UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2007
[_] TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934
From the transition period from ____ to _____.
Commission file number 01-28911.
BRIGHTON OIL & GAS, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Colorado 91-1869677
--------------------------------- --------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
9595 Wilshire Blvd., Suite 510, Beverly Hills, California 90210
(Address of principal executive offices)
(310) 275-9095 (Issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days: Yes [X] No [_]
As of July 11, 2007,82,819,811 shares of the issuer's common equity is
outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [_] No [X]
PART I - FINANCIAL INFORMATION
Item 1. Financial Information
F-1
BRIGHTON OIL & GAS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) JUNE 30, 2007
F-2
BRIGHTON OIL & GAS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007
C O N T E N T S
Consolidated Balance Sheet (Unaudited) F-4
Consolidated Statements of Operations (Unaudited) F-5, F-6
Consolidated Statements of Cash Flows (Unaudited) F-7
Consolidated Statements of Stockholders' Equity (Unaudited) F-8
Notes to Consolidated Financial Statements (Unaudited) F-9
F-3
BRIGHTON OIL & GAS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2007
(Unaudited)
ASSETS
Cash $ 1,911
------------
Total Current Assets 1,911
Prepaid expenses 6,000
------------
Total Other Assets 6,000
TOTAL ASSETS $ 7,911
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 289,223
Accrued expenses 1,526,026
Accrued interest payable to affiliate 30,753
Shares to be issued 5,000,000
Loan payable to affiliate 141,148
Notes payable to affiliate, net 325,000
------------
Total Current Liabilities 7,312,150
Stockholders' Deficit
Common Stock, $.001 par value, 100,000,000 shares authorized,
82,819,811 issued and outstanding as of June 30, 2007 82,820
Additional paid in capital 40,232,068
Prepaid consulting (6,084,584)
Accumulated deficit (41,534,543)
------------
Total stockholders' deficit (7,304,239)
------------
Total liabilities and stockholders' deficit $ 7,911
============
The accompanying notes are an integral part of these
unaudited consolidated financial statements.
F-4
BRIGHTON OIL & GAS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2007
(Unaudited)
Three Month Period Ended Three Month Period Ended
June June 30, 2007 June June 30, 2006
NET REVENUE $ -- $ --
------------ ------------
OPERATING EXPENSES
Professional fees 1,410,683 2,904,199
Technology license royalties -- --
Depreciation, amortization and impairment -- --
Other general and administrative 34,039 8,627,944
------------ ------------
Total operating expenses 1,444,722 11,532,143
------------ ------------
NET OPERATING LOSS (1,444,722) (11,532,143)
Interest expense (162,500) 0
Gain on settlement of debt -- --
------------ ------------
NET LOSS $ (1,607,222) $(11,532,143)
============ ============
LOSS PER SHARE - BASIC & DILUTED $ (0.02) $ (0.36)
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC & DILUTED 81,273,771 32,208,981
============ ============
F-5
BRIGHTON OIL & GAS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Period from January
Six Month Period Six Month Period 27, 2005 (inception) to
Ended June 30, 2007 Ended June 30, 2006 June 30, 2007
NET REVENUE $ -- $ -- $ --
------------ ------------ ------------
OPERATING EXPENSES
Professional fees 2,661,453 15,134,949 26,077,653
Technology license royalties -- -- 160,417
Depreciation, amortization and impairment -- -- 59,811
Other general and administrative 133,706 8,637,079 15,566,462
------------ ------------ ------------
Total operating expenses 2,795,159 23,772,028 41,864,343
------------ ------------ ------------
NET OPERATING LOSS (2,795,159) (23,772,028) (41,804,343)
Interest expense (675,000) 0 (675,000)
Gain on settlement of debt -- -- 215,000
------------ ------------ ------------
NET LOSS $ (3,470,159) $(23,772,028) $(42,264,343)
============ ============ ============
LOSS PER SHARE - BASIC & DILUTED $ (0.04) $ (0.92)
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC & DILUTED 78,473,771 25,850,870
============ ============
Weighted average number of dilutive securities has not been taken since
the effect of dilutive securities would be anti-dilutive.
The accompanying notes are an integral part of these
unaudited financial statements.
F-6
BRIGHTON OIL & GAS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Period from
January 27, 2005
Six Month Period Six Month Period (inception) to
Ended June 30, Ended June 30, June 30, 2007
2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (3,470,159) $ (23,772,028) $(42,324,343)
Adjustments to reconcile net loss to cash used by operating activities:
Depreciation -- -- 3,811
Amortization on investment in custer leasehold -- -- 9,333
Impairment on investment in custer leasehold -- -- 46,667
Stock issued for services 490,848 23,279,583 31,283,098
Amortization of prepaid consulting fees 1,936,666 -- 1,936,666
Expenses paid by note payable -- 125,000 --
Amortization of beneficial conversion feature 1,000,000 -- 1,000,000
Shares to be issued -- -- 5,000,000
Changes in certain assets and liabilities, net of divestiture
Increase in Inventory -- -- (29,102)
Increase in Other assets (6,000) -- (8,087)
Increase (Decrease) in Accrued expenses 30,753 -- 1,350,278
Increase in Accounts payable and accrued expenses 166,994 152,905 577,454
------------ ------------- ------------
CASH FLOWS USED IN OPERATING ACTIVITIES: 149,102 (214,540) (1,154,225)
------------ ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- -- (38,952)
------------ ------------- ------------
CASH FLOWS USED IN INVESTING ACTIVITIES -- -- (38,952)
------------ ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from convertible note - related party 141,148 -- 541,148
Related party advances (288,400) -- 653,940
------------ ------------- ------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES (147,252) -- 1,195,088
------------ ------------- ------------
NET INCREASE IN CASH &CASH EQUIVALENTS 1,850 (214,540) 1,911
CASH &CASH EQUIVALENTS, BEGINNING OF PERIOD 61 -- --
------------ ------------- ------------
CASH &CASH EQUIVALENTS, END OF PERIOD $ 1,911 $ (214,540) $ 1,911
============ ============= ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ -- -- $ --
============ ============= ============
Income taxes paid $ -- -- $ --
============ ============= ============
Net liabilities assumed with recapitalization $ -- -- $ 200,000
============ ============= ============
Divestiture of subsidiary to related party $ -- -- $ 544,340
============ ============= ============
Common stock issued for debt $ 350,000 -- $ 750,000
============ ============= ============
Common stock issued for acquiring Custer Leasehold (677,000
shares issued) -- -- $ 406,200
============ ============= ============
The accompanying notes are an integral part
of these unaudited financial statements.
