SEC Company Response from DALECO RESOURCES CORP (CIK 0000746967) — Dec 5, 2005
DALECO RESOURCES CORP (CIK 0000746967)
Date: Dec. 5, 2005 · CIK: 0000746967 · Accession: 0001144204-05-038683
AI Filing Summary & Sentiment
Letter
Unassociated Document
LAW OFFICES OF
EHMANN, VAN DENBERGH & TRAINOR, P.C.
TWO PENN CENTER PLAZA, SUITE
TELEPHONE: (215) 851-9800
1500 JOHN F. KENNEDY BOULEVARD
DIRECT DIAL: Ext.
PHILADELPHIA, PENNSYLVANIA
FAX: (215) 851-9820
October 17, 2005
VIA FAX AND REGULAR MAIL
Securities and Exchange Commission
Division of Corporate Finance
Office of Small Business Review
Fifth Street, N.W.
Washington, D.C. 20549-00405
ATTN: Mr. Kevin Stretzel
Fax No: 202-772-9220
Re: Daleco Resources Corporation
File No: 0-12214
Gentlemen,
Form 1O KSB/A for the Fiscal Year Ended September 30, 2004
Financial Statements
1.
We note your response to our prior comments five and six. It remains unclear to us why you are unable to determine the fair value of the consideration received or given. It appears from your response that you received 3,000,000 shares of publicly traded stock and it continues to be unclear why the fair value of the consideration received is not determinable. In addition, please explain how you are accounting for the shares you own of Ostara. Please address SFAS 115 in your response. Please contact us to discuss these matters at your earliest convenience.
Updated Answer:
After our conference call (Kevin Stretzel, Jill Davis, Gary Novinskie, Warren Trainor, Theresa Castro, Jun Quinto), we agreed that the investment in Ostara shares and warrants are considered as available for sale securities.
EHMANN, VAN DENBERGH & TRAINOR, P.C.
Page
We looked again at the PSNet shares we received in exchange for our technology assets. We were not aware during the fiscal year ended September 30, 2004 that Ostara would acquire PSNet. PSNet was a privately held company at the time we exchanged our technology assets for 3,000,000 shares and warrants to purchase 15 million shares of PSNet. We did not own more than 15% of PSNet. We did not receive any financial statements from PSNet. We did not have any other basis for valuing the PSNet shares and warrants. For the fiscal year ended September 30, 2004, we valued our investment in privately held (nonpublicly traded) PSNet at the carrying amount of our technology assets, or at cost because we did not exercise any control over PSNet nor did we own more than 15% of PSNet. Based on the reasons we stated, we believe we do not need to amend our 10-KSB for fiscal year ended September 30, 2004 nor the first quarter ended March 31, 2005.
We will amend the 10-QSB for the quarters ended March 31, 2005 and June 30, 2005 for the change in fair value of Ostara shares and warrants for available for sale securities affecting the balance sheet investment account and other comprehensive income.
There was a net gain of $40,402 for the January 13, 2005 transaction, which had a negligible and inconsequential effect on earnings per share for the quarter ended March 31, 2005. The change in fair value of Ostara shares and warrants increased other comprehensive income by $9,726,562 and stock dividends (available for sale Ostara shares and warrants) reduced other comprehensive income by $7,044,776 for the quarter ended March 31, 2005.
P&L remained the same for quarter ended June 30, 2005. The change in fair value of Ostara shares and warrants decreased other comprehensive income by $3,125,411 for the quarter ended June 30, 2005.
We calculated the fair value of the warrants using the Black Scholes option-pricing model summarized as follows:
01/13/05
03/31/05
06/30/05
Stock price
$
0.11
$
1.02
$
0.13
Exercise price
$
2.00
$
2.00
$
4.00
Term (90 days/360)
0.25
0.25
0.25
Volatility
374.70
%
345.21
%
300.10
%
Discount rate
2.35
%
2.82
%
3.14
%
Call option value
$
0.02
$
0.48
$
0.0033
EHMANN, VAN DENBERGH & TRAINOR, P.C.
Page
Please refer to the attached abbreviated balance sheet, statement of operations, and statement of comprehensive income.
We believe the above points are consistent with our conference call. If the above points are acceptable to you, we will amend the 10-QSBs for the quarters ended March, 31, 2005 and June 30, 2005. Should you wish to discuss the foregoing, please feel free to contact the undersigned.
