10-QSB
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-QSB
[X]
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE
ACT OF
1934.
For
the
quarterly period ended September
30,
2006
Commission
File Number: 333-86518
US
ENERGY HOLDINGS, INC.
(Exact
name of registrant as specified in its charter.)
NEVADA
(State
or other jurisdiction of
incorporation
or organization)
|
75-3025152
(I.R.S.
Employer Identification No.)
|
4606
FM
1960 West, Suite 443, Houston, Texas 77069
(Address
of principal executive offices)
(281)
315-8895
(Issuer's
telephone number)
Check
whether the registrant (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. xYes oNo
Indicate
by check mark whether the Registrant is a shell company (as defined in
Rule
12b-2 of the Securities Exchange Act of 1934) (check one): o Yes xNo
State
the
number of shares outstanding of each of the issuers classes of common
equity, as
of the latest practicable date: 5,393,978 shares of Common Stock, as
of May 18 ,
2006.
Transitional
Small Business Disclosure Format (check one): xYes oNo
US
ENERGY HOLDINGS, INC.
(FORMERLY
PITBOSS ENTERTAINMENT, INC.)
CONDENSED
FINANCIAL STATEMENTS
SEPTEMBER
30, 2006 AND 2005
TABLE
OF CONTENTS
Page(s)
Condensed
Balance Sheet as of September 30, 2006 (Unaudited) 3
Condensed
Statements of Operations for the nine months and
three
months ended September 30, 2006 and 2005 (Unaudited)
4
Condensed
Statements of Cash Flows for the nine months ended
September
30, 2006 and 2005 (Unaudited)
5
Notes
to
the Condensed Financial Statements
6-18
US
ENERGY HOLDINGS, INC.
(FORMERLY
PITBOSS ENTERTAINMENT, INC.)
CONDENSED
FINANCIAL STATEMENTS
SEPTEMBER
30, 2006 AND 2005
US
ENERGY HOLDINGS, INC.
(FORMERLY
PITBOSS ENTERTAINMENT, INC.)
BALANCE
SHEET
SEPTEMBER
30, 2006 AND 2005
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
Cash
|
|
$
|
465
|
|
|
|
|
|
|
Intagible
Assets
|
|
|
|
|
Well
Rights - Oil and Gas
|
|
|
50,000
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
50,465
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' (DEFICIT)
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
5,150
|
|
Loan
payable - officers
|
|
|
235,118
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
240,268
|
|
|
|
|
|
|
STOCKHOLDERS'
(DEFICIT)
|
|
|
|
|
Common
stock, $.001 Par Value; 75,000,000 shares authorized
|
|
|
|
|
5,393,978
issued and outstanding
|
|
|
5,394
|
|
Warrants
outstanding
|
|
|
777,357
|
|
Additional
paid-in capital
|
|
|
2,530,442
|
|
Accumulated
deficit
|
|
|
(3,502,996
|
)
|
|
|
|
|
|
Total
Stockholders' (Deficit)
|
|
|
(189,803
|
)
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
|
|
$
|
50,465
|
|
US
ENERGY HOLDINGS, INC.
|
|
|
|
|
|
|
|
|
|
(FORMERLY
PITBOSS ENTERTAINMENT, INC.)
|
|
|
|
|
|
|
|
|
|
CONDENSED
STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
FOR
THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
Nine Months Ended
|
|
|
For
Three Months Ended
|
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
$
|
100,000
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
Consulting
services
|
|
|
736,300
|
|
|
-
|
|
|
-
|
|
|
-
|
|
General
and administrative expenses
|
|
|
32,873
|
|
|
-
|
|
|
56
|
|
|
-
|
|
Total
Operating Expenses
|
|
|
869,173
|
|
|
-
|
|
|
56
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forgiveness
of debt
|
|
|
15,597
|
|
|
-
|
|
|
15,597
|
|
|
-
|
|
Total
Other income
|
|
|
15,597
|
|
|
-
|
|
|
15,597
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(LOSS)
BEFORE PROVISION FOR TAXES
|
|
|
(853,576
|
)
|
|
-
|
|
|
15,541
|
|
|
-
|
|
Provision
for income taxes
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) from continuing operations
|
|
|
(853,576
|
)
|
|
-
|
|
|
15,541
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DISCONTINUED
OPERATIONS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from Operations of Discontinued Segment
|
|
|
-
|
|
|
(100,194
|
)
|
|
-
|
|
|
(26,118
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)
|
|
$
|
(853,576
|
)
|
$
|
(100,194
|
)
|
$
|
15,541
|
|
$
|
(26,118
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS
(LOSS) PER SHARE - BASIC AND DILUTED
|
|
$
|
(0.18
|
)
|
$
|
(0.06
|
)
|
$
|
0.00
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF COMMON
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHARES
OUTSTANDING - BASIC AND DILUTED
|
|
|
4,667,128
|
|
|
1,660,000
|
|
|
5,393,978
|
|
|
1,660,000
|
|
US
ENERGY HOLDINGS, INC.
