On August 3, 2007, Kykuit Resources, LLC purchased from Hemus, Ltd. ( “Hemus” ) a 75% interest in certain oil, natural gas and mineral rights located in the Montana Breaks area of Montana. The Company is the managing member of Kykuit and owns 43.8% of the Company. At the same time, Kykuit and Hemus executed a joint venture development agreement pursuant to which Kykuit agreed to develop and operate all of their joint leasehold interests in the Montana Breaks. The current investment by the Company in this venture is $1,254,393. It is anticipated that drilling will begin in May of 2008.
Richard M. Osborne, the Company’s chairman and chief executive officer, and Steven A. Calabrese, a director of the Company, also own interests in Kykuit. Energy West Incorporated, a publicly-held public utility company of which Richard Osborne is the chairman and a significant stockholder, also owns an interest in Kykuit.
The Company is currently concentrating in Kykuit Resources LLC, which anticipates beginning its drilling in Montana during May 2008.