UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2009.
or
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934 |
For the transition period from to to
Commission File Number : 333-137460.
NEXGEN PETROLEUM CORP.
(Exact name of registrant as specified in its charter)
| Nevada | 26-24106855 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | |
2808 Cowan Circle Las Vegas, NV (Address of principal executive offices) | 89102 (Zip Code) |
866-446-1869
(Registrant’s telephone number, including area code)
2820 W. Charleston Blvd., Suite 22
Las Vegas, NV 89102
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.
x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
¨ Yes ¨ No
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 | ¨ | (Do not check if a smaller reporting company) | Smaller reporting company | x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
¨ Yes x No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
¨ Yes ¨ No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 56,413,000 shares of common stock with a par value of $0.001 as of August 1, 2009.
TABLE OF CONTENTS
| USE OF NAMES | 1 |
| CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS | 1 |
| PART I – FINANCIAL INFORMATION | 1 |
| Item 1. Financial Statements | 1 |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 3 |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk. | 7 |
| Item 4T. Controls and Procedures. | 7 |
| PART II - OTHER INFORMATION | 9 |
| Item 1. Legal Proceedings | 9 |
| Item 1A. Risk Factors | 9 |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 9 |
| Item 3. Defaults upon Senior Securities | 9 |
| Item 4. Submission of Matters to a Vote of Security Holders | 9 |
| Item 5. Other Information | 9 |
| Item 6. Exhibits | 10 |
USE OF NAMES
In this annual report, the terms “Nexgen Petroleum”, “Company”, “we”, or “our”, unless the context otherwise requires, mean Nexgen Petroleum Corp. and its subsidiaries, if any.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q and other reports that we file with the SEC contain statements that are considered forward-looking statements. Forward-looking statements give the Company’s current expectations, plans, objectives, assumptions or forecasts of future events. All statements other than statements of current or historical fact contained in this quarterly report, including statements regarding the Company’s future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plans,” “potential,” “projects,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend,” and similar expressions. These statements are based on the Company’s current plans and are subject to risks and uncertainties, and as such the Company’s actual future activities and results of operations may be materially different from those set forth in the forward looking statements. Any or all of the forward-looking statements in this quarterly report may turn out to be inaccurate and as such, you should not place undue reliance on these forward-looking statements. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. The forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and assumptions due to a number of factors, including:
| · | dependence on key personnel; |
| · | degree of success of exploration and development programs; |
| · | the operation of our business; and |
| · | general economic conditions in the United States. |
These forward-looking statements speak only as of the date on which they are made, and except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor 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. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements contained in this quarterly report.
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Our financial statements included in this Form 10-Q are as follows:
| F-1 | Balance Sheets as of June 30, 2009 (unaudited) and March 31, 2009 (audited); |
| F-2 | Statements of Operations for the three months ended June 30, 2009 and 2008 and period from April 17, 2006 (inception) to June 30, 2009 (unaudited); |
| F-3 | Statement of Stockholders’ Deficit for period from April 17, 2006 (inception) to June 30, 2009 (unaudited); |
| F-4 | Statements of Cash Flows for the three months ended June 30, 2009 and 2008 and period from April 17, 2006 (inception) to June 30, 2009(unaudited); and |
| F-5 | Notes to Financial Statements. |
These unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended June 30, 2009, are not necessarily indicative of the results that can be expected for the full year.
NEXGEN PETROLEUM CORP.
(formerly Blackrock Petroleum Corp.)
(AN EXPLORATION STAGE COMPANY)
BALANCE SHEETS
As of June 30, 2009 and March 31, 2009
| | | June 30, 2009 | | | March 31, 2009 | |
| | | (Unaudited) | | | (Audited) | |
| ASSETS | | | | | | |
| Current assets | | | | | | |
| Cash | | $ | 11,250 | | | $ | 3,626 | |
| Prepaid expenses | | | - | | | | - | |
| Total current assets | | | 11,250 | | | | 3,626 | |
| | | | | | | | | |
| Oil and gas properties ( successful efforts basis) | | | 2,229,800 | | | | 2,229,800 | |
| | | | | | | | | |
| Property and equipment – Note 3 | | | 195 | | | | 385 | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 2,241,245 | | | $ | 2,233,811 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
| | | | | | | | | |
| LIABILITIES | | | | | | | | |
| Current liabilities | | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 12,131 | | | $ | 12,271 | |
| Shareholders’ loans – Note 5 | | | 1,650,793 | | | | 1,641,793 | |
| | | | | | | | | |
| TOTAL LIABILITIES | | | 1,662,924 | | | | 1,654,064 | |
| | | | | | | | | |
| STOCKHOLDERS’ EQUITY | | | | | | | | |
| Common stock, $.001 par value, 1,350,000,000 shares authorized, 56,413,000 ( March 31, 2009 – 56,413,000) shares issued and outstanding | | | 10,413 | | | | 10,413 | |
| Additional paid in capital | | | 998,733 | | | | 978,211 | |
| Deficit accumulated during the exploration stage | | | (430,825 | ) | | | (408,877 | ) |
| Total stockholders’ equity | | | 578,321 | | | | 579,747 | |
| | | | | | | | | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | | $ | 2,241,245 | | | $ | 2,233,811 | |
See accompanying notes to financial statements.
NEXGEN PETROLEUM CORP.