|
|
|
|
|
|
(FORMERLY
PITBOSS ENTERTAINMENT, INC.)
|
|
|
|
|
|
CONDENSED
STATEMENTS OF CASH FLOW
|
|
|
|
|
|
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
Continuing
Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss)
|
|
$
|
(853,576
|
)
|
$
|
-
|
|
Adjustments
to reconcile net (loss) to net cash
|
|
|
|
|
|
|
|
(used
in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for services
|
|
|
586,300
|
|
|
-
|
|
Common
stock issued for compensation
|
|
|
100,000
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase)
in Intangable assets - Well Rights Gas and Oil
|
|
|
(50,000
|
)
|
|
-
|
|
(Decrease)
in accounts payable and accrued expenses
|
|
|
(2,463
|
)
|
|
-
|
|
Total
|
|
|
633,837
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Net
cash (used in) operating activities
|
|
|
(219,739
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
Discontinued
Operations:
|
|
|
|
|
|
|
|
(Loss)
from discontinued operations
|
|
|
-
|
|
|
(100,194
|
)
|
Change
in assets disposed of
|
|
|
-
|
|
|
75,007
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities - discontinued division
|
|
|
-
|
|
|
(25,187
|
)
|
|
|
|
|
|
|
|
|
Discontinued
Investing Activities:
|
|
|
-
|
|
|
(3,086
|
)
|
|
|
|
|
|
|
|
|
Discontinued
Financing Activities:
|
|
|
-
|
|
|
(4,184
|
)
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
Increase
in amounts due from related parties
|
|
|
219,521
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
219,521
|
|
|
-
|
|
|
|
|
|
|
|
|
|
NET
(DECREASE) IN CASH
|
|
|
(218
|
)
|
|
(32,457
|
)
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS -
|
|
|
|
|
|
|
|
BEGINNING
OF PERIOD
|
|
|
683
|
|
|
32,457
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS - END OF PERIOD
|
|
$
|
465
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW
|
|
|
|
|
|
|
|
INFORMATION:
|
|
|
|
|
|
|
|
Interest
paid
|
|
$
|
-
|
|
$
|
-
|
|
Income
taxes paid
|
|
$
|
-
|
|
$
|
-
|
|
NOTE
1- BASIS OF PRESENTATION
The
interim financial statements included herein, presented in accordance with
accounting principles generally accepted in the United States have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
present and not misleading.
These
statements reflect all adjustments, consisting of normal recurring adjustments,
which, in the opinion of management, are necessary for fair presentation of
the
information contained therein. It is suggested that these interim financial
statements be read in conjunction with the audited financial statements of
the
Company for the period ended December 31, 2005 and notes thereto included in
the
Company’s Form 10-KSB. The Company follows the same accounting policies in the
preparation of interim reports.
Results
of operations for the interim periods are not indicative of annual
results.
NOTE
2- HISTORY AND ORGANIZATION OF COMPANY
Karma
Media, Inc. (the “Company”) was organized April 21, 1999 under the laws of the
State of Nevada, as Le Gourmet Co. Inc.
On
March
11, 2002, the Company amended its Articles of Incorporation to increase the
number of authorized shares to 25,000,000 shares and to change the par value
to
$0.001.
On
March
17, 2003, the Company amended its Articles of Incorporation to change its name
to Estelle Reyna, Inc.
On
September 11, 2003, the Company amended its Articles of Incorporation to change
its name to Karma Media, Inc.
On
July
8, 2005, the Company amended its Articles of Incorporation to change its name
to
PitBoss Entertainment, Inc.
