UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10 - QSB/A
(Amendment No. 1)
 
x  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 2007

o  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to _____

KAL Energy, Inc.
(Formerly Patriarch, Inc.)
(Exact name of small business issuer as specified in its charter)

     
Delaware
333-97201
98-0360062
(State or other jurisdiction of incorporation or organization)
(Commission File Number)
(IRS Employer Identification Number)

93-95 Gloucester Place London, United Kingdom
W1U 6JQ
(Address of principal executive offices)
(Zip Code)

Issuer’s telephone number:  (44) 20 7487 8426

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities 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  x    No o

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

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 99,182,772 at December 31, 2007.

Transitional Small Business Disclosure Format (Check one):  Yes o No x


 
EXPLANATORY NOTE
 
This Amendment No. 1 to the Quarterly Report on Form 10-QSB of KAL Energy, Inc. for the quarterly period ended November 30, 2007, which was originally filed with the Securities and Exchange Commission on January 14, 2008, is being filed to amend the disclosures under the sections entitled “Expenses” and “Plan of Operation” in Item 2. This Amendment No. 1 does not reflect events occurring after January 14, 2008, the date of the filing of our original Form 10-QSB, or modify or update those disclosures that may have been affected by subsequent events.
 

Item 2. Management’s Discussion and Analysis or Plan of Operation
 
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 
This Quarterly Report on Form 10-QSB contains forward-looking statements that have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995 and concern matters that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Discussions containing forward-looking statements may be found in the material set forth under “Management’s Discussion and Analysis or Plan of Operation” and other sections of this Quarterly Report. Words such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or similar words are intended to identify forward-looking statements, although not all forward-looking statements contain these words. Although we believe that our opinions and expectations reflected in the forward-looking statements are reasonable as of the date of this Quarterly Report, we cannot guarantee future results, levels of activity, performance or achievements, and our actual results may differ substantially from the views and expectations set forth in this Quarterly Report. We expressly disclaim any intent or obligation to update any forward-looking statements after the date hereof to conform such statements to actual results or to changes in our opinions or expectations. Readers are urged to carefully review and consider the various disclosures made by us, which attempt to advise interested parties of the risks, uncertainties, and other factors that affect our business, including without limitation the disclosures made under the caption “Management’s Discussion and Analysis or Plan of Operation” in this Quarterly Report and the audited financial statements and the notes thereto and disclosures made under the captions “Management’s Discussion and Analysis or Plan of Operation” and “Financial Statements” included in our Annual Report on Form 10-KSB for the fiscal year ended May 31, 2007. We obtained the market data and industry information contained in this Quarterly Report from internal surveys, estimates, reports and studies, as appropriate, as well as from market research, publicly available information and industry publications. Although we believe our internal surveys, estimates, reports, studies and market research, as well as industry publications, are reliable, we have not independently verified such information, and, as such, we do not make any representation as to its accuracy.
 
Plan of Operation
 
Our plan of operation for the twelve months following the date of this interim report is to further refine the Graha property and continue the move into exploration of our PT Bunyut Bara Mandiri (“Bunyut”) concession in Kalimantan, Indonesia. We expect this program to run through the second half of the 2008 calendar year. This program will cost approximately $2,000,000 for the Graha property and $1,000,000 for the Bunyut property. The program is designed to define parts of the concession to Joint Ore Reserves Committee, or JORC, Compliant measured status, determine its mineability and to explore other prospective areas of our concessions for additional resources.
 
As of November 30, 2007, we had $692,735 in cash and cash equivalents in our accounts. We will be seeking to raise additional working capital of approximately US$10,000,000 by the third quarter of our 2007 fiscal year to fund capital and operational costs to get us through the exploration phase and from there raise the necessary funding to complete all feasibility and pre production costs to get us to early production.
 
Results of Operations
 
Three-month period ended November 30, 2007 compared to the three-month period ended November 30, 2006
 
Revenues
 
We have not earned any revenue from our operations from the date of our inception on February 21, 2001 through November 30, 2007. Our activities have been financed from the proceeds of private placement offerings of our common stock. We do not anticipate earning any revenue until we have obtained additional capital to fund early production from our coal concessions.
 
