SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2014
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File number 000-54834
WOODGATE ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware | 46-1874004 |
| (State or other jurisdiction of | (I.R.S. Employer Identification No.) |
| incorporation or organization) |
2500 Tanglewilde
Suite 260
Houston, Texas 77063
(Address of principal executive offices) (zip code)
713-978-6551
(Registrant's telephone number, including area code)
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 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", "non-accelerated filer", and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
| Large Accelerated filer | ¨ | Accelerated filer | ¨ |
| Non-accelerated filer | ¨ | Smaller reporting company | x |
| (do not check if smaller reporting company) | |||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
¨ Yes x No
Indicate the number of shares outstanding of each of the registrant's classes of common stock as of the latest practicable date.
| Class | Outstanding at June 30, 2014 |
| Common Stock, par value $0.0001 | 47,612,000 |
Documents incorporated by reference: None
PART I
ITEM 1.FINANCIAL STATEMENTS
Woodgate Energy Corporation
A Development Stage Company
Consolidated Statements of Financial Position
As of June 30, 2014 and December 31, 2013
| June 30, 2014 | 2013 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and Cash Equivalents | 47,542 | 736,647 | ||||||
| Accounts Receivable - Related Party | - | - | ||||||
| Accrued Gas Sales | 48 | 506 | ||||||
| Prepaid Expense | 12,500 | 13,415 | ||||||
| Refundable Deposits | 11,204 | 11,204 | ||||||
| 71,294 | 761,772 | |||||||
| Fixed Assets | ||||||||
| Property and Equipment | 34,265 | 34,265 | ||||||
| Furniture and Fixtures | 39,236 | 39,236 | ||||||
| Project Under Development | 19,930,305 | 19,009,407 | ||||||
| Less accumulated DD&A | (70,644 | ) | (69,692 | ) | ||||
| Total Assets | 20,004,456 | 19,774,988 | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Accounts Payable | 461,351 | 124,086 | ||||||
| Accounts Payable - Related Party | 143,618 | 142,749 | ||||||
| Accrued Expense | 885,942 | 906,045 | ||||||
| Payroll Tax Liabilities | 6,507 | - | ||||||
| Direct Deposit Liabilities | - | - | ||||||
| Notes Payable | - | - | ||||||
| 1,497,418 | 1,172,880 | |||||||
| Long-term Debt | ||||||||
| Notes Payable - Related Parties | 453,981 | 453,981 | ||||||
| Total | 1,951,399 | 1,626,861 | ||||||
| Loss Incurring Since Inception | (6,248,395 | ) | (5,886,327 | ) | ||||
| Stockholder's Equity (100,000,000 common shares authorized, 47,612,000 and 47,345,000 shares issued and outstanding as of June 30, 2014 and Dec 31, 2013) | 24,301,452 | 24,034,454 | ||||||
| Total Liabilities and Stockholders' Equity | 20,004,456 | 19,774,988 | ||||||
The accompanying notes are an integral part of the financial statements.