F-7
BRIGHTON OIL & GAS, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE THREE MONTH PERIODS ENDED JUNE 30, 2007 AND 2006
FOR THE CUMMULATIVE PERIOD FROM JANUARY 27, 2005 (INCEPTION) TO JUNE 30, 2007
(Unaudited)
Additional
Common Stock Paid in Prepaid
Shares amount Capital Consulting )
------------ ------------ ------------ ------------
Balance, January 27, 2005 (inception) -- $ -- $ -- $ --
Founder's stock issued 8,380,000 8,380 (8,380) --
Stock issued for debt 800,000 800 399,200 --
Shares issued for license agreement 8,618,750 8,619 (8,619) --
Effect of reverse merger 1,384,009 1,384 (201,384) --
Divestiture of subsidiary to related party -- -- 544,340 --
Net loss for the year -- -- -- --
------------ ------------ ------------ ------------
Balance, December 31, 2005 19,182,759 19,183 725,157 --
Shares issued for employment 4,550,000 4,550 8,482,950 --
Shares issued for services 17,108,000 17,108 28,781,392 (7,633,750)
Shares issued for lease agreement 677,000 677 405,523 --
Net loss for the year -- -- -- --
------------ ------------ ------------ ------------
Balance, December 31, 2006 41,517,759 $ 41,518 $ 38,395,022 $ (7,633,750)
============ ============ ============ ============
Shares issued for services 6,302,052 6,302 522,046 (387,500)
Shares issued for debt conversion 35,000,000 35,000 315,000 --
Amortization of beneficial conversion feature 1,000,000
Amortization of shares issued for services -- -- -- 1,936,666
Net loss for the for the three months ended June 30, 2007 -- -- -- --
------------ ------------ ------------ ------------
Balance, June 30, 2007 82,819,811 $ 82,820 $ 40,232,068 $ (6,084,584)
============ ============ ============ ============
Deficit
Accumulated
during the Total
development stockholder's
Stage equity/(deficit)
------------ ------------
Balance, January 27, 2005 (inception) $ -- $ --
Founder's stock issued -- --
Stock issued for debt -- 400,000
Shares issued for license agreement -- --
Effect of reverse merger -- (200,000)
Divestiture of subsidiary to related party -- 544,340
Net loss for the year (807,600) (807,600)
------------ ------------
Balance, December 31, 2005 (807,600) (63,260)
Shares issued for employment -- 8,487,500
Shares issued for services -- 21,164,750
Shares issued for lease agreement (350,200) 56,000
Net loss for the year (36,906,584) (36,906,584)
------------ ------------
Balance, December 31, 2006 $(38,064,384) $ (7,261,594)
============ ============
Shares issued for services -- 140,848
Shares issued for debt conversion 350,000
Amortization of beneficial conversion feature 1,000,000
Amortization of shares issued for services 1,936,666
Net loss for the for the three months ended June 30, 2007 (3,470,159) (3,470,159)
------------ ------------
Balance, June 30, 2007 $(41,534,543) $ (7,304,239)
============ ============
The accompanying notes are an integral part
of these unaudited financial statements.
F-8
BRIGHTON OIL & GAS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2007
1. Summary of Significant Accounting Policies
A. Organization and General Description of Business
Brighton Oil & Gas, Inc. ("We" or "the Company") was incorporated under the laws
of the State of Colorado, on July 6, 2005. On July 19, 2005, the Company,
completed the acquisition of Special Stone Surfaces, Es3, Inc., a Nevada
Corporation ("Es3") pursuant to the terms of an Exchange Agreement (the
"Exchange Agreement") by and among the Company, Crown Partners, Inc., a Nevada
corporation and at such time, the largest stockholder of the Company ("Crown
Partners"), Es3, and certain stockholders of Es3 (the "Es3 Stockholders"). Under
the terms of the Exchange Agreement, the Company acquired all of the outstanding
capital stock of Es3 in exchange for the issuance of 19,182,759 shares of the
Company's common stock to the Es3 Stockholders, Crown Partners and certain
consultants The transactions effected by the Exchange Agreement have been
accounted for as a reverse merger. This reverse merger transaction has been
accounted for as a recapitalization of Es3, as Es3 is the accounting acquirer,
effective July 19, 2005. As a result, the historical equity of the Company has
been restated on a basis consistent with the recapitalization. In addition, the
Company changed its accounting year-end from September 30 to December 31, which
was Es3's accounting year-end.
Accordingly the financial statements contained in report include the operations
of the Company in its new line of business. As a result of the transactions
contemplated by the Exchange Agreement, the Company had one active operating
subsidiary--Es3. Es3 was formed in January 2005 and began operations in March
2005 in the business of manufacturing and distributing a range of decorative
stone veneers and finishes based on proprietary Liquid Stone Coatings(TM) and
Authentic Stone Veneers(TM). Effective October 1, 2005, the Company sold all of
its shares in Es3.
On April 3, 2006 the Board of Directors approved a change of direction for the
Company, from the business of Manufacturing and distributing decorative stone
veneers and finishes, to the business of oil and gas exploration and production,
mineral lease purchasing and all activities associated with acquiring, operating
and maintaining the assets of such operations. As such the Company changed it's
name from National Healthcare Technology, Inc., to Brighton Oil & Gas, Inc., on
June 6, 2007.
B. Basis of Presentation and Organization
The accompanying unaudited consolidated financial statements have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission (the "SEC") Form 10-QSB and Item 310 of Regulation S-B, and
Generally Accepted Accounting Principles for interim financial reporting. The
consolidated financial statements include the accounts of the Company. The
information furnished herein reflects all adjustments consisting of normal
recurring accruals and adjustments) which are, in the opinion of management,
necessary to fairly present the operating results for the respective periods.
Certain information and footnote disclosures normally present in annual
consolidated financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been omitted
pursuant to such rules and regulations. These consolidated financial statements
should be read in conjunction with the audited consolidated financial statements
and footnotes for the year ended December 31, 2006 included in the Company's
Annual Report on Form 10-KSB. The results of the three month periods ended March
31, 2007 and 2006 are not necessarily indicative of the results to be expected
for the full year ending December 31, 2007.
C. Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Estimates and assumptions are
reviewed periodically and the effects of revisions are reflected in the
financial statements in the period they are determined.
J. Basic and Diluted Net Earnings (loss) per Share
The Company adopted the provisions of SFAS No. 128, "Earnings Per Share"
("EPS"). SFAS No. 128 provides for the calculation of basic and diluted earnings
per share. Basic EPS includes no dilution and is computed by dividing income or
loss available to common shareholders by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
of securities that could share in the earnings or losses of the entity. For the
periods ended March 31, 2007 and 2006 and from inception through March 31, 2007,
basic and diluted loss per share are the same since the calculation of diluted
per share amounts would result in an anti-dilutive calculation.
