Storm Cat Energy (fka SCUEF)

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Any “ownership change” could limit our ability to utilize our net operating losses carryforwards: Under the Internal Revenue Code of 1986,
as amended (the “Internal Revenue Code”), a corporation is generally allowed a deduction in any taxable year for net operating losses carried
over from prior years. A corporation’s use of its net operating loss carryforwards is generally limited under section 382 of the Internal
Revenue Code if a corporation undergoes an “ownership change.” When an “ownership change” occurs pursuant to the implementation of a
plan of reorganization under the Bankruptcy Code, the general limitation under section 382 of the Internal Revenue Code may not apply if
certain requirements are satisfied under either section 382(l)(5) or section 382(l)(6) of the Internal Revenue Code. We may experience an
“ownership change” in connection with the Plan, but we have not yet established the Plan and determined whether we will be eligible for or
rely on the special rule under section 382(l)(5) or the special rule under section 382(l)(6). Assuming we rely on section 382(l)(5) of the Internal
Revenue Code, a second “ownership change” within two years from the effective date of the Plan would eliminate completely our ability to
utilize our net operating loss carryovers. Regardless of whether we rely on section 382(l)(5) of the Internal Revenue Code, an “ownership
change” after the effective date of the Plan could significantly limit our ability to utilize our net operating loss carryforwards for taxable years
including or following such “ownership change.”


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