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Expenses
 
We incurred $946,506 of exploration expenses related to our exploration activities. We spent $593,393 in our coal concessions in Indonesia and $353,113 on due diligence exploration in Mongolia. These funds were incurred in continuing the Phase II drilling programme on the PT Graha Panca Karsa, or Graha, property to get further definition of the resource, including its quality and mineability. The due diligence costs were incurred to evaluate a potential property in Ulaanbaatar, Mongolia. Stock based compensation expense increased to $1,551,245 from the prorated expense of the granted options and restricted shares. Professional and consulting fees for the three month period ended November 30, 2007 increased to $164,793, as compared to $10,628 for the three month period ended November 30, 2006. We incurred significant consulting expenses related to our business planning efforts, as well as legal expenses related to our current financing activities. General and administrative expenses for the three month period ended November 30, 2007 increased to $475,374, as compared to $490 for the three month period ended November 30, 2006. The increased costs resulted from salaries and directors fees, facilities expense, travel, investor relations and amortization of intangibles. We instituted a new travel policy during the quarter ended November 30, 2007 to further curtail travel expenditures going forward. The Company’s expenses totaled $3,137,918 for the three months ended November 30, 2007 versus proforma expenses of $161,708 for the comparable prior year period. This increase in the rate of expenditure is due our initiation of significant exploration activities in February 2007 following the reorganization transaction.
 
Loss
 
Net loss for the three month period ended November 30, 2007 increased to $3,128,844, as compared to $11,118 for the three month period ended November 30, 2006. The increased loss was due to an increase in expenses, as discussed above. We have not attained profitable operations and are dependent upon obtaining additional financing to move from our exploration activities to our initial production. Our proforma losses increased to $10,944,385, due primarily to continued spending on our exploration of the Graha property.
 
Six-month period ended November 30, 2007 compared to the Six-month period ended November 30, 2006
 
Revenues
 
We have not earned any revenue from our operations from the date of our inception on February 21, 2001 through November 30, 2007. Our activities have been financed from the proceeds of private placement offerings of our common stock. We do not anticipate earning any revenue until we have obtained additional capital to fund early production from our coal concessions.
 
Expenses
 
We incurred $2,372,251 of exploration expenses related to our exploration activities. We spent $2,019,138 in our coal concessions in Indonesia and $353,113 in due diligence exploration in Mongolia. These funds were incurred to conclude the Phase I drilling programme that resulted in a JORC compliant inferred resource of 204 million tones and to embark on the Phase II drilling programme on the Graha property to further define the resource, including its quality and mineability. The due diligence costs were incurred to evaluate a potential property in Ulaanbaatar, Mongolia. Stock based compensation expense increased to $3,078,640 from the prorated expense of the granted options and restricted shares. Professional and consulting fees for the six month period ended November 30, 2007 increased to $375,070, as compared to $14,977 for the six month period ended November 30, 2006. We incurred significant consulting expenses related to our business planning efforts, as well as legal expenses related to our current financing activities. General and administrative expenses for the six month period ended November 30, 2007 increased to $851,461, as compared to $560 for the six month period ended November 30, 2006. The increased costs resulted from salaries and directors fees, facilities expense, travel, investor relations and amortization of intangibles. Our expenses totaled $6,677,422 versus proforma expenses of $255,698 in the previous year. This increase in the rate of expenditure is due to our initiation of significant exploration activities in February 2007 following the reorganization transaction.
 
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Loss
 
Net loss for the six month period ended November 30, 2007 increased to $6,655,514, as compared to $15,537 for the six month period ended November 30, 2006. The increased loss was due to an increase in expenses, as discussed above. We have not attained profitable operations and are dependent upon obtaining additional financing to move from our exploration activities to our initial production. Our proforma losses increased to $10,944,385, due primarily to, continued spending on our exploration of the Graha property.
 
Capital Resources
 
As of November 30, 2007, we had current assets of $814,164, consisting of $692,735 in cash and cash equivalents and $121,429 in prepaid expenses and deposits.
 
Liabilities
 
As of November 30, 2007, we had liabilities of $3,110,239, consisting of accounts payable and accrued liabilities of $1,796,229, notes payable of $75,000 and shares to be issued of $1,239,010.  This increase in liabilities puts us in a position where liabilities exceed cash reserves as of November 30, 2007.
 
