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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

(Mark One)
PQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended:  July 31, 2011

£TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
 For the transition period from to

Commission file number: 000-49870

Big Cat Energy Corporation
(Exact name of small business issuer as specified in its charter)

Nevada
61-1500382
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)

121 W. Merino St.
PO Box 500
Upton, WY 82730
(Address of principal executive offices)

(307) 468-9369
(Issuer’s telephone number)

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 PNo £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
Accelerated filer
Non-accelerated filer
PSmaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes £No P

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 67,590,403 shares of common stock, $.0001 par value as of September 14, 2011

 
1

 


BIG CAT ENERGY CORPORATION

INDEX

   
Page
     
PART 1.
FINANCIAL INFORMATION
 
   
 
ITEM 1.
FINANCIAL STATEMENTS
 
       
   
Condensed Balance Sheets as of July 31, 2011 (Unaudited) and April 30, 2011
3
       
   
Condensed Statements of Operations for the three months ended July 31, 2011 and 2010, and for the cumulative period from June 19, 1997 (inception) through July 31, 2011 (Unaudited)
 
4
       
   
Condensed Statements of Cash Flows for the three months ended July 31, 2011 and 2010, and for the cumulative period from June 19, 1997 (inception) through July 31, 2011 (Unaudited)
 
5
       
   
Condensed Statement of Shareholders’ Equity for the three months ended July 31, 2011 and the cumulative period from June 19, 1997 (inception) through July 31, 2011 (Unaudited)
 
6
       
   
Notes to Unaudited Condensed Financial Statements
7
       
 
ITEM 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
14
       
 
ITEM 4T.
CONTROLS AND PROCEDURES
18
   
PART II.
OTHER INFORMATION
20
   
 
ITEM 1.
Legal Proceedings
20
       
 
ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds
20
       
 
ITEM 3.
Default Upon Senior Securities
20
       
 
ITEM 4.
Submission of Matters to a Vote of Security Holders
20
       
 
ITEM 5.
Other Information
20
       
 
ITEM 6.
EXHIBITS
20
   
 
SIGNATURES
21



 
2

 


PART I.

ITEM 1.  FINANCIAL STATEMENTS.

BIG CAT ENERGY CORPORATION
(A Development Stage Company)
Condensed Balance Sheets

   
July 31, 2011
   
April 30, 2011
 
   
(Unaudited)
       
ASSETS
 
Current Assets:
           
Cash and cash equivalents
  $ 23,411     $ 3,806  
Accounts receivable-trade
    13,922       12,578  
Inventory
    19,615       19,615  
Marketable securities, available for sale
    176,834       739,180  
Prepaid expenses and other current assets
    9,733       9,233  
Total current assets
    243,515       784,412  
                 
Furniture and Equipment, at cost
               
Equipment leased
    1,006       1,509  
Furniture and equipment, net of accumulated depreciation
    5,959       6,855  
Total
    6,965       8,364  
                 
Intangible Assets, net
    113,574       111,453  
                 
Total Assets
  $ 364,054     $ 904,229  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
                 
Current Liabilities:
               
Accounts payable and accrued liabilities
  $ 230,174     $ 175,453  
Deferred salaries
    128,250       128,250  
Deferred revenue
    1,250       6,875  
                   Total current liabilities
    359,674       310,578  
                 
Stockholders’ Equity:
               
Common stock - $.0001 par value; 100,000,000 shares authorized; 67,590,403 shares issued and outstanding
    6,759       6,759  
Additional paid-in capital
    12,508,825       12,508,825  
Accumulated other comprehensive income (loss)
    --       221,754  
(Deficit) incurred during the development stage
    (12,511,204 )     (12,143,687 )
Total stockholders’ equity
    4,380       593,651  
                 
Total Liabilities and Stockholders’ Equity
  $ 364,054     $ 904,229  

See accompanying notes to condensed financial statements.


 
3

 


BIG CAT ENERGY CORPORATION
 
(A Development Stage Company)
 
Condensed Statements of Operations
 
(Unaudited)
 
   
   
   
   
 
For the Three Months Ended
July 31,
   
June 19, 1997
(Inception)
Through
July 31,
 
   
2011
   
2010
   
2011
 
Revenues
                 
       Sales
  $ 12,000     $ --     $ 92,000  
       Lease revenue
    5,625       24,375       284,375  
       Other
    114       --       17,601  
      17,739       24,375       393,976  
Cost of ARID tools sold
    503       --       12,539  
        Gross margin
    17,236       24,375       381,437  
                         
Costs and expenses:
                       
Personnel costs
    82,864       112,688       9,070,274  
Professional fees
    7,015       54,979       861,746  
Research and development
    --       --       14,010  
Selling expense
    56,039       57,831       1,179,566  
Depreciation and amortization
    2,570       2,414       34,386  
Other general and administrative expenses
    9,832       15,392       710,429  
                         
