADA RESOURCES, LLC
(A
DEVELOPMENT STAGE COMPANY)
FOR
THE PERIOD FROM INCEPTION
(DECEMBER
29, 2005) THROUGH DECEMBER 31, 2005
|
Cash
flows from operating activities:
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
—
|
|
|
Net
cash provided by operating activities
|
|
|
—
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
Additions
to oil and gas properties
|
|
|
(50,000)
|
|
|
Net
cash used for investing activities
|
|
|
(50,000)
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
Capital
contributions by members
|
|
|
50,000
|
|
|
Net
cash provided by financing activities
|
|
|
50,000
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
—
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of period
|
|
|
—
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
—
|
|
The
accompanying notes are an integral part of these financial statements
BRASADA RESOURCES LLC
BRASADA RESOURCES LLC
(A
DEVELOPMENT STAGE COMPANY)
DECEMBER
31, 2005
Note
1 - Summary of Operations and Going Concern
Brasada
Resources LLC (the “Company”) was organized December 29, 2005 as a limited
liability company under the laws of the state of Delaware. The Company’s
principal business is to pursue opportunities in oil and gas acquisition,
exploration and development. In accordance with Statement of Financial
Accounting Standards (“SFAS”) No. 7, Accounting and Reporting by Development
Stage Enterprises, the Company is considered to be a development stage
company.
The
Company’s ability to continue as a going concern is dependent upon obtaining the
necessary financing to acquire, explore and develop oil and gas interests
and to
generate profitable operations from its oil and gas interests in the future.
To
address these matters, management intends to:
|
·
|
borrow
from Foothills Resources, Inc., a Nevada company (“Foothills”), under a
bridge loan facility to fund its planned initial acquisition, exploration
and development activities (see Note 3);
and
|
|
·
|
pursue
a merger with Foothills, which will allow the Company to raise
additional
capital through the sale and issuance of common shares of its corporate
successor-in-interest (see Note 3).
|
Should
the going concern assumptions not be appropriate and the Company not be able
to
realize its assets and settle its liabilities in the normal course of
operations, these financial statements would require adjustments to the amounts
and classifications of assets and liabilities.
Note
2 - Significant Accounting Policies
Principles
of consolidation
The
Company accounts for its investments in oil and gas joint ventures using
the
proportionate consolidation method, whereby the Company’s proportionate share of
each entity’s assets, liabilities, revenues and expenses is included in the
appropriate classification in the financial statements.
Use
of estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to
make
estimates and assumptions that affect the amounts reported in the financial
statements. Actual results could differ from such estimates. Changes in such
estimates may affect amounts reported in future periods.
Oil
and gas properties
The
Company follows the full-cost method of accounting for oil and gas properties.
Under this method, all productive and nonproductive costs incurred in connection
with the acquisition, exploration and development of oil and gas reserves
are
capitalized in separate cost centers for each country in which the Company
has
operations. Such capitalized costs include leasehold acquisition, geological,
geophysical and other exploration work, drilling, completing and equipping
oil
and gas wells, asset retirement costs, internal costs directly attributable
to
property acquisition, exploration and development, and other related costs.
The
Company also capitalizes interest costs related to unevaluated oil and gas
properties.
The
capitalized costs of oil and gas properties in each cost center are amortized
using the unit-of-production method. Sales or other dispositions of oil and
gas
properties are normally accounted for as adjustments of capitalized costs.
Gains
or losses are not recognized in income unless a significant portion of a
cost
center’s reserves is involved. Capitalized costs associated with the acquisition
and evaluation of unproved properties are excluded from amortization until
it is
determined whether proved reserves can be assigned to such properties or
until
the value of the properties is impaired. Unproved properties are assessed
at
least annually to determine whether any impairment has occurred. If the net
capitalized costs of oil and gas properties in a cost center exceed an amount
equal to the sum of the present value of estimated future net revenues from
proved oil and gas reserves in the cost center and the costs of properties
not
being amortized, both adjusted for income tax effects, such excess is charged
to
expense.
Asset
retirement obligations
The
fair
value of an asset retirement obligation is recognized in the period in which
it
is incurred if a reasonable estimate can be made. The Company’s asset retirement
obligations primarily relate to the abandonment of oil and gas wells and
producing facilities.
Members'
capital
The
operations of the Company are governed by the provisions of an operating
agreement executed by and among its members. The total capital contributed
by
the members as of December 31, 2005 was $50,000.
Revenue
recognition
Oil
and
gas revenues from producing wells are recognized when title and risk of loss
is
transferred to the purchaser of the oil or gas.
New
accounting pronouncements
In
December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
123 (revised 2004), Share-Based Payment (“SFAS 123(R)”). SFAS 123(R) is a
revision of SFAS No. 123, Accounting for Stock Based Compensation (“SFAS 123”),
and supersedes Accounting Principles Board Opinion No. 25, Accounting for
Stock
Issued to Employees (“APB 25”). Among other items, SFAS 123(R) eliminates the
use of APB 25 and the intrinsic value method of accounting, and requires
companies to recognize the cost of employee services received in exchange
for
awards of equity instruments based on the grant date fair value of those
awards.
SFAS 123(R) permits the use of the Black-Scholes model as well as other standard
option pricing models. The compliance date for SFAS 123(R) has been amended
such
that the standard will be effective for the first full fiscal year beginning
after June 15, 2005. The Company has not yet determined which model it will
use
to measure the fair value of employee stock options upon the adoption of
SFAS
123(R) and has not yet determined the impact on the Company’s future operating
results.
In
March
2005, the Securities and Exchange Commission (“SEC”) issued Staff Accounting
Bulletin (“SAB“) No. 107 on SFAS No. 123(R) (“SAB 107”). SAB 107 reinforces the
flexibility allowed by SFAS 123(R) to choose an option pricing model, provides
guidance on when it would be appropriate to rely exclusively on either
historical or implied volatility in estimating expected volatility and provided
examples and simplified approaches to determining the expected term. In April
2005, the SEC extended the date by which companies are required to adopt
SFAS
123(R) from the first reporting period beginning on or after June 15, 2005
to
the first reporting period of the first full fiscal year beginning on or
after
June 15, 2005.
Note
3 - Subsequent Events
In
January 2006, the Company’s members contributed an additional $50,000 to its
capital.
In
January 2006, the Company entered into a Farmout and Participation Agreement
providing for a joint venture for exploration, development and production
of oil
and gas in the Eel River Basin, California (the “Eel River Agreement”). Under
the terms of the Eel River Agreement, the Company will serve as operator
of the
joint venture. To earn interests in certain of the leases held by its joint
venture partner, the Company must (a) drill two exploratory wells no later
than
June 30, 2006, subject to rig availability, (b) acquire 1,000 additional
leasehold acres in the area of mutual interest, and (c) conduct certain other
operations. Following successful completion of these activities, the Company
has
the right, but not the obligation, to conduct additional activities in
accordance with the Eel River Agreement to earn additional leasehold
interests.
