IMPERIAL PETROLEUM INC - 10-Q filing on 2012-03-21

GENERAL	6 Months Ended
Jan. 31, 2012
GENERAL	1. GENERAL The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for the interim periods presented have been included. Operating results for the periods presented are not necessarily indicative of the results, which may be expected for the year ending July 31, 2012. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended July 31, 2011. *Organization* Imperial Petroleum, Inc. (the “Company”), a publicly held corporation, was organized under the laws of the state of Nevada. The Company’s principal business consists of biodiesel production and oil and gas exploration and production in the United States. The Company, through its wholly-owned subsidiary, Arrakis Oil Recovery, LLC is developing and implementing a process for the recovery of heavy oil from mineable oil sands in the U.S. and internationally. At January 31, 2012, the Company has not fully implemented the oil recovery process. *Basis of Presentation* The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Ridgepointe Mining Company, Imperial Chemical Company (formerly The Rig Company), Hoosier Biodiesel Company (formerly Global-Imperial Joint Venture, Inc.), Arrakis Oil Recovery, LLC, and e-biofuels, LLC. All significant inter-company accounts and transactions have been eliminated in consolidation. *Use of Estimates* The presentation of financial statements in conformity with generally accepted U.S. accounting principles 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. *Cash and Cash Equivalents* For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. *Accounts Receivable* Accounts receivable are carried on a gross basis, with no discounting, less the allowance for doubtful accounts. We estimate the allowance for doubtful accounts based on existing economic conditions, the financial conditions of the customers, and the amount and the age of past due accounts. Receivables are considered past due if full payment is not received by the contractual due date. Past due accounts are generally written off against the allowance for doubtful accounts only after all collection attempts have been exhausted. There is no collateral held for accounts receivable. The allowance for doubtful accounts was $44,430 and $44,430 as of January 31, 2012 and July 31, 2011, respectively. Bad debt expense for the six months ended January 31, 2012 was $0. Bad debt expense for the year ended July 31, 2011, 2010, and 2009 was $44,430, $25,001 and $0, respectively. *Fair Value of Financial Instruments* Fair values of cash and cash equivalents, investments and short-term debt approximate their carrying values due to the short period of time to maturity. Fair values of long-term debt are based on quoted market prices or pricing models using current market rates, which approximate carrying values. See Note 12 for further details. *Concentrations of Credit Risk* Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and accounts receivable. The Company’s cash is deposited in three financial institutions. Cash and certificates of deposit at banks are insured by the FDIC up to $250,000. At times, the balances in these accounts may be in excess of federally insured limits. As of January 31, 2012, the Company had no deposits in excess of federally insured limits. The Company currently operates in the biodiesel production industry. The concentration of credit risk in a single industry affects the Company’s overall exposure to credit risk because customers may be similarly affected by changes in economic and other conditions. During the quarter ended January 31, 2012, the Company’s major purchasers of its biodiesel were 39% to Element Renewable Energy; 33% to Fusion Renewable and 19% to Ultra Green Energy Services. As of January 31, 2012, these three customers made up 0%, 0%, and 50% of the Company’s accounts receivable, respectively. During the year ended July 31, 2011, the Company’s major purchasers of its biodiesel were 36.3% to Fusion, 24.5% to Element, and 17.1% to Pilot. *Revenue Recognition* The Company derives revenue from sales of oil, gas, and biodiesel products. The Company recognizes revenue when a formal arrangement exists, the price is fixed or determinable, all obligations have been performed pursuant to the terms of the formal arrangement, and collectability is reasonably assured. The Company also derives revenues from government incentive programs relating to biodiesel production. These revenues are recognized when the amount of the incentive is reasonably determinable and collection is reasonably assured. *Oil and Gas Properties* The Company follows the full cost method of accounting for oil and gas properties. Accordingly, all costs associated with acquisition, exploration, and development of oil and gas reserves, including directly related overhead costs, are capitalized. All capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are amortized on the unit-of-production method using estimates of proved reserves. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is added to the capitalized costs to be amortized. In addition, the capitalized costs are subject to a “ceiling test,” which basically limits such costs to the aggregate of the “estimated present value,” discounted at a 10-percent interest rate of future net revenues from proved reserves, based on current economic and operating conditions, plus the lower of cost or fair market value of unproved properties. Sales of proved and unproved properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in income. See Note 13 for additional information on Oil and Gas Properties. *Other Property and Equipment* Property and equipment are stated at cost. Depreciation is computed by the straight-line method over the estimated useful lives of assets. Expenditures that significantly increase values or extend useful lives are capitalized. Expenditures for maintenance and repairs are charged to expenses as incurred. Upon sale or retirement of property and equipment, the cost and related accumulated depreciation and depletion are eliminated from the respective accounts and the resulting gain or loss is included in current earnings. Mining exploration costs are expensed as incurred. Development costs are capitalized. Depletion of capitalized mining costs will be calculated on the units of production method based upon current production and reserve estimates when placed in service. *Inventories* Inventories are stated at the lower of cost or market. The inventory as of January 31, 2012 and July 31, 2011 was $40,086 and $1,293,171, respectively. All inventory pertains to our operations at e-biofuels. The balance of the inventory as of January 31, 2012 is made up of $39,930 in raw materials and $156 in finished goods. The balance of the inventory as of July 31, 2011 was made up of $641,331 in raw materials and $651,840 in finished goods. There is no allowance for obsolete inventory