(formerly Blackrock Petroleum Corp.)
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF OPERATIONS
Three months ended June 30, 2009 and 2008
Period from April 17, 2006 (Inception) to June 30, 2009
(Unaudited)
| | | Three months ended June 30, 2009 | | | Three months ended June 30, 2008 | | | Period from April 17, 2006 (Inception) to June 30, 2009 | |
| | | | | | | | | | |
| Revenues | | $ | 0- | | | $ | 0- | | | $ | 0- | |
| | | | | | | | | | | | | |
| General and administrative expenses: | | | | | | | | | | | | |
| Professional fees | | | 469 | | | | 44,933 | | | | 277,428 | |
| Depreciation | | | 190 | | | | 190 | | | | 2,184 | |
| Bank charges | | | 99 | | | | 227 | | | | 1,684 | |
| Foreign exchange loss (gain) | | | -0- | | | | -0- | | | | 177 | |
| Filing and registration | | | -0- | | | | 3,442 | | | | 7,357 | |
| Product development | | | -0- | | | | -0- | | | | 30,455 | |
| Office and miscellaneous | | | 668 | | | | 1,749 | | | | 9,835 | |
| Total general and administrative | | | 1,426 | | | | 50,541 | | | | 329,120 | |
| | | | | | | | | | | | | |
| Net loss before other expense | | | (1,426 | ) | | | (50,541 | ) | | | (329,120 | ) |
| | | | | | | | | | | | | |
| Other income (expense) | | | | | | | | | | | | |
| Interest income | | | -0- | | | | -0- | | | | 3,765 | |
| Interest expense | | | (20,522 | ) | | | (19,760 | ) | | | (105,146 | ) |
| Loss on sale of equipment | | | -0- | | | | -0- | | | | (324 | ) |
| Total other income (expense) | | | (20,522 | ) | | | (19,760 | ) | | | (101,705 | ) |
| | | | | | | | | | | | | |
| Net loss | | $ | (21,948 | ) | | $ | (70,301 | ) | | $ | (430,825 | ) |
| | | | | | | | | | | | | |
| Net loss per share: | | | | | | | | | | | | |
| Basic and diluted | | $ | (0 .00 | ) | | $ | (0 .01 | ) | | $ | 0.00 | |
| | | | | | | | | | | | | |
| Weighted average shares outstanding: | | | | | | | | | | | | |
| Basic and diluted, as adjusted for 15:1 stock split | | | 56,413,000 | | | | 55,000,000 | | | | | |
See accompanying notes to financial statements.
NEXGEN PETROLEUM CORP.
(formerly Blackrock Petroleum Corp.)
(AN EXPLORATION STAGE COMPANY)
STATEMENT OF STOCKHOLDERS’ EQUITY
Period from April 17, 2006 (Inception) to June 30, 2009
(Unaudited)
| | | Common stock | | | Additional paid-in capital | | | Share subscriptions | | | Deficit Accumulated during the development stage | | | Total | |
| | | Shares | | | Amount | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Issuance of common stock for cash @$.001 | | | 135,000,000 | | | $ | 9,000 | | | $ | 81,000 | | | $ | -0- | | | $ | - | | | $ | 90,000 | |
| Net loss for the period | | | - | | | | - | | | | - | | | | - | | | | (81,059 | ) | | | (81,059 | ) |
| Balance, March 31, 2007 | | | 135,000,000 | | | | 9,000 | | | | 81,000 | | | | -0- | | | | (81,059 | ) | | | 8,941 | |
| Proceeds of share subscription | | | | | | | | | | | | | | | 470,000 | | | | | | | | 470,000 | |
| Imputed interest on shareholder loan | | | | | | | | | | | 3,904 | | | | | | | | | | | | 3,904 | |
| Net loss for the period | | | - | | | | - | | | | - | | | | - | | | | (128,230 | ) | | | (128,230 | ) |
| Balance, March 31, 2008 | | | 135,000,000 | | | | 9,000 | | | | 84,904 | | | | 470,000 | | | | (209,289 | ) | | | 354,615 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Proceeds of share subscription | | | | | | | | | | | | | | | 344,000 | | | | | | | | 344,000 | |
| Voluntary surrender and cancellation of shares | | | (80,000,00 | ) | | | | | | | | | | | | | | | | | | | | |
| Issuance of common stock for $ 1 per share | | | 215,000 | | | | 215 | | | | 214,785 | | | | (215,000 | ) | | | | | | | | |
| Issuance of common stock for $ .50 per share | | | 1,198,000 | | | | 1,198 | | | | 597,802 | | | | (599,000 | ) | | | | | | | | |
| Imputed interest on shareholder loan | | | | | | | | | | | 80,720 | | | | | | | | | | | | 80,720 | |
| Net loss for the period | | | - | | | | - | | | | - | | | | - | | | | (199,588 | ) | | | (199,588 | ) |
| Balance, March 31, 2009 | | | 56,413,000 | | | | 10,413 | | | | 978,211 | | | | -0- | | | | (408,877 | ) | | | 579,747 | |
| Imputed interest on shareholder loan | | | | | | | | | | | 20,522 | | | | | | | | | | | | 20,522 | |
| Net loss for the period | | | - | | | | - | | | | - | | | | - | | | | (21,948 | ) | | | (21,948 | ) |
| Balance, June 30, 2009 | | | 56,413,000 | | | $ | 10,413 | | | $ | 998,733 | | | $ | -0- | | | $ | (430,825 | ) | | $ | 578,321 | |
See accompanying notes to financial statements.