K. Recent Accounting Pronouncements
In September 2006, FASB issued SFAS 157 `Fair Value Measurements'. This
Statement defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles (GAAP), and expands disclosures
about fair value measurements. This Statement applies under other accounting
pronouncements that require or permit fair value measurements, the Board having
previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute. Accordingly, this Statement does not require any
new fair value measurements. However, for some entities, the application of this
Statement will change current practice. This Statement is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. The management is currently
evaluating the effect of this pronouncement on financial statements.
F-9
In September 2006, FASB issued SFAS 158 `Employers' Accounting for Defined
Benefit Pension and Other Postretirement Plans--an amendment of FASB Statements
No. 87, 88, 106, and 132(R)' This Statement improves financial reporting by
requiring an employer to recognize the over-funded or under-funded status of a
defined benefit postretirement plan (other than a multiemployer plan) as an
asset or liability in its statement of financial position and to recognize
changes in that funded status in the year in which the changes occur through
comprehensive income of a business entity or changes in unrestricted net assets
of a not-for-profit organization. This Statement also improves financial
reporting by requiring an employer to measure the funded status of a plan as of
the date of its year-end statement of financial position, with limited
exceptions. An employer with publicly traded equity securities is required to
initially recognize the funded status of a defined benefit postretirement plan
and to provide the required disclosures as of the end of the fiscal year ending
after December 15, 2006. An employer without publicly traded equity securities
is required to recognize the funded status of a defined benefit postretirement
plan and to provide the required disclosures as of the end of the fiscal year
ending after June 15, 2007. However, an employer without publicly traded equity
securities is required to disclose the following information in the notes to
financial statements for a fiscal year ending after December 15, 2006, but
before June 16, 2007, unless it has applied the recognition provisions of this
Statement in preparing those financial statements. The requirement to measure
plan assets and benefit obligations as of the date of the employer' s fiscal
year-end statement of financial position is effective for fiscal years ending
after December 15, 2008. The management is currently evaluating the effect of
this pronouncement on financial statements.
In February 2007, FASB issued FASB Statement No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities. FAS 159 is effective for fiscal
years beginning after November 15, 2007. Early adoption is permitted subject to
specific requirements outlined in the new Statement. Therefore, calendar-year
companies may be able to adopt FAS 159 for their first quarter 2007 financial
statements.
The new Statement allows entities to choose, at specified election dates, to
measure eligible financial assets and liabilities at fair value that are not
otherwise required to be measured at fair value. If a company elects the fair
value option for an eligible item, changes in that item's fair value in
subsequent reporting periods must be recognized in current earnings. FAS 159
also establishes presentation and disclosure requirements designed to draw
comparison between entities that elect different measurement attributes for
similar assets and liabilities.
2. Going Concern
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate the continuation of
the Company as a going concern. The Company reported a cumulative net loss of
$41,909,788 and had a stockholder's deficit of $7,025,663 at June 30, 2007. The
information included in this Form 10-QSB should be read in conjunction with
Management's Discussion and Analysis and Financial Statements and notes thereto
included in the Company's December 31, 2006 Form 10-KSB.
3. Income Taxes
The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the financial statements
or tax returns. Under this method, deferred income taxes are recognized for the
tax consequences in future years of differences between the tax bases of assets
and liabilities and their financial reporting amounts at each period end based
on enacted tax laws and statutory tax rates applicable to the periods in which
the differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.
4. Accrued Expenses
As of June 30, 2007, the accrued expenses comprise of the following:
Payroll taxes $1,285,651
Dispute settlement 13,000
Compensation 6,375
Audit fee 6,000
Consulting fee 215,000
----------
$1,526,026
==========
5. Note Payable
On January 11, 2007 the company entered into an agreement with Camden Holdings,
Inc., also an affiliate of the Company, wherein the Company memorialized its
obligation to pay Camden Holdings, Inc $650,000 by December 31, 2007 for monies
owed to Camden. The Company also gave Camden the right to convert all or part of
this debt into shares of the Company's common stock at $.01 per share. The
company recorded a beneficial conversion of $650,000 on the note which is being
amortized over the life of the note. During the six month period ended June 30,
2007, the Company amortized $325,000 of this unamortized discount as interest
expense. As of June 30, 2007, the company has recorded unamortized discount of
$325,000. The note is being shown net of the unamortized discount in the
accompanying financials. The Company recorded an interest payable of $30,753 for
the six month period ended June 30, 2007.
F-10
6. Equity Transactions
The Company is authorized to issue 100,000,000 shares of common shares with a
par value of $.001 per share. These shares have full voting rights. There were
85,619,811 issued and outstanding as of June 30, 2007.
A. Issuance of Common Stock
In February 2005, the Company issued 8,380,000 shares of unregistered common
stock at par value of $0.001 to founding stockholders without consideration,
including 6,250,000 shares to Boston Equities Corporation (a related party).
In June 2005, the Company issued 800,000 shares of unregistered common stock at
par value of $0.001 in exchange for the debt arising out of monies advanced to
the Company in the amount of $400,000 by Boston Equities Corporation pursuant to
a convertible debt agreement dated March 1, 2005. The terms of the convertible
debt agreement allowed Boston Equities Corporation to convert its debt to shares
of common stock at $.50 per share.
In June 2005, the Company's issued an aggregate of 8,618,750 shares of
unregistered common at par value of $0.001 stock to the shareholders of Aronite
Industries, Inc. ("Aronite") in connection with the license of certain
trademarks from Aronite. Certain officers, directors and shareholders of the
Company are former or current officers, directors and shareholders of Aronite.
Aronite and the Company are under common control and, therefore, the transaction
was recorded at Aronite's basis, which was zero.
In July 2005, in accordance with the terms of the Exchange Agreement, the
Company issued 400,000 shares of registered common stock to two consultants,
d.b.a. WB International, Inc. in accordance with the terms of the Exchange
Agreement.
In July 2005, the Company issued for no consideration 78,571 shares of its
unregistered common stock at par value of $0.001 to the former shareholders of
National Healthcare Technologies, Inc. and an additional 905,438 shares of its
unregistered common stock at par value of $0.001 to Crown Partners, a former
major shareholder of National Healthcare Technologies, Inc. in accordance with
the terms of the Exchange Agreement.
In April 2006, the Company issued 1,800,000 shares of its unregistered common
stock to its Chief Executive Officer and Director, Ross-Lyndon James, in
accordance with the terms of the Management Employment Agreement. The shares,
which vested upon issuance,were recorded at the fair market value of $3,690,000
on the date of issuance.
In April 2006, the Company issued 1,800,000 shares of its unregistered common
stock to its Chief Financial Officer and Director, Brian Harcourt, in accordance
with the terms of the Management Employment Agreement. The shares, which vested
upon issuance, were recorded at the fair market value of $3,690,000 on the date
of issuance.