Risk Factors
 
The following risks could affect our business, financial results and results of operations. These risk factors should be considered in connection with evaluating the forward-looking statements contained in this Quarterly Report on Form 10-QSB because these factors could cause the actual results and conditions to differ materially from those projected in the forward-looking statements.   
 
Risks Related to Us
 
We are in the exploration stage and have yet to establish our mining operations, which makes it difficult to evaluate our business. There can be no assurance that we will ever generate revenues from operations or ever operate profitably.
 
We are currently in the exploration stage and have yet to establish our mining operations. Our limited history makes it difficult for potential investors to evaluate our business. We need to complete a drilling program and obtain feasibility studies on the properties in which we have an interest in order to establish the existence of commercially viable coal deposits and proven and probable reserves on such properties. Therefore, our proposed operations are subject to all of the risks inherent in the unforeseen costs and expenses, challenges, complications and delays frequently encountered in connection with the formation of any new business, as well as those risks that are specific to the coal industry in general. Despite our best efforts, we may never overcome these obstacles to financial success. There can be no assurance that our efforts will be successful or result in revenue or profit, or that investors will not lose their entire investment.
 
If we do not obtain financing when needed, our business will fail .
 
As of November 30, 2007, we had approxiamtely $692,735 in cash and cash equivalents in our accounts. We estimate that we will need approximately US$10,000,000 in working capital to fund capital and operational costs required to get us through the exploration phase and will need additional working capital following the exploration phase to complete all feasibility and pre-production costs to get us to early production. We currently do not have any arrangements for additional financing and we may not be able to obtain financing when required. Obtaining additional financing would be subject to a number of factors, including the market prices for our products, production costs, the availability of credit, prevailing interest rates and the market prices for our common stock.
 
Future sales of our equity securities will dilute existing stockholders .
 
To fully execute our long-term business plan, we may need to raise additional working capital through future sales of our equity securities. Any such future sales of our equity securities, when and if issued, would result in dilution to our existing stockholders.
 
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We face numerous uncertainties in confirming the existence of economically recoverable coal reserves and in estimating the size of such reserves, and inaccuracies in our estimates could result in lower than expected revenues, higher than expected costs or failure to achieve profitability.
 
We have not established the existence of commercially viable coal deposits on all of the properties in which we have an interest. Further exploration will be required in order to establish the existence of economically recoverable coal reserves and in estimating the size of those reserves. However, estimates of the economically recoverable quantities and qualities attributable to any particular group of properties, classifications of reserves based on risk of recovery and estimates of net cash flows expected from particular reserves prepared by different engineers or by the same engineers at different times may vary substantially. Actual coal tonnage recovered from identified reserve areas or properties and revenues and expenditures with respect to such reserves may vary materially from estimates. Inaccuracies in any estimates related to our reserves could materially affect our ability to successfully commence profitable mining operations.  
 
Our future success depends upon our ability to acquire and develop coal reserves that are economically recoverable and to raise the capital necessary to fund mining operations.
 
Our future success depends upon our conducting successful exploration and development activities and acquiring properties containing economically recoverable coal deposits. In addition, we must also generate enough capital, either through our operations or through outside financing, to mine these reserves. Our current strategy includes completion of exploration activities on our current properties and, in the event we are able to establish the existence of commercially viable coal deposits on such properties, continuing to develop our existing properties. Our ability to develop our existing properties and to commence mining operations will be dependent on our ability to obtain sufficient working capital through financing activities.  
 
Our ability to implement our planned development and exploration projects is dependent on many factors, including the ability to receive various governmental permits.
 
In the event our planned exploration activities confirm the existence of significant coal deposits on our properties, we will then be required to renew our rights in the properties in order to continue with development and mining operations. This may include renewing the existing exploration Kuasa Pertambangan, or KP, on each property, or applying for exploitation KP’s in order to have the right to commence mining operations. We currently intend to maintain interests in the properties described herein by making timely application for renewal of the existing KP’s or by filing applications to obtain the required forms of KP to commence exploitation of the properties. Although we believe that absent unusual circumstances, such as failure to pay rent or fees or the existence of excessive environmental damage, it is common practice for the Indonesian government to approve requests for issuance or renewal of KP’s, there can be no assurance that our applications will be approved. In the event our applications are not approved, we will no longer have any interest in the properties and will be unable to continue with exploration, development or exploitation of such properties.
 