NOTE
2- HISTORY
AND ORGANIZATION OF COMPANY (CONTINUED)
On
February 1, 2006, the Board of Directors Amended the Articles of Incorporation
to change its name and address from PitBoss Entertainment, Inc., to US Energy
Holdings, Inc. effective March 3, 2006.
On
February 3, 2006, Claude Eldridge was named Chairman/CEO and Secretary of US
Energy Holdings, Inc.
In
February, 2006, the Company amended its Articles of Incorporation to increase
the number of authorized shares to 75,000,000 shares at $0.001 par
value.
In
March
2006, US Energy Holdings, Inc. announced it will enter into a joint-venture
with
Houston-based Hawk Explorations, Inc. for the development and drilling of four
oil well sites and four natural gas sites.
NOTE
3- SIGNIFICANT ACCOUNTING POLICIES AND
PROCEDURES
Cash
and cash equivalents
The
Company maintains a cash balance in a non-interest bearing account that
currently does not exceed federally insured limits. For the purpose of the
statements of cash flows, all highly liquid investments with an original
maturity of three months or less are considered to be cash equivalents. Cash
equivalents include funds held in a Paypal account. There were no such cash
and
cash equivalents as of September 30, 2006.
Fixed
assets
Fixed
assets are recorded at cost. Minor additions and renewals are expensed in the
period incurred. Major additions and renewals are capitalized and depreciated
over their estimated useful lives. Depreciation is calculated using half year
convention over the estimated useful lives as follows:
Computers
and equipment 3 years
NOTE
3- SIGNIFICANT
ACCOUNTING POLICIES AND PROCEDURES (CONTINUED)
Impairment
of long-lived assets
Long-lived
assets held and used by the Company are reviewed for possible impairment
whenever events or circumstances indicate the carrying amount of an asset may
not be recoverable or is impaired. Management has not had any impairment
adjustments for the nine and three months ended September 30, 2006 and 2005,
respectively.
The
Company as of October 2005 and January 2006 ceased its former business plans.
The Company formerly recognized revenue when earned through affiliate programs.
The affiliate programs are with various companies whereby they will pay a
referral or commission for sales generated through a link on the Company’s
website. The affiliates generally took 30 days to process the commission once
the sale occurs. The Company recognized the commission once it was notified
of
the amount. For consulting, on-line marketing and sponsorship and appearance
income the Company recognizes revenue as services are performed.
Advertising
costs
The
Company expenses all costs of advertising as incurred. The advertising costs
are
included in general and administrative expenses in the condensed statements
of
operations for the nine months ended September 30, 2006 and 2005.
Oil
and Gas Exploration and Development
Property
Acquisition Costs
- Oil
and gas leasehold acquisition costs are capitalized and included in the balance
sheet caption properties, plants and equipment. Leasehold impairment is
recognized based on exploratory experience and management’s judgment. Upon
discovery of commercial reserves, leasehold costs are transferred to proved
properties.
Exploratory
Costs
-Geological
and geophysical costs and the costs of carrying and retaining undeveloped
properties are expensed as incurred. Exploratory well costs are capitalized,
or
“suspended,” on the balance
NOTE
3- SIGNIFICANT
ACCOUNTING POLICIES AND PROCEDURES (CONTINUED)
Exploratory
Costs (continued)
sheet
pending further evaluation of whether economically recoverable reserves have
been found. If economically recoverable reserves are not found, exploratory
well
costs are expensed as dry holes. If exploratory wells encounter potentially
economic quantities of oil and gas, the well costs remain capitalized on the
balance sheet as long as sufficient progress assessing the reserves and the
economic and operating viability of the project is being made. For complex
exploratory discoveries, it is not unusual to have exploratory wells remain
suspended on the balance sheet for several years while we perform additional
appraisal drilling and seismic work on the potential oil and gas field, or
we
seek government or co-venturer approval of development plans or seek
environmental permitting. Once all required approvals and permits have been
obtained, the projects are moved into the development phase and the oil and
gas
reserves are designated as proved reserves.
Unlike
leasehold acquisition costs, there is no periodic impairment assessment of
suspended exploratory well costs. In addition to reviewing suspended well
balances quarterly, management continuously monitors the results of the
additional appraisal drilling and seismic work and expenses the suspended well
costs as a dry hole when it judges that the potential field does not warrant
further investment in the near term.