In
February 2006, the Company was converted into a Delaware corporation named
Brasada California, Inc. (“Brasada”). Under Delaware law, all of the Company’s
assets, liabilities, rights and obligations were acquired and assumed by
Brasada, and the capital of the Company’s members was exchanged for shares of
Brasada’s common stock.
In
March
2006, Brasada entered into a binding term sheet with Foothills providing
for (a)
a private placement of $7,000,000 of common stock and warrants of Foothills,
(b)
the merger of Brasada into a wholly owned subsidiary of Foothills, in exchange
for the issuance of 42.9% of the issued and outstanding common stock of
Foothills to the shareholders of Brasada, and (c) the bridge loan facility
described in the following paragraph.
In
March
2006, Brasada entered into agreements with Foothills, pursuant to which Brasada
may borrow up to $3,000,000 from Foothills to meet agreed working capital
commitments. The loans are evidenced by a promissory note (the “Bridge Note”),
which matures 120 days from the date of the loans, bears interest at 9% per
annum payable monthly commencing 30 days from the date of the loans, and
is
secured by all of Brasada’s assets and shares of its common stock equal to 51%
of such stock issued and outstanding. Upon the closing of the transaction
described in the preceding paragraph, all amounts outstanding under the Bridge
Note will be forgiven, and the Bridge Note will be deemed repaid in full.
(unaudited)
The
following tables set forth information about the Company’s oil and gas producing
activities pursuant to the requirements of SFAS No. 69, “Disclosures About Oil
and Gas Producing Activities.” All of the Company’s oil and gas producing
activities are within the United States.
Capitalized
Costs as of December 31, 2005
|
|
|
|
|
|
|
Proved
properties
|
|
$
|
—
|
|
|
Unproved
properties
|
|
|
54,856
|
|
|
|
|
|
54,856
|
|
|
|
|
|
|
|
|
Accumulated
depreciation, depletion and amortization
|
|
|
—
|
|
|
Net
capitalized costs
|
|
$
|
54,856
|
|
|
|
Costs
Incurred for the Period from Inception (December 29, 2005) through December
31,
2005
|
Property
acquisition:
|
|
|
|
|
|
Proved
properties
|
|
$
|
—
|
|
|
Unproved
properties
|
|
|
54,072
|
|
|
Exploration
|
|
|
784
|
|
|
Development
|
|
|
—
|
|
|
Total
costs incurred
|
|
$
|
54,856
|
|
Oil
and Gas Reserve Quantities
Proved
reserves represent estimated quantities of crude oil and natural gas which
geological and engineering data demonstrate to be reasonably recoverable
in the
future from known reservoirs under existing economic and operating conditions.
Proved developed reserves can be expected to be recovered through existing
wells, with existing equipment and operating methods.
The
Company had no proved reserves as of December 31, 2005.
F-20
FOOTHILLS
RESOURCES, INC.
FINANCIAL
STATEMENTS OF ASSETS ACQUIRED
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors and Stockholders of
Foothills
Resources, Inc.
Bakersfield,
California
We
have
audited the accompanying statements of revenues and direct operating
expenses of
TARH E&P Holdings L.P., Texas Properties as described in Note 1, for the two
years ended December 31, 2004 and 2005. These financial statements
are the
responsibility of management. Our responsibility is to express an opinion
on
these financial statements based on our audits.
We
conducted our audit in accordance with the standards of the Public
Company
Accounting Oversight Board (United States). Those standards require
that we plan
and perform the audit to obtain reasonable assurance about whether
the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the
financial
statements. An audit also includes assessing the accounting principles
used and
significant estimates made by management, as well as evaluating the
overall
financial statement presentation. We believe that our audit provides
a
reasonable basis for our opinion.
The
accompanying statements of revenues and direct operating expenses reflect
the
revenues and direct operating expenses attributable to TARH E&P Holdings’
Texas properties, as described in Note 2, and are not intended to be
a complete
presentation of the revenues and expenses of TARH E&P Holdings L.P. Texas
properties.
In
our
opinion, the financial statements referred to above present fairly,
in all
material respects, the revenues and direct operating expenses of TARH
E&P
Holdings L.P., Texas properties, as described in Note 1, for the two
years ended
December 31, 2004 and 2005, in conformity with accounting principles
generally
accepted in the United States of America.
|
|
|
|
BROWN
ARMSTRONG PAULDEN
McCOWN
STARBUCK THORNBURGH & KEETER
ACCOUNTANCY
CORPORATION
|
Bakersfield,
California
November
20, 2006
F-21
Foothills
Resources, Inc.
Acquired
Texas Oil and Gas Properties
Statements
of Revenues and Direct Operating Expenses
Six
Months Ended June 30, 2006 and 2005 and
Years
Ended December 31, 2005 and 2004
(in
Thousands)
|
|
Six
Months Ended June 30,
|
|
Year
Ended December 31,
|
|
|||||||||
|
|
|
2006
|
|
2005
|
|
2005
|
|
2004
|
|
||||
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
|
||||||
|
Revenues:
|
|||||||||||||
|
Oil
and gas sales
|
$
|
7,798
|
$
|
7,480
|
$
|
14,042
|
$
|
8,352
|
|||||
|
|
|
|
|
|
|||||||||
|
Direct
operating expenses:
|
|||||||||||||
|
Production
taxes
|
583
|
471
|
1,090
|
656
|
|||||||||
|
Lease
operating expenses
|
1,602
|
1,462
|
3,358
|
2,258
|
|||||||||
|
|
|||||||||||||
|
Excess
of revenues over direct operating expenses
|
$
|
5,613
|
$
|
5,547
|
$
|
9,594
|
$
|
5,438
|
|||||
The
accompanying notes are an integral part of these financial
statements.
F-22
Foothills
Resources, Inc.
Notes
to Statements of Revenues and Direct Operating
Expenses
Note
1 - The Properties
The
accompanying statements represent the revenues and direct operating
expenses
attributable to the net working and revenue interests in four Texas
oil and gas
properties acquired by Foothills Resources, Inc. (“Foothills” or the “Company”)
on September 8, 2006 (the “Properties”), from TARH E&P Holdings L.P. (the
“Seller”). Foothills acquired the properties for approximately $61,492,000,
as
adjusted, with an effective date of September 1, 2006. The Properties
were used by the Seller for the exploration, development and production
of oil
and gas, which is the intended continued use for the acquired assets
by the
Company. The acquired properties and their related operations will
be included
in Foothills’ consolidated financial statements from the date of
closing.
The
Company acquired a 100% working interest in the Goose Creek and Goose
Creek East
Fields in Harris County, Texas, a 100% working interest in the Saratoga
Field in
Hardin County, Texas, and a 95% working interest in the Cleveland Field
in
Liberty County, Texas.
The
consideration paid for the Properties consisted of i) the payment of
approximately $57,318,000 in cash, and ii) the issuance of 1,605,345
shares of
the Company’s common stock.
The
$57,318,000 cash portion of the purchase price was funded through $42,500,000
in
borrowings under a subordinated, second lien credit facility with affiliates
of
Goldman, Sachs & Co., cash proceeds from the sale by the Company of equity
in a private offering, and available working capital.