In April 2006, in accordance with the terms of a Consulting Agreement, the
Company issued 3,500,000 shares of the Company's common stock to Credit First
Holding Limited, a related party, for consulting services. The Company recorded
the shares at the fair market value of $7,175,000. The expense is being
amortized over the period of the consulting agreement as the services are being
performed. During the year ended December 31, 2006 the Company amortized
$1,793,750 as consulting expense. During the three month period ended March 31,
2007, the Company amortized $597,917.
In April 2006, in accordance with the terms of a Consulting Agreement, the
Company issued 700,000 shares of the Company's common stock to Monterosa Group
Limited for consulting services. The Company recorded the shares at the fair
market value of $1,435,000. The expense is being amortized over the period of
the consulting agreement as the services are being performed. During the year
ended December 31, 2006 the Company amortized $358,750 as consulting expense.
During the three month period ended March 31, 2007, the Company amortized
$119,583.
In April 2006, in accordance with the terms of a Consulting Agreement, the
Company issued 2,800,000 shares of the Company's common stock to Design, Inc., a
related party, for consulting services. The Company recorded the expense at the
fair market value of shares of $6,440,000.
In April 2006, in accordance with the terms of a Consulting Agreement, the
Company issued 2,500,000 shares of the Company's common stock to Camden
Holdings, Inc., a related party, for consulting services. The Company recorded
the expense at the fair market value of shares of $5,750,000.
In April 2006, in accordance with the terms of a Consulting Agreement, the
Company issued 1,800,000 shares of the Company's common stock to Summit Oil &
Gas, a related party, for consulting services The Company recorded the expense
at the fair market value of shares of $3,690,000
In April 2006, in accordance with the terms of a Consulting Agreement, the
Company issued 700,000 shares of the Company's common stock to Bluefin, LLC for
consulting services. The Company recorded the shares at the fair market value of
$1,435,000. The expense is being amortized over the period of the consulting
agreement as the services are being performed. During the year ended December
31, 2006 the Company amortized $358,750 as consulting expense. During the three
month period ended March 31, 2007, the Company amortized $119,583.
On June 16, 2006, we issued 375,000 shares each to John McDermit and John E.
Havens, who served on our advisory board. The shares, which vested upon
issuance, were recorded at the fair market value on the date of issuance, for a
total of $1,027,500.
In August, 2006, in accordance with an agreement between the parties, the
Company issued 677,000 shares of the Company's common stock to Summitt Oil & Gas
to acquire certain lease rights. The shares were valued at $406,200. The Company
recorded the asset at the historical cost of $56,000 to the related party and
recorded $350,200 as a deemed dividend to the related party.
F-11
In August, 2006, in accordance with the terms of a Consulting Agreement, the
Company issued 209,000 shares of its common stock to Catalyst Consulting, Inc.
In September, 2006, pursuant to the terms of a Consulting Agreement, the Company
issued an additional 209,000 shares of its common stock to Catalyst Consulting,
Inc., under the Company's 2006-1 Consultant and Employee Services Plan. These
shares issuances represent prepaid consulting services for the period of July 1,
2006 through December 31, 2006. The Company recorded the expense at the fair
market value of shares of $209,000.
On August 17, 2006, in accordance with the terms of a Consulting Agreement, the
Company issued 500,000 shares of its common stock to Ramp International, Inc. In
September, 2006, pursuant to the terms of a Consulting Agreement, the Company
issued 500,000 shares of its common stock to Ramp International, Inc., under the
Company's 2006-1 Consultant and Employee Services Plan. This share issuance
represents prepaid consulting expense for the period from September 2, 2006
through February 2, 2007 with this expense to be amortized over 18 months. The
agreement was based on fair market value totaling $500,000 of which $400,000 was
amortized during the year ended December 31, 2006. During the three month period
ended March 31, 2007, the Company amortized $100,000. The Company also owed Ramp
a cash payment of $215,000 which was waived off by Ramp as of December 31, 2006,
so this amount has been recorded as a gain on settlement of debt.
On August 17, 2006, in accordance with the terms of a Consulting Agreement, the
Company issued 100,000 shares of its common stock to Jon Konheim. The Company
recorded the expense at the fair market value of shares of $60,000.
In August 2006 in accordance with the terms of a Consulting Agreement, the
Company issued 100,000 shares of its common stock to Linda Contreras. The
Company recorded the expense at the fair market value of shares of $120,000
In September, 2006, pursuant to the terms of a Consulting Agreement, the Company
issued 2,700,000 shares of its common stock to Summitt Ventures, under the
Company's 2006-1 Consultant and Employee Services Plan. The Company recorded the
expense at the fair market value of shares of $1,680,000
The Company issued 200,000 shares of its common stock to its former president,
Samuel Petrossian, in September, 2006 as compensation for services, pursuant to
an employment agreement. Mr. Petrossian resigned in November, 2006. The Company
recorded the expense at the fair market value of shares of $80,000.
In September, 2006, the Company adopted the 2006-1 Consultant and Employee
Services Plan wherein the Company registered 3,800,000 shares of its common
stock for issuance to consultants and employees of the Company.
In September, 2006, pursuant to the terms of a Consulting Agreement, the Company
issued 190,000 shares of its common stock to Frank Layton under the Company's
2006-1 Consultant and Employee Services Plan. The Company recorded the expense
at the fair market value of shares of $76,000.
In September, 2006, pursuant to the terms of a Consulting Agreement, the Company
issued 150,000 shares, of its common stock to Linda Contreras under the
Company's 2006-1 Consultant and Employee Services Plan.The Company recorded the
expense at the fair market value of shares of $60,000.
In September, 2006, pursuant to the terms of a Consulting Agreement, the Company
issued 400,000 shares of its common stock to Raymond Robinson under the
Company's 2006-1 Consultant and Employee Services Plan. The Company recorded the
expense at the fair market value of shares of $160,000.
In October, 2006, pursuant to the terms of a Consulting Agreement, the Company
issued 50,000 shares of its common stock to Claudia J. Zaman, attorney., under
the Company's 2006-1 Consultant and Employee Services Plan. The Company recorded
the expense at the fair market value of shares of $8,500.
On January 11, 2007 the company entered into an agreement with Summitt Oil and
Gas, Inc., also an affiliate of the Company, wherein the Company memorialized
its obligation to pay Summitt $350,000 by December 31, 2007 for monies owed to
Summitt. The Company also gave Summitt the right to convert all or part of this
debt into shares of the Company's common stock at $.01 per share, which right
Summitt has exercised. As a result of this conversion, Summitt was issued
35,000,000 shares of the Company's common stock, in restricted form, and the
Company has extinguished the debt of $350,000 owed to Summitt. The company
recorded a beneficial conversion of $350,000 on the note. The Company
extinguished the debt of $350,000 to the related party on conversion of the note
and recorded $350,000 as interest expense. Additionally, the Company entered
into a consulting agreement with Summitt wherein the Company agreed to pay
Summitt $450,000 and issue Summitt five million shares of the Company's common
stock, in restricted form, in consideration for Summitt's services through
December 31, 2007. The shares were issued in January, 2007. The company recorded
the consulting expense based on the cash and the fair value of the shares on the
date of issuance. The expense is being amortized over the term of the consulting
agreement. As of March 31, 2007, the company has recorded a prepaid consulting
of $387,500 on the agreement.