We do not own a direct interest in the mining concessions in which we claim to have an interest. Our interests are based upon contractual arrangements which give us rights in the properties without any direct ownership. If it is determined that the contractual arrangements we have established do not satisfy legal requirements or do not give us necessary rights in the properties, we may be unable to proceed with exploration, development or exploitation activities on the properties described herein.
 
Indonesian mining regulations do not currently permit KP’s to be held by non-Indonesian companies or by Indonesian companies which are wholly or partly owned by non-Indonesian persons or entities. Therefore, in order for a non-Indonesian entity such as us to have mining rights on properties in Indonesia, it is necessary to establish special contractual arrangements. We believe that the contractual arrangements we have established, which involve selecting and entering into agreements with Indonesian individuals who act as our nominees in acquiring ownership interests in the KP’s, represent a well established and accepted shed procedure which has been used by many other foreign companies which are currently conducting mining operations in Indonesia. However, there is no assurance that the contractual arrangements we have established are adequate to give us rights to explore, develop and exploit the properties or that our rights in such properties would be upheld in the event of a legal challenge by governmental officials or by a third party. Any challenge to the contractual arrangements we have established could delay the exploration or development of the properties and could ultimately result in the loss of any right or interest in such properties.    
 
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Due to variability in coal prices and in our cost of producing coal, as well as certain contractual commitments, we may be unable to sell coal at a profit.
 
In the event we are able to commence coal production from our properties, we will plan to sell any coal we produce for a specified tonnage amount and at a negotiated price pursuant to short-term and long-term contracts. Price adjustment, "price reopener" and other similar provisions in long-term supply agreements may reduce the protection from short-term coal price volatility traditionally provided by such contracts. Any adjustment or renegotiation leading to a significantly lower contract price would result in decreased revenues and lower our gross margins. Coal supply agreements also typically contain force majeure provisions allowing temporary suspension of performance by us or our customers during the duration of specified events beyond the control of the affected party. Most coal supply agreements contain provisions requiring us to deliver coal meeting quality thresholds for certain characteristics such as Btu, sulfur content, ash content, hardness and ash fusion temperature. Failure to meet these specifications could result in economic penalties, including price adjustments, the rejection of deliveries or, in the extreme, termination of the contracts. Consequently, due to the risks mentioned above with respect to long-term supply agreements, we may not achieve the revenue or profit we expect to achieve from any such future sales commitments. In addition, we may not be able to successfully convert these future sales commitments into long-term supply agreements.
 
The coal industry is highly competitive and includes many large national and international resource companies. There is no assurance that we will be able to effectively compete in this industry and our failure to compete effectively could cause our business to fail or could reduce our revenue and margins and prevent us from achieving profitability.
 
In the event we are able to produce coal, we will be in competition for sale of our coal with numerous large producers and hundreds of small producers who operate globally. The markets in which we may seek to sell our coal are highly competitive and are affected by factors beyond our control. There is no assurance of demand for any coal we are able to produce, and the prices that we may be able to obtain will depend primarily on global coal consumption patterns, which in turn are affected by the demand for electricity, coal transportation costs, environmental and other governmental regulations and orders, technological developments and the availability and price of competing alternative energy sources such as oil, natural gas, nuclear energy and hydroelectric energy. In addition, during the mid-1970s and early 1980s, a growing coal market and increased demand for coal attracted new investors to the coal industry and spurred the development of new mines and added production capacity throughout the industry. Although demand for coal has grown over the recent past, the industry has since been faced with overcapacity, which in turn has increased competition and lowered prevailing coal prices. Moreover, because of greater competition for electricity and increased pressure from customers and regulators to lower electricity prices, public utilities are lowering fuel costs and requiring competitive prices on their purchases of coal. Accordingly, there is no assurance that we will be able to produce coal at competitive prices or that we will be able to sell any coal we produce for a profit. Our inability to compete effectively in the global market for coal would cause our business to fail.
 
Our inability to diversify our operations may subject us to economic fluctuations within our industry.
 
Our limited financial resources reduce the likelihood that we will be able to diversify our operations. Our probable inability to diversify our activities into more than one business area will subject us to economic fluctuations within the coal industry and therefore increase the risks associated with our operations.
 
We rely heavily on our senior management, the loss of which could have a material adverse effect on our business.
 