as of January 31, 2012 or July 31, 2011. *Long-Lived Assets* Long-lived assets to be held and used or disposed of other than by sale are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. When required, impairment losses on assets to be held and used or disposed of other than by sale are recognized based on the fair value of the asset. Long-lived assets to be disposed of by sale are reported at the lower of its carrying amount of fair value less cost to sell. *Income Taxes* Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of change in tax rates is recognized in income in the period that includes the enactment date. *Earnings and Loss Per Common Share* Earnings (Loss) per common share-basic are computed by dividing reported net income (loss) by the weighted average common shares outstanding. Except where the result would be anti-dilutive, net income (loss) per common share-diluted has been computed assuming the exercise of stock warrants and stock options that are in-the-money as of period-end. *Reclassification* Certain reclassifications have been made to prior periods to conform to the current presentation. *Change of Control* In November 2011, the Company accepted the resignation of Jeffrey T. Wilson and Aaron M. Wilson from its Board of Directors. Mr. Jeffrey Wilson was the Chairman and President of the Company and resigned due to health issues. The original intent of the Company was to retain Mr. Wilson’s services as a technical consultant; however, the Company and Mr. Wilson were unable to reach a consulting agreement. In November, 2011, Mr. Aaron Wilson resigned to allow for the appointment of Mr. Tim Jones, who was also promoted to Chief Financial Officer and President of the Company’s e-biofuels, LLC subsidiary, to the Board. Mr. Aaron Wilson retained his title as President of the Company’s Arrakis Oil Recovery, LLC subsidiary. In November, 2011, the Board appointed Mr. John Ryer, a director of the Company, as its new Chief Executive Officer and President. In January 2011, Mr. Ryer resigned from the Board of Directors and as the Chief Executive Officer due to personal reasons. There were no disputes between Mr. Ryer and management of the Company or with its auditors. Mr. Robert Willmann was approved by the Board to replace Mr. Ryer as a Director until the next regular shareholders meeting. In December 2011, Mr. Ben Campbell resigned as a director of the Company. In December 2011, Mr. Greg Thagard was appointed to the position of Chairman of the Board. In January 2012, Mr. Tim Jones was approved as interim CEO and President of the Company. In February 2012, the Company accepted the resignation of Mr. Robert Willmann from its Board of Directors. Mr. Willmann resigned due to time constraints and had no disagreements with the Management of the Company or with its independent accountants. In February 2012, Mr. Aaron Wilson was terminated from his position as President of Arrakis Oil Recovery, LLC due to cash constraints. *Recent Accounting Pronouncements* The FASB issued ASC subtopic 855-10 (formerly SFAS 165 “Subsequent Events”), incorporating guidance on subsequent events into authoritative accounting literature and clarifying the time following the balance sheet date which management reviewed for events and transactions that may require disclosure in the financial statements. The Company has adopted this standard. The standard increased our disclosure by requiring disclosure reviewing subsequent events. ASC 855-10 is included in the “Subsequent Events” accounting guidance. In June 2011, the FASB issued ASU 2011-05 Comprehensive Income (Topic 220 - Presentation of Comprehensive Income). Under this amendment, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This Update eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments in this Update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. For public entities, the amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. We are evaluating the provisions of ASU 2011-05 and do not believe it will have a material impact on the Company’s consolidated financial statements. In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This ASU represents the converged guidance of the FASB and the IASB (the Boards) on fair value measurement. The collective efforts of the Boards and their staffs, reflected in ASU 2011-04, have resulted in common requirements for measuring fair value and for disclosing information about fair value measurements, including a consistent meaning of the term “fair value.” The Boards have concluded the common requirements will result in greater comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRSs. The amendments to the FASB Accounting Standards Codification™ (Codification) in this ASU are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. Early application is not permitted. We are evaluating the provisions of ASU 2011-04 and do not believe it will have a material impact on the Company’s consolidated financial statements. In June 2011, the FASB issued Presentation of Comprehensive Income under ASU 2011-05 or ASU 2011-05. ASU 2011-05 requires the presentation of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. ASU 2011-05 will be effective for the Company’s first quarter of fiscal year 2013. The adoption of ASU 2011-05 may require a change in the presentation of the Company’s comprehensive income from the statement of capital shares and equities to the presentation of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The amendments in ASU 2011-05 are to be applied retrospectively. The adoption of ASU 2011-05 is not expected to have a material effect on the Company’s condensed financial statements. In September 2011, the FASB issued Testing Goodwill for Impairment under ASU 2011-08, which is intended to reduce the cost and complexity of the annual goodwill impairment test by providing entities with the option of performing a qualitative assessment to determine whether impairment testing is necessary. The revised standard will be effective for annual and interim goodwill impairment tests performed beginning in the first quarter of fiscal year 2012, with early adoption permitted under certain circumstances. The Company is currently evaluating options related to early adoption. Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future financial statements *International Financial Reporting Standards* In November 2008, the Securities and Exchange Commission (“SEC”) issued for comment a proposed roadmap regarding potential use of financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. Under the proposed roadmap, the Company would be required to prepare financial statements in accordance with IFRS in fiscal year 2014, including comparative information also prepared under IFRS for fiscal 2013 and 2012. The Company is currently assessing the potential impact of IFRS on its financial statements and will continue to follow the proposed roadmap for future developments.