In April, 2007, pursuant to the terms of a consulting agreement, the Company
issued 100,000 shares of its common stock to Claudia J. Zaman, attorney. The
Company recorded the transaction at the fair market value of shares of $24,000,
recognized $10,000 of expense in April, 2007 and recorded and additional $10,000
of expense in June, 2007. At June 30, 2007 there was $14,000 as prepaid legal
fees on the Balance Sheet.
In April, 2007, pursuant to the terms of a consulting agreement, the Company
issued 100,000 shares of its common stock to Stephen Taylor, consultant. The
Company recorded the transaction at the fair market value of shares of $48,000.
The full $48,000 was expensed in April, 2007.
In April, 2007, pursuant to the terms of a consulting agreement, the Company
issued 1,000,000 shares of its common stock to Dieu Vuong, consultant. The
Company recorded the transaction at the fair market value of shares of $180,000.
The full $180,000 was expensed in April, 2007.
F-12
B. Warrants
In February 2005, the Company issued a warrant to acquire up to 600,000 shares
of unregistered common stock at an exercise price of $0.60 per share to W.B.
International, Inc., in exchange for consulting services. All shares vested upon
grant. The warrant expires 5 years from the date of issuance.
In June 2005, the Company issued a warrant to acquire up to 600,000 shares of
unregistered common stock at an exercise price of $0.70 per share to each of
Liquid Stone Manufacturing, Inc. and Stone Mountain Finishes, Inc. in
consideration of certain license agreements. All shares vested upon grant. The
warrants expire 5 years from the date of issuance.
In June 2005, the Company issued a warrant to an employee to purchase up to
100,000 shares of the company's restricted common stock at an exercise price of
$0.70 per share The shares vested monthly over three years and have a 10 year
option period. The employee was terminated in February 2006 and the warrants
were forfeited.
No warrants were granted during the three month period ended March 31, 2007 or
the three month period ended June 30, 2007:
The weighted average remaining contractual life of warrants outstanding is 2.80
years at March 31, 2007.
------------------------------------------ -- -------------------- --------------------------------------- --
Outstanding Warrants Exercisable Warrants
----------------------- --------------------- -------------------- --------------------- --------------------
Range of Number Average Remaining Average Intrinsic Number
Exercise Price Contractual Life Value
$0.67 1,800,000 2.55 - 1,800,000
----------------------- --------------------- -------------------- --------------------- --------------------
The Company estimated the fair value of each stock warrant at the grant date by
using the Black-Scholes option-pricing mode.
The weighted-average assumptions used in estimating the fair value of warrants
granted during the year periods June 30, 2007, and the period ended June 30,
2006 along with the weighted-average grant date fair values, were as follows.
2006
------------------------------------- -----------------------------------
Expected volatility 80.0%
Expected life in years 5 years
Risk free interest rate 5.07%
Dividend yield 0%
------------------------------------- -----------------------------------
C. Employee Options
On April 3, 2006, the Board of Directors of the Company authorized and approved
the adoption of the 2006 Stock Option Plan effective April 3, 2006 (the "Plan").
The Plan is administered by the duly appointed compensation committee. The Plan
is authorized to grant stock options of up to 2,500,000 shares of the Company's
common stock. At the time a stock option is granted under the Plan, the
compensation committee shall fix and determine the exercise price and vesting
schedules at which such shares of common stock of the Company may be acquired.
As of March 31, 2007, no options to purchase the Company's common stock have
been granted under the Plan.
There were no options outstanding at June 30, 2007.
In September, 2006, the Board of Directors of the Company authorized and
approved the adoption of the 2006-1 Consultants and Employees Service Plan
effective September 7, 2006 (the "Consultants Plan"). The Plan is administered
by the duly appointed compensation committee. The Plan is authorized to grant
stock options and make stock awards of up to 3,800,000 shares of the Company's
common stock. At the time a stock option is granted under the Plan, the
compensation committee shall fix and determine the exercise price and vesting
schedules at which such shares of common stock of the Company may be acquired.
The Consultants Plan was registered on September 15, 2006 and as of June 30,
2007 a total of 3,799,000 shares had been issued and granted under the
Consultants Plan.
5. Related Party Transactions
A. Boston Equities Corporation
The following transaction took place between the Company and parties sharing
common ownership or control with Boston Equities Corporation, a shareholder,
which owns approximately 25% of the Company's outstanding and issued common
stock:
On April 3, 2006, the Company entered into a consulting agreement with Summitt
Oil and Gas, Inc. ("Summit") to provide business management services and advice
as it relates to the future of the company. Under the terms of the Agreement,
the Company shall pay Summitt a fee of two hundred and fifty thousand dollars
($250,000) in cash plus one million eight hundred thousand (1,800,000)
restricted of the Company's common stock. The fee is non-refundable and
considered earned when the shares are delivered. The agreement is for six months
expiring in October, 2006. The Company has fully amortized the expense for the
cash and shares paid as of December 31, 2006.
F-13
On April 4, 2006, the Company entered into an assignment of an oil and gas lease
with Summitt. Under the agreement in exchange for the leasehold rights in 160
acres in the County of Custer, Oklahoma, the Company has agreed to pay Summitt
consideration of seventy-seven thousand (677,000) restricted shares of the
Company's common stock. The shares of stock were issued on August 22, 2006.
Additionally, there is excepted from the assignment and conveyance and reserved
and retained in Summitt an overriding royalty equal to 3% of the value of all
oil produced and removed under the lease and the net proceeds received by
Assignee from the sale of all gas and casing head gasoline produced and sold
under the lease.
On April 25, 2006, the Company entered into a short term bridge financing in the
form of a promissory note to Camden Holdings, Inc. in the amount of three
hundred and fifty thousand dollars ($350,000) to be used as working capital. The
Note was due on August 25, 2006. No interest is payable on the note. On June 8,
2006, the Company entered into a short term bridge financing in the form of a
promissory note to Camden Holdings, Inc. in the amount of one hundred and fifty
thousand dollars ($150,000) to be used as working capital. The Note was due on
December 31, 2006 and has been extended to December 31, 2007 and on January 11,
2007 was increased to $650,000. Interest is being accrued at 10$ per annum. At
June 30, 2007, the advances outstanding were $143,648.