Our future success is dependent on having capable seasoned executives with the necessary business knowledge and relationships to execute our business plan. Accordingly, the services of our management team, specifically, Martin Hurley, our Chief Executive Officer, who serves pursuant to an employment agreement, and Jorge Nigaglioni, our Chief Financial Officer, who serves pursuant to an employment agreement, and our board of directors are deemed essential to maintaining the continuity of our operations. If we were to lose their services, our business could be materially adversely affected. Our performance will also depend on our ability to find, hire, train, motivate and retain other executive officers and key employees, of which there can be no assurance.
 
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Because our assets and operations are located outside the United States and a majority of our officers and directors are non-United States citizens living outside of the United States, investors may experience difficulties in attempting to enforce judgments based upon United States federal securities laws against us and our directors. United States laws and/or judgments might not be enforced against us in foreign jurisdictions.
 
All of our operations are conducted through a subsidiary corporation organized and located outside of the United States, and all the assets of such subsidiary corporation are located outside the United States. In addition, all of our officers and directors, other than our Chief Financial Officer, Jorge Nigaglioni, are foreign citizens. As a result, it may be difficult or impossible for United States investors to enforce judgments of United States courts for civil liabilities against us or against any of our individual directors or officers. In addition, United States investors should not assume that courts in the countries in which our subsidiary is incorporated or where the assets of our subsidiary are located would enforce judgments of United States courts obtained in actions against us or our subsidiary based upon the civil liability provisions of applicable United States federal and state securities laws or would enforce, in original actions, liabilities against us or our subsidiary based upon these laws.
 
Risks Related to the Coal Business
 
The international coal industry is highly cyclical, which will subject us to fluctuations in prices for any coal we produce.
 
In the event we are able to produce coal, we will be exposed to swings in the demand for coal, which will have an impact on the prices for our coal. The demand for coal products and, thus, the financial condition and results of operations of companies in the coal industry, including us, are generally affected by macroeconomic fluctuations in the world economy and the domestic and international demand for energy. In recent years, the price of coal has been at historically high levels, but these price levels may not continue. Any material decrease in demand for coal could have a material adverse effect on our operations and profitability.
 
The price of coal is driven by the global market. It is affected by changing requirements of customers based on their needs and the price of alternative sources of energy such as natural gas and oil .
 
In the event that we are able to begin producing coal, our success will depend upon maintaining a consistent margin on our coal sales to pay our costs of mining and capital expenditures. We intend to seek to control our costs of operations, but pressures by government policies and the price of substitutes could drive the price of coal down to make it unprofitable for us. The price of coal is controlled by the global market and we will be dependent on both economic and government policies to maintain the price above our future cost structure.
 
Logistics costs could increase and limit our ability to sell coal to end customers economically .
 
Logistics costs represent a significant portion of the total cost of coal and, as a result, the cost of transportation is a critical factor in a customer’s purchasing decision. Increases in transportation costs could make coal a less competitive source of energy or could make some of our operations less competitive than other sources of coal. Our future coal production, if any, will depend upon barge, trucking, pipeline and ocean-going vessels to deliver coal to markets. While coal customers typically arrange and pay for transportation of coal from the mine or port to the point of use, disruption of these transportation services because of weather-related problems, infrastructure damage, capacity restraints, strikes, lock-outs, lack of fuel or maintenance items, transportation delays or other events could temporarily impair our ability to supply coal to our customers and thus could adversely affect our results of operations.  
 
Operating a mine has hazardous risks that can delay and increase the costs of production .
 
Our mining operations, if any, will be subject to conditions that can impact the safety of the workforce, or delay production and deliveries or increase the full cost of mining. These conditions include fires and explosions from methane gas or coal dust; accidental discharges; weather, flooding and natural disasters; unexpected maintenance problems; key equipment failures; variations in coal seam thickness; variations in the amount of rock and soil overlying the coal deposit; variations in rock and other natural materials and variations in geologic conditions. Despite our efforts, once operational, significant mine accidents could occur and have a substantial impact.
 
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A shortage of skilled labor in the mining industry could pose a risk to achieving optimal labor productivity and competitive costs, which could adversely affect our profitability.
 