| 2 |
Woodgate Energy Corporation
A Development Stage Company
Consolidated Statement of Operations
For the Six Months Ending June 30, 2014 and 2013 and the Period Since Inception
| For the First Six Months Ending | ||||||||||||
| June 30, 2014 | June 30, 2013 | June 6, 2005 (Inception) to June 30, 2014 | ||||||||||
| Revenues | ||||||||||||
| Gas Sales | 437 | 2,141 | 24,330 | |||||||||
| Other Income | - | 467 | - | |||||||||
| Total | 437 | 2,608 | 24,330 | |||||||||
| Costs and Expenses | ||||||||||||
| Direct operating costs | 21,606 | 21,806 | 61,265 | |||||||||
| General and administrative costs | ||||||||||||
| Adv. & Marketing Expenses | 15,800 | - | 20,463 | |||||||||
| Bad Debt | - | 107,302 | 107,302 | |||||||||
| Bank charges | 224 | 453 | 3,283 | |||||||||
| Communication | 411 | 412 | 7,457 | |||||||||
| Depreciation, depletion and amortization | 952 | 723 | 70,644 | |||||||||
| Employee insurance | - | - | - | |||||||||
| Financing Cost | 8,333 | - | 666,870 | |||||||||
| Insurance | 8,627 | 13,220 | 106,655 | |||||||||
| Legal | 25,772 | 294 | 809,145 | |||||||||
| License Fees | 814 | 126 | 19,830 | |||||||||
| Miscellaneous | 362 | 1,181 | 45,390 | |||||||||
| Payroll | 225,068 | 223,869 | 3,756,566 | |||||||||
| Professional Fees | 19,181 | 358,231 | 3,410,197 | |||||||||
| Rent | 23,756 | 24,929 | 257,352 | |||||||||
| Regulatory | 651 | - | 651 | |||||||||
| Supplies | 2,280 | 2,055 | 52,228 | |||||||||
| Taxes | - | 4,028 | 6,820 | |||||||||
| Travel | 8,558 | 11,375 | 466,868 | |||||||||
| Utilities | 2,160 | 1,667 | 56,068 | |||||||||
| Total | 364,555 | 771,671 | 9,925,054 | |||||||||
| Operating Income | (364,118 | ) | (769,063 | ) | (9,900,724 | ) | ||||||
| Interest, Expense and Other Income | ||||||||||||
| Other Income | 2,050 | - | 4,959,170 | |||||||||
| Other Expense | - | - | (126,492 | ) | ||||||||
| Net unrealized gains (losses) on investments | - | - | (1,180,349 | ) | ||||||||
| Income from Continuing Operations | (362,068 | ) | (769,063 | ) | (6,248,395 | ) | ||||||
| Earnings (loss) per Common Share | (0.01 | ) | (0.04 | ) | ||||||||
The accompanying notes are an integral part of the financial statements.
| 3 |
Woodgate Energy Corporation
A Development Stage Company
Consolidated Statement of Cash Flows
For the Six Months Ending June 30, 2014, 2013 and the Period Since Inception
| For the First Six Months Ending | ||||||||||||
| June 30, 2014 | June 30, 2013 | June 6, 2005 (Inception) to June 30, 2014 | ||||||||||
| Operating Activities | ||||||||||||
| Net Income | (362,068 | ) | (769,063 | ) | (6,248,395 | ) | ||||||
| Adjustments to reconcile Net Income to net Cash provided by Operations | ||||||||||||
| Accounts Payable | 797,934 | (644,345 | ) | 5,083,491 | ||||||||
| Accounts Receivable | (460,668 | ) | 751,231 | (460,668 | ) | |||||||
| Accrued Expense | (27,225 | ) | 227,236 | 935,875 | ||||||||
| Accrued Interest | 8,333 | - | 8,333 | |||||||||
| Accrued Sale of Gas Income | 457 | 279 | (49 | ) | ||||||||
| Credit Cards | (519 | ) | (10 | ) | - | |||||||
| Deposits | - | - | (11,204 | ) | ||||||||
| Depreciation | 952 | 723 | 70,644 | |||||||||
| Note Receivable - Related Party | - | 4,537,500 | - | |||||||||
| Payroll Tax Liabilities | 6,682 | 1,789 | 6,506 | |||||||||
| Prepaid Expense | 915 | 1,309 | (12,500 | ) | ||||||||
| Net Cash Provided/(used) by Operating Activities | (35,207 | ) | 4,106,649 | (627,967 | ) | |||||||
| Investing Activities | ||||||||||||
| Projects Under Development | (920,898 | ) | (517,881 | ) | (19,930,304 | ) | ||||||
| Property & Equipment | - | - | (73,501 | ) | ||||||||
| (920,898 | ) | (517,881 | ) | (20,003,805 | ) | |||||||
| Financing Activities | ||||||||||||
| Notes Payables | - | (3,761,593 | ) | 453,981 | ||||||||
| Proceeds from Issuance of Stock | 267,000 | (1,950 | ) | 269,157 | ||||||||
| Proceeds from Stock Sale | - | 875 | 1,346,492 | |||||||||
| Proceeds from Members/Stockholder's Contribution | - | 159,963 | 18,609,684 | |||||||||
| Net Cash Provided by Financing Activities | 267,000 | (3,602,705 | ) | 20,679,314 | ||||||||
| Net Cash increase for period | (689,105 | ) | (13,937 | ) | 47,542 | |||||||
| Cash at Beginning of Period | 736,647 | 55,100 | - | |||||||||
| Cash at end of Period | 47,542 | 41,163 | 47,542 | |||||||||
The accompanying notes are an integral part of the financial statements.