Note
2 - Basis of Presentation
The
historical financial statements reflecting the financial position,
results of
operations and cash flows required by accounting principles generally
accepted
in the United States of America are not presented, since such information
is
neither readily available on an individual property basis nor meaningful
for the
properties acquired because the entire acquisition cost is being assigned
to oil
and gas properties. Accordingly the statements of revenues and direct
operating expenses are presented in lieu of the financial statements
required
under Rule 3-05 of Securities and Exchange Commission (“SEC”) Regulation
S-X.
The
accompanying statements of revenues and direct operating expenses represent
Foothills’ net working and revenue interests in the Properties acquired and are
presented on the full cost basis of accounting. Depreciation, depletion
and amortization; accretion of asset retirement obligations; allocated
general
and administrative expenses; interest expense and income; and income
taxes have
been excluded because the property interests acquired represent only
a portion
of a business, and the expenses incurred are not necessarily indicative
of the
expenses to be incurred by Foothills.
The
preparation of the financial statements in conformity with accounting
principles
generally accepted in the United States requires use of estimates and
assumptions regarding certain types of revenues and expenses. Such
estimates
primarily relate to the unsettled transactions and events as of the
date of the
financial statements. Actual results may differ from such
estimates.
F-23
FOOTHILLS
RESOURCES, INC.
PRO
FORMA FINANCIAL STATEMENTS
AS
OF JUNE 30, 2006
AND
FOR THE SIX MONTHS ENDED JUNE 30, 2006
The
accompanying unaudited pro forma combined financial statements (“pro forma
statements”) reflect (i) the acquisition by Foothills Resources, Inc.
(“Foothills” or the “Company”) of certain producing properties in the Texas Gulf
Coast area (the “TARH Acquisition”) from TARH E&P Holdings, L.P. (“TARH”),
(ii) the concurrent closing of a $22,500,000 private placement of Foothills’
common stock and warrants (the “Equity Offering”) , and (iii) the concurrent
closing of a $42,500,000 credit facility (the “Credit Facility”) (collectively,
the “Transactions”).
The
pro
forma statements have been prepared from, and should be read in conjunction
with, (i) the Company’s unaudited financial statements as of June 30, 2006 and
for the six months then ended, and (ii) the unaudited Statements of
Revenues and
Direct Operating Expenses of the Acquired Texas Oil and Gas Properties
for the
six months ended June 30, 2006. The following unaudited pro forma combined
balance sheet has been prepared as though the Transactions had occurred
on June
30, 2006, and the unaudited pro forma combined statement of operations
for the
six months ended June 30, 2006 has been prepared as though the Transactions
had
occurred on January 1, 2006. The pro forma statements do not necessarily
reflect
the financial position or results of operations that would have resulted
had the
Transactions actually occurred at those dates. In addition, the pro
forma
statements are not necessarily indicative of the results that may be
expected
for the year ended December 31, 2006, or any other period.
An
unaudited pro forma combined statement of operations for the Company’s latest
fiscal year has not been presented because the statement would not
have provided
meaningful information. In accordance with reverse takeover accounting
requirements, the statement would have covered only the period from
December 29,
2005, the date of formation of the Company’s predecessor, through December 31,
2005.
The
pro
forma statements reflect pro forma adjustments that are described in
the
accompanying notes and are based on available information and certain
assumptions that we believe are reasonable but are subject to
change.
F-24
FOOTHILLS
RESOURCES, INC.
(A
Development Stage Company)
UNAUDITED
PRO FORMA COMBINED BALANCE SHEET
AS
OF JUNE 30, 2006
(dollars
in thousands)
|
Foothills
|
|
Acquired
|
|
Pro
Forma
|
|
Pro
|
|
|||||||||
|
|
|
Historical
|
|
Properties
|
|
Adjustments
|
|
Forma
|
||||||||
|
ASSETS
|
|
|
|
|
|
|||||||||||
|
Current
assets:
|
|
|
|
|
||||||||||||
|
|
|
|
$
|
(54,219
|
)
|
a
|
|
|||||||||
|
Cash
and cash equivalents
|
$
|
5,286
|
$
|
-
|
22,701
|
b
|
$
|
15,596
|
||||||||
|
|
|
|
41,828
|
c
|
|
|||||||||||
|
Prepaid
expenses
|
227
|
-
|
|
|
227
|
|||||||||||
|
|
5,513
|
-
|
|
|
15,823
|
|||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Property
and equipment, at cost:
|
|
|
|
|
|
|||||||||||
|
Oil
and gas properties, using full-cost accounting -
|
|
|
|
|
|
|||||||||||
|
|
|
|
62,631
|
a
|
|
|||||||||||
|
Proved
properties
|
-
|
-
|
(5,185
|
)
|
c
|
57,446
|
||||||||||
|
Unproved
properties not being amortized
|
5,308
|
-
|
(3,099
|
)
|
a
|
2,209
|
||||||||||
|
Other
property and equipment
|
128
|
-
|
|
|
128
|
|||||||||||
|
|
5,436
|
-
|
|
|
58,783
|
|||||||||||
|
Less
accumulated depreciation, depletion and amortization
|
(5
|
)
|
-
|
|
|
(5
|
)
|
|||||||||
|
|
5,431
|
-
|
|
|
59,778
|
|||||||||||
|
Other
assets
|
94
|
-
|
672
|
c
|
766
|
|||||||||||
|
|
$
|
11,038
|
$
|
-
|
$
|
65,329
|
|
$
|
76,367
|
|||||||
|
|
|
|
|
|
|
|||||||||||
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
||||||||||||
|
Current
liabilities:
|
|
|
|
|
||||||||||||
|
Current
portion of long-term debt
|
$
|
-
|
$
|
-
|
$
|
2,385
|
c
|
$
|
2,385
|
|||||||
|
Accounts
payable and accrued liabilities
|
353
|
-
|
|
|
353
|
|||||||||||
|
Current
portion of asset retirement obligations
|
-
|
-
|
117
|
a
|
117
|
|||||||||||
|
|
353
|
-
|
|
|
2,855
|
|||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Long-term
debt
|
-
|
-
|
28,689
|
c
|
28,689
|
|||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Asset
retirement obligations
|
-
|
-
|
1,022
|
a
|
1,022
|
|||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Stockholders’
equity:
|
|
|
|
|
||||||||||||
|
|
|
|
2
|
a
|
|
|||||||||||
|
Common
stock, $0.001 par value
|
49
|
-
|
10
|
b
|
61
|
|||||||||||
|
|
|
|
4,172
|
a
|
|
|||||||||||
|
Additional
paid-in capital
|
12,211
|
-
|
22,691
|
b
|
45,315
|
|||||||||||
|
|
|
|
6,241
|
c
|
|
|||||||||||
|
Deficit
accumulated during the development stage
|
(1,575
|
)
|
-
|
|
|
(1,575
|
)
|
|||||||||
|
|
10,685
|
-
|
|
|
43,801
|
|||||||||||
|
|
$
|
11,038
|
$
|
-
|
$
|
65,329
|
|
$
|
76,367
|
|||||||
F-25
FOOTHILLS
RESOURCES, INC.