On January 11, 2007 the company entered into an agreement with Summitt Oil and
Gas, Inc., also an affiliate of the Company, wherein the Company memorialized
its obligation to pay Summitt $350,000 by December 31, 2007 for monies owed to
Summitt. The Company also gave Summitt the right to convert all or part of this
debt into shares of the Company's common stock at $.01 per share, which right
Summitt has exercised. As a result of this conversion, Summitt was issued
35,000,000 shares of the Company's common stock, in restricted form, and the
Company has extinguished the debt of $350,000 owed to Summitt. The company
recorded a beneficial conversion of $350,000 on the note. The Company
extinguished the debt of $350,000 to the related party on conversion of the note
and recorded $350,000 as interest expense. Additionally, the Company entered
into a consulting agreement with Summitt wherein the Company agreed to pay
Summitt $450,000 and issue Summitt five million shares of the Company's common
stock, in restricted form, in consideration for Summitt's services through
December 31, 2007. The shares were issued in January, 2007. The company recorded
the consulting expense based on the cash and the fair value of the shares on the
date of issuance. The expense is being amortized over the term of the consulting
agreement. As of June 30, 2007, the company has recorded a prepaid consulting of
$387,500 on the agreement.
On January 11, 2007 the company entered into an agreement with Camden Holdings,
Inc., also an affiliate of the Company, wherein the Company memorialized its
obligation to pay Camden Holdings, Inc $650,000 by December 31, 2007 for monies
owed to Camden. The Company also gave Camden the right to convert all or part of
this debt into shares of the Company's common stock at $.01 per share. The
company recorded a beneficial conversion of $650,000 on the note which is being
amortized over the life of the note. During the three month period ended March
31, 2007, the Company amortized 162,500 of this unamortized discount as interest
expense. As of June 30, 2007, the company has recorded unamortized discount of
$650,000. The note is being shown net of the unamortized discount in the
accompanying financials.
6. Commitments and Contingencies
A. Legal
The Company is periodically involved in legal actions and claims that arise as a
result of events that occur in the normal course of operations. The Company is
not currently aware of any formal legal proceedings or claims that the Company
believes will have, individually or in the aggregate, a material adverse effect
on the Company's financial position or results of operations.
B. Operating Leases
The Company currently has an office at 1660 Union Street, Suite 200, San Diego,
CA 92101, which it maintains
7. Subsequent events
None.
8. Restatement
Subsequent to the issuance of the Company's financial statements for the
year ended December 31, 2006, the Company determined that certain
transactions and presentation in the financial statements had not been
accounted for properly in the Company's financial statements.
Specifically, the issuance of shares pursuant to a consulting agreement
was recorded twice and expensed due to wrong certification by the stock
transfer agent. The company has restated its financial statements as of
December 31, 2006 for that correction. This also effected the beginning
balances of the equity, the statement of operations from inception to
March 31, 2007, the statement of cash flows for the period from inception
to March 31, 2007 and the statement of stockholders' equity from inception
to March 31, 2007.
The Company has restated its financial statements for these adjustments as of
March 31, 2007.
The effect of the correction of the error is as follows:
F-14
AS
PREVIOUSLY AS
REPORTED RESTATED
------------- ------------
BALANCE SHEET
As of March 31, 2007
----------------------------
Stockholder's Equity:
Additional paid-in capital $ 40,982,222 $ 39,905,022
Accumulated deficit $(41,007,321) $(39,927,321)
STATEMENT OF OPERATIONS:
For the period from inceptiono
to March 31, 2007
-----------------
Professional fee $ 24,606,970 $ 23,526,970
Total operating expenses $ 40,872,121 $ 39,792,121
Net operating loss $ 40,872,121 $ 39,792,121
Net loss $ 40,657,121 $ 39,577,121
STATEMENT OF CASH FLOWS:
For the period from inceptiono
to March 31, 2007
-----------------
NET LOSS $ 40,657,121 $ 39,577,121
CASH FLOWS FROM OPERATING ACTIVITIES
Adjustments to reconcile net loss to cash used by operating activities:
Stock issued for services $ 30,954,750 $ 29,814,750
F-15
Item 2. Management's Discussion and Analysis or Plan of Operation.
This report contains forward looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended and Section 21E of the Securities
Exchange Act of 1934, as amended. When used in this Form 10-QSB, the words
"anticipate", "estimate", "expect", "project" and similar expressions are
intended to identify forward-looking statements. Such statements are subject to
certain risks, uncertainties and assumptions including the possibility that the
Company's proposed plan of operation will fail to generate projected revenues.
Additional risks, uncertainties and assumptions include, but are not limited to,
the factors that we describe in the section entitled "Management's Discussion
and Analysis" in the Form 10-KSB/A for the year ended December 31, 2006. Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
anticipated, estimated or projected. The Company's actual results could differ
materially from those set forth on the forward looking statements as a result of
the risks set forth in the Company's filings with the Securities and Exchange
Commission, general economic conditions, and changes in the assumptions used in
making such forward looking statements.
General
There was no revenue during the three month and six month periods ended June 30,
2007 and June 60, 2006. Expenses in the three month period ended June 30, 2007
was $1,444,722 compared to expenses in the three month period ended June 30,
2006 of $11,532,143. Expenses in the six month period ended June 30, 2007 was
$2,795,159 compared to expenses in the six month period ended June 30, 2006 of
$23,772,028. The reduction in expenses is due to the non-recurring expenses
incurred in 2006 related to changing the direction of the Company.
Plan of Operation
On April 3, 2006, our Board of Directors approved a change of direction for the
Company, from the business of manufacturing and distributing decorative stone
veneers and finishes, to the business of oil and gas exploration and production,
mineral lease purchasing and all activities associated with acquiring, operating
and maintaining the assets of such operations. This plan of operating will
include the acquiring of proven fields and the developing of these properties by
commencing drilling operations. In order to maximize economies of scale and to
leverage the knowledge and expertise of others, we will partner with third
parties to exploit any such properties.
In conjunction with our change of direction, in April 2006, we entered into a
consulting agreement with Summitt Oil and Gas, Inc. ("Summitt"), as well as
other third parties, to provide business management services, and advice as it
relates to the future of the company. This service shall include the drafting
and preparation of business plans, operating budgets, cash flow projections and
other business management services as we venture into the oil and gas business.
In April 2006 we executed an assignment of an oil and gas lease under which we
acquired 100% of the leasehold rights to drill and otherwise exploit 160 acres
of certain underlying oil and gas reserves located in the County of Custer,
Oklahoma, which we acquired from Summitt for 677,000 restricted shares of our
common stock and agreed to pay Summitt a royalty equal to 3% of the value of all
oil produced and removed under the lease and the net proceeds received by us
from the sale of all gas and casinghead gasoline produced and sold under the
lease. The leasehold interest is not developed and accordingly not currently
producing oil or gas. Upon receiving the necessary capitalization, we intend to
explore the development of this field. During the quarter ended fiscal 2006, the
Company issued 677,000 of its common stock to Summitt and recorded an expense of
$9,333 in connection with this agreement during the quarter.