GENERAL

6 Months Ended

Jan. 31, 2012

1. GENERAL

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for the interim periods presented have been included. Operating results for the periods presented are not necessarily indicative of the results, which may be expected for the year ending July 31, 2012. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended July 31, 2011.

Organization

Imperial Petroleum, Inc. (the “Company”), a publicly held corporation, was organized under the laws of the state of Nevada.

The Company’s principal business consists of biodiesel production and oil and gas exploration and production in the United States. The Company, through its wholly-owned subsidiary, Arrakis Oil Recovery, LLC is developing and implementing a process for the recovery of heavy oil from mineable oil sands in the U.S. and internationally. At January 31, 2012, the Company has not fully implemented the oil recovery process.

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Ridgepointe Mining Company, Imperial Chemical Company (formerly The Rig Company), Hoosier Biodiesel Company (formerly Global-Imperial Joint Venture, Inc.), Arrakis Oil Recovery, LLC, and e-biofuels, LLC. All significant inter-company accounts and transactions have been eliminated in consolidation.

Use of Estimates

The presentation of financial statements in conformity with generally accepted U.S. accounting principles 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 revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

Accounts Receivable

Accounts receivable are carried on a gross basis, with no discounting, less the allowance for doubtful accounts. We estimate the allowance for doubtful accounts based on existing economic conditions, the financial conditions of the customers, and the amount and the age of past due accounts. Receivables are considered past due if full payment is not received by the contractual due date. Past due accounts are generally written off against the allowance for doubtful accounts only after all collection attempts have been exhausted. There is no collateral held for accounts receivable. The allowance for doubtful accounts was $44,430 and $44,430 as of January 31, 2012 and July 31, 2011, respectively. Bad debt expense for the six months ended January 31, 2012 was $0. Bad debt expense for the year ended July 31, 2011, 2010, and 2009 was $44,430, $25,001 and $0, respectively.

Fair Value of Financial Instruments

Fair values of cash and cash equivalents, investments and short-term debt approximate their carrying values due to the short period of time to maturity. Fair values of long-term debt are based on quoted market prices or pricing models using current market rates, which approximate carrying values. See Note 12 for further details.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and accounts receivable.