(A
Development Stage Company)
UNAUDITED
PRO FORMA COMBINED STATEMENT OF OPERATIONS
SIX
MONTHS ENDED JUNE 30, 2006
(dollars
in thousands, except per share amounts)
|
Foothills
|
|
Acquired
|
|
Pro
Forma
|
|
Pro
|
|
|||||||||
|
|
|
Historical
|
|
Properties
|
|
Adjustments
|
Forma
|
|||||||||
|
Income:
|
|
|
|
|
|
|||||||||||
|
Oil
and gas revenues
|
$
|
-
|
$
|
7,798
|
$
|
(485
|
)
|
C
|
$
|
7,313
|
||||||
|
Interest
income
|
82
|
-
|
|
|
82
|
|||||||||||
|
|
82
|
7,798
|
(485
|
)
|
|
7,395
|
||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Expenses:
|
|
|
|
|||||||||||||
|
Production
costs
|
-
|
2,185
|
(36
|
)
|
C
|
2,149
|
||||||||||
|
General
and administrative
|
1,652
|
-
|
|
|
1,652
|
|||||||||||
|
Interest
|
-
|
-
|
4,942
|
B
|
4,942
|
|||||||||||
|
Depreciation,
depletion and amortization
|
5
|
-
|
1,606
|
A
|
1,611
|
|||||||||||
|
|
1,657
|
2,185
|
6,512
|
|
10,354
|
|||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Net
income (loss)
|
$
|
(1,575
|
)
|
$
|
5,613
|
$
|
(6,997
|
)
|
|
$
|
(2,959
|
)
|
||||
|
|
|
|
|
|
|
|||||||||||
|
Basic
and diluted net loss per share
|
$
|
(0.05
|
)
|
|
|
|
$
|
(0.07
|
)
|
|||||||
|
|
|
|
|
|
|
|||||||||||
|
Weighted
average number of common shares outstanding - basic and
diluted
|
31,871,979
|
|
10,093,814
|
|
41,965,793
|
|||||||||||
F-26
FOOTHILLS
RESOURCES, INC.
NOTES
TO PRO FORMA FINANCIAL STATEMENTS
AS
OF JUNE 30, 2006
AND
FOR THE SIX MONTHS ENDED JUNE 30, 2006
|
1.
|
BASIS
OF PRESENTATION
|
These
pro
forma combined financial statements have been prepared in accordance
with
generally accepted accounting principles in the United States of America
(“GAAP”) and the Company’s accounting policies, as disclosed in Note 2 of the
unaudited financial statements of the Company for the six months ended
June 30,
2006.
The
pro
forma combined financial statements are based on the estimates and
assumptions
included in these notes and include all adjustments necessary for the
fair
presentation of the transactions in accordance with GAAP.
These
pro
forma combined financial statements are not intended to reflect results
of
operations or the financial position which would have actually resulted
had the
Transactions been effected on the dates indicated.
|
2.
|
PRO
FORMA ADJUSTMENTS TO THE COMBINED BALANCE
SHEET
|
The
following adjustments have been made to reflect the Transactions, as
if the
Transactions had occurred on June 30, 2006 for purposes of the pro
forma
combined balance sheet.
|
a.
|
Record
the preliminary pro forma allocation of the purchase price
of the TARH
Acquisition using the purchase method of accounting. The
following is a
calculation and allocation of purchase price to the acquired
assets and
liabilities based on their relative fair values, pending
completion of the
Company’s valuation analysis:
|
|
Purchase
price (in thousands):
|
|
|||
|
Cash
payments funded from working capital, the Equity Offering
and the Credit
Facility:
|
|
|||
|
Performance
deposit paid prior to June 30, 2006 and included in the capitalized
costs
of unproved oil and gas properties in the Company’s June 30, 2006 balance
sheet
|
$
|
3,099
|
||
|
Additional
performance deposits paid after June 30, 2006 and amounts
paid at
closing
|
54,219
|
|||
|
Deemed
value of 1,605,345 shares of the Company’s common stock issued to
TARH
|
4,174
|
|||
|
|
|
|||
|
Total
purchase price
|
$
|
61,492
|
||
|
|
|
|||
|
Preliminary
allocation of purchase price (in thousands):
|
|
|||
|
Oil
and gas properties - proved
|
$
|
62,631
|
||
|
Asset
retirement obligations:
|
|
|||
|
Current
portion
|
(117
|
)
|
||
|
Long-term
portion
|
(1,022
|
)
|
||
|
|
|
|||
|
Net
assets acquired
|
$
|
61,492
|
||
|
b.
|
Record
the issuance of 10,093,814 Units of Foothills at $2.25 per
Unit in the
Equity Offering for total proceeds of $22,711,000, and net
proceeds of
$21,495,000 after estimated issue costs of $1,216,000. Each
Unit consisted
of one share of Foothills common stock and a warrant to purchase
one-half
share of Foothills common
stock.
|
|
c.
|
Record
(i) borrowings under the Credit Facility of $42,500,000,
of which
$2,385,000 was classified as current, resulting in net proceeds
of
$41,828,000 after estimated issue costs of $672,000, and
(ii) debt issue
discount totaling $11,426,000, consisting of $5,185,000 representing
the
fair value of an overriding royalty interest conveyed to
an affiliate of
the lender under the Credit Facility and $6,241,000 representing
the fair
value of Foothills’ common stock warrants issued to an affiliate of the
lender under the Credit
Facility.
|
F-27
|
3.
|
PRO
FORMA ADJUSTMENTS TO THE COMBINED STATEMENT OF
OPERATIONS
|
The
following adjustments have been made to reflect the Transactions, as
if the
Transactions had occurred on January 1, 2006 for purposes of the pro
forma
combined statement of operations.
|
A.
|
Record
(i) incremental depreciation, depletion and amortization
expense in
accordance with the full-cost method of accounting for oil
and gas
properties based on the purchase price allocation to capitalized
costs of
oil and gas properties, and (ii) pro forma accretion of asset
retirement
obligations on the properties
acquired.
|
|
B.
|
Record
(i) pro forma interest expense based on the terms of the
Credit Facility,
(ii) amortization of pro forma debt issue discount, and (iii)
amortization
of pro forma debt issue
costs.
|
|
C.
|
Record
the pro forma amounts included in the revenues and direct
operating
expenses of the acquired properties that would have been
attributable to
the overriding royalty interest conveyed to an affiliate
of the lender
under the Credit Facility.
|
F-28
50,974,374
Shares of Common Stock
Foothills
Resources, Inc.