Operating Loss
    (141,084 )     (218,929 )     (11,488,974 )
                         
Other Income (Expense)
                       
       Interest income
    1       480       124,385  
       (Loss) on sale of marketable securities
    (59,425 )     --       (59,425 )
       Valuation (loss) on marketable securities
    (167,009 )     --       (167,009 )
       Litigation proceeds
    --       --       30,000  
       (Loss) on valuation from private placement
    --       --       (433,000 )
      (226,433 )     480       (505,049 )
Loss before discontinued operations
    (367,517 )     (218,449 )     (11,994,023 )
                         
Discontinued operations
    --       --       (517,181 )
                         
Net loss
  $ (367,517 )   $ (218,449 )   $ (12,511,204 )
                         
Net loss per share
  $ (0.01 )   $ (0.01 )        
Weighted average number of common shares outstanding-basic and diluted
    67,590,403       43,657,776          

See accompanying notes to condensed financial statements.


 
4

 


BIG CAT ENERGY CORPORATION
 
(A Development Stage Company)
 
Condensed Statements of Cash Flows
 
(Unaudited)
 
   
 
For the Three Months Ended
July 31,
   
June 19, 1997
(Inception)
Through
July 31,
 
   
2011
   
2010
   
2011
 
Cash Flows From Operating Activities:
                 
Net Loss
  $ (367,517 )   $ (218,449 )   $ (12,511,204 )
Adjustments to reconcile net loss to net cash used by operating activities:
                       
     Depletion, depreciation and amortization
    2,570       2,414       34,386  
     Stock based compensation
    --       14,350       6,470,396  
     Stock in lieu of payment
    --       18,167       28,667  
     Contributed services and other
    --       --       10,425  
     Cash flow from discontinued operations
    --       --       833,369  
     Valuation loss on marketable securities
    167,009       --       167,009  
     Loss on sale of marketable securities
    59,425       --       59,425  
     Sale of leased equipment
    503       --       503  
     Inventory write off
    --       --       6,538  
     Changes in operating assets and liabilities:
                       
         Accounts receivable
    (1,344 )     --       (13,922 )
         Prepaid and other
    (500 )     1,267       (9,733 )
         Payables and accrued liabilities
    54,721       8,489       230,174  
         Deferred revenue
    (5,625 )     (24,375 )     1,250  
         Deferred salaries
    --       30,000       128,250  
Net cash provided by (used in)
                       
operating activities
    (90,758 )     (168,137 )     (4,564,467 )
Cash flows from investing activities:
                       
Purchase of unproven oil and gas properties
    --       --       (1,794,231 )
Purchase of inventory
    --       --       (27,662 )
Purchase of equipment
    --       --       (19,520 )
Proceeds from sale of marketable securities
    114,158       --       114,158  
Other assets
    (3,795 )     (11,139 )     (110,410 )
Cash used in discontinued operations
    --       --       (133,757 )
Net cash provided by (used in)
                       
investing activities
    110,363       (11,139 )     (1,971,422 )
Cash flows from financing activities:
                       
Proceeds from related party advances
    --       --       62,618  
Repayment of related party advances
    --       --       (40,036 )
Proceeds from the sale of common stock
    --       --       6,307,901  
Payments for offering costs
    --       --       (21,752 )
Cash flow provided by discontinued operations
    --       --       250,569  
Net cash provided by
                       
financing activities
    --       --       6,559,300  
                         
Net Increase (Decrease) in cash and
                       
cash equivalents
    19,605       (179,276 )     23,411  
Cash and cash equivalents:
                       
Beginning of period
    3,806       192,312       --  
                         
End of period
  $ 23,411     $ 13,036     $ 23,411  
                         
Noncash investing and financing transactions:
                       
 Forgiveness of debt by related party, accounted for as  capital contributed
  $ --     $ --     $ 22,582  
Stock issued to related party for ARID  technology
  $ --     $ --     $ 23,990  
Spin off of Sterling Oil & Gas
  $ --     $ --     $ 1,794,231  
Change other comprehensive income (loss)
  $ (221,754 )   $ --     $ --  
See accompanying notes to condensed financial statements.