Earnings
(Loss) Per Share of Common Stock
Historical
net (loss) per common share is computed using the weighted average number of
common shares outstanding. Diluted earnings per share (EPS) includes additional
dilution from common stock equivalents, such as stock issuable pursuant to
the
exercise of stock options and warrants. Common stock equivalents were not
included in the computation of diluted earnings per share when the Company
reported a loss because to do so would be anti-dilutive for periods presented.
As of September 31, 2005, the Company had 3,000,000 warrants
available.
NOTE
3- SIGNIFICANT ACCOUNTING POLICIES AND PROCEDURES
(CONTINUED)
Earnings
(Loss) Per Share of Common Stock (Continued)
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
Net
(Loss)
|
|
$
|
(853,576
|
)
|
$
|
(100,194
|
)
|
|
|
|
|
|
|
|
|
Weighed-average
common shares
|
|
|
|
|
|
|
|
outstanding
(Basic)
|
|
|
4,667,128
|
|
|
1,660,000
|
|
|
|
|
|
|
|
|
|
Weighed-average
common shares
|
|
|
|
|
|
|
|
equivalents:
|
|
|
|
|
|
|
|
Stock
options
|
|
|
-
|
|
|
-
|
|
Warrants
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Weighed-average
common shares
|
|
|
|
|
|
|
|
outstanding
(Diluted)
|
|
|
4,667,128
|
|
|
1,660,000
|
|
The
following is a reconciliation of the computation for basic and diluted EPS:
Start-up
costs
Reporting
on the costs of start-up activities Statement of Position 98-5 (SOP 98-5),
“Reporting on the Costs of Start-Up Activities,” which provides guidance on the
financial reporting of start- up costs and organizational costs, requires most
costs of start-up activities and organizational costs to be expensed as
incurred. SOP 98-5 is effective for fiscal years beginning after December 15,
1998. With the adoption of SOP 98-5, there has been little or no effect on
the
Company’s financial statements.
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 reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those
estimates.
Fair
value of financial instruments
Fair
value of financial instruments discussed herein are based upon certain market
assumptions and pertinent information available to management as of September
30, 2006 and 2005. The respective carrying value of certain balance sheet
financial instruments approximated their fair values. These financial
instruments include cash and equivalents, accounts receivable, prepaid expenses
and accounts payable and accrued expenses. Fair values were assumed to
approximate carrying values because they are short term in nature and their
carrying amounts approximate fair values or they are payable on
demand.
Reclassification
Certain
amounts for the period ended September 30, 2005 have been reclassified to
conform to the presentation of the September 30, 2006 amounts. The
reclassifications have no effect on the net loss for the period ended September
30, 2006.
Income
taxes
Deferred
income tax assets and liabilities are computed annually for differences between
the financial statement and tax basis of assets and liabilities that will result
in taxable or deductible amounts in the future based on enacted tax laws and
rates applicable on 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. Income tax expense
is
the tax payable or refundable for the period plus or minus the change during
the
period in deferred tax assets and liabilities.
Discontinued
Operations
In
accordance with SFAS No. 144, “Accounting for the Impairment or disposal of
Long-Lived Assets,” discontinued operations include components of entities or
entire entities that, through disposal transactions, will be eliminated from
the
on-going operations of the Company.
NOTE
3- SIGNIFICANT
ACCOUNTING POLICIES AND PROCEDURES (CONTINUED)
Recent
pronouncements
In
December 2004, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 151, “Inventory
Costs.” SFAS No. 151 requires abnormal amounts of inventory costs related
to idle facility, freight handling and wasted material expenses to be recognized
as current period charges. Additionally, SFAS No. 151 requires that
allocation of fixed production overheads to the costs of conversion be based
on
the normal capacity of the production facilities. The standard is effective
for
fiscal years beginning after June 15, 2005. The adoption of SFAS
No. 151 did not have a material impact on the Company’s financial position
or results of operations.
On
December 16, 2004, the Financial Accounting Standards Board (“FASB”) published
Statement of Financial Accounting Standards No. 123 (Revised 2004), “
Share-Based Payment ” (“SFAS 123R”). SFAS 123R requires that compensation cost
related to share-based payment transactions be recognized in the financial
statements. Share-based payment transactions within the scope of SFAS 123R
include stock options, restricted stock plans, performance-based awards, stock
appreciation rights, and employee share purchase plans. The provisions of FAS
123R, as amended, are effective for small business issuers beginning as of
the
next fiscal year after December 15, 2005. Accordingly, the Company will
implement the revised standard in the first quarter of fiscal year 2006.