PROSPECTUS
December
2006
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
24. Indemnification of Directors and Officers.
Under
Nevada law, a corporation shall indemnify a director or officer against
expenses, including attorneys’ fees, actually and reasonably incurred by him, to
the extent the director or officer has been successful on the merits or
otherwise in defense of any action, suit or proceeding. A corporation may
indemnify a director or officer who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, against expenses,
including attorneys’ fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him/her in connection with the action,
suit
or proceeding. Excepted from that immunity are:
|
·
|
a
willful failure to deal fairly with the company or its stockholders
in
connection with a matter in which the director has a material conflict
of
interest;
|
|
·
|
a
violation of criminal law (unless the director had reasonable cause
to
believe that his or her conduct was lawful or no reasonable cause
to
believe that his or her conduct was
unlawful);
|
|
·
|
a
transaction from which the director derived an improper personal
profit;
and
|
|
·
|
willful
misconduct.
|
Our
bylaws include an indemnification provision under which we have the power to
indemnify our directors, officers and former officers and directors (including
heirs and personal representatives) against all costs, charges and expenses
actually and reasonably incurred, including an amount paid to settle an action
or satisfy a judgment to which the director or officer is made a party by reason
of being or having been a director or officer of Foothills or any of our
subsidiaries.
Our
bylaws also provide that our directors may cause us to purchase and maintain
insurance for the benefit of a person who is or was serving as a director,
officer, employee or agent of Foothills or any of our subsidiaries (including
heirs and personal representatives) against a liability incurred by him/her
as
our director, officer, employee or agent.
Item
25. Other Expenses of Issuance and Distribution.
Set
forth
below is an estimate (except for registration fees, which are actual) of the
approximate amount of the fees and expenses payable by us in connection with
the
issuance and distribution of the shares of common stock being sold by the
selling stockholders pursuant to this registration statement. The selling
stockholders will not bear any portion of such fees and expenses.
|
EXPENSE
|
AMOUNT
|
|||
|
|
|
|||
|
Registration
Fees
|
$
|
11,862
|
||
|
Printing
and Engraving Costs*
|
______
|
|||
|
Legal
Fees*
|
______
|
|||
|
Accounting
Fees*
|
______
|
|||
|
Listing
Fees*
|
______
|
|||
|
Transfer
Agent Fees*
|
||||
|
Miscellaneous
Fees and Expenses*
|
______
|
|||
|
Total*
|
$
|
______
|
||
*
To be
completed by amendment.
Item
26. Recent Sales of Unregistered Securities.
There
have been no sales of unregistered securities within the last three years which
would be required to be disclosed pursuant to Item 701 of Regulation S-B, except
for the following:
On
September 8, 2006, and September 27, 2006, we closed on a private offering
of
units consisting of shares of our common stock and warrants to acquire our
common stock. Each unit we sold in the offering consisted of one share of common
stock and a warrant to acquire one-half share of common stock for five years
at
an exercise price of $2.75 per share. On September 8, 2006, we received
$22,500,000 in proceeds from the offering, through the sale of 10,000,000 units,
issuing to investors in the offering 10,000,000 shares of common stock and
warrants to acquire 5,000,000 shares of common stock. On September 27, 2006,
we
received proceeds of an additional $211,059 through the sale of an additional
93,804 units to additional investors in the offering.
The
September, 2006 offering was exempt from the registration requirements of the
Securities Act under Section 4(2) of the Securities Act and Rule 506 of
Regulation D promulgated by the SEC. The units were offered and sold only to
“accredited investors,” as that term is defined under Rule 501 of Regulation D,
some of which were institutional investors, and to fewer than 35 non-accredited
investors, in compliance with Rule 506. Sanders Morris Harris Inc. acted as
placement agent in the private offering and, for its services, received
compensation from us of $1,246,306, plus warrants to acquire 473,233 shares
of
common stock at $2.25 per share. Sanders Morris Harris Inc. did not receive
compensation for 3,333,333 units sold in the offering to Goldman, Sachs &
Co.
Each
of
the investors in the September, 2006 offering executed a subscription agreement,
securities purchase agreement and registration rights agreement, all dated
as of
September 8, 2006.
Also
on
September 8, 2006, we
closed
Foothills Texas, Inc.’s acquisition of properties from TARH E&P Holdings,
L.P. The
consideration included the issuance of 1,605,345 shares of common stock to
TARH
E&P Holdings, L.P. These shares were issued to TARH E&P
Holdings, L.P. in a private transaction which was exempt from the
registration requirements of the Securities Act under Section 4(2) of the
Securities Act.
On
April
6, 2006, our wholly-owned subsidiary merged with Foothills California, Inc.
(formerly Brasada California, Inc.). On the closing date of that merger, the
holders of Foothills California Inc.’s issued and outstanding capital stock
before the merger surrendered all of their issued and outstanding capital stock
of Foothills California, Inc. and received 17,375,000 shares of our common
stock. This issuance of shares to the former stockholders of Foothills
California, Inc. was exempt from the registration requirements of the Securities
Act under Section 4(2) of the Securities Act.
On
the
closing date of the merger, and on April 20, 2006, we closed a private offering
of an aggregate of 17,142,857 units consisting of one share of our common stock
and warrants to acquire three-quarters of a share of common stock for five
years, at an exercise price of $1.00 per whole share. In this offering, we
received aggregate consideration of $12,000,000. Some of the consideration
for
the units sold in this offering was in the form of debentures that we sold
prior
to the closing date of the offering to accredited investors. These debentures
converted into units in the offering on a dollar-for-dollar basis upon the
closing date of the offering and the merger.
Item
27. Exhibits
|
Exhibit
No.
|
Description
|
Reference
|
|
2.1
|
Agreement
and Plan of Merger and Reorganization, dated as of April 6, 2006,
by and
between Foothills Resources, Inc., a Nevada corporation, Brasada
Acquisition Corp., a Delaware corporation and Brasada California,
Inc., a
Delaware corporation.
|
Incorporated
by reference to Exhibit 2.1 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
3.1
|
Articles
of Incorporation of Foothills Resources, Inc.
|
Incorporated
by reference to Exhibit 3.1 to the Registration Statement on Form
SB-2/A
filed with the Securities and Exchange Commission on June 18, 2001
(File
No. 333-59708).
|
|
3.2
|
Certificate
of Amendment of the Articles of Incorporation of Foothills Resources,
Inc.
|
Incorporated
by reference to Exhibit 3.2 to the Registration Statement on Form
SB-2/A filed with the Securities and Exchange Commission on June
18, 2001
(File No. 333-59708).
|
|
3.3
|
Bylaws
of Foothills Resources, Inc.
|
Incorporated
by reference to Exhibit 3.3 to the Registration Statement on Form
SB-2/A filed with the Securities and Exchange Commission on June
18, 2001
(File No. 333-59708).
|
|
4.1
|
Specimen
Stock Certificate of Foothills Resources, Inc.
|
Incorporated
by reference to Exhibit 4.1 to the Registration Statement on Form
SB-2/A filed with the Securities and Exchange Commission on June
18, 2001
(File No. 333-59708).
|
|
4.2
|
Form
of Warrant issued to the Investors in the Private Placement Offering,
April 6, 2006.
|
Incorporated
by reference to Exhibit 4.2 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
Exhibit
No.
|
Description
|
Reference
|
|
4.3
|
Form
of Lock-Up Agreement by and between Foothills Resources, Inc. and
the
Brasada Stockholders.