| 4 |
Woodgate Energy Corporation
A Development Stage Company
Consolidated Statement of Stockholders' Equity
For the Period Ending June 30, 2014
| Shares | Common Stock | Members’ Capital | Additional Paid-in Capital | Accumulated Earnings | Total Members Equity | |||||||||||||||||||
| Balance at Jannuary 1, 2012 (capital and accumulated earnings from E & P Co., LLC and Prestige O & G, LLC) | - | - | 11,141,469 | - | (3,014,667 | ) | 8,126,802 | |||||||||||||||||
| Issuance of Common Stock at inception of Woodgate Energy Corporation | 20,000,000 | 2,000 | - | - | - | 2,000 | ||||||||||||||||||
| Member Investment in E & P Co., LLC | - | - | 1,515,000 | - | - | 1,515,000 | ||||||||||||||||||
| Member Investment in Prestige O & G, LLC | - | - | - | - | - | - | ||||||||||||||||||
| Net Income/loss | - | - | - | - | (592,816 | ) | (592,816 | ) | ||||||||||||||||
| Balance December 31, 2012 | 20,000,000 | 2,000 | 12,656,469 | - | (3,607,483 | ) | 9,050,986 | |||||||||||||||||
| Member Investment in E & P Co., LLC | 12,395,428 | 12,395,428 | ||||||||||||||||||||||
| Member Investment in Prestige O & G, LLC | 454,441 | 454,441 | ||||||||||||||||||||||
| Redemption of Common Stock | (19,500,000 | ) | (1,950 | ) | - | - | - | (1,950 | ) | |||||||||||||||
| Issuance of 8,750,000 shares of Common Stock | 8,750,000 | 875 | - | - | - | 875 | ||||||||||||||||||
| Reverse Merger of E & P Co., LLC and Prestige O & G, LLC | 36,750,000 | 3,675 | (25,506,338 | ) | 22,684,854 | - | (2,817,809 | ) | ||||||||||||||||
| Shares issued by Private Placement | 1,345,000 | 135 | - | 1,344,865 | - | 1,345,000 | ||||||||||||||||||
| Net Income/loss | - | - | - | - | (2,278,844 | ) | (2,278,844 | ) | ||||||||||||||||
| Balance December 31, 2013 | 47,345,000 | 4,735 | - | 24,029,719 | (5,886,327 | ) | 18,148,127 | |||||||||||||||||
| Shares issued by Private Placement | 267,000 | 25 | - | 266,973 | - | 266,998 | ||||||||||||||||||
| Net Income/Loss | - | - | - | - | (362,068 | ) | (362,068 | ) | ||||||||||||||||
| Balance June 30, 2014 | 47,612,000 | 4,760 | - | 24,296,692 | (6,248,395 | ) | 18,053,057 | |||||||||||||||||
The accompanying notes are an integral part of the financial statements.
| 5 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF ACCOUNTING POLICIES
Principles of Consolidation. The Consolidated Financial Statements include the accounts of subsidiaries the Corporation controls.
Majority ownership is normally the indicator of control that is the basis on which subsidiaries are consolidated. However, certain factors may indicate that a majority-owned investment is not controlled and therefore should be accounted for using the equity method of accounting. These factors occur where the minority shareholders are granted by law or by contract substantive participating rights. These include the right to approve operating policies, expense budgets, financing and investment plans, and management compensation and succession plans.