Previously, the Company accounted for its share-based payment transactions
under
the provisions of APB 25, which does not necessarily require the recognition
of
compensation cost in the financial statements (note 3(e)). The adoption of
SFAS
No. 123R did not have a material impact on the Company’s financial
position, results of operations, or cash flows.
In
May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error
Corrections.” SFAS No. 154 replaces Accounting Principles Board (“APB”)
Opinion No. 20, “Accounting Changes” and SFAS No. 3, “Reporting
Accounting Changes in Interim Financial Statements.” SFAS No. 154 requires
retrospective application to prior periods’ financial statements of a voluntary
change in accounting principle unless it is impracticable. APB No. 20
previously required that most voluntary changes in accounting principle be
recognized by including the cumulative
NOTE
3- SIGNIFICANT
ACCOUNTING POLICIES AND PROCEDURES (CONTINUED)
Recent
pronouncements (continued)
effect
of
changing to the new accounting principle in net income in the period of the
change. SFAS No. 154 is effective for accounting changes
and
corrections of errors made in fiscal years beginning after December 15,
2005. The adoption of SFAS No. 154 did not have a material impact on the
Company’s 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 No. 155 resolves issues addressed in SFAS No. 133
Implementation Issue No. D1, “Application of Statement 133 to Beneficial
Interests in Securitized Financial Assets,” and permits fair value remeasurement
for any hybrid financial instrument that contains an embedded derivative that
otherwise would require bifurcation, clarifies which interest-only strips and
principal-only strips are not subject to the requirements of SFAS No. 133,
establishes a requirement to
evaluate
interests in securitized financial assets to identify interests that are
freestanding derivatives or that are hybrid financial instruments that contain
an embedded derivative requiring bifurcation, clarifies that concentrations
of
credit risk in the form of subordination are not embedded derivatives and amends
SFAS No. 140 to eliminate the prohibition on a qualifying special-purpose
entity from holding a derivative financial instrument that pertains to a
beneficial interest other than another derivative financial instrument. SFAS
No. 155 is effective for all financial instruments acquired or issued after
the beginning of the first fiscal year that begins after September 15,
2006. The adoption of FAS 155 is not anticipated to have a material impact
on
the Company’s financial position, results of operations, or cash
flows.
In
March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of
Financial Assets, an amendment of FASB Statement No. 140.” SFAS
No. 156 requires an entity to recognize a servicing asset or liability each
time it undertakes an obligation to service a financial asset by entering into
a
servicing contract under a transfer of the servicer’s financial assets that
meets the requirements for sale accounting, a transfer of the servicer’s
financial assets to a qualified special-purpose entity in a guaranteed mortgage
securitization in which the transferor retains all of the resulting securities
and classifies them as either available-for-sale or trading securities in
accordance with SFAS No. 115, “Accounting for Certain Investments in Debt
and Equity Securities” and an acquisition or
NOTE
3- SIGNIFICANT
ACCOUNTING POLICIES AND PROCEDURES (CONTINUED)
Recent
pronouncements (continued)
assumption
of an obligation to service a financial asset that does not relate to financial
assets of the servicer or its consolidated affiliates. Additionally, SFAS
No. 156 requires all separately recognized servicing assets and servicing
liabilities to be initially measured at fair value, permits an entity to choose
either the use of an amortization or fair value method for subsequent
measurements, permits at initial adoption a one-time reclassification of
available-for-sale securities to trading securities by entities with recognized
servicing rights and requires separate presentation of servicing assets and
liabilities subsequently measured at fair value and additional disclosures
for
all separately recognized servicing assets and liabilities. SFAS No. 156 is
effective for transactions entered into after the beginning of the first fiscal
year that begins after September 15, 2006. The adoption of FAS 156 is not
anticipated to have a material impact on the Company’s financial position or
results of operations.
In
September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157, Fair
Value Measurements,(“FAS
157”). This Standard defines fair value, establishes a framework for measuring
fair value in generally accepted accounting principles and expands disclosures
about fair value measurements. FAS 157 is effective for financial statements
issued for fiscal years beginning after November 15, 2007 and interim
periods within those fiscal years. The adoption of FAS 157 is not expected
to
have a material impact on the Company’s financial position, results of
operations or cash flows.