|
Incorporated
by reference to Exhibit 4.3 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
4.4
|
Warrant
issued to Goldman, Sachs & Co. in connection with the Credit
Agreement, dated as of September 8, 2006.
|
Incorporated
by reference to Exhibit 4.1 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
4.5
|
Warrant
issued to Goldman, Sachs & Co. in the offering, dated as of September
8, 2006.
|
Incorporated
by reference to Exhibit 4.2 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
4.6
|
Form
of Warrant issued to the Investors in the Private Placement Offering,
September 8, 2006.
|
Incorporated
by reference to Exhibit 4.3 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
5.1
|
Consent
of McGuireWoods LLP.*
|
|
|
10.1
|
Form
of Subscription Agreement by and between Foothills Resources, Inc.
and the
investors in the Offering.
|
Incorporated
by reference to Exhibit 10.1 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
10.2
|
Form
of Registration Rights Agreement by and between Foothills Resources,
Inc.
and the investors in the Offering.
|
Incorporated
by reference to Exhibit 10.2 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
10.3
|
Split
Off Agreement, dated April 6, 2006, by and among Foothills Resources,
Inc., J. Earl Terris, Foothills Leaseco, Inc. and Brasada California,
Inc.
|
Incorporated
by reference to Exhibit 10.3 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
10.4
|
Employment
Agreement, dated April 6, 2006, by and between Foothills Resources,
Inc.
and Dennis B. Tower.
|
Incorporated
by reference to Exhibit 10.4 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
Exhibit
No.
|
Description
|
Reference
|
|
10.5
|
Employment
Agreement, dated April 6, 2006, by and between Foothills Resources,
Inc.
and John L. Moran.
|
Incorporated
by reference to Exhibit 10.5 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
10.6
|
Employment
Agreement, dated April 6, 2006, by and between Foothills Resources,
Inc.
and W. Kirk Bosché.
|
Incorporated
by reference to Exhibit 10.6 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
10.7
|
Employment
Offer Letter and Agreement, dated April 21, 2006, by and between
Foothills
Resources, Inc. and James Drennan.**
|
|
|
10.8
|
Form
of Indemnity Agreement by and between Foothills Resources, Inc.
and the
Directors and Officers of Foothills Resources, Inc.
|
Incorporated
by reference to Exhibit 10.7 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
10.9
|
Farmout
and Participation Agreement, dated as of January 3, 2006, by and
between
INNEX California, Inc. and Brasada Resources, LLC.
|
Incorporated
by reference to Exhibit 10.8 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
10.10
|
Notice
and Acknowledgement of Increase of Offering
|
Incorporated
by reference to Exhibit 10.9 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
10.11
|
Purchase
and Sale Agreement, dated as of June 21, 2006, by and between Foothills
Texas, Inc. and TARH E&P Holdings, L.P. relating to properties in
Goose Creek Field and East Goose Creek Field, Harris County,
Texas.
|
Incorporated
by reference to Exhibit 10.1 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on June 27, 2006 (File
No.
001-31547).
|
|
10.12
|
Purchase
and Sale Agreement, dated as of June 21, 2006, by and between Foothills
Texas, Inc. and TARH E&P Holdings, L.P. relating to properties in
Cleveland Field, Liberty County, Texas and in Saratoga Field, Hardin
County, Texas.
|
Incorporated
by reference to Exhibit 10.2 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on June 27, 2006 (File
No.
001-31547).
|
|
Exhibit
No.
|
Description
|
Reference
|
|
10.13
|
Supplemental
Agreement, dated as of June 21, 2006, by and between Foothills Texas,
Inc.
and TARH E&P Holdings, L.P.
|
Incorporated
by reference to Exhibit 10.3 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on June 27, 2006 (File
No.
001-31547).
|
|
10.14
|
Registration
Rights Agreement, dated as of September 8, 2006, by and between Foothills
Resources, Inc. and TARH E&P Holdings, L.P.
|
Incorporated
by reference to Exhibit 10.1 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
10.15
|
Credit
and Guaranty Agreement, dated as of September 8, 2006, by and among
Foothills Resources, Inc., certain subsidiaries of Foothills Resources,
Inc., Various Lenders and J. Aron & Company.
|
Incorporated
by reference to Exhibit 10.2 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
10.16
|
Pledge
and Security Agreement, First Lien, dated as of September 8, 2006,
by and
between Foothills Resources, Inc., Foothills California, Inc., Foothills
Texas, Inc. and Foothills Oklahoma, Inc. as Grantors and J. Aron
&
Company.
|
Incorporated
by reference to Exhibit 10.3 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
10.17
|
Pledge
and Security Agreement, Second Lien, dated as of September 8, 2006,
by and
between Foothills Resources, Inc., Foothills California, Inc., Foothills
Texas, Inc. and Foothills Oklahoma, Inc. as Grantors and J. Aron
&
Company.
|
Incorporated
by reference to Exhibit 10.4 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
10.18
|
Deed
of Trust, Mortgage, Assignment, Security Agreement, Fixture Filing
and
Financing Statement, First Lien, dated September 8, 2006, from Foothills
Texas, Inc. to John K. Howie, as Trustee, and J. Aron & Company, as
Agent.
|
Incorporated
by reference to Exhibit 10.5 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
10.19
|
Deed
of Trust, Mortgage, Assignment, Security Agreement, Fixture Filing
and
Financing Statement, Second Lien, dated September 8, 2006, from Foothills
Texas, Inc. to John K. Howie, as Trustee, and J. Aron & Company, as
Agent.
|
Incorporated
by reference to Exhibit 10.6 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
10.20
|
Conveyance
of Overriding Royalty Interest, dated as of September 8, 2006, from
Foothills Texas, Inc. to MTGLQ Investors, L.P.
|
Incorporated
by reference to Exhibit 10.7 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
Exhibit
No.
|
Description
|
Reference
|
|
10.21
|
Form
of Subscription Agreement and Investor Questionnaire, dated as
of
September 8, 2006, by and among Foothills Resources, Inc. and the
investors in the Offering.
|
Incorporated
by reference to Exhibit 10.8 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
10.22
|
Form
of Securities Purchase Agreement, dated as of September 8, 2006,
by and
among Foothills Resources, Inc. and the investors in the
Offering.
|
Incorporated
by reference to Exhibit 10.9 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
10.23
|
Form
of Registration Rights Agreement, dated as of September 8, 2006,
by and
among Foothills Resources, Inc. and the investors in the
Offering.
|
Incorporated
by reference to Exhibit 10.10 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
| 10.24 |
Employment
Agreement, dated October 4, 2006, by and between Foothills Resources,
Inc.
and Michael Moustakis.*
|
|
|
16.1
|
Letter
from Amisano Hanson regarding Change in Certifying
Accountant.
|
Incorporated
by reference to Exhibit 16.1 to the Current Report on Form 8-K/A
filed
with the Securities and Exchange Commission on May 5, 2006 (File
No.