The Company’s cash is deposited in three financial institutions. Cash and certificates of deposit at banks are insured by the FDIC up to $250,000. At times, the balances in these accounts may be in excess of federally insured limits. As of January 31, 2012, the Company had no deposits in excess of federally insured limits.

The Company currently operates in the biodiesel production industry. The concentration of credit risk in a single industry affects the Company’s overall exposure to credit risk because customers may be similarly affected by changes in economic and other conditions. During the quarter ended January 31, 2012, the Company’s major purchasers of its biodiesel were 39% to Element Renewable Energy; 33% to Fusion Renewable and 19% to Ultra Green Energy Services. As of January 31, 2012, these three customers made up 0%, 0%, and 50% of the Company’s accounts receivable, respectively. During the year ended July 31, 2011, the Company’s major purchasers of its biodiesel were 36.3% to Fusion, 24.5% to Element, and 17.1% to Pilot.

Revenue Recognition

The Company derives revenue from sales of oil, gas, and biodiesel products. The Company recognizes revenue when a formal arrangement exists, the price is fixed or determinable, all obligations have been performed pursuant to the terms of the formal arrangement, and collectability is reasonably assured. The Company also derives revenues from government incentive programs relating to biodiesel production. These revenues are recognized when the amount of the incentive is reasonably determinable and collection is reasonably assured.

Oil and Gas Properties

The Company follows the full cost method of accounting for oil and gas properties. Accordingly, all costs associated with acquisition, exploration, and development of oil and gas reserves, including directly related overhead costs, are capitalized. All capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are amortized on the unit-of-production method using estimates of proved reserves. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is added to the capitalized costs to be amortized.

In addition, the capitalized costs are subject to a “ceiling test,” which basically limits such costs to the aggregate of the “estimated present value,” discounted at a 10-percent interest rate of future net revenues from proved reserves, based on current economic and operating conditions, plus the lower of cost or fair market value of unproved properties.

Sales of proved and unproved properties are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in income.

See Note 13 for additional information on Oil and Gas Properties.

Other Property and Equipment

Property and equipment are stated at cost. Depreciation is computed by the straight-line method over the estimated useful lives of assets. Expenditures that significantly increase values or extend useful lives are capitalized. Expenditures for maintenance and repairs are charged to expenses as incurred. Upon sale or retirement of property and equipment, the cost and related accumulated depreciation and depletion are eliminated from the respective accounts and the resulting gain or loss is included in current earnings.

Mining exploration costs are expensed as incurred. Development costs are capitalized. Depletion of capitalized mining costs will be calculated on the units of production method based upon current production and reserve estimates when placed in service.

Inventories

Inventories are stated at the lower of cost or market. The inventory as of January 31, 2012 and July 31, 2011 was $40,086 and $1,293,171, respectively. All inventory pertains to our operations at e-biofuels. The balance of the inventory as of January 31, 2012 is made up of $39,930 in raw materials and $156 in finished goods. The balance of the inventory as of July 31, 2011 was made up of $641,331 in raw materials and $651,840 in finished goods. There is no allowance for obsolete inventory as of January 31, 2012 or July 31, 2011.

Long-Lived Assets

Long-lived assets to be held and used or disposed of other than by sale are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. When required, impairment losses on assets to be held and used or disposed of other than by sale are recognized based on the fair value of the asset. Long-lived assets to be disposed of by sale are reported at the lower of its carrying amount of fair value less cost to sell.

Income Taxes

Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of change in tax rates is recognized in income in the period that includes the enactment date.

Earnings and Loss Per Common Share

Earnings (Loss) per common share-basic are computed by dividing reported net income (loss) by the weighted average common shares outstanding. Except where the result would be anti-dilutive, net income (loss) per common share-diluted has been computed assuming the exercise of stock warrants and stock options that are in-the-money as of period-end.

Reclassification

Certain reclassifications have been made to prior periods to conform to the current presentation.

Change of Control

In November 2011, the Company accepted the resignation of Jeffrey T. Wilson and Aaron M. Wilson from its Board of Directors. Mr. Jeffrey Wilson was the Chairman and President of the Company and resigned due to health issues. The original intent of the Company was to retain Mr. Wilson’s services as a technical consultant; however, the Company and Mr. Wilson were unable to reach a consulting agreement.