 
5

 




BIG CAT ENERGY CORPORATION
 
(A Development Stage Company)
 
Condensed Statements of Changes in Stockholders’ Equity
 
For the Three Months ended July 31, 2011and
 
the Cumulative Period from June 19, 1997 (Inception) Through July 31, 2011
 
(Unaudited)
 
   
Common Stock
   
Additional Paid-in Capital
   
(Deficit) Incurred During
Development Stage
   
accumulated Other
Compre-hensive
   
Total
 
   
Shares
   
Par value $.0001
   
Income
 
                                     
Balance, at Inception (June 19, 1997)
                                   
Stock issued for services upon inception at June 19, 1997 issued at par
    500,000     $ 50     $     $     $ --     $ 50  
Common stock cancelled March 2002
    (500,000 )     (50 )                 --       (50 )
Sale of common stock at $0.10 per share, April  2002
    1,114,000       111       111,289              --       111,400  
Contributed services (January  2000 through April  2003)
                10,425              --       10,425  
Cumulative net (loss)
                      (132,543 )     --       (132,543 )
Balance, April 30, 2005
    1,114,000       111       121,714       (132,543 )     --       (10,718 )
Sale of common stock (March through April  2006) at $0.05 per share
    7,400,000       740       369,260              --       370,000  
Sale of common stock (March 2006 at $0.01 per share
    2,500,000       250       24,750       --        --       25,000  
Common stock issued in exchange for assets
    12,450,000       1,245       22,745       --        --       23,990  
Net (loss)
                      (145,182 )     --       (145,182 )
Balance, April 30, 2006
    23,464,000       2,346       538,469       (277,725 )     --       263,090  
Sale of common stock (May through June 2006) at $0.50 per share
    4,065,000       407       2,032,093              --       2,032,500  
Sale of common stock (January 2007) at $0.75 per share
    2,012,000       201       1,508,799              --       1,509,000  
Offering costs
                (21,752 )           --       (21,752 )
Contributed capital
                22,582             --       22,582  
Stock-based compensation
                1,840,000             --       1,840,000  
Net (loss)
                      (2,639,221 )     --       (2,639,221 )
Balance, April 30, 2007
    29,541,000       2,954       5,920,191       (2,916,946 )     --       3,006,199  
Sale of common stock (October 2007) at $1.00 per share
    500,000       50       499,950              --       500,000  
Sale of units (April 2008) at $0.50 per unit
    1,000,000       100       499,900              --       500,000  
Spin off Sterling subsidiary
                (844,050 )           --       (844,050 )
Stock-based compensation
                2,360,000             --       2,360,000  
Net (loss)
                      (4,378,294 )     --       (4,378,294 )
Balance, April 30, 2008
    31,041,000       3,104       8,435,991       (7,295,240 )     --       1,143,855  
 
Sale of units (May 2008) at $0.50 per unit
     1,000,000        100        499,900          --          --       500,000  
Stock based compensation
    --       --       1,543,625       --       --       1,543,625  
Net (loss)
    --       --       --       (2,664,180 )     --       (2,664,180 )
Balance, April 30, 2009
    32,041,000       3,204       10,479,516       (9,959,420 )             523,300  
Sale of units (July 2009) at $0.05 per unit
     10,000,000        1000       499,000          --          --        500,000  
Sale of units (April 2010) at $0.05 per unit
    1,200,000       120       59,880       --       --       60,000  
Stock in lieu of payment at $0.05 per share
    240 000       24       11,976       --       --       12,000  
Stock based compensation
    --       --       121,565       --       --       121,565  
Net (loss)
    --       --       --       (1,050,294 )     --       (1,050,294 )
Balance, April 30, 2010
    43,481,000       4,348       11,171,937       (11,009,714 )     --       166,571  
  Stock in lieu of payroll at $0.09 per share
    363,334       36       32,664       --       --       32,700  
   Stock in lieu of  payroll at $0.10 per share
    3,579,402       358       357,582       --       --       357,940  
   Stock in lieu of payment at $0.10 per share
    166,667       17       16,650       --       --       16,667  
  Unrealized gain on marketable securities
    --       --       --       --       221,754       221,754  
  Sale of units (January 2011) at $0.03 per Unit
    20,000,000       2,000       715,426       --       --       717,426  
  Stock based compensation
    --       --       214,566       --       --       214,566  
  Net (loss)
    --       --       --       (1,133,973 )     --       (1,133,973 )
Balance, April 30, 2011
    67,590,403       6,759       12,508,825       (12,143,687 )     221,754       593,651  
  Unrealized (loss) on marketable securities
    --       --       --       --       (221,754 )     (221,754 )
  Net (loss)
    --       --       --       (367,517 )     --       (367,517 )
Balance July 31, 2011
    67,590,403     $ 6,759     $ 12,508,825     $ (12,511,204 )   $ --     $ 4,380  

See accompanying notes to condensed financial statements.

 
6

 


BIG CAT ENERGY CORPORATION
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)

Note 1:  Presentation, Organization and Nature of Operations

Presentation

The accompanying unaudited financial statements of Big Cat Energy Corporation (the “Company”) at July 31, 2011 and 2010 have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial statements pursuant to, instructions to Form 10-Q, and Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. These condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended April 30, 2011. In management’s opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation to make the Company’s financial statements not misleading have been included. The results of operations for the period ended July 31, 2011 and 2010 presented are not necessarily indicative of the results to be expected for the full year. The April 30, 2011 balance sheet has been derived from the Company’s audited financial statements included in the Company’s annual report on Form 10-K for the year ended April 30, 2011.