The
FASB
also issued in September 2006 Statement of Financial Accounting Standards
No. 158, Employers’
Accounting for Defined Benefit Pension and Other Postretirement Plans — an
amendment of FASB Statement No. 87, 88, 106 and 132(R),
(“FAS
158”) .
This
Standard requires recognition of the funded status of a benefit plan in the
statement of financial position. The Standard also requires recognition in
other
comprehensive income certain gains and losses that arise during the period
but
are deferred under pension accounting rules, as well as modifies the timing
of
reporting and adds certain disclosures. FAS 158 provides recognition and
disclosure elements to be effective as of the end of the fiscal year after
December 15, 2006 and measurement elements to be effective for fiscal years
ending after December 15, 2008. The Company has not yet analyzed the impact
FAS 158 will have on its financial condition, results of operations, cash flows
or disclosures.
NOTE
3- SIGNIFICANT
ACCOUNTING POLICIES AND PROCEDURES (CONTINUED)
NOTE
4- INCOME
TAXES
The
Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, “Accounting for Income Taxes” (SFAS No. 109), which requires
use of the liability method. SFAS No. 109 provides that deferred tax assets
and
liabilities are recorded based on the differences between the tax bases of
assets and liabilities and their carrying amounts for financial reporting
purposes, referred to as temporary differences. Deferred tax assets and
liabilities at the end of each period are determined using the currently enacted
tax rates applied to taxable income in the periods in which the deferred tax
assets and liabilities are expected to be settled or realized.
At
September 30, 2006, deferred tax assets consisted of the following:
At
September 30, 2006, the Company had accumulated deficits in the amount of
$3,502,996 available to offset future taxable income through 2026. The Company
established valuation allowances equal to the full amount of the deferred tax
assets due to the uncertainty of the utilization of the operating losses in
future periods.
NOTE
5- STOCKHOLDERS’
(DEFICIT)
As
of
June 30, 2006 the Company had 5,393,978 shares of common stock
outstanding.
On
January 10, 2006, the Company issued 500,000 shares of its $0.001 par value
common stock to an officer of the Company as compensation. The fair value was
$100,000.
Deferred
tax assets
|
|
$
|
1,050,900
|
|
Less:
valuation allowance
|
|
|
(1,050,900
|
)
|
|
|
|
|
|
Net
deferred tax assets
|
|
$
|
-
|
|
NOTE
5- STOCKHOLDERS’
(DEFICIT) (Continued)
On
March
28, 2006, the Company issued 2,255,000 shares of its $0.001 par value common
stock to individuals in a termination agreement. The fair value was
$586,300.
The
Company is authorized to issue 75,000,000 shares of its $0.001 par value common
stock.
On
July 8
2005, the Company reported and approved a 10 to 1 reverse split of its $0.001
par value common stock.
During
2005, the Company issued 97,898 shares of its $0.001 par value common stock
to
individuals in a termination agreement. The fair value was $
802,036.
All
share
and per share amounts have been retroactively restated to reflect the splits
discussed above.
NOTE
6- WARRANTS
AND OPTIONS
On
December 4, 2003, the Company issued one warrant to a consultant to purchase
3,000,000 shares of the Company’s $0.001 par value common stock. The warrant
exercise price is $0.50 per share of common stock and substantially all warrants
will expire on or before October 31, 2013. The warrant has been determined
to
have a market value of $777,357 using the Black- Scholes option pricing model
with a market value per common share of $0.50, a risk free rate of return of
4.41%, an exercise period of ten years and a volatility of 80% and was
discounted for the lack of marketability.
During
the nine months ended September 30, 2006, no warrants have been
exercised.
NOTE
7- LOAN
PAYABLE - OFFICERS
These
amounts represent loans payable to various current and former officers of the
Company for working capital needs, due on demand and without any repayment
terms.
NOTE
8- RELATED
PARTY TRANSACTIONS
During
the nine months ended September 30, 2006 and 2005, the Company paid the
president of the Company $0 and $6,500, respectively for his
services.
During
the nine months ended September 30, 2006 and 2005, the Company paid the
secretary of the Company $0 and $12,900, respectively for her
services.
During
the nine months ended September 30, 2006, the Company issued 500,000 shares
of
its $0.001 par value common stock to an officer of the Company as compensation
valued at $100,000.
During
the nine months ended September 30, 2006, one of the officers loans payable
to a
former officer of the Company was forgiven totaling $15,587 and is included
in
other income.