Evidence of loss in value that might indicate impairment of investments in companies accounted for on the equity method is assessed to determine if such evidence represents a loss in value of the Corporation’s investment that is other than temporary. Examples of key indicators include a history of operating losses, a negative earnings and cash flow outlook, significant downward revisions to oil and gas reserves, and the financial condition and prospects for the investee’s business segment or geographic region. If evidence of an other than temporary loss in fair value below carrying amount is determined, an impairment is recognized. In the absence of market prices for the investment, discounted cash flows are used to assess fair value.
Revenue Recognition. The Corporation generally sells crude oil, natural gas and petroleum under short-term agreements at prevailing market prices. In some cases (e.g., natural gas), products may be sold under long-term agreements, with periodic price adjustments. Revenues are recognized when the products are delivered, which occurs when the customer has taken title and has assumed the risks and rewards of ownership, prices are fixed or determinable and collectibility is reasonably assured.
Derivative Instruments. The Corporation makes no use of derivative instruments. The Corporation does not engage in speculative derivative activities or derivative trading activities, nor does it use derivatives with leveraged features.
Fair Value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Hierarchy Levels 1, 2 and 3 are terms for the priority of inputs to valuation techniques used to measure fair value. Hierarchy Level 1 inputs are quoted prices in active markets for identical assets or liabilities. HierarchyLevel 2 inputs are inputs other than quoted prices included within Level 1 that are directly or indirectly observable for the asset or liability. Hierarchy Level 3 inputs are inputs that are not observable in the market.
Property, Plant and Equipment. Depreciation, depletion and amortization, based on cost less estimated salvage value of the asset, are primarily determined under either the unit-of-production method or the straight-line method, which is based on estimated asset service life taking obsolescence into consideration. Maintenance and repairs, including planned major maintenance, are expensed as incurred. Major renewals and improvements are capitalized and the assets replaced are retired.
Interest costs incurred to finance expenditures during the construction phase of multiyear projects are capitalized as part of the historical cost of acquiring the constructed assets. The project construction phase commences with the development of the detailed engineering design and ends when the constructed assets are ready for their intended use. Capitalized interest costs are included in property, plant and equipment and are depreciated over the service life of the related assets.
The Corporation uses the “successful efforts” method to account for its exploration and production activities. Under this method, costs are accumulated on a field-by-field basis with certain exploratory expenditures and exploratory dry holes being expensed as incurred. Costs of productive wells and development dry holes are capitalized and amortized on the unit-of-production method.
The Corporation carries as an asset exploratory well costs when the well has found a sufficient quantity of reserves to justify its completion as a producing well and where the Corporation is making sufficient progress assessing the reserves and the economic and operating viability of the project. Exploratory well costs not meeting these criteria are charged to expense. Other exploratory expenditures, including geophysical costs and annual lease rentals, are expensed as incurred.
| 6 |
Acquisition costs of proved properties are amortized using a unit-of-production method, computed on the basis of total proved oil and gas reserves.
Capitalized exploratory drilling and development costs associated with productive depletable extractive properties are amortized using unit-of-production rates based on the amount of proved developed reserves of oil, gas and other minerals that are estimated to be recoverable from existing facilities using current operating methods.
Under the unit-of-production method, oil and gas volumes are considered produced once they have been measured through meters at custody transfer or sales transaction points at the outlet valve on the lease or field storage tank.
Production involves lifting the oil and gas to the surface and gathering, treating, field processing and field storage of the oil and gas. The production function normally terminates at the outlet valve on the lease or field production storage tank. Production costs are those incurred to operate and maintain the Corporation’s wells and related equipment and facilities and are expensed as incurred. They become part of the cost of oil and gas produced. These costs, sometimes referred to as lifting costs, include such items as labor costs to operate the wells and related equipment; repair and maintenance costs on the wells and equipment; materials, supplies and energy costs required to operate the wells and related equipment; and administrative expenses related to the production activity.
Proved oil and gas properties held and used by the Corporation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets.