Sincerely,
/s/ C. Warren Trainor
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CORRESP
1
filename1.htm
Unassociated Document
LAW
OFFICES OF
EHMANN,
VAN DENBERGH & TRAINOR, P.C.
TWO PENN CENTER PLAZA,
SUITE
220
TELEPHONE:
(215)
851-9800
1500 JOHN F. KENNEDY
BOULEVARD
DIRECT
DIAL: Ext.
222
PHILADELPHIA, PENNSYLVANIA
19102
FAX:
(215)
851-9820
October
17, 2005
VIA
FAX AND REGULAR MAIL
Securities
and Exchange Commission
Division
of Corporate Finance
Office
of
Small Business Review
450
Fifth
Street, N.W.
Washington,
D.C. 20549-00405
ATTN:
Mr.
Kevin Stretzel
Fax
No:
202-772-9220
Re:
Daleco Resources Corporation
File No:
0-12214
Gentlemen,
Form
1O KSB/A for the Fiscal Year Ended September 30, 2004
Financial
Statements
1.
We
note your response to our prior comments five and six. It remains
unclear
to us why you are unable to determine the fair value of the consideration
received or given. It appears from your response that you received
3,000,000 shares of publicly traded stock and it continues to be
unclear
why the fair value of the consideration received is not determinable.
In
addition, please explain how you are accounting for the shares
you own of
Ostara. Please address SFAS 115 in your response. Please contact
us to
discuss these matters at your earliest
convenience.
Updated
Answer:
After
our
conference call (Kevin Stretzel, Jill Davis, Gary Novinskie, Warren Trainor,
Theresa Castro, Jun Quinto), we agreed that the investment in Ostara shares
and
warrants are considered as available for sale securities.
EHMANN,
VAN DENBERGH & TRAINOR, P.C.
Page
2
We
looked
again at the PSNet shares we received in exchange for our technology assets.
We
were not aware during the fiscal year ended September 30, 2004 that Ostara
would
acquire PSNet. PSNet was a privately held company at the time we exchanged
our
technology assets for 3,000,000 shares and warrants to purchase 15 million
shares of PSNet. We did not own more than 15% of PSNet. We did not receive
any
financial statements from PSNet. We did not have any other basis for valuing
the
PSNet shares and warrants. For the fiscal year ended September 30, 2004,
we
valued our investment in privately held (nonpublicly traded) PSNet at the
carrying amount of our technology assets, or at cost because we did not exercise
any control over PSNet nor did we own more than 15% of PSNet. Based on the
reasons we stated, we believe we do not need to amend our 10-KSB for fiscal
year
ended September 30, 2004 nor the first quarter ended March 31,
2005.
We
will
amend the 10-QSB for the quarters ended March 31, 2005 and June 30, 2005
for the
change in fair value of Ostara shares and warrants for available for sale
securities affecting the balance sheet investment account and other
comprehensive income.
There
was
a net gain of $40,402 for the January 13, 2005 transaction, which had a
negligible and inconsequential effect on earnings per share for the quarter
ended March 31, 2005. The change in fair value of Ostara shares and warrants
increased other comprehensive income by $9,726,562 and stock dividends
(available for sale Ostara shares and warrants) reduced other comprehensive
income by $7,044,776 for the quarter ended March 31, 2005.
P&L
remained the same for quarter ended June 30, 2005. The change in fair value
of
Ostara shares and warrants decreased other comprehensive income by $3,125,411
for the quarter ended June 30, 2005.
We
calculated the fair value of the warrants using the Black Scholes option-pricing
model summarized as follows:
01/13/05
03/31/05
06/30/05
Stock
price
$
0.11
$
1.02
$
0.13
Exercise
price
$
2.00
$
2.00
$
4.00
Term
(90 days/360)
0.25
0.25
0.25
Volatility
374.70
%
345.21
%
300.10
%
Discount
rate
2.35
%
2.82
%
3.14
%
Call
option value
$
0.02
$
0.48
$
0.0033
EHMANN,
VAN DENBERGH & TRAINOR, P.C.
Page
3
Please
refer to the attached abbreviated balance sheet, statement of operations,
and
statement of comprehensive income.
We
believe the above points are consistent with our conference call. If the
above
points are acceptable to you, we will amend the 10-QSBs for the quarters
ended
March, 31, 2005 and June 30, 2005. Should you wish to discuss the foregoing,
please feel free to contact the undersigned.