Office
space and services were provided without charge by an officer, director and
shareholder through December 2005. Such costs are immaterial to the financial
statements and, accordingly, have not been reflected therein. The officers
and
directors of the Company are involved in other business activities and may,
in
the future, become involved in other business opportunities. If a specific
business opportunity becomes available, such persons may face a conflict in
selecting between the Company and their other business interests. The Company
has not formulated a policy for the resolution of such conflicts.
NOTE
9- COMMITMENT
On
December 4, 2003, the Company executed a consulting agreement with Christopher
Pair to assist the Company with strategic planning and introducing potential
business partners and customers. The agreement provides for (a) consulting
fees
paid quarterly based on 20% of net revenues less certain revenues attributable
to revenues not associated with the contract and other expenses; and (b)
issuance of one warrant to purchase up to 3,000,000 shares of the Company’s
$0.001 par value common stock. Consulting fees associated with the warrant
were
based on a value of $0.50 per share. The value of the warrant was based on
the
then- market closing price of the Company’s common stock. The Company then
discounted both the then- market closing price because the shares issued and
options to purchase shares were restricted and the volume of trading of the
Company’s common stock that was not restricted
NOTE
9- COMMITMENT
(Conitnued)
was
relatively low. The resulting consulting expense recognized for the warrant
issuance was $777,356 for the year ended December 31, 2003. During the nine
months ended September 30, 2006, the Company has not paid or accrued any
consulting fees.
NOTE
10- GOING
CONCERN
As
shown
in the accompanying financial statements, the Company has sustained net
operating losses for the nine months ended September 30, 2006 and 2005, and
has
sustained large accumulated deficits.
The
Company’s future success is dependent upon its ability to achieve profitable
operations and generate cash from operating activities. At September 30, 2006
there is substantial doubt whether this can happen. There is no guarantee that
the Company will be able to generate revenues in the near future.
The
financial statements do not include any adjustments that might result from
the
outcome of this uncertainty.
The
Company formerly known as Karma Media, Inc. had operations in the first quarter
of 2005. The Company has ceased those operations and expects to initiate a
new
revenue recognition stream. The statement of operations for the third quarter
of
2005 shows all operating activities as discontinued operations.
Management’s
Discussion and Plan of Operation
Forward-Looking
Statements
This
Quarterly Report contains forward-looking statements about US Energy Holdings,
Inc.’s business, financial condition and prospects that reflect management’s
assumptions and beliefs based on information currently available. We can give
no
assurance that the expectations indicated by such forward-looking statements
will be realized. If any of our management’s assumptions should prove incorrect,
or if any of the risks and uncertainties underlying such expectations should
materialize, US Energy Holdings actual results may differ materially from those
indicated by the forward-looking statements.
The
key
factors that are not within our control and that may have a direct bearing
on
operating results include, but are not limited to, acceptance of our services,
our ability to expand our customer base, managements’ ability to raise capital
in the future, the retention of key employees and changes in the regulation
of
our industry.
There
may
be other risks and circumstances that management may be unable to predict.
When
used in this Quarterly Report, words such as, ”believes,” ”expects,”
“intends,” ”plans,” ”anticipates,” ”estimates”
and
similar expressions are intended to identify forward-looking statements,
although there may be certain forward-looking statements not accompanied by
such
expressions.
Management’s
Discussion and Plan of Operation
We
were
incorporated on January 01, 2006, and have begun our planned principal
operations. Our efforts to date have focused primarily on formation and
organization of our company and the development and implementation of our
business Natural Gas plan. During the three and nine months ended September
30,
2006 and 2005, we did not generate any revenues. We have generated a total
of $0
in revenues from our Natural Gas services. We do not have any long-term
agreements to provide our services to any customer. As a result, we are unable
to predict the stability of, and ability to continue to generate, ongoing
revenues.
For
the
nine and three months ended September 30, 2006, we incurred operating expenses
in our continued pursuit of our stated business objective of $869,173 and $56,
respectively. For the nine months ended September 30, 2006, these operating
expenses included $100,000 of compensation expense, $736,300 of consulting
services and $32,873 of general and administrative expenses. During the three
months ended September 30, 2006, a loan payable of $15,597 was forgiven and
included as other income.
The
net
result for the nine months ended September 30, 2006 was a loss of $853,576
or
($0.18) per share, and for the three months ended September 30, 2006 was income
of $15,541 or $0.00 per share.