Description of Operations

Big Cat Energy Corporation (“Big Cat” or the “Company”), a Nevada corporation, owns the exclusive right to a patented technology known as Aquifer Recharge Injection Device (“ARID”) which allows Coal Bed Methane (“CBM”) operators to re-inject water produced from productive coal seams.  The Company is in the development stage in accordance with FASB Accounting Standards Codification (“ASC”) 915, Development Stage Entities. The Company has been in the development stage since inception and has yet to generate any significant revenue-producing operations. Activities since its inception have primarily involved its organization, development of the Company and more recently, its ARID initiative.

Note 2:  Liquidity

Going Concern

As of July 31, 2011, the Company had a working capital deficit of $116,159 and stockholders’ equity of $4,380. The Company has realized minimal revenues and has incurred significant losses from operations and used significant cash flow to fund operations for the periods presented in this Quarterly Report. Historically, Big Cat has relied upon outside investor funds to maintain its operations and develop its business. Big Cat’s plan for continuation anticipates continued funding from investors and receipt of approved proposals. This funding would be used for operations, for working capital, as well as business expansion during the upcoming fiscal year. The Company can provide no assurance that additional investor funds will be available on terms acceptable to the Company. These conditions raise substantial doubt about Big Cat’s ability to continue operations as a going concern.


 
7

 


Big Cat’s ability to continue as a going concern is dependent upon raising capital through debt or equity financing and ultimately by increasing revenue and achieving profitable operations. The Company can offer no assurance that it will be successful in its efforts to raise additional proceeds or achieve profitable operations. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities in the normal course of business.

Note 3:  Summary of Accounting Policies:

Use of Estimates – The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amount 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 periods.  Actual results could differ from those estimates.

Cash and Cash EquivalentsCash and cash equivalents include cash on hand, amounts held in banks and highly liquid investments purchased with an original maturity of three months or less.

Advertising-The Company expenses advertising costs as they are incurred.

Intangible Assets – The Company capitalized the costs to patent the ARID process and ARID trademark. These costs are being amortized over the life, twenty (20) years, of the patents on a straight line basis. The intangibles serve as collateral for the accrued deferred salaries.  The Company expects to record amortization expense for subsequent periods as follows:

FY 2011                      $6,714
FY 2012                      $6,720
FY 2013                      $6,720
FY 2014                      $6,720
FY 2015                      $6,720
Thereafter                      $79,980

The Company accounts for intangibles in accordance with ASC 350, Intangible-Goodwill and Other. The Company evaluates intangibles, at a minimum, on a annual basis and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. Impairment of intangibles is tested by comparing the carrying amount to the fair value. The fair values are estimated using discounted projected cash flows. If the carrying amount exceeds its fair value, intangibles are considered impaired and a second step is performed to measure the amount of impairment loss, if any. The Company evaluates the impairment of intangibles as of the end of each fiscal year or whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable. These circumstances include:
·  
a significant decrease in the market value of an asset;
·  
a significant adverse change in the extent or manner in which an asset is used; or
·  
an accumulation of costs significantly in excess of the amount originally expected for the acquisition of an asset.

The Company did not recognize an impairment expense related to intangible assets during the periods ended July 31, 2011 or 2010.

 
8

 


Concentrations of Credit Risk – The Company’s cash equivalents are exposed to concentrations of credit risk.  The Company manages and controls this risk by investing the cash equivalents and short term investments with major financial institutions.

Furniture and Equipment Furniture and equipment is stated at cost.  Depreciation is provided on furniture, fixtures and equipment using the straight-line method over an estimated service life of three to seven years.

The cost of normal maintenance and repairs is charged to operating expenses as incurred.  Material expenditures which increase the life of an asset are capitalized and depreciated over the estimated remaining useful life of the asset.

Concentration of Customer Base - The Company had one leasing customer and three leasing customers during the periods ended July 31, 2011 and 2010. The Company had a single purchaser of the ARID tool during the period ended July 31, 2011.

Income Taxes – Income taxes are accounted for by recognizing deferred income tax assets and liabilities for the expected future income tax consequences, based on enacted tax laws, of temporary differences between the financial reporting and tax basis of assets, liabilities and carryforwards. Deferred tax assets are recognized for the expected future effects of all deductible temporary differences, loss carryforwards and tax credit carryforwards. Deferred tax assets are then reduced, if deemed necessary, by a valuation allowance for the amount of any tax benefit which, more likely than not, are not expected to be realized.