Efficient coal mining using modern techniques and equipment requires skilled laborers, preferably with at least a year of experience and proficiency in multiple mining tasks. In order to support our planned production opportunities, we intend to sponsor both in-house and vocational coal mining programs at the local level in order to train additional skilled laborers. In the event the shortage of experienced labor continues or worsens or we are unable to train the necessary amount of skilled laborers, there could be an adverse impact on our future labor productivity and costs and our ability to commence production and therefore have a material adverse effect on our earnings.
 
The coal industry could have overcapacity which would affect the price of coal and in turn, would impact our ability to realize a profit from future coal sales.
 
Current prices of alternative fuels such as oil are at high levels, spurring demand and investment in coal. This can lead to over investment and over capacity in the sector, dropping the price of coal to unprofitable levels. Such an occurrence would adversely affect our ability to commence mining operations or to realize a profit from any future coal sales we may seek to make.
 
Environmental pressures could increase and accelerate requirements for cleaner coal or coal processing.
 
Environmental pressures could drive potential purchasers of coal to either push the price of coal down in order to compete in the energy market or move to alternative energy supplies therefore reducing demand for coal. Requirements to have cleaner mining operations could lead to higher costs for us which could hamper our ability to make future sales at a profitable level. Coal plants emit carbon dioxide, sulfur and nitrate particles to the air. Various countries have imposed cleaner air legislations in order to minimize those emissions. Some technologies are available to do so, but also increase the price of energy derived by coal. Such an increase will drive customers to make a choice on whether or not to use coal as their driver for energy production.
 
Risks Related to Doing Business in Indonesia
 
We face the risk that changes in the policies of the Indonesian government could have a significant impact upon the business we may be able to conduct in Indonesia and the profitability of such business .
 
Indonesia’s economy as it relates to coal is in a transition. Indonesia has recently reduced taxation on the import of mining equipment and on the export of coal. Those changes make doing business in Indonesia more favorable, but such regulations can change in the future, and could have the effect of limiting the financial viability of our operations. Other-in country regulations could increase costs of operations, limit export quotas or net trade.
 
Inflation in Indonesia could negatively affect our profitability and growth .
 
Indonesia’s rapid climb amongst the world exporters of coal can drive increased competition and access to resources can lead to higher costs. Indonesia has kept inflation in the 6% range per annum, but constant interest rate cuts by the central bank to spur investment can lead to quicker inflation hikes. We will monitor inflation and adjust cost structures as necessary, but market pressures on resources could possibly result in operating delays.
 
We may experience currency fluctuation and longer exchange rate payment cycles .
 
The local currencies in the countries in which we intend to seek to sell our products may fluctuate in value in relation to other currencies. Such fluctuations may affect the cost of our product sold and the value of our local currency profits. While we are not conducting any operations in countries other than Indonesia at the present time, we may expand to other countries and may then have an increased risk of exposure of our business to currency fluctuation.
 
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Terrorist threats and civil unrest in Indonesia may negatively affect our business, financial condition and results of operations.
 
Our business is affected by general economic conditions, fluctuations in consumer confidence and spending, and market liquidity, which can decline as a result of numerous factors outside of our control,  such as terrorist attacks and acts of war. Our business also may be affected by civil unrest and individuals who engage in activities intended to disrupt our business operations. Future terrorist attacks against Indonesia or the interests of the United Kingdom or other Western nations in Indonesia, rumors or threats of war, actual conflicts involving Indonesia, the United Kingdom, or their allies, or military or trade disruptions affecting our customers may materially adversely affect our operations. As a result, there could be delays or losses in future transportation and deliveries of coal to our customers, decreased future sales of our coal and extension of time for payment of accounts receivable from our customers. Strategic targets such as energy-related assets may be at greater risk of future terrorist attacks than other targets in Indonesia. In addition, disruption or significant increases in energy prices could result in government-imposed price controls. It is possible that any, or a combination, of these occurrences could have a material adverse effect on our business, financial condition and results of operations.
 
Environmental disasters like earthquakes and tsunamis in Indonesia may negatively affect our business, financial condition and results of operations .
 
The coal concessions which we intend to operate in Indonesia are subject to natural disasters that can delay our drilling efforts to get certified measurements of the properties coal reserves, destroy infrastructure required for production and create delays in delivering product to our end customers. These impacts will require us to adjust our operations and may be financially detrimental to our success.
 
Risks Relating to Public Company Compliance Requirements
 
Public company compliance may make it more difficult to attract and retain officers and directors .
 