Sincerely,
/s/ C. Warren Trainor
C. Warren
Trainor
cc:
Gary J. Novinskie, President &
CFO
Vasquez & Company
LLP
9/30/2004
12/31/2004
3/31/2005
6/30/2005
1/13/2005
3/31/2005
6/30/2005
Balance
sheet
Technology
assets
A
-542,621
Investment-available
for sale
B
542,621
-3,125,411
583,023
3,264,809
139,398
40,402
9,726,562
-7,044,776
Stockholders'
equity
Dividends
C
7,044,776
Statement
of operations
Unrealized
gain
D
-40,402
Other
comprehensive income
Unrealized
gain- available for sale
E
-9,726,562
3,125,411
0
0
0
0
Shares
Shares
Warrants
Warrants
12/31/04
01/13/05
03/31/05
06/30/05
Stockholders
Daleco
Stockholders
Daleco
Cost
(book value basis)
$
235,498
a
$
307,123
b
$
542,621
$
542,621
Increase
in value
$
22,877
$
17,525
$
40,402
Fair
value (FV)
$
258,375
$
324,648
$
583,023
Shares
2,049,969
950,031
3,000,000
Warrants
10,249,845
4,750,155
15,000,000
FV
shares
$
225,497
$
104,503
$
330,000
FV
warrants
$
172,896
$
80,127
$
253,023
FV
$
583,023
Re-allocated
cost
$
160,921
$
74,577
a
$
235,498
Re-allocated
cost
$
209,864
$
97,259
b
$
307,123
$
542,621
Increase
in value
$
64,576
$
29,926
-$36,968
-$17,132
$
40,402
FV
shares
$
225,497
$
104,503
$
330,000
FV
warrants
$
172,896
$
80,127
$
253,023
FV
1/13/05
$
583,023
$
583,023
Increase
in value
$
1,865,471
$
864,529
$
2,730,000
$
4,780,912
$
2,215,650
$
6,996,562
$
9,726,562
FV
3/31/05 before dividends
$
2,090,968
$
969,032
$
4,953,808
$
2,295,777
$
10,309,585
Dividends
$
-2,090,968
$
-4,953,808
$
-7,044,776
FV
3/31/05
$
0
$
969,032
$
0
$
2,295,777
$
3,264,809
$
3,264,809
Decrease
in value
$
845,528
$
2,279,883
$
3,125,411
FV
6/30/05
$
0
$
123,504
$
0
$
15,894
$
139,398
Daleco
Resources Corporation
Consolidated
statement of operations (abbreviated)
3
months
6
months
3
months
9
months
3/31/2005
3/31/2005
6/30/2005
6/30/2005
Other
income (expenses)
Gain
on exchange of PSNet shares for Ostara shares
40,402
40,402
*
40,402
40,402
*
Interest
income
7
7
Interest
expense
(168,789
)
(207,278
)
(33,570
)
(240,848
)
Other
income
(24,800
)
(24,800
)
Total
other income (loss), net
(128,380
)
(142,076
)
6,832
(175,639
)
Loss
before provision for income taxes
(511,295
)
(1,038,440
)
(424,777
)
(1,503,619
)
Provision
for income taxes
Net
loss (Note 10)
($511,295
)
($1,038,440
)
($424,777
)
($1,503,619
)
Less:
dividends on Class A & B preferred shares
(36,631
)
(83,907
)
(83,907
)
Net
loss attributable to common shareholders
($547,926
)
($1,122,347
)
($424,777
)
($1,587,526
)
Basic
and fully diluted net loss per common share
($0.02
)
($0.04
)
($0.01
)
($0.05
)
Weighted
average number of shares of
common
shares outstanding
Basic
28,693,043
28,693,043
29,514,472
28,877,197
Diluted
38,142,622
38,142,622
38,484,051
35,796,776
Daleco
Resources Corporation
Consolidated
Statement of Comprehensive Income (Loss)
NEW
AND SEPARATE STATEMENT
3
months
6
months
3
months
6
months
3/31/2005
3/31/2005
6/30/2005
6/30/2005
Net
loss
($511,295
)
($1,038,440
)
($424,777
)
($1,503,619
)
Unrealized
holding gains (losses) during the period
9,726,562