We adopted ASC 740, Income Taxes as of April 1, 2008. This topic provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a "more-likely-than-not" recognition threshold at the effective date to be recognized upon the adoption of ASC 740 and in subsequent periods. We have identified no significant uncertain tax positions as of July 31, 2011 or 2010. The cumulative effect of adopting ASC 740 has not resulted in a liability on the balance sheet. The total amount of unrecognized tax benefits as of the date of adoption was zero.

We recognize interest and penalties related to uncertain tax positions in income tax expense. No interest and penalties related to uncertain tax positions were accrued as of July 31, 2011 or 2010.

Fair Value of Financial Instruments – The Company’s financial instruments consist of cash and cash equivalents, accounts receivable and accounts payable. The fair market value of these financial instruments approximates or is equal to the book value due to the short term nature of these balances.

Fair Value Measurements - are determined by the Company’s adoption of ASC 820 Fair Market Measurement and Disclosures as of May 1, 2008, including the application of the statement to non-recurring, non-financial assets and liabilities. The adoption of ASC 820 did not have a material impact on the Company’s fair value measurements. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal (or most advantageous market) for the asset or liability in an orderly transaction between market participants at the measurement date.


 
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Stock-Based Compensation – The Company accounts for stock-based compensation arrangements in accordance with ASC 718, Compensation-Stock Compensation, which permits entities to recognize as expense over the vesting period, the fair value of all stock-based awards on the date of grant. The Company recorded no expense for stock-based compensation for the three months ended July 31, 2011 compared to $14,350 for the same period in 2010.

Research and Development Expenditures – Costs related to the research, design, and development of products are charged to research and development expenses as incurred.  The Company did not incur any research and development costs for the three months ended July 31, 2011 or 2010.

Net Loss Per Share – Basic net loss per share is computed using the weighted average number of common shares outstanding during the period.  Contingently issuable shares are included in the computation of basic net income (loss) per share when the related conditions are satisfied.  Diluted net income per share is computed using the weighted average number of common shares and potentially dilutive securities outstanding during the period.  Potentially dilutive securities consist of contingently issuable shares, the incremental common shares issuable upon conversion of preferred stock or convertible debt (using the “if converted” method) and shares issuable upon the exercise of stock options and warrants (using the “treasury stock” method).  Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive.

As of July 31, 2011 the Company had options issued to purchase 4,135,000 shares and warrants issued to purchase 18,173,033 shares that would be potentially dilutive. At July 31, 2010, the Company had options issued to purchase 3,935,000 shares and warrants issued to purchase 8,300,000 shares that would be potentially dilutive.  The options and warrants outstanding were excluded from the calculation of diluted earnings per share as their effect would have been anti-dilutive as of those dates.

Revenue Recognition-The Company leases its ARID tool and process to its customers. Revenue is recognized equally over the term of lease. When the lease is executed the Company records deferred revenue as an Other Current Liability for those amounts paid for lease commitments for the next 12 months and a Long Term Obligation for those amounts in excess of 12 months. At July 31, 2011 the Company has recorded $1,250 as Other Current Liabilities for deferred revenue.

The Company sells ARID tools and revenue is recognized on the tool sales when the ARID tools have been delivered to the customer.

Reclassifications – Certain reclassifications have been made to prior years’ amounts to conform to the classifications used in the current year.  Such reclassifications had no effect on the Company’s net loss in any of the periods presented.

Warranty accrual – ASC 450 requires companies to accrue for warranty exposure based on reasonable estimates of the amount incurred based on historical data, the Company has accrued no costs for warranty resolution as of July 31, 2011 and April 30, 2011.

Recent Pronouncements – We have reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of our operations.


 
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Note 4:  Fair Value Measurements:

ASC 820 establishes a fair value hierarchy which prioritizes the inputs used in measuring fair value into three broad levels as follows:

Level 1- Quoted prices in active markets for identical assets or liabilities.
Level 2- Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.
Level 3- Unobservable inputs based on the Company’s assumptions,

ASC 820 requires the use of observable market data if such data is available without undue cost and effect.

Fair Value Measurements at Reporting Date Using
 
 
 
Description
 
 
 
July 31, 2011
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Securities available for sale
$176,834
$176,834
$0
$0
Total
$176,834
$176,834
$0
$0

Note 5: Marketable Securities:
Cost and fair value of available for sale securities at July 31, 2011 are as follows:
 
 
Cost
 
Unrealized
Gains/
Losses
 
Realized
Losses
 
Fair Value
Shares of High Plains Gas, Inc.
$343,843
 
 --
 
   $167,009
 
$176,834

In accordance with ASC 320, Investments – Debt and Equity Securities, we have considered the reported operating losses of High Plains Gas, Inc. and other internal factors in our evaluation of whether the valuation loss on the shares as of July 31, 2011 is other than temporary. Based on High Plains Gas, Inc.’s negative working capital, significant reported losses and continued decline in share market price, we have concluded that as of July 31, 2011, the decline in share valuation is other than temporary and we have recognized the valuation loss of $167,009 in our 3 month operating loss as of July 31, 2011.
 