In November, 2011, Mr. Aaron Wilson resigned to allow for the appointment of Mr. Tim Jones, who was also promoted to Chief Financial Officer and President of the Company’s e-biofuels, LLC subsidiary, to the Board. Mr. Aaron Wilson retained his title as President of the Company’s Arrakis Oil Recovery, LLC subsidiary.

In November, 2011, the Board appointed Mr. John Ryer, a director of the Company, as its new Chief Executive Officer and President. In January 2011, Mr. Ryer resigned from the Board of Directors and as the Chief Executive Officer due to personal reasons. There were no disputes between Mr. Ryer and management of the Company or with its auditors. Mr. Robert Willmann was approved by the Board to replace Mr. Ryer as a Director until the next regular shareholders meeting.

In December 2011, Mr. Ben Campbell resigned as a director of the Company.

In December 2011, Mr. Greg Thagard was appointed to the position of Chairman of the Board.

In January 2012, Mr. Tim Jones was approved as interim CEO and President of the Company.

In February 2012, the Company accepted the resignation of Mr. Robert Willmann from its Board of Directors. Mr. Willmann resigned due to time constraints and had no disagreements with the Management of the Company or with its independent accountants.

In February 2012, Mr. Aaron Wilson was terminated from his position as President of Arrakis Oil Recovery, LLC due to cash constraints.

Recent Accounting Pronouncements

The FASB issued ASC subtopic 855-10 (formerly SFAS 165 “Subsequent Events”), incorporating guidance on subsequent events into authoritative accounting literature and clarifying the time following the balance sheet date which management reviewed for events and transactions that may require disclosure in the financial statements. The Company has adopted this standard. The standard increased our disclosure by requiring disclosure reviewing subsequent events. ASC 855-10 is included in the “Subsequent Events” accounting guidance.

In June 2011, the FASB issued ASU 2011-05 Comprehensive Income (Topic 220 - Presentation of Comprehensive Income). Under this amendment, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This Update eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. The amendments in this Update do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. For public entities, the amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. We are evaluating the provisions of ASU 2011-05 and do not believe it will have a material impact on the Company’s consolidated financial statements.

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This ASU represents the converged guidance of the FASB and the IASB (the Boards) on fair value measurement. The collective efforts of the Boards and their staffs, reflected in ASU 2011-04, have resulted in common requirements for measuring fair value and for disclosing information about fair value measurements, including a consistent meaning of the term “fair value.” The Boards have concluded the common requirements will result in greater comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRSs. The amendments to the FASB Accounting Standards Codification™ (Codification) in this ASU are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. Early application is not permitted. We are evaluating the provisions of ASU 2011-04 and do not believe it will have a material impact on the Company’s consolidated financial statements.

In June 2011, the FASB issued Presentation of Comprehensive Income under ASU 2011-05 or ASU 2011-05. ASU 2011-05 requires the presentation of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. ASU 2011-05 will be effective for the Company’s first quarter of fiscal year 2013. The adoption of ASU 2011-05 may require a change in the presentation of the Company’s comprehensive income from the statement of capital shares and equities to the presentation of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The amendments in ASU 2011-05 are to be applied retrospectively. The adoption of ASU 2011-05 is not expected to have a material effect on the Company’s condensed financial statements.

In September 2011, the FASB issued Testing Goodwill for Impairment under ASU 2011-08, which is intended to reduce the cost and complexity of the annual goodwill impairment test by providing entities with the option of performing a qualitative assessment to determine whether impairment testing is necessary. The revised standard will be effective for annual and interim goodwill impairment tests performed beginning in the first quarter of fiscal year 2012, with early adoption permitted under certain circumstances. The Company is currently evaluating options related to early adoption.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future financial statements

International Financial Reporting Standards

In November 2008, the Securities and Exchange Commission (“SEC”) issued for comment a proposed roadmap regarding potential use of financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. Under the proposed roadmap, the Company would be required to prepare financial statements in accordance with IFRS in fiscal year 2014, including comparative information also prepared under IFRS for fiscal 2013 and 2012. The Company is currently assessing the potential impact of IFRS on its financial statements and will continue to follow the proposed roadmap for future developments.