The Corporation estimates the future undiscounted cash flows of the affected properties to judge the recoverability of carrying amounts. Cash flows used in impairment evaluations are developed using annually updated corporate plan investment evaluation assumptions for crude oil commodity prices, refining and chemical margins and foreign currency exchange rates. Annual volumes are based on field production profiles,which are also updated annually. Prices for natural gas and other products are based on corporate plan assumptions developed annually by major region and also for investment evaluation purposes. Cash flow estimates for impairment testing exclude derivative instruments.
Impairment analyses are generally based on proved reserves. Where probable reserves exist, an appropriately risk-adjusted amount of these reserves may be included in the impairment evaluation. An asset group would be impaired if the undiscounted cash flows were less than its carrying value. Impairments are measured by the amount the carrying value exceeds fair value.
Significant unproved properties are assessed for impairment individually, and valuation allowances against the capitalized costs are recorded based on the estimated economic chance of success and the length of time that the Corporation expects to hold the properties. Properties that are not individually significant are aggregated by groups and amortized based on development risk and average holding period. The valuation allowances are reviewed at least annually.
Gains on sales of proved and unproved properties are only recognized when there is neither uncertainty about the recovery of costs applicable to any interest retained nor any substantial obligation for future performance by the Corporation.
Losses on properties sold are recognized when incurred or when the properties are held for sale and the fair value of the properties is less than the carrying value.
Asset Retirement Obligations and Environmental Liabilities. The Corporation incurs retirement obligations for certain assets. The fair values of these obligations are recorded as liabilities on a discounted basis, which is typically at the time the assets are installed. The costs associated with these liabilities are capitalized as part of the related assets and depreciated. Over time, the liabilities are accreted for the change in their present value.
Liabilities for environmental costs are recorded when it is probable that obligations have been incurred and the amounts can be reasonably estimated. These liabilities are not reduced by possible recoveries from third parties and projected cash expenditures are not discounted.
Foreign Currency Translation. The Corporation selects the United States Dollar as the functional reporting currency for it’s based on the currency of the primary economic environment in which each subsidiary operates.
| 7 |
For all operations, gains or losses from remeasuring foreign currency transactions into the functional currency are included in income.
NOTE 2. GOING CONCERN
The Company sustained operating losses since inception. It has losses at June 30, 2014 and December 31, 2013 of $362,068 and $2,278,844, respectively. The Company has an accumulated deficit of $6,248,395 since inception. The Company’s continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations, which it has not been able to accomplish to date, and/or obtain additional financing from its stockholders and/or other third parties.
These financial statements have been prepared on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the next fiscal year. The continuation of the Company as a going concern is dependent upon financial support from stockholders and the ability of the Company to obtain necessary equity financing to continue operations.
There is no assurance that the Company will ever be profitable. The financial statements do not include any adjustments to reflect the possible future effect on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a growing concern.
Management has developed specific current and long-term plans to address its viability as a going concern as follows:
| · | Upon registration, the Company will attempt to raise funds through equity offerings. If successful, these funds will be used to provide working capital. |
| · | In the longer term, the Company believes the cash flows from growth in its operations will provide resources for continued operations. |
There can be no assurance the Company will have the ability to implement its business plan and to ultimately attain profitability. The Company’s long-term viability as a going concern is dependent upon three key factors:
| · | The Company’s ability to obtain adequate sources of equity funding to meet current commitments and fund the continuation of its business operation in the near term. |
| · | The ability of the Company to control costs and expand revenues. |
| · | The ability of the Company to ultimately achieve adequate profitability and cash flows from operations to sustain its operations. |
NOTE 3.ACCOUNTING CHANGES
The Corporation has not adopted authoritative guidance in 2014 having a material impact on the Corporation’s financial statements.
NOTE 4. STOCKHOLDERS’ EQUITY
The Company is authorized to issue 100,000,000 shares of common stock and 20,000,000 shares of preferred stock.
In July 2012, the Company issued 20,000,000 common shares to two directors and officers for an aggregated amount of $2,000 in cash.
On May 16, 2013, the Company redeemed an aggregate of 19,500,000 of the 20,000,000 outstanding shares at a redemption price of $.0001 per share for an aggregate redemption price of $1,950.