Note 6: Shareholders’ Equity

Private Offerings

During the three months ended July 31, 2011, there were no stock transactions by the Company.

During the three months ended July 31, 2010, the Company issued 363,334 shares of restricted common stock to non-officer employees in lieu of payment of $18,167 in salary.

In accordance with ASC 815, Derivatives and Hedging, and the terms of the warrants and the transaction documents, the warrants were determined to represent an equity transaction and, therefore, the fair value of the warrants are contained within the equity section and not separately recorded apart from the common shares issued as part of the private placement.

 
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The above private offerings were made in reliance on an exemption from registration in the United States under Section 4(2) and/or Regulation D of the United States Securities Act of 1933, as amended.

Note 7:  Stock Option Plan

The Company has adopted the 2007 Nonqualified Stock Option Plan (the “Plan”), as amended. The Company has reserved 5,000,000 shares of common stock for the plan.  During Fiscal 2009 the Board of Directors granted options to purchase 1,665,000 shares to directors, officers and key employees and consultants of the Company, effective December 31, 2008. The exercise price of the options was $0.12, the closing price of Company shares on December 31, 2008. The options granted on December 31, 2008 became exercisable on December 31, 2009 and expire on December 31, 2014. During Fiscal 2010 the Board of Directors granted options to purchase 410,000 shares to outside directors and key employees of the Company, effective January 4, 2010. The exercise price of the options was $0.15, the closing price of Company shares on January 4, 2010. The options granted on January 4, 2010 became exercisable on January 4, 2011 and expire on January 4, 2015. Also during Fiscal 2010, Charles Peck and George Hampton, resigned as Directors of the Company and forfeited their stock options to purchase 600,000 shares each.

As of July 31, 2011, and 2010 the outstanding options are fully vested, however, the agreement only allows for a certain number of options to be exercised each year through January 4, 2015.  Due to the limitations on exercising the options, and the fact that they would expire if the employee resigns or is terminated for cause, the Company has treated the options as if they vest over a two-year period.

Note 8:  Income Tax

The Federal net operating loss (“NOL”) carryforward of the Company totaling approximately $5,139,000 as of July 31, 2011 expires on various dates through 2031.  Internal Revenue Code Section 382 places a limitation on the amount of taxable income which can be offset by NOL carryforwards after a change in control (generally a greater than 50% change in ownership) of a loss corporation.  Generally, after a change in control, a loss corporation cannot deduct NOL carryforwards in excess of the Section 382 limitation.  Due to these “change in ownership” provisions, utilization of NOL carryforwards may be subject to an annual limitation regarding their utilization against taxable income in future periods.  We have not performed a Section 382 analysis.  However, if performed, Section 382 may be found to limit potential future utilization of our NOL carryforwards.  We have established a full valuation allowance against the deferred tax assets because, based on the weight of available evidence including our continued operating losses, it is more likely than not that all of the deferred tax assets will not be realized.  Because of the full valuation allowance, no income tax expense or benefit is reflected on the statement of operations.

Note 9:  Related Party Transactions

During the three months ended July 31, 2011, Sterling Oil & Gas Company (“Sterling”), an affiliate of Big Cat, paid $2,100 of operating expense on behalf of Big Cat. As of July 31, 2011and April 30, 2011 a total of $10,394 and $8,294 is due to Sterling and has been included in the accounts payable and accrued liabilities on the accompanying balance sheet.

During the three months ended July 31, 2011, the Company collected $11,256 from High Plains Gas, Inc. (“High Plains”). As of July 31, 2011 and April 30, 2011, a total of $1,322 and $12,578 is due from High Plains and has been recorded in the accounts receivable-trade on the accompanying balance sheet.

 
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For the three months ended July 31, 2010, the officers of the company provided management services to its affiliated company, Sterling Oil & Gas Company. The Company did not record any income from Sterling for these services. The Company also retained Wharton Consulting to provide marketing service to the Company. Thomas E, Wharton, a Director for the Company, is the managing partner of Wharton Consulting. The Company recorded consulting fees to Mr. Wharton and Wharton Consulting of $36,000 for the three months ended July 31, 2010.

Note 10:  Subsequent Events

Management has evaluated all activity of the Company and concluded no subsequent events have occurred that would require disclosure.