In April 2006, we entered into a consulting agreement with BlueFin,
Inc.("BlueFin"). BlueFin has been retained to provide business development,
investor relations services, and introductions to qualified funding sources,
introductions to oil and gas business prospects and introductions to accredited
investors. By leveraging BlueFin's resources the Company anticipates that it
will be able to find sources of capital to fund its operations in the oil and
gas business.
In April 2006, we also entered into an agreement with Monterosa Group Limited
("Monterossa"). Monterossa has been retained to provide services including
operation administration, transaction processing and management, systems
development, staff recruitment, acquisition transaction support services, and
other business management services as the Company moves into the oil and gas
business.
In April 2006, we also engaged Camden Holdings, Inc. ("Camden"), an entity
experienced in the energy sector that will assist the Company in locating oil
and gas opportunities for us. Camden's services include the drafting and
preparation of business plans, operating budgets, cash flow projections and
other business management services as we venture into the oil and gas business.
We have also been able to leverage our relationship with Camden to obtain
short-term financing as needed. Camden has also agreed to advance sums to the
Company to assist in funding its operations over the short-term. As of March 31,
2007 , Camden has advanced the Company the sum of $88,682. In addition, the
company also has a convertible note payable to Camden Holdings (See Notes 5).
In April 2006, we also engaged Design, Inc. ("Design"), an entity experienced in
the energy sector that will assist the Company in financing the transactions
introduced by Camden and our other consultants.
In July, 2006, the Company entered into a Consulting Agreement with Summitt
Ventures Inc. ("SVI") for three months which required the Company to issue
2,800,000 of its common stock to SVI for services to be provided to the Company
including business management services and related services. These shares were
issued in August, 2006. In September, 2006, the Company entered into another
agreement with SVI under the same terms and conditions as the original
agreement. The Company issued 2,700,000 shares to SVI in September, 2006.
In July, 2006, the Company entered into a Consulting Agreement with Catalyst
Consulting Partners, LLC to provide the Company with business consulting
services in exchange for the issuance of 518,000 shares of the Company's common
stock. These shares were issued during the quarter ended September 30, 2006.
In September, 2006, the Company entered into a Services Agreement with Rhone
Alternative Marketing Partners ("RAMP) for marketing and public relations
services in exchange for the issuance of 1,000,000 shares of the Company's
common stock. These shares were issued during the quarter ended September 30,
2006.
During the quarter ended September 30, 2006, the Company compensated certain
third party individuals who provided services to the Company. In August and
September, 2006, 600,000 shares were issued for services. In September, 2006, an
additional 740,000 shares were issued to consultants for services under the
Company's 2006-1 Consultants and Employees Services Plan. This Plan was adopted
in September, 2006 and reserved 3,800,000 shares of the Company's common stock
to consultants and employees, which shares were registered in September, 2006.
At December 31, 2006 and at June 30, 2007, 3,799,000 shares were issued under
the Plan.
We believe that by changing our direction to the oil and gas markets we have
improved our prospects for success due to both the current and expected future
positive market conditions which we expect to exploit initially from the
valuable contacts, industry expertise and business opportunities we expect to
derive from Summitt, an industry experienced consulting resource, and other
third party consultants.
Additionally, we intend to reincorporate the Company to a Nevada corporation
("Reincorporation"). The business purpose of the Reincorporation is to allow us
to avail ourselves to Nevada corporate law. Nevada is a recognized leader in
adopting and implementing comprehensive, flexible corporate laws responsive to
the legal and business needs of corporations organized under its laws. The
Nevada Revised Statutes is an enabling statute that is frequently revised and
updated to accommodate changing business needs.
Additionally, consistent with the change of our direction into the oil and gas
business, we changed the name of the Company from National Healthcare
Technology, Inc., to Brighton Oil & Gas, Inc., on June 6, 2007.
We anticipate that we will have to raise additional capital to fund operations
over the next 12 months. To the extent that we are required to raise additional
funds to acquire properties, and to cover costs of operations, we intend to do
so through additional public or private offerings of debt or equity securities,
including a drilling fund to raise $5,000,000. There are no commitments or
arrangements for other offerings in place, no guaranties that any such
financings would be forthcoming, or as to the terms of any such financings. Any
future financing may involve substantial dilution to existing investors. We have
also been relying on our common stock to pay third parties for services which
has resulted substantial dilution to existing investors.
Estimated Funding Required During the Next Twelve Months:
-------------------------------------------- --------------- --- ---------------
Prospect Development & Seismic $1,000,000 to $5,000,000
-------------------------------------------- --------------- --- ---------------
Drilling & Development $2,500,000 to $5,000,000
-------------------------------------------- --------------- --- ---------------
Offering Costs & Expenses $50,000 to $50,000
-------------------------------------------- --------------- --- ---------------
General Corporate Expenses $100,000 to $150,000
-------------------------------------------- --------------- --- ---------------
Working Capital $700,000 to $1,000,000
-------------------------------------------- --------------- --- ---------------
Total $4,350,000 to $11,200,000
-------------------------------------------- --------------- --- ---------------
The minimum expenditures noted above will allow us to commence with acquiring,
exploring and developing properties as well as commence drilling operations. In
the event that we are able to raise further funds, we will primarily expend such
funds on further prospect development and seismic studies and then to fund
further drilling operations Consistent with this change of our business,
effective October 1, 2005 we sold all of the capital stock of Es3 to Liquid
Stone Partners. A partner holding a minority interest in Liquid Stone
Partnerships is also a director of the Company. We currently have one full-time
employee. We will primarily rely on outside consultants and do not currently
foresee any significant changes in the number of our employees.
Item 3. Controls and Procedures.
Our Chief Executive Officer and Chief Financial Officer has evaluated the
effectiveness of our disclosure controls and procedures (as such term is defined
in Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") as of the end of the period ended June 30, 2007, (the
"Evaluation Date"). During the course of the audit for our year end December 31,
2005 in May 2006, our auditor discovered numerous errors in our financial
statements in our quarterly report for the period ended September 30, 2005 as
disclosed in our form 8-K/A filed on June 14, 2006. As a result of these errors,
and others, we restated our form 10-QSB for the quarter ended September 30,
2005, and will restate the financial statements for the period ended June 30,
2005, in our Form 8-K/A filed on January 24, 2006. Our conclusion to restate our
form 10QSB for the quarter ended September 30, 2005 and Form 8-K/A filed on
January 24, 2006, has resulted in affecting our assessments regarding our
controls, and that they were not effective as of the period ended December 31,
2006 and constituted material weaknesses which began after the close of the
Exchange Agreement on or about July 19, 2006. As of the period covered by this
report, we believe that the material weaknesses no longer exist. The material
weaknesses were primarily a result of our having no controller and no qualified
personnel and as a result transactions were omitted, recorded incorrectly, or
recorded without support.