On May 17, 2013, the Company issued 8,750,000 shares of its common stock pursuant to Section 4(2) of the Securities Act of 1933 at par representing 94.5% of the total outstanding 9,250,000 shares of common stock.
In July 2013, the Company began to offer its common shares through private placement. The first sale was registered on July 30, 2013. By June 30, 2014, the Company had issued 1,612,000 shares of its common stock through private placement.
On September 6, 2013, the Company entered into a business combination with two LLCs – Prestige O & G, LLC and E & P Co., LLC, taking the form of a reverse merger.
The exchange closing took place on September 25, 2013 and the Company allotted a new issue of 36,750,000 to the members of Prestige O & G, LLC and E & P Co., LLC
As of June 30, 2014, the Company had 47,612,000 shares of common stock and no preferred stock issued and outstanding.
| 8 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Cash and Cash Equivalents
At June 30, 2014 and December 31, 2013, the Company had Cash and Cash Equivalents consisting of $47,542 and $736,647, respectively.
Accounts Receivable
At June 30, 2014 and December 31, 2013, the Company had Accounts Receivable – Related Party consisting of $ 0 and $0, respectively.
Projects Under Developments
At June 30, 2014 and December 31, 2013, the Company’s Projects Under Development were $19,930,305 and $19,009,407, respectively.
| Entity | June 30, 2014 | 2013 | ||||||
| Woodgate Energy Corporation (Parent) | - | - | ||||||
| E & P Co., LLC (Subsidiary) | 9,330,297 | 8,869,848 | ||||||
| Prestige O & G, LLC (Subsidiary) | 10,600,008 | 10,139,559 | ||||||
| Total | 19,930,305 | 19,009,407 | ||||||
Notes Payable
At June 30, 2014 and December 31, 2013, the Company held Notes Payable consisting of $453,981 and $453,981, respectively.
| Entity | June 30, 2014 | 2013 | ||||||
| Woodgate Energy Corporation (Parent) | - | - | ||||||
| E & P Co., LLC (Subsidiary) | 453,981 | 453,981 | ||||||
| Prestige O & G, LLC (Subsidiary) | - | - | ||||||
| Total | 453,981 | 453,981 | ||||||
Accounts Payable
At June 30, 2014 and December 31, 2013, the Company held Accounts Payable consisting of $604,969 and $266,835, respectively.
| Entity | June 30, 2014 | 2013 | ||||||
| Woodgate Energy Corporation (Parent) | 250 | - | ||||||
| E & P Co., LLC (Subsidiary) | 604,719 | 266,835 | ||||||
| Prestige O & G, LLC (Subsidiary) | - | - | ||||||
| Total | 604,969 | 266,835 | ||||||
Revenues
For the six months ending June 30, 2014 and 2013, Woodgate had limited revenues of gas sales in the amount of $437 and $2,141 and had limited income or cash flows from operations. The continuation of Woodgate as a going concern is dependent upon financial support from its stockholders or its ability to obtain necessary equity financing to continue operations.
| 9 |
Earnings Per Share
For the six months ending June 30, 2014 and 2013, the company recorded losses of $362,068 and $769,063, respectively. This resulted in Earnings Per Share of ($0.01) and ($0.04) for those respective period ends. The majority of these losses are attributable to operational expenses incurred by the subsidiaries of the Company.
Litigation and other Contingencies
Management has regular litigation reviews, including updates from corporate and outside counsel, to assess the need for accounting recognition or disclosure of these contingencies. The Company accrues an undiscounted liability for those contingencies where the incurrence of loss is probable and the amount can be reasonably estimated. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. The Company does not record liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated or when the liability is believed to be only reasonably possible or remote. For purposes of our contingency disclosures, “significant” includes material matters as well as other matters which management believes should be disclosed. Woodgate Energy Corporation will continue to defend itself vigorously in these matters. Based on a consideration of all relevant facts and circumstances, the Company does not believe the ultimate outcome of any currently pending lawsuit against Woodgate Energy Corporation will have a material adverse effect upon the Company’s operations, financial condition, or financial statements taken as a whole.