NEXGEN PETROLEUM CORP.
(formerly Blackrock Petroleum Corp.)
(AN EXPLORATION STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Three months ended June 30, 2009 and 2007
Period from April 17, 2006 (Inception) to June 30, 2009
(Unaudited)
| | | Three months ended June 30, 2009 | | | Three months ended June 30, 2009 | | | Period from April 17, 2006 (Inception) to June 30, 2009 | |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | | | | |
| Net loss | | $ | (21,948 | ) | | $ | (70,301 | ) | | $ | (430,825 | ) |
| Adjustments to reconcile net loss to Cash used by operating activities: | | | | | | | | | | | | |
| Depreciation | | | 190 | | | | 190 | | | | 2,184 | |
| Imputed interest | | | 20,522 | | | | 19,760 | | | | 105,146 | |
| Loss on sale of property and equipment | | | -0- | | | | -0- | | | | 324 | |
| Change in non-cash working capital items Prepaid expenses | | | -0- | | | | -0- | | | | -0- | |
| Accounts payable and accrued liabilities | | | (140 | ) | | | (14,668 | ) | | | 12,131 | |
| CASH FLOWS USED IN OPERATING ACTIVITIES | | | (1,376 | ) | | | (65,019 | ) | | | (311,040 | ) |
| CASH FLOWS USED IN INVESTING ACTIVITIES | | | | | | | | | | | | |
| Oil and gas properties | | | -0- | | | | -0- | | | | (2,229,800 | ) |
| Proceeds on disposal of property and equipment | | | -0- | | | | -0- | | | | 1,688 | |
| Purchase of property and equipment | | | -0- | | | | -0- | | | | (4,391 | ) |
| CASH FLOWS USED IN INVESTING ACTIVITIES | | | -0- | | | | -0- | | | | (2,232,503 | ) |
| | | | | | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | | | | | |
| Loans from (repayments to) shareholders | | | 9,000 | | | | (100,000 | ) | | | 1,650,793 | |
| Share subscription received | | | -0- | | | | 344,000 | | | | 470,000 | |
| Proceeds from sales of common stock | | | -0- | | | | -0- | | | | 434,000 | |
| CASH FLOWS PROVIDED BY FINANCING ACTIVITIES | | | 9,000 | | | | 244,000 | | | | 2,554,793 | |
| | | | | | | | | | | | | |
| NET INCREASE (DECREASE) IN CASH | | | 7,624 | | | | 178,981 | | | | 11,250 | |
| Cash, beginning of period | | | 3,626 | | | | 8,008 | | | | -0- | |
| Cash, end of period | | $ | 11,250 | | | $ | 186,989 | | | $ | 11,250 | |
| | | | | | | | | | | | | |
| SUPPLEMENTAL CASH FLOW INFORMATION | | | | | | | | | | | | |
| Interest paid | | $ | - | | | $ | - | | | $ | - | |
| Income taxes paid | | $ | - | | | $ | - | | | $ | - | |
See accompanying notes to financial statements.
NEXGEN PETROLEUM CORP.
(formerly Blackrock Petroleum Corp.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2009
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Nexgen Petroleum Corp. have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s filing with the SEC on Form 10-K. In the opinion of management, all adjustments necessary in order for the financial statements to be not misleading have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year 2009 as reported in Form 10-K, have been omitted.
NOTE 2 – SUMMARY OF ACCOUNTING POLICIES
Nature of Business
Nexgen Petroleum Corp. (“Nexgen”) was incorporated as DGT Corp. in Nevada on April 17, 2006. On September 20, 2007, the Company completed a merger with subsidiary Blackrock Petroleum Corp. and changed its name from DGT Corp. to Blackrock Petroleum Corp. On June 5, 2008, the Company completed a merger with subsidiary Nexgen Petroleum Corp. and changed its name from Blackrock Petroleum Corp. to Nexgen Petroleum Corp.
Nexgen is an exploration stage company which intends to acquire interests in leases for oil and gas prospects and then drill exploratory and development wells with industry participants.
On March 10, 2008, Nexgen entered into a Farmout and Participation Agreement with respect to two test wells on an oil and gas lease dated December 22, 2007. Under the Farmout Agreement, Nexgen is paying 60% of all costs associated with the test wells to earn a 30% interest in the associated production spacing units. See Note 7.
NEXGEN PETROLEUM CORP.
(formerly Blackrock Petroleum Corp.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2009
NOTE 2 – SUMMARY OF ACCOUNTING POLICIES (continued)
Oil and Gas Properties
Nexgen accounts for oil and gas exploration and development costs using the successful efforts method. Geological and geophysical costs and the costs of carrying and retaining undeveloped properties are expensed as incurred. Exploratory well costs are capitalized pending further evaluation of whether economically recoverable reserves have been found. If economically recoverable reserves are not found, explanatory well costs will be expensed as dry holes. All exploratory wells are evaluated for economic viability within one year of well completion and the related capital costs are reviewed quarterly. Exploratory well costs that discover potentially economically recoverable reserves in areas where a major capital expenditure would be required before production could begin and where the economic viability of that major capital expenditure depends upon the successful completion of further exploratory work in the area, remain capitalized as long as the additional exploratory work is underway or firmly planned.