 
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ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This Quarterly Report includes certain statements that may be deemed to be “forward-looking” statements that reflect our current views with respect to future events and financial performance. All statements include in this Quarterly Report, other than statements of historical facts, address matters that we reasonably expect, believe or anticipate will or may occur in the future. Forward-looking statements may relate to, among other things:

§  
our future financial position, including working capital and anticipated cash flow;

§  
the risks of the oil and gas industry, as they relate to demand for leasing the ARID tool;

§  
market demand;

§  
risks and uncertainties involving geology of oil and gas deposits;

§  
the uncertainty of estimates and projections relating to costs and expenses;

§  
health, safety and environmental risks;

§  
uncertainties as to the availability and cost of financing; and

§  
the possibility that government policies or laws may change or governmental approvals may be delayed or withheld.

Additional factors may exist that could adversely affect our business and financial performance as reported in this report. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Forward looking statements contained in this Quarterly Report are made as of the respective dates set forth in this Quarterly Report. Such forward-looking statements are based on the beliefs, expectations and opinions of management as of the date the statements are made. We do not intend to update these forward-looking statements, except as required by law. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.

Plan of Operations

The plan of operation discussed below in this report for the three months ended July 31, 2011, reflects the operations of our current business which is to sell the ARID tool and process to oil and gas companies.


 
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Currently, we are currently leasing two ARID tools and previously have sold eight ARID tools for installation in CBM (coal bed methane) gas well bores in the Powder River Basin of Wyoming. We have received an order from a related party for fifteen ARID tools to be acquired and installed in fall of 2011. The Company has begun the permitting process for these wells.

The ARID In-bore Aquifer Recharge Injection System has been selected as the water handling component for a proof of concept project to enhance the public water supply in the Southwestern United States. The project team includes, among others, a major university and a US Federal Agency. The project involves the collection and re-injection of a combined solution of treated brine water and drinking water into existing drinking water aquifers to enhance and preserve the public drinking water supply for future use.

Big Cat has executed a Distribution Agreement with WellDog, Inc. to be Big Cat’s exclusive distributor of the ARID technology in Australia, China, Indonesia and Germany, effective April 2011. To date, we have not realized any sales through WellDog.

Fulfillment of the above opportunities and new business may require additional working capital. The Company is currently exploring potential financing options, including private placement and debt opportunities, to provide for the Company’s potential future cash flow requirements.

Patents and Trademarks

Patent Status:
 
In the United States Big Cat has two pending regular patent applications before the United States Patent Office (“USPTO”).   The first application claims the use of a single device for water handling in a well bore and the second application claims the use of multiple devices for water handling in a well bore.  We have not yet received the first office action on the first application. In the second patent application, we have received a first office actions and our response has overcome the initial concerns cited by the USPTO.  We have also received a second action on the merits and have submitted our response.

In Europe, Big Cat has one pending regular patent application.  We have received and responded to the first office action in that matter and the second action from the European Patent Office.

In Canada, Big Cat has received allowance of its patent applications. The Company has made payment of the issuance fee.

In Australia, Big Cat has one pending regular patent application.  We have demanded normal examination of the application and should shortly receive a first action on the merits.

Trademark Status:

In the United States, the Certification of Registration for the ARID mark was issued on January 12, 2010 and will remain in effect for 10 years.


 
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Also, in the United States, the word mark BIG CAT and the BIG CAT ENERGY CORP. and Design marks have been opposed by Caterpillar Inc. on grounds of likelihood of confusion with and dilution of Caterpillar’s CAT mark.  The opposition proceeding is in the discovery phase at present. Once sufficient discovery has taken place so that the parties can better assess the matter, we will determine whether settlement is an option.

Results of Operations

Three Months Ended July 31, 2011 Compared to Three Months Ended July 31, 2010

We reported a net loss for the three months ended July 31, 2011 of $367,517 compared with a net loss of $218,449 during the three months ended July 31, 2010. The net loss for the three months ended July 31, 2011, included a non-cash valuation loss on marketable securities of $167,009. The net loss for the three months ended July 31, 2010 included $14,350 attributable to non-cash consideration related to the issuance of stock options to management.

We recorded personnel costs of $82,864 during the three month period ended July 31, 2011, as compared to $112,688 during the same period in 2010. The decrease was due to a reduction in salaries effective April1, 2011. As noted above, we recorded a stock based compensation charge of $14,350 for the three month period ended July 31, 2010.

We incurred professional fees of $7,015 during the three month period ended July 31, 2011, as compared to $54,979 during the same period 2010. The decrease was due to the cancellation of a consulting agreement with Wharton Consulting. Professional fees include legal and accounting fees incurred for regulatory filings.

We incurred selling costs of $56,039 for the three months ended July 31, 2011, as compared to $57,831 for the same period in 2010.

Our other general and administrative costs were $9,832 during the three month period ended July 31, 2011, as compared to $15,392 during the same period in 2010. The major component of other general and administrative costs is insurance expense in both years and travel and entertainment in the period ended July 31, 2010.

Liquidity and Capital Resources

As of July 31, 2011 we had a working capital deficit of $116,159; therefore, we may seek additional sources of capital for the coming year.