On April 16, 2009, Noram Drilling Company filed an original complaint against E & P Co. International, LLC and E & P Co., LLC in the 37th District Court of Louisiana, arguing E & P Co., LLC was liable for breach of contract by E & P Co., LLC under the theory of single enterprise liability. The Company argues no such single enterprise liability exists as the contract is to be construed under Texas law. On January 16, 2013, the 37th District Court in the Parish of Caldwell, Louisiana, the court granted E & P Co., LLC’s Motion for Summary Judgment, holding the Company not to be a party to the drilling contract. The Court further denied NorAm’s Motion for Summary Judgment for damages. On December 11, 2013, the Court of Appeals of the Second Circuit of the State of Louisiana affirmed the trial court’s finding.
At this time, the company is subject to no legal proceedings and the Company is unaware of any proceedings contemplated against it.
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Supplemental Information on Oil and Gas Exploration and Production
The results of operations for producing activities shown below do not include earnings from nonoperating activities.
| Results of Operations for the 6 Months Ending June 30 | 2014 | 2013 | ||||||
| Revenue | ||||||||
| Sales to third parties | 437 | 2,608 | ||||||
| Production costs excluding taxes | 21,606 | 21,806 | ||||||
| Exploration expenses incurred | - | - | ||||||
| Taxes other than income | - | - | ||||||
| Related income tax | - | - | ||||||
| Results of producing activities | (21,169 | ) | (19,198 | ) | ||||
Management’s judgment regarding the project’s capitalization of exploration well costs is based upon its current inability to estimate reserves. Currently, the project requires additional investment and approximately six months production history at substantially higher rates before an appropriate valuation of proved reserves may be made. The Company anticipates the following costs necessary to achieve proven reserve status of which E & P Co., LLC will be responsible for its interest accordingly:
| Description | Cost | |||
| Addition of new saltwater disposal well | 1,000,000 | |||
| Re-drill Well No. 1 | 1,000,000 | |||
| Replace pumps on Wells No. 4 and 5 | 200,000 | |||
| Proved reserves valuation | 25,000 | |||
| - | ||||
| Net costs | 2,225,000 | |||
As of June 30, 2014 and December 31, 2013, the amounts of capitalized costs related to oil and gas producing activities was as follows:
| June 30, 2014 | 2013 | |||||||||||||||
| Consolidated | Entity’s Share of Equity Method Investees | Consolidated | Entity’s Share of Equity Method Investees | |||||||||||||
| Unproved oil and gas properties | 19, 930,305 | 19, 930,305 | 19,009,407 | 19,009,407 | ||||||||||||
| Proved oil and gas properties | - | - | - | - | ||||||||||||
| Accumulated depreciation, depletion and amortization, and valuation allowances | - | - | - | - | ||||||||||||
| Net capitalized costs | 19, 930,305 | 19, 930,305 | 19,009,407 | 19,009,407 | ||||||||||||
The aging of amounts of capitalized well costs and number of projects are as follows:
| Period Ending December 31 | Well Costs Capitalized for the Period | Number of Projects | |||||||
| 2008 | 5,569,607 | 2 | |||||||
| 2009 | 2,986,906 | 2 | |||||||
| 2010 | 3,544,207 | 2 | |||||||
| 2011 | 5,285,613 | 2 | |||||||
| 2012 | 965,360 | 2 | |||||||
| 2013 | 657,714 | 2 | |||||||
| June 30, 2014 | 920,898 | 2 | |||||||
| Total | 19,930,305 | 2 | |||||||
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Costs Incurred In Oil And Gas Property Acquisition,
Exploration And Development
For The Six Months Ended June 30, 2014 and Year Ending December 31, 2013
| Consolidated Entries | June 30, 2014 | 2013 | ||||||
| Acquisition of Properties | ||||||||
| Proved | - | - | ||||||
| Unproved | 10,000 | 10,000 | ||||||
| Exploration Costs | 11,606 | 2,562 | ||||||
| Development Costs | 899,292 | 645,152 | ||||||
| Entity’s Share of Equity Method Investees: | ||||||||
| Acquisition of Properties | ||||||||
| Proved | - | - | ||||||
| Unproved | 10,000 | 10,000 | ||||||
| Exploration Costs | 11,606 | 2,562 | ||||||
| Development Costs | 899,292 | 645,152 | ||||||
Subsequent Events
Subsequent to the date of this Report, commencing in July 2014, the Company has been in process of identifying a market maker for achieving the trading status for its shares. The Company expects its share to be traded by the end of Q4 2014.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
Iformation not required to be filed by Smaller reporting companies.