Property and Equipment
The Company’s capital asset has been capitalized and is being depreciated over its estimated useful life on a straight line basis over a three year period.
Cash and Cash Equivalents
For the purposes of presenting cash flows, Nexgen considers all highly liquid investments with original maturities of three months or less to be cash equivalents.
Fair Value of Financial Instruments
The Company’s financial instruments consist of cash and cash equivalents and payables. The carrying amount of these financial instruments approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
NEXGEN PETROLEUM CORP.
(formerly Blackrock Petroleum Corp.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2009
NOTE 2 – SUMMARY OF ACCOUNTING POLICIES (continued)
Use of Estimates
The preparation of 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 the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Basic loss per share
Basic loss per share has been calculated based on the weighted average number of shares of common stock outstanding during the period.
Recent Accounting Pronouncements
Nexgen does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.
NOTE 3 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
| | | June | | | March | |
| | | 30, 2009 | | | 31, 2009 | |
| | | | | | | | | |
| Computer equipment | | $ | 2,291 | | | $ | 2,291 | |
| Less: Accumulated depreciation | | | ( 2,096 | ) | | | ( 1,906 | ) |
| | | $ | 195 | | | $ | 385 | |
The capital asset is being depreciated on a straight-line basis over its estimated useful life of three years. In August 2006, certain computer equipment was disposed of for proceeds of $1,688.
NOTE 4 – INCOME TAXES
For the period ended June 30, 2009, Nexgen has incurred net losses and, therefore, has no tax liability. The net deferred tax asset generated by the loss carry-forward has been fully reserved. The cumulative net operating loss carry-forward is approximately $430,000 at June 30, 2009 and will expire beginning in the year 2026.
| (formerly Blackrock Petroleum Corp.) |
| (AN EXPLORATION STAGE COMPANY) |
| NOTES TO THE FINANCIAL STATEMENTS |
NOTE 4 – INCOME TAXES (continued)
The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:
| | | June 30, 2009 | | | June 30, 2008 | |
| Deferred tax asset attributable to: | | | | | | |
| Net operating loss carryover | | $ | 146,000 | | | $ | 95,000 | |
| Valuation allowance | | | (146,000 | ) | | | (95,000 | ) |
| Net deferred tax asset | | $ | - | | | $ | - | |
NOTE 5 – SHAREHOLDERS’ LOANS
During the year ended March 31, 2008, the Company received loans from two shareholders in the principal amounts of $622,500, $800,000 and $225,000. During the year ended March 31, 2009, the Company repaid $100,000 of the $225,000 loan received and $40,000 of the $622,500 loan. In addition, during the year ended March 31, 2009 Nexgen received loans of $134,293 from a shareholder. All loans are non-interest bearing and are due on demand. The loans are considered to be short-term at June 30, 2009 and the Company expects that it will need to pay these back within the next twelve months. Imputed interest at 5% per annum has been recorded as an increase in additional paid in capital.
NOTE 6 – COMMON STOCK
At inception, Nexgen issued 9,000,000 shares of stock for $90,000 cash.
Effective September 20, 2007, Nexgen affected a fifteen (15) for one (1) forward stock split.
On September 18, 2007, Nexgen received stock subscription proceeds related to a private placement of 1,000,000 shares at $.50 per share. Subsequently, $455,000 of the subscription proceeds were returned. On February 20, 2008, Nexgen received stock subscriptions proceeds of $425,000 related to a private placement of shares at $ .50 per share.
During the period ended March 31, 2009, Nexgen received stock subscriptions proceeds of $129,000 related to a private placement of shares at $.50 per share and $215,000 related to a private placement of shares at $1.00 per share.
NEXGEN PETROLEUM CORP.
(formerly Blackrock Petroleum Corp.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2009
NOTE 7– COMMITMENTS
On March 10, 2008, Nexgen entered into a Farmout and Participation Agreement with respect to two test wells on an oil and gas lease dated December 22, 2007. Under the Farmout Agreement, Nexgen is paying 60% of all costs associated with the test wells to earn a 30% interest in the associated production spacing units.
On or about April 11, 2008, the Company entered into a letter agreement (the “Letter Agreement”) with Montello Resources (USA) Ltd., Park Place Energy Corp., and Austin Developments Corp., dated effective April 11, 2008, whereby the parties agreed to amend the March 10, 2008 Farmout Agreement as follows: (i) Article 8 (Area of Mutual Interest) of the Farmout & Royalty Procedure attached as Schedule “C” to the Farmout Agreement shall apply; (ii) the Mutual Interest Lands shall comprise all PNG rights 50% or more of which are located within the boundaries of that area of lands located within Morgan County, State of Tennessee, USA as outlined on the map attached to the Letter Agreement; (iii) the Area of Mutual Interest shall be in effect until 11:50 pm on April 10, 2010; and (iv) the participating interests of the parties hereto in the Area of Mutual Interest during the term thereof shall be Montello – 35%, Park Place – 5%, Austin – 30% and the Company – 30%.
In addition, on or about April 11, 2008, the Company entered into a Farmout and Participation Agreement (the “Farmout Agreement”), which is effective as of April 11, 2008, with Montello Resources (USA) Ltd., a subsidiary of Montello Resources Ltd., Park Place Energy Corp., an Alberta corporation, and Austin Developments Corp., an Alberta corporation, with respect to two test wells on the oil and gas lease dated March 25, 2008 between Robert and Kathy Lavender, as lessors, and Montello Resources (USA) Ltd., as lessee, located in Morgan County, Tennessee.