Limitations on the Effectiveness of Internal Controls
Disclosure controls and procedures are designed to provide reasonable assurance
of an entity achieving its disclosure objectives. Our chief executive officer
and chief financial officer has concluded that our disclosure controls and
procedures are effective at that reasonable assurance level as of the period
covered by this report. The likelihood of achieving such objectives is affected
by limitations inherent in disclosure controls and procedures. These include the
fact that human judgment in decision-making can be faulty and that breakdowns in
internal control can occur because of human failures such as simple errors or
mistakes or intentional circumvention of the established process.
There were no changes in the Company's internal controls over financial
reporting, known to the Chief Executive Officer and Chief Financial Officer that
occurred during the most recent fiscal quarter that have materially affected, or
are reasonably likely to materially affect, the Company's internal control over
financial reporting.
In May 2006, we remedied the material weakness in internal control over
financial reporting by having our Chief Executive Officer and Chief Financial
Officer review in detail all adjustments affecting the issuances of our
securities, and we retained an outside consultant to make accounting entries.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are not a party to any material pending legal proceeding and no such action
by or, to the best of our knowledge, against us have been threatened.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the Quarter ending June 30, 2007, we issued no securities using the
exemptions available under the Securities Act of 1933 including unregistered
sales made pursuant to Section 4(2) of the Securities Act of 1933.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
The Company's CEO and CFO resigned in April 2007 and was replaced by Linda
Contreras, who was also appointed as the sole officer.
In April, 2007, the Company held a Special Meeting of Shareholders' where a
re-incorporation in Nevada was approved along with a name change to Brighton Oil
& Gas, Inc. The shareholders also ratified the 2006 Stock Option Plan.
Item 6. Exhibits and Reports on Form 10-Q.
a) Exhibits.
------- -------- ---------------------------------------------------------------
10.4 Consulting Agreement dated April 3, 2006 by and between Summitt
Oil and Gas, Inc. and Company (previously filed as an exhibit
to our Form 8-K, file no. 001-28911, on April 5, 2006, and
incorporated herein by reference).
------- -------- ---------------------------------------------------------------
10.5 Management Employment Agreement dated April 3, 2006 by and
between Ross Lyndon James and the Company (previously filed as
an exhibit to our Form 8-K, file no. 001-28911, on April 5,
2006, and incorporated herein by reference).
------- -------- ---------------------------------------------------------------
10.6 Management Employment Agreement dated April 3, 2006 by and
between Brian Harcourt and the Company (previously filed as an
exhibit to our Form 8-K, file no. 001-28911, on April 5, 2006,
and incorporated herein by reference).
------- -------- ---------------------------------------------------------------
10.7 2006 Employee Stock Option Plan (previously filed as an exhibit
to the Company's Form 8-K, file no. 001-28911, on April 5,
2006, and incorporated herein by reference).
------- -------- ---------------------------------------------------------------
10.8 Consulting Agreement by and between us and Camden Holdings,
Inc. dated January 8, 2006 (previously filed as an exhibit to
our Form 10-KSB/A, file no. 001-28911, on June 8, 2006, and
incorporated herein by reference).
------- -------- ---------------------------------------------------------------
10.9 Consulting Agreement by and between us and Design, Inc. dated
January 8, 2006 (previously filed as an exhibit to our Form
10-KSB/A, file no. 001-28911, on June 8, 2006, and incorporated
herein by reference).
------- -------- ---------------------------------------------------------------
10.10 Stock Purchase Agreement between us and Liquid Stone Partners
dated April 4, 2006 (previously filed as an exhibit to our Form
10-KSB/A, file no. 001-28911, on June 8, 2006, and incorporated
herein by reference).
------- -------- ---------------------------------------------------------------
10.11 Amended Assignment of leasehold rights between us and Summitt
Holdings, Inc. dated April 4, 2006 (previously filed as an
exhibit to our Form 10-KSB/A, file no. 001-28911, on June 8,
2006, and incorporated herein by reference).
------- -------- ---------------------------------------------------------------
10.12 Consulting Agreement between us and Credit First Holdings, Inc.
dated April 5, 2006(previously filed as an exhibit to our Form
10-KSB/A, file no. 001-28911, on June 8, 2006, and incorporated
herein by reference).
------- -------- ---------------------------------------------------------------
10.13 Promissory note executed by us to repay Camden Holdings, Inc.
dated April 25, 2006 (previously filed as an exhibit to our
Form 10-KSB/A, file no. 001-28911, on June 8, 2006, and
incorporated herein by reference).
------- -------- ---------------------------------------------------------------
10.14 Promissory note executed by us to repay Camden Holdings, Inc.
dated June 8, 2006 (previously filed and incorporated herein by
reference)
------- -------- ---------------------------------------------------------------
10.16 Consolidated note and security agreement with Camden Holdings,
Inc. dated January 5, 2007 (previously filed as an exhibit to
our form 8-K, file no. 01-28911 and incorporated herein by
reference)
------- -------- ---------------------------------------------------------------
10.17 Consulting agreement with Camden Holdings,Inc. dated January
5, 2007 (previously filed as an exhibit to our form 8-K, file
no. 01-28911 and incorporated herein by reference)
------- -------- ---------------------------------------------------------------
10.18 Consolidated note and security agreement with Summitt Oil & Gas,
Inc., Inc. dated January 5, 2007 (previously filed as an
exhibit to our form 8-K, file no. 01-28911 and incorporated
herein by reference)
------- -------- ---------------------------------------------------------------
10.18 Consulting agreement with Summitt Oil & Gas, Inc., Inc. dated
January 5, 2007 (previously filed as an exhibit to our form 8-K,
file no. 01-28911 and incorporated herein by reference)
------- -------- ---------------------------------------------------------------
31.1 Certification by Sam Plunkett, Chief Executive Officer, as
required under Section 302 of Sarbannes-Oxley Act of 2002,
attached hereto.
------- -------- ---------------------------------------------------------------
31.2 Certification by Sam Plunkett, Chief Financial Officer, as
required under Section 302 of the Sarbannes-Oxley Act of 2002,
attached hereto.
------- -------- ---------------------------------------------------------------
32.1 Certification as required under Section 906 of Sarbannes-Oxley
Act of 2002, attached hereto.
------- -------- ---------------------------------------------------------------
(b) Reports on Form 8-K.
No reports on Form 8-K were filed for the quarter ended September 30, 2006.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BRIGHTON OIL & GAS, INC.
Date: August 20, 2007
By:
-------------------------------------
Linda Contreras
Chief Executive Officer
-7-