001-31547).
|
|
21.1
|
List
of Subsidiaries.**
|
|
|
23.1
|
Consent
of McGuireWoods LLP (included in Exhibit 5.1).*
|
|
|
23.2
|
Consent
of Brown, Armstrong, Paulden, McCown, Starbuck, Thornburgh & Keeter
Accountancy Corporation.*
|
| * |
Filed
herewith
|
| ** | Filed previously |
Item
28. Undertakings.
The
undersigned registrant hereby undertakes:
|
(1)
|
To
file, during any period in which offers or sales are being made,
a
post-effective amendment to this registration statement
to:
|
|
(i)
|
Include
any prospectus required by Section 10(a)(3) of the Securities
Act;
|
|
(ii)
|
Reflect
in the prospectus any facts or events which, individually or together,
represent a fundamental change in the information in the registration
statement. Notwithstanding the foregoing, any increase or decrease
in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation
from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant
to
Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in
the effective registration statement;
and
|
|
(iii)
|
Include
any additional or changed material information on the plan of
distribution.
|
|
(2)
|
For
determining liability under the Securities Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the
initial
bona fide offering.
|
|
(3)
|
To
file a post-effective amendment to remove from registration any of
the
securities that remain unsold at the end of the offering.
|
|
(4)
|
For
determining liability of the undersigned small business issuer under
the
Securities Act to any purchaser in the initial distribution of the
securities, the undersigned small business issuer undertakes that
in a
primary offering of securities of the undersigned small business
issuer
pursuant to this registration statement, regardless of the underwriting
method used to sell the securities to the purchaser, if the securities
are
offered or sold to such purchaser by means of any of the following
communications, the undersigned small business issuer will be a seller
to
the purchaser and will be considered to offer or sell such securities
to
such purchaser:
|
|
(i)
|
Any
preliminary prospectus or prospectus of the undersigned small business
issuer relating to the offering required to be filed pursuant to
Rule 424
(§ 230.424 of this chapter);
|
|
(ii)
|
Any
free writing prospectus relating to the offering prepared by or on
behalf
of the undersigned small business issuer or used or referred to by
the
undersigned small business issuer;
|
|
(iii)
|
The
portion of any other free writing prospectus relating to the offering
containing material information about the undersigned small business
issuer or its securities provided by or on behalf of the undersigned
small
business issuer; and
|
|
(iv)
|
Any
other communication that is an offer in the offering made by the
undersigned small business issuer to the purchaser.
|
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
(the
“Act”) may be permitted to directors, officers and controlling persons of the
small business issuer pursuant to the foregoing provisions, or otherwise, the
small business issuer has been advised that in the opinion of the Securities
and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
In
the
event that a claim for indemnification against such liabilities (other than
the
payment by the small business issuer of expenses incurred or paid by a director,
officer or controlling person of the small business issuer in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
small business issuer will, unless in the opinion of our counsel the matter
has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
For
the
purpose of determining liability under the Securities Act to any purchaser,
each
prospectus filed pursuant to Rule 424(b) (§ 230.424(b) of this chapter) as part
of a registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in reliance
on
Rule 430A (§ 230.430A of this chapter), shall be deemed to be part of and
included in the registration statement as of the date it is first used after
effectiveness. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made
in a
document incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as
to a
purchaser with a time of contract of sale prior to such first use, supersede
or
modify any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document
immediately prior to such date of first use.
SIGNATURES
In
accordance with the requirements of the Securities Act of 1933, as amended,
the
registrant certifies that it has reasonable grounds to believe that it meets
all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in Bakersfield,
California on December 14, 2006.
Foothills
Resources, Inc.
By:
/s/ Dennis B. Tower
Name:
Dennis
B.
Tower
Title:
Chief
Executive Officer
In
accordance with the requirements of the Securities Act of 1933, as amended,
this
registration statement was signed by the following persons in the capacities
and
on the dates stated:
|
Signature
|
Title
|
Date
|
||
|
/s/
Dennis
B. Tower
|
|
Chief
Executive Officer, Director
|
|
December
14, 2006
|
|
Dennis
B. Tower
|
|
|
|
|
|
/s/
John
L. Moran
|
|
President,
Director
|
December
14, 2006
|
|
|
John
L. Moran
|
|
|||
|
/s/
W.
Kirk Bosché
|
|
Chief
Financial Officer
|
December
14, 2006
|
|
|
W.
Kirk Bosché
|
|
|||
|
/s/
Christopher
P. Moyes
|
|
Director
|
December
14, 2006
|
|
|
Christopher
P. Moyes
|
|
|||
|
/s/
Frank
P. Knuettel
|
|
Director
|
December
14, 2006
|
|
|
Frank
P. Knuettel
|
|
|||
|
/s/
John
A. Brock
|
Director
|
December
14, 2006
|
||
|
John
A. Brock
|
EXHIBIT
INDEX
|
Exhibit
No.
|
Description
|
Reference
|
|
2.1
|
Agreement
and Plan of Merger and Reorganization, dated as of April 6, 2006,
by and
between Foothills Resources, Inc., a Nevada corporation, Brasada
Acquisition Corp., a Delaware corporation and Brasada California,
Inc., a
Delaware corporation.
|
Incorporated
by reference to Exhibit 2.1 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
3.1
|
Articles
of Incorporation of Foothills Resources, Inc.
|
Incorporated
by reference to Exhibit 3.1 to the Registration Statement on Form
SB-2/A
filed with the Securities and Exchange Commission on June 18, 2001
(File
No. 333-59708).
|
|
3.2
|
Certificate
of Amendment of the Articles of Incorporation of Foothills Resources,
Inc.
|
Incorporated
by reference to Exhibit 3.2 to the Registration Statement on Form
SB-2/A filed with the Securities and Exchange Commission on June
18, 2001
(File No. 333-59708).
|
|
3.3
|
Bylaws
of Foothills Resources, Inc.
|
Incorporated
by reference to Exhibit 3.3 to the Registration Statement on Form
SB-2/A filed with the Securities and Exchange Commission on June
18, 2001
(File No. 333-59708).
|
|
4.1
|
Specimen
Stock Certificate of Foothills Resources, Inc.
|
Incorporated
by reference to Exhibit 4.1 to the Registration Statement on Form
SB-2/A filed with the Securities and Exchange Commission on June
18, 2001
(File No. 333-59708).
|
|
4.2
|
Form
of Warrant issued to the Investors in the Private Placement Offering,
April 6, 2006.
|
Incorporated
by reference to Exhibit 4.2 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
4.3
|
Form
of Lock-Up Agreement by and between Foothills Resources, Inc. and
the
Brasada Stockholders.
|
Incorporated
by reference to Exhibit 4.3 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
4.4
|
Warrant
issued to Goldman, Sachs & Co. in connection with the Credit
Agreement, dated as of September 8, 2006.
|
Incorporated
by reference to Exhibit 4.1 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
Exhibit
No.
|
Description
|
Reference
|
|
4.5
|
Warrant
issued to Goldman, Sachs & Co. in the offering, dated as of September
8, 2006.
|
Incorporated
by reference to Exhibit 4.2 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
4.6
|
Form
of Warrant issued to the Investors in the Private Placement Offering,
September 8, 2006.