NEXGEN PETROLEUM CORP.
(formerly Blackrock Petroleum Corp.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2009
NOTE 7– COMMITMENTS (continued)
Under the Farmout Agreement the participating interests are as follows:
Montello Resources (USA) Ltd., as operator, is paying 15% of all costs associated with the test well to earn a 35% interest in the associated production spacing units; Austin Developments Corp. is paying 20% of the costs to earn a 30% interest; Park Place Energy Corp. is paying 5% of the costs to earn a 5% interest; and the Company is paying 60% of the costs to earn a 30% interest. As of June 30, 2008, the Company has incurred $132,000 in capital expenditures on this property by participating in the drilling and completion of the Morgan Highpoint #5 test well, which has been cased and shut in.
On or about August 26, 2008, the Company entered into an equalization and joint operating agreement with Montello Resources (USA) Ltd,, Park Place Energy Corp. and Austin Developments Corp. with respect to interests in various joint lands and wells. The initial working interests of the parties in the Property are (i) with respect to the Bowen Block, Park Place 5%, Montello 55% and Austin 40%, and (ii) with respect to the balance of the leases on the Property, Park Place 5%, Montello 35%, Austin 30% and the Company, 30%. Among other terms and conditions as between Montello and the Company, the Company will bear on Montello’s behalf, $ 1,250,000 with respect to Montello’s working interest share of any joint expense incurred on the Property, and when the Company has paid such amount, it shall have earned from Montello, an undivided 15% working interest in the Bowen Block. As among Montello, Austin and the Company, if warranted upon completion of certain anticipated operations on the Property, the Company shall commission at its expense, an engineering report to evaluate the 100% working interest in the proven and probably oil and gas assets in the Bowen Block. Among other terms and conditions, within 30 days of the receipt of this evaluation, the Company may acquire an undivided 5% working interest from Montello and an undivided 10% working interest from Austin in the Bowen Block for (i) pro rata percentage dollar amount as calculated from the engineering evaluation (ii) a pro rata percentage of the sum of $ 325,000.
On August 21, 2008, the Company and Montello USA entered into an amending agreement (the “Amending Agreement”) to the Equalization and JO Agreement which was amended as follows:
(i) | If the Company does not advise Montello USA in writing on or prior to September 1, 2008, that it intends to be bound by all of the provisions of clause 4 of the Equalization and JO Agreement, then all of the terms and conditions of said clause 4 shall thereafter not apply as between the parties; and |
NEXGEN PETROLEUM CORP.
(formerly Blackrock Petroleum Corp.)
(AN EXPLORATION STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
June 30, 2009
NOTE 7– COMMITMENTS (continued)
(ii) | Notwithstanding the foregoing, Montello USA may at any time at its sole, unfettered discretion unilaterally terminate the provisions of said clause 4 of the Equalization and JO Agreement as between the parties by so advising the Company in writing. The sole exception to Montello USA’s exercising this unilateral right to terminate is if the Company had already paid the Carried Amount of $1,250,000 in total on behalf of Montello USA. |
NOTE 8 – LIQUIDITY AND GOING CONCERN
The Company has negative working capital, has incurred losses since inception, and has not yet received revenues from sales of products or services. These factors create substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.
The ability of the Company to continue as a going concern is dependent on the Company generating cash from the sale of its common stock and/or obtaining debt financing and attaining future profitable operations. Management’s plans include selling its equity securities and obtaining debt financing to fund its capital requirement and ongoing operations; however, there can be no assurance the Company will be successful in these efforts.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following plan of operation together with our financial statements and related notes appearing elsewhere in this quarterly report. This plan of operation contains forward-looking statements that involve risks, uncertainties, and assumptions. The actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors.
Overview
We are a development stage company that focuses on acquiring and exploring oil and gas properties primarily in North America. The Company currently has interests in oil and gas properties in the Morgan Highpoint Project in Tennessee. We intend to acquire interests in leases for oil and gas prospects either through farmout arrangements, participation arrangements or straight acquisition of oil and gas interests, and then drill exploratory and development wells with the help of other industry participants. We do not intend to operate any properties.
Year of Organization and Corporate History
Nexgen Petroleum Corp. was incorporated in the State of Nevada on April 17, 2006, under the name DGT Corp. Our shares of common stock were quoted for trading on the Over-the-Counter Bulletin Board (the “OTCBB”) on December 22, 2006, under the symbol “DGTR”. On September 20, 2007, our Company and its wholly owned subsidiary, Blackrock Petroleum Corp. merged and our name changed to Blackrock Petroleum Corp. Our trading symbol on the OTCBB was changed to “BRPC”. On May 21, 2008, we underwent another merger with our wholly owned subsidiary Nexgen Petroleum Corp. At that time our name was changed to Nexgen Petroleum Corp. and our trading symbol on the OTCBB was changed to “NXPE” effective June 9, 2008.