Cash used in operating activities was $90,758 for the three months ended July 31, 2011, compared to cash used in operating activities of $168,137 for the three months ended July 31, 2010. For the three months ended July 31, 2011, cash used in operations is primarily from our operating loss offset by a non-cash valuation loss on marketable securities of $167,009. For the three months ended July 31, 2010, cash used in operations was principally from our net loss offset by non-cash compensation expense of $14,350 and stock in lieu of payments of $18,167.

Cash flows provided by investing activities were $110,363 for the three months ended July 31, 2011, primarily from the sale of marketable securities compared to cash used in investing activities of $11,139 for the three months ended July 31, 2010.

 
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There were no cash flows from financing activities for the three months ended July 31, 2011 and 2010.

During the three months ended July 31, 2010, the Company issued 363,334 shares of restricted common stock to non-officer employees in lieu of payment of $18,167 in salary.

There were no financing transactions for the three months ended July 31, 2011 or 2010.

Financial Instruments and Other Information

As of July 31, 2011 and April 30, 2011, we had cash and cash equivalents, accounts payable and accrued liabilities, which are each carried at approximate fair value due to the short maturity date of those instruments. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.

Critical Accounting Polices and Estimates

Use of Estimates in the Preparation of Financial Statements

The preparation of the 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 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. The Company bases its estimates on historical experience and on various assumptions it believes to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

Equity Based Compensation

On January 1, 2006, we adopted ASC 718, Compensation-Stock Compensation, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options based on estimated fair value.

ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of the grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in our statement of operations. Prior to the adoption of ASC 718, we had no stock-based compensation awarded to employees and directors.

Intangible Assets

We evaluate intangibles, at a minimum, on an annual basis and whenever events and changes in circumstances suggest that the carrying amount may not be recoverable. Impairment of intangibles is tested by comparing the carrying amount to the fair value, which is estimated using discounted projected cash flows.


 
17

 


Recent Pronouncements

We have reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of our operations.

Off-Balance Sheet Arrangements

From time-to-time, we may enter into off-balance sheet arrangements and transactions that can give rise to off-balance sheet obligations. As of July 31, 2011 and April 30, 2011, there were no off –balance sheet arrangements.

ITEM 4T.  CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Based on an evaluation required by paragraph (b) of  §240.13a–15 of the effectiveness of the registrant's disclosure controls and procedures (as defined in §240.13a–15(e)), the Company’s principal executive officer and principal financial officer concluded that, as of July 31, 2011 and  April 30, 2011, its disclosure controls and procedures are not effective as described below.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934. The framework used by management to evaluate the effectiveness of the registrant's internal control over financial reporting as required by paragraph (c) of §240.13a–15 is the COSO Internal Control – Integrated Framework.  Based on management’s assessment, management concluded that the Company internal control over financial reporting is not effective as of July 31, 2011 April 30, 2011 due to the existence of significant deficiencies constituting a material weakness, as described below.

This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report is not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.

LIMITATIONS ON EFFECTIVENESS OF CONTROLS
Our Principal Executive Officer and Principal Financial Officer do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake.  Additional controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.  The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.


 
18

 


MATERIAL WEAKNESS IDENTIFIED
A material weakness is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

In connection with the preparation of our financial statements for the year ended April 30, 2011 and period ended July 31, 2011, certain significant deficiencies in internal control became evident to management that represent a material weakness.  The Company has experienced an increasing complexity in its transactions and this complexity resulted in significant adjustments to the accounting records underlying the financial statements. Management corrected all misstatements prior to the release of the Company’s financial statements.

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There were no changes in the Company’s internal control over financial reporting that materially affected, or were reasonably likely to materially affect, the Company’s internal control over financial reporting during the quarter ended July 31, 2011.


 
19

 


PART II.  OTHER INFORMATION

ITEM 1. Legal Proceedings None

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds None
 
ITEM 3. Default Upon Senior Securities None

ITEM 4. Submission of Matters to a Vote of Security Holders None

ITEM 5. Other Information None

ITEM 6. EXHIBITS.

Exhibits
Document Description
31.1
Section 302 Certification of Principal Executive Officer.
31.2
Section 302 Certification of Principal Financial Officer.
32.1
Section 906 Certification of Chief Executive Officer.
32.2
Section 906 Certification of Chief Financial Officer.


 
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SIGNATURES

In accordance with Section 13 or 15(d) of the Securities and Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 14th day of September, 2011.

 
BIG CAT ENERGY CORPORATION
     
 
BY:
/s/ Timothy Barritt
   
Timothy Barritt, President and Principal  Executive Officer
     
 
BY:
/s/ Richard G. Stifel
   
Richard G. Stifel, Principal Accounting Officer and  Principal Financial Officer

21