|
Incorporated
by reference to Exhibit 4.3 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
5.1
|
Consent
of McGuireWoods LLP.*
|
|
|
10.1
|
Form
of Subscription Agreement by and between Foothills Resources, Inc.
and the
investors in the Offering.
|
Incorporated
by reference to Exhibit 10.1 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
10.2
|
Form
of Registration Rights Agreement by and between Foothills Resources,
Inc.
and the investors in the Offering.
|
Incorporated
by reference to Exhibit 10.2 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
10.3
|
Split
Off Agreement, dated April 6, 2006, by and among Foothills Resources,
Inc., J. Earl Terris, Foothills Leaseco, Inc. and Brasada California,
Inc.
|
Incorporated
by reference to Exhibit 10.3 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
10.4
|
Employment
Agreement, dated April 6, 2006, by and between Foothills Resources,
Inc.
and Dennis B. Tower.
|
Incorporated
by reference to Exhibit 10.4 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
10.5
|
Employment
Agreement, dated April 6, 2006, by and between Foothills Resources,
Inc.
and John L. Moran.
|
Incorporated
by reference to Exhibit 10.5 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
Exhibit
No.
|
Description
|
Reference
|
|
10.6
|
Employment
Agreement, dated April 6, 2006, by and between Foothills Resources,
Inc.
and W. Kirk Bosché.
|
Incorporated
by reference to Exhibit 10.6 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
10.7
|
Employment
Offer Letter and Agreement, dated April 21, 2006, by and between
Foothills
Resources, Inc. and James Drennan.**
|
|
|
10.8
|
Form
of Indemnity Agreement by and between Foothills Resources, Inc.
and the
Directors and Officers of Foothills Resources, Inc.
|
Incorporated
by reference to Exhibit 10.7 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
10.9
|
Farmout
and Participation Agreement, dated as of January 3, 2006, by and
between
INNEX California, Inc. and Brasada Resources, LLC.
|
Incorporated
by reference to Exhibit 10.8 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
10.10
|
Notice
and Acknowledgement of Increase of Offering
|
Incorporated
by reference to Exhibit 10.9 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 6, 2006 (File
No.
001-31547).
|
|
10.11
|
Purchase
and Sale Agreement, dated as of June 21, 2006, by and between Foothills
Texas, Inc. and TARH E&P Holdings, L.P. relating to properties in
Goose Creek Field and East Goose Creek Field, Harris County,
Texas.
|
Incorporated
by reference to Exhibit 10.1 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on June 27, 2006 (File
No.
001-31547).
|
|
10.12
|
Purchase
and Sale Agreement, dated as of June 21, 2006, by and between Foothills
Texas, Inc. and TARH E&P Holdings, L.P. relating to properties in
Cleveland Field, Liberty County, Texas and in Saratoga Field, Hardin
County, Texas.
|
Incorporated
by reference to Exhibit 10.2 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on June 27, 2006 (File
No.
001-31547).
|
|
10.13
|
Supplemental
Agreement, dated as of June 21, 2006, by and between Foothills
Texas, Inc.
and TARH E&P Holdings, L.P.
|
Incorporated
by reference to Exhibit 10.3 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on June 27, 2006 (File
No.
001-31547).
|
|
Exhibit
No.
|
Description
|
Reference
|
|
10.14
|
Registration
Rights Agreement, dated as of September 8, 2006, by and between Foothills
Resources, Inc. and TARH E&P Holdings, L.P.
|
Incorporated
by reference to Exhibit 10.1 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
10.15
|
Credit
and Guaranty Agreement, dated as of September 8, 2006, by and among
Foothills Resources, Inc., certain subsidiaries of Foothills Resources,
Inc., Various Lenders and J. Aron & Company.
|
Incorporated
by reference to Exhibit 10.2 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
10.16
|
Pledge
and Security Agreement, First Lien, dated as of September 8, 2006,
by and
between Foothills Resources, Inc., Foothills California, Inc., Foothills
Texas, Inc. and Foothills Oklahoma, Inc. as Grantors and J. Aron
&
Company.
|
Incorporated
by reference to Exhibit 10.3 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
10.17
|
Pledge
and Security Agreement, Second Lien, dated as of September 8, 2006,
by and
between Foothills Resources, Inc., Foothills California, Inc., Foothills
Texas, Inc. and Foothills Oklahoma, Inc. as Grantors and J. Aron
&
Company.
|
Incorporated
by reference to Exhibit 10.4 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
10.18
|
Deed
of Trust, Mortgage, Assignment, Security Agreement, Fixture Filing
and
Financing Statement, First Lien, dated September 8, 2006, from Foothills
Texas, Inc. to John K. Howie, as Trustee, and J. Aron & Company, as
Agent.
|
Incorporated
by reference to Exhibit 10.5 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
10.19
|
Deed
of Trust, Mortgage, Assignment, Security Agreement, Fixture Filing
and
Financing Statement, Second Lien, dated September 8, 2006, from Foothills
Texas, Inc. to John K. Howie, as Trustee, and J. Aron & Company, as
Agent.
|
Incorporated
by reference to Exhibit 10.6 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
10.20
|
Conveyance
of Overriding Royalty Interest, dated as of September 8, 2006, from
Foothills Texas, Inc. to MTGLQ Investors, L.P.
|
Incorporated
by reference to Exhibit 10.7 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
10.21
|
Form
of Subscription Agreement and Investor Questionnaire, dated as of
September 8, 2006, by and among Foothills Resources, Inc. and the
investors in the Offering.
|
Incorporated
by reference to Exhibit 10.8 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
Exhibit
No.
|
Description
|
Reference
|
|
10.22
|
Form
of Securities Purchase Agreement, dated as of September 8, 2006,
by and
among Foothills Resources, Inc. and the investors in the
Offering.
|
Incorporated
by reference to Exhibit 10.9 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
|
10.23
|
Form
of Registration Rights Agreement, dated as of September 8, 2006,
by and
among Foothills Resources, Inc. and the investors in the
Offering.
|
Incorporated
by reference to Exhibit 10.10 to the Current Report on Form 8-K filed
with the Securities and Exchange Commission on September 11, 2006
(File
No. 001-31547).
|
| 10.24 | Employment Agreement, dated October 4, 2006, by and between Foothills Resources, Inc. and Michael Moustakis.* | |
|
16.1
|
Letter
from Amisano Hanson regarding Change in Certifying
Accountant.
|
Incorporated
by reference to Exhibit 16.1 to the Current Report on Form 8-K/A
filed
with the Securities and Exchange Commission on May 5, 2006 (File
No.
001-31547).
|
|
21.1
|
List
of Subsidiaries.**
|
|
|
23.1
|
Consent
of McGuireWoods LLP (included in Exhibit 5.1).*
|
|
|
23.2
|
Consent
of Brown, Armstrong, Paulden, McCown, Starbuck, Thornburgh & Keeter
Accountancy Corporation.*
|
| * |
Filed
herewith.
|
| ** | Filed previously |