Effective September 20, 2007, a forward stock split of our authorized, issued and outstanding common stock was undertaken on a fifteen to one basis. As a result, our authorized capital increased from 90,000,000 shares of common stock with a par value of $0.001 and 10,000,000 shares of preferred stock with a par value of $0.001 to 1,350,000,000 shares of common stock with a par value of $0.001 and 10,000,000 shares of preferred stock with a par value of $0.001. Our issued and outstanding share capital increased from 9,000,000 shares of common stock to 135,000,000 shares of common stock.
Our Business
When Nexgen Petroleum operated as DGT Corp., we were in the business of providing professional digital photo editing services for photo studios. However, we changed our business plan and have now focused our activities on the oil and gas industry as an exploration stage corporation. We intend to acquire interests in leases for oil and gas prospects either through farmout arrangements, participation arrangements or the straight acquisition of oil and gas interests, and then drill exploratory and development wells with the help of other industry participants. We do not intend to operate any properties. We intend to focus our oil and gas activities in North America as well as other regions.
It is our intention that in the projects in which we hold interests, another party will typically act as the operator of the project. With respect to the projects that we will participate in, we will provide the operator with timely funding for our proportionate share of costs as well as with technical input on how best to develop the property. As a way to keep our overhead down, we will engage the services of consultants who have technical expertise to best represent the Company’s interests.
The Company currently has an interest in an oil and gas property in Morgan County, Tennessee. Our principal capital expenditures to date have been $2,044,800 to acquire the interest in the oil and gas property in Morgan County, Tennessee. We continue to work on identifying new properties for acquisition.
Our Property - Morgan Highpoint Property, Tennessee, USA
On March 10, 2008, the Company entered into a farmout and participation agreement (the “Farmout Agreement”), which is effective as of February 26, 2008, with Montello Resources (USA) Ltd. (“Montello USA”), a subsidiary of Montello Resources Ltd. (TSX-V: MEO), Park Place Energy Corp. (OTCBB: PRPL) (“PRPL”), an Alberta corporation, and Austin Developments Corp. (TSX-V: AUL) (“AUL”), an Alberta corporation, with respect to two test wells on the oil and gas lease dated December 22, 2007, between Southeast Ventures, Inc., as lessor, and Montello USA, as lessee, located in Morgan County, Tennessee.
Under the Farmout Agreement the participating interests are as follows: Montello USA, as operator, is paying 15% of all costs associated with the test wells to earn a 35% interest in the associated production spacing units; AUL is paying 20% of the costs to earn a 30% interest; PRPL is paying 5% of the costs to earn a 5% interest; and the Company is paying 60% of the costs to earn a 30% interest. As of June 30, 2009, the Company has incurred $2,044,800 in capital expenditures on this property. The Morgan Highpoint #3 and the Morgan Highpoint #4 test wells were drilled, completed, cased and shut in. The Company earned its 30% interest in the associated production spacing units on these two wells on July 1, 2008.
The foregoing description of the Farmout Agreement does not purport to be complete and is qualified in its entirety by reference to the Farmout Agreement, which was attached as Exhibit 10.1 to the Form 8-K filed on March 17, 2008, which is incorporated herein by reference.
On or about April 11, 2008, the Company entered into a letter agreement (the “Letter Agreement”) with Montello USA, PRPL, and AUL, dated effective April 11, 2008, whereby the parties agreed to amend the March 10, 2008, Farmout Agreement as follows: (i) Article 8 (Area of Mutual Interest) of the Farmout & Royalty Procedure attached as Schedule “C” to the Farmout Agreement shall apply; (ii) the Mutual Interest Lands shall comprise all PNG rights 50% or more of which are located within the boundaries of that area of lands located within Morgan County, State of Tennessee, USA as outlined on the map attached to the Letter Agreement; (iii) the Area of Mutual Interest shall be in effect until 11:50 pm on April 10, 2010; and (iv) the participating interests of the parties hereto in the Area of Mutual Interest during the term thereof shall be Montello USA – 35%, PRPL – 5%, AUL – 30% and the Company – 30%.
The foregoing description of the Letter Agreement does not purport to be complete and is qualified in its entirety by reference to the Letter Agreement, which was attached as Exhibit 10.2 to the Form 10-KSB filed on July 14, 2008, which is incorporated herein by reference.
In addition, on or about April 11, 2008, the Company entered into a farmout and participation agreement (the “Farmout Agreement #2”), which is effective as of April 11, 2008, with Montello USA, PRPL, and AUL with respect to one test well on the oil and gas lease dated March 25, 2008, between Robert and Kathy Lavender, as lessors, and Montello USA, as lessee, located in Morgan County, Tennessee. Under the Farmout Agreement #2, the participating interests are as follows: Montello USA, as operator, is paying 15% of all costs associated with the test well to earn a 35% interest in the associated production spacing unit; AUL is paying 20% of the costs to earn a 30% interest; PRPL is paying 5% of the costs to earn a 5% interest; and the Company is paying 60% of the costs to earn a 30% interest. As of June 30, 2009, the Company had incurred $132,000 in capital expenditures on this property for the Morgan Highpoint #5 test well, which was drilled, completed, cased and shut in. The funds for this operation were from the excess funds remaining from the Morgan Highpoint #3 and #4 drilling operations. The Company earned its 30% interest in the associated production spacing unit on the Morgan Highpoint #5 test well on July 1, 2008.
The foregoing description of the Farmout Agreement #2 does not purport to be complete and is qualified in its entirety by reference to the Farmout Agreement #2, which was attached as Exhibit 10.3 to the Form 10-KSB filed on July 14, 2008, which is incorporated herein by reference.