The Sarbanes-Oxley Act of 2002 and new rules subsequently implemented by the Commission have required changes in corporate governance practices of public companies. As a public entity, we expect these new rules and regulations to increase compliance costs and to make certain activities more time consuming and costly. As a public entity, we also expect that these new rules and regulations may make it more difficult and expensive for us to obtain director and officer liability insurance in the future and it may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve as directors or as executive officers.
 
Risks Relating to Our Common Stock
 
Our stock price may be volatile .
 
The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:
 
·  
technological innovations or new products and services by us or our competitors;
 
·  
additions or departures of key personnel;
 
·  
limited “public float” following the reorganization transaction, in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for the common stock;
 
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·  
our ability to execute our business plan;
 
·  
operating results that fall below expectations;
 
·  
loss of any strategic relationship;
 
·  
industry developments;
 
·  
economic and other external factors; and
 
·  
period-to-period fluctuations in our financial results.  
 
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
 
There is currently no liquid trading market for our common stock and we cannot ensure that one will ever develop or be sustained .
 
Our common stock is currently approved for quotation on the Over-The-Counter Bulletin Board maintained by the National Association of Securities Dealers, Inc., or the OTC Bulletin Board, trading under the symbol “KALG.OB.” However, there is limited trading activity and not currently a liquid trading market. There is no assurance as to when or whether a liquid trading market will develop, and if such a market does develop, there is no assurance that it will be maintained. Furthermore, for companies whose securities are quoted on the OTC Bulletin Board, it is more difficult to obtain accurate quotations, to obtain coverage for significant news events because major wire services generally do not publish press releases about such companies, and to obtain needed capital. As a result, purchasers of our common stock may have difficulty selling their shares in the public market, and the market price may be subject to significant volatility.
 
Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline or could affect our ability to raise additional working capital
 
If our current stockholders seek to sell substantial amounts of common stock in the public market either upon expiration of any required holding period under Rule 144 or pursuant to an effective registration statement, it could create a circumstance commonly referred to as “overhang,” in anticipation of which the market price of our common stock could fall substantially. The existence of an overhang, whether or not sales have occurred or are occurring, also could make it more difficult for us to raise additional financing in the future through sale of securities at a time and price that we deem acceptable.    
 
Our common stock is currently deemed to be “penny stock”, which makes it more difficult for investors to sell their shares .
 
Our common stock is currently subject to the “penny stock” rules adopted under Section 15(g) of the Securities Exchange Act or 1934, as amended, or the Exchange Act. The penny stock rules apply to companies whose common stock is not listed on the Nasdaq Stock Market or other national securities exchange and trades at less than $5.00 per share or that have tangible net worth of less than $5,000,000 ($2,000,000 if the company has been operating for three or more years). These rules require, among other things, that brokers who trade penny stock to persons other than “established customers” complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. If we remain subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for our securities. If our securities are subject to the penny stock rules, investors will find it more difficult to dispose of our securities.
 
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The elimination of monetary liability against our directors, officers and employees under Delaware law and the existence of indemnification rights to our directors, officers and employees may result in substantial expenditures by us and may discourage lawsuits against our directors, officers and employees .
 
Our certificate of incorporation, as amended, does not contain any specific provisions that eliminate the liability of our directors for monetary damages to us and our stockholders. However, we are prepared to give such indemnification to our directors and officers to the fullest extent provided by Delaware law. We may also have contractual indemnification obligations under its employment agreements with its executive officers. The foregoing indemnification obligations could result in us incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and resultant costs may also discourage us from bringing a lawsuit against directors and officers for breaches of their fiduciary duties and may similarly discourage the filing of derivative litigation by our stockholders against our directors and officers even though such actions, if successful, might otherwise us and our stockholders.
 
PART II - OTHER INFORMATION
 
ITEM 6. Exhibits.
 
The exhibits set forth below are filed as part of this Amendment No. 1 to Quarterly Report on Form 10-QSB:
 
Exhibit
Number
 
 
Description
     
31.1
 
Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.*
     
31.2
 
Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.*

* Filed herewith

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
KAL ENERGY, INC.
     
Dated: March 31, 2008
 
/s/ Martin Hurley
 
 
Martin Hurley
Chief Executive Officer
     
 
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