We
expect
to incur ongoing losses for the next 12 months of operations unless we are
able
to increase our revenue generating ability significantly. Our independent
registered public accountant has expressed substantial doubt about our ability
to continue as a going concern as footnoted in the financial statements. If
our
business fails, our investors may face a complete loss of their
investment.
We
believe our cash on hand as of September 30, 2006 of $465 is not sufficient
to
continue operations for the next 12 months without generating revenues or
additional capital infusions. We cannot assume that any financing can be
obtained or, if obtained, that it will be on reasonable terms. Without
realization of additional capital, it would be unlikely for us to continue
as a
going concern.
US
Energy
Holdings, Inc. is an aspiring South Texas energy resource company with an
emphasis on oil and gas development drilling and production. Claude Eldridge,
US
Energy Holdings, Inc.'s new Chairman / CEO stated "I am dedicated to the
revitalization of jobs in the energy sector, as one of the world's most
important subjects it has become increasingly important for our company to
invest in our world's resources, technology, and economic future".
Mr.
Eldridge concluded, "US Energy Holdings, Inc. will also begin production in
virgin oil and gas rich resources that have become viable development plays
due
to technological advances, drilling innovation and rising market prices. US
Energy Holdings, Inc. will focus on the acquisition of long-life proven
resources that offer the opportunity to increase current production on producing
wells as well as begin new production on acquired properties for sites located
through new technology. The production costs are predictable and the proven
reserves minimize risk and ensure the protection of sustainable cash flow
earnings".
In
the
reporting quarter there was an outstanding issue of $15,597 owed to Mr. John
D.
Jarvis, these monies were loaned to the Company for legal and accounting fees.
Mr. Jarvis forgave the loan owed to him by the Company for consideration in
a
private business opportunity between Mr. Jarvis and Mr.
Eldridge.
We
do not
believe that our business is subject to seasonal factors. Our management does
not expect to incur costs related to research and development. We currently
do
not own any significant plant or equipment that we would seek to sell in the
near future.
The
company has not yet drilled the well sites described in Ozona Texas and that
factor has limited our ability to maintain our operating objectives. Our
management believes it is imperative to hire additional employees and/or
officers and directors within the next three to six months. If we are unable
to
hire additional personnel, either as employees, directors, officers or outside
consultants, we may be unable to continue operating as a going
concern.
US
Energy
Holdings does not have any off-balance sheet arrangements.
We
have
not paid for expenses on behalf of any of our directors. Additionally, we
believe that this fact shall not materially change.
Controls
and Procedures
We
maintain a set of disclosure controls and procedures designed to ensure that
information required to be disclosed in our reports filed under the Securities
Exchange Act, is recorded, processed, summarized and reported within the time
periods specified by the SEC’s rules and forms. Disclosure controls are also
designed with the objective of ensuring that this information is accumulated
and
communicated to our management, including our chief executive officer and chief
financial officer, as appropriate, to allow timely decisions regarding required
disclosure.
Based
upon their evaluation as of the end of the period covered by this report, our
chief executive officer and chief financial officer concluded that our
disclosure controls and procedures are not effective to ensure that information
required to be included in our periodic SEC filings is recorded, processed,
summarized, and reported within the time periods specified in the SEC rules
and
forms.
Our
board
of directors was advised by Bagell, Josephs, Levine & Company, L.L.C., our
independent registered public accounting firm, that during their performance
of
audit procedures for 2005 Bagell, Josephs, Levine & Company, L.L.C.
identified a material weakness as defined in Public Company Accounting Oversight
Board Standard No. 2 in our internal control over financial
reporting.
This
deficiency consisted primarily of inadequate staffing and supervision that
could
lead to the untimely identification and resolution of accounting and disclosure
matters and failure to perform timely and effective reviews. However, our size
prevents us from being able to employ sufficient resources to enable us to
have
adequate segregation of duties within our internal control system. Management
is
required to apply its judgment in evaluating the cost-benefit relationship
of
possible controls and procedures.
Item
1 Exhibits
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
|
|
US
ENERGY HOLDINGS, INC.
|
|
|
|
Date: November
20, 2006
|
By:
|
/s/Claude
Eldridge
|
|
Claude
Eldridge
|
|
Title:
Chairman,
Chief Executive Officer and Director
|