On or about August 26, 2008, the Company entered into an equalization and joint operating agreement (the “Equalization and JO Agreement”), dated July 7, 2008, with Montello USA, PRPL and AUL, with respect to interests in the joint lands and wells more particularly described in Schedule “A” to the Equalization and JO Agreement (collectively, the “Property”). The Equalization and JO Agreement supersedes and replaces all previous agreements between the parties with respect to the Property and establishes the manner in which operations will be conducted on the Property. The initial working interests of the parties in the Property are: (i) with respect to the Bowen Block (as defined in the Equalization and JO Agreement), PRPL 5%, Montello USA 55% and AUL 40%; and (ii) with respect to the balance of the leases on the Property, PRPL 5%, Montello USA 35%, AUL 30% and the Company 30%. Among other terms and conditions, as between Montello USA and the Company, the Company will bear on Montello USA’s behalf $1,250,000 with respect to Montello USA’s working interest share of any joint expense incurred on the Property and when the Company has paid such amount, it shall have earned from Montello USA an undivided 15% working interest in the Bowen Block. As among Montello USA, AUL and the Company, if warranted upon completion of certain anticipated operations on the Property, the Company shall commission (at its own expense) an engineering report to evaluate the 100% working interest in the proven and probable oil and gas assets in the Bowen Block (the “Evaluation”). Among other terms and conditions, within 30 days of receipt of the Evaluation, the Company may acquire an undivided 5% working interest from Montello USA and an undivided 10% working interest from AUL in the Bowen Block for: (i) a pro rata percentage dollar amount as calculated from the Evaluation; and (ii) a pro rata percentage of the sum of $325,000.
The foregoing description of the Equalization and JO Agreement does not purport to be complete and is qualified in its entirety by reference to the Equalization and JO Agreement, which was attached as Exhibit 10.1 to the Form 10-Q filed on November 14, 2008, which is incorporated herein by reference.
As of June 30, 2009, the Company had incurred $185,000 in capital expenditures on the Bowen Block property.
On August 21, 2008, the Company and Montello USA entered into an amending agreement (the “Amending Agreement”) to the Equalization and JO Agreement which was amended as follows:
| (i) | If the Company does not advise Montello USA in writing on or prior to September 1, 2008, that it intends to be bound by all of the provisions of clause 4 of the Equalization and JO Agreement, then all of the terms and conditions of said clause 4 shall thereafter not apply as between the parties; and |
| (ii) | Notwithstanding the foregoing, Montello USA may at any time at its sole, unfettered discretion unilaterally terminate the provisions of said clause 4 of the Equalization and JO Agreement as between the parties by so advising the Company in writing. The sole exception to Montello USA’s exercising this unilateral right to terminate is if the Company had already paid the Carried Amount of $1,250,000 in total on behalf of Montello USA. |
The foregoing description of the Amending Agreement does not purport to be complete and is qualified in its entirety by reference to the Amending Agreement, which was attached as Exhibit 10.2 to the Form 10-Q filed on November 14, 2008, which is incorporated herein by reference.
Plan of Operations
We have not yet generated or realized any revenues from our business operations. Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. This is because we have not generated any revenues and no revenues are anticipated until we are able to acquire oil and gas prospects, explore and develop such prospects and are able to produce oil and/or gas from our exploration and development. There is no assurance we will ever reach this point. Accordingly, we must raise cash from sources other than the sale of oil and/or gas. Our only other source for cash at this time is investments by others in us. We must raise cash to implement our plan and stay in business. If we require additional money and are unable to raise it, we may have to suspend or cease operations.
We intend to acquire interests in leases for oil and gas prospects either through farmout arrangements, participation arrangements or straight acquisition of oil and gas interests, and then drill exploratory and development wells with the help of other industry participants. We do not intend to operate any properties at this time. We intend to focus our oil and gas activities in North America as well as other regions.
On the Morgan Highpoint Project, we intend to commence discussions with the other participants under the Equalization and JO Agreement in order to determine our future activities and estimated costs associated with any future activities.
We do not intend to hire any employees at this time.
Anticipated Expenses over the Next Twelve Months
We anticipate that we will spend approximately $270,000 on our expenses in the next twelve months. Below is a table showing these expenses.
| Expense Item | | Estimated Annual Amount | |
| Legal | | | 75,000 | |
| Accounting | | | 55,000 | |
| Travel Expenses | | | 10,000 | |
| Web Design & Technical Consultant | | | 5,000 | |
| Printing | | | 5,000 | |
| Office Expenses | | | 10,000 | |
| Filing Fees & Transfer Agent | | | 10,000 | |
| Working Capital | | | 100,000 | |
| TOTAL | | | 270,000 | |
Liquidity and Capital Resources
As of June 30, 2009, we had total current assets of $11,250 and total assets of $2,241,245 compared to total current assets of $186,989 and total assets of $2,232,745 as of June 30, 2008. Our total current assets as of June 30, 2009 comprise of cash in the amount of $11,250 compared to cash in the amount of $$186,989 as of June 30, 2008. Our total current liabilities as of June 30, 2009 were $1,662,924 represented by accounts payable and accrued liabilities of $12,131 and shareholders’ loans of $1,650,793 compared to total current liabilities of $37,171 represented by accounts payable and accrued liabilities as of June 30, 2008. As a result, on June 30, 2009, we had a working capital deficiency of $1,651,674 compared to a working capital surplus of $149,818 on June 30, 2008, which change was mainly a result of the change of the shareholders’ loans from long term to short term.