ITEM 4. Controls and Procedures.
Disclosures and Procedures
Pursuant to Rules adopted by the Securities and Exchange Commission, the Company carried out an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Exchange Act Rules. This evaluation was done as of the end of the period covered by this report under the supervision and with the participation of the Company's Board of Directors.
Based upon that evaluation, they concluded that, as ofJune 30, 2014 that the Company's disclosure controls and procedures are effective in gathering, analyzing and disclosing information needed to ensure that the information required to be disclosed by the Company in its periodic reports is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
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This Quarterly Report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this Quarterly Report.
Changes in Internal Control Over Financial Reporting
Notwithstanding the change in control of management and shareholders, there was no change in the Company's internal control over financial reporting that was identified in connection with such evaluation that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no legal proceedings against the Company and the Company is unaware of such proceedings contemplated against it.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the past three years, Woodgate has issued 47,612,000 common shares pursuant to Section 4(2) of the Securities Act of 1933 for an aggregate purchase price of $4,760 as follows:
On July 31, 2012, Woodgate issued the following shares of its common stock:
| Name | Number of Shares | Consideration |
| Tiber Creek Corporation | 10,000,000 | $1,000 |
| MB Americus LLC | 10,000,000 | $1,000 |
On May 16, 2013, the Company redeemed an aggregate of 19,500,000 of the then 20,000,000 shares of outstanding stock at a redemption price of $.0001 per share for an aggregate redemption price of $1,950.
On May 17, 2013, the Company issued 8,750,000 shares of its common stock pursuant to Section 4(2) of the securities Act of 1933 at par representing 94.5%of the total outstanding 9,250,000 shares of the common stock.
In July 2013, the Company began to offer its common shares through private placement. The first sale was registered on July 30, 2013. By June 30, 2014, the Company had issued 1,612,000 shares of its common stock through private placement.
On September 6, 2013, the Company entered into a Business Combination with two LLCs – Prestige O&G, LLC and E&P Co, LLC and the combination took the form of Stock-for-Stock acquisition.
The Exchange Closing took place on September 25, 2013 and the Company allotted a new issue of 23,453,050 Common Shares to be given to the members of Prestige O&G, LLC and E&P Co., LLC for the purpose of acquiring the LLCs by the Company. Additionally, the Company also allotted the aggregate of 13,296,950 Common shares against the outstanding Debt balances in the books of LLCs as it appeared on the day of business combination. In sum, a total of 36,750,000 shares of common stock of the Company were issued in the Acquisitions.
As of June 30, 2014, 47,612,000 shares of common stock and no preferred stock were issued and outstanding.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
(a) Not applicable.
(b) Item 407(c)(3) of Regulation S-K:
During the quarter covered by this Report, there have not been any material changes to the procedures by which security holders may recommend nominees to the Board of Directors.
ITEM 6. EXHIBITS
| (a) | Exhibits |
| 31 | Certification of the President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32 | Certification of the President and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 101.1NS | XBRL Instance Document |
| 101.SCH | XBRL Taxonomy Extension Schema Document |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
| 101.DEF | XBRL Taxonomy Extension Definitions Linkbase Document |
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SIGNATURES
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.
| WOODGATE ENERGY CORPORATION | ||
| By: | /s/ Fuad Al-Humoud | |
| President Chief Financial Officer | ||
Dated: Aug 14, 2014
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