We are a development stage corporation and have not generated any revenue to date from our activities. Despite our hope for revenues in the foreseeable future, we believe that revenues will be sparse and irregular and, if we receive any at all, will be far less than necessary to carry out our business forward without additional financing. We have cash in the amount of $11,250 as of June 30, 2009, which is not enough to meet our projected expenditures in the next twelve months. Thus, in order to meet our capital needs, we will most likely need to raise funds from other sources to remain in business. We intend to raise additional money through private placements, however, there can be no assurance that we will be able to raise additional money in the future. If we need additional capital and cannot raise the necessary amount, we will either be required to suspend activities until we do raise the cash or cease activity entirely.
Results of Operations
Operating activities used $311,040 in cash for the period from inception (April 17, 2006) to June 30, 2009. Our net loss of $430,825 was the primary component of our negative operating cash flow. Investing activities for the period from inception (April 17, 2006) to June 30, 2009, used $4,391 for the purchase of equipment and $2,229,800 for the acquisition of oil and gas property interests, offset by proceeds received on the sale of equipment of $1,688 for a total of $2,232,503. Net cash flows provided by financing activities for the period from inception (April 17, 2006) to June 30, 2009 was $2,554,793 represented as loans from shareholders of $1,650,793 and proceeds from the sale of our stock and proceeds from share subscriptions of $904,000.
Net Loss. Our net loss from April 17, 2006 (inception) to June 30, 2009 is $430,825. Our net loss for the three month period ended June 30, 2009 is $21,948. The principal components of our losses for the three month period ended June 30, 2009, included legal and professional expenses of $469 compared to $44,933 for the three months ended June 30, 2008, depreciation expenses of $190 which was the same for the three months ended June 30, 2008, bank charges of $99 compared to $227 for the three months ended June 30, 2008, filing and registration expenses of $Nil compared to $3,442 for the three months ended June 30, 2008 and office and miscellaneous expenses of $668 compared to $1,749 for the three months ended June 30, 2008. This condition raises substantial doubt about our ability to continue as a going concern. Our continuation as a going concern is dependent on our ability to meet our obligations, to obtain additional financing as may be required and ultimately to attain profitability. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Net Operating Losses. As of June 30, 2009, we had a net operating loss carry forward of approximately $430,000 which will expire beginning in the year 2026.
Revenues. We have not generated any revenues to date from our operations.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Going Concern Statement
We have negative working capital, have not yet received revenues from sales of products or services, and have recurring losses from operations. The continuation of our company as a going concern is dependent upon our Company attaining and maintaining profitable operations and raising additional capital. The financial statements do not include any adjustment relating to the recovery and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should our Company discontinue operations.
Due to the uncertainty of our ability to meet our current operating expenses and the capital expenses noted above, in their report on the annual financial statements for the year ended March 31, 2009, our independent auditors included an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
The continuation of our business is dependent upon us raising additional financial support. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a “smaller reporting company” (as defined by §229.10(f)(1)), we are not required to provide the information required by this Item.
ITEM 4T. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our President, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our President concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is: (i) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms; and (ii) accumulated and communicated to our management, including our President, as appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
| | 1. | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; |
| | 2. | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and |
| | 3. | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
As of June 30, 2009, management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; and (3) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by our Chief Executive Officer in connection with the review of our financial statements as of June 30, 2009.
Management believes that the material weaknesses set forth in items (2) and (3) above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.
Management’s Remediation Initiatives
In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we have initiated, or plan to initiate, the following series of measures:
| | 1. | We plan to create a position to segregate duties consistent with control objectives and plan to increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us; and |
| | 2. | We plan to appoint one or more outside directors to our board of directors who shall be appointed to an audit committee resulting in a fully functioning audit committee who will undertake the oversight in the establishment and monitoring of required internal controls and procedures such as reviewing and approving estimates and assumptions made by management when funds are available to us. |
Management believes that the appointment of one or more outside directors, who shall be appointed to a fully functioning audit committee, will remedy the lack of a functioning audit committee and a lack of a majority of outside directors on our Board.
We anticipate that these initiatives will be at least partially, if not fully, implemented by March 31, 2010.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during our fiscal quarter of the period covered by this quarterly report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.
ITEM 1A. RISK FACTORS
As a “smaller reporting company” (as defined by §229.10(f)(1)), we are not required to provide the information required by this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters have been submitted to our security holders for a vote, through the solicitation of proxies or otherwise, during the quarterly period ended June 30, 2009.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
(a) Exhibit List
| 31.1 | Certificate pursuant to Rule 13a-14(a) |
| 31.2 | Certificate pursuant to Rule 13a-14(a) |
| 32.1 | Certificate pursuant to 18 U.S.C. §1350 |
| 32.2 | Certificate pursuant to 18 U.S.C. §1350 |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | NEXGEN PETROLEUM CORP. (Registrant) | |
| | | |
| Date: August 19, 2009 | By: /s/ Hsien Loong Wong | |
| | Hsien Loong Wong | |
| | President, CEO, CFO, Secretary, Treasurer and Director (Principal Executive Officer and Principal Financial Officer) | |
