UNITED STATES
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 August 31, 2012
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
COMMISSION FILE NUMBER 000-53520
---------
DISCOVERY ENERGY CORP.
F/K/A "Santos Rresource Corp."
(Exact Name of Registrant as Specified in Its Charter)
Nevada 98-0507846
(State or other jurisdiction of incorporation (I.R.S.Employer
or organization) Identification No.)
One Riverway Drive, Suite 1700, Houston, TEXAS 77056
(Address of principal executive offices)
713-840-6495
(Registrant's telephone number
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. Yes [X] 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 ( 232.405 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 [X]
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 [ ] 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 [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 62,595,500 common shares as of
October 12, 2012
DISCOVERY ENERGY CORP.
(an Exploration stage company)
Balance Sheets
(Unaudited)
August 31, February 29,
2012 2012
---------- ------------
Assets
Current Assets
Cash $ 162,809 $ 504,742
Other receivables 1,007 3,828
Deposit for acquisition of oil
and gas license 980,000 730,000
Prepaid expenses 4,842 -
------------ ------------
Total Current Assets 1,148,658 1,238,570
------------ ------------
Total Assets $ 1,148,658 $ 1,238,570
============= ============
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued
liabilities $ 131,928 $ 34,215
Accounts payable- related party - 50,000
------------- ------------
Total Current Liabilities 131,928 84,215
Stockholders' Equity
Preferred Stock- 10,000,000 shares
authorized, zero issued and
outstanding - -
Common Stock - 500,000,000 shares
authorized, $0.001 par value -
62,448,500 and 60,858,500 shares
issued and outstanding, respectively 62,449 60,859
Additional paid in capital 1,634,565 1,437,405
Deficit accumulated during the
exploration stage (680,284) (343,909)
-------------- ------------
Total Stockholders'Equity 1,016,730 1,154,355
------------- ------------
Total Liabilities and Stockholders'
Equity $ 1,148,658 $ 1,238,570
==================================
The accompanying notes are an integral part of these unaudited interim financial
statements.
Discovery Energy Corp..
(an Exploration stage company)
Statements of Expenses
(Unaudited)
Cumulative
Three Three Six Six From Inception
Months Months Months Months (May 24, 2006)
Ended Ended Ended Ended to
August 31, August 31, August 31, August 31, August 31,
2012 2011 2012 2011 2012
--------- -------- ---------- --------- ---------
Expenses
General and
administrative $ 10,232 $ 28 $ 32,470 $ 74 $ 34,641
Mineral property costs 123,080 - 170,592 29,740 270,021
Professional fees 69,931 1,482 133,723 6,327 393,068
Rent 1,104 - 3,170 - 3,371
Travel 980 - 4,143 - 4,274
---------- ------- --------- ------- ---------
Total expenses (205,327) (1,510) (344,098) (36,141) (705,375)
Other Income
Gain on debt for
settlement of
accounts payable - - - - 17,980
Miscellaneous income 6,730 - 7,973 - 7,973
Foreign exchange
(loss) gain (250) - (250) (615) (862)
--------- -------- ---------- ------- ---------
Other income (expenses) 6,480 - 7,723 (615) 25,091
--------- -------- --------- ------- ---------
Net loss $ (198,847) $ (1,510) $(336,375) $(36,756) $(680,284)
========== ======== ========= ======== =========
Net loss per share -
basic and diluted $ (0.00) $ (0.00) $ (0.01) $ (0.00)
Weighted average number
of shares outstanding -
basic and diluted 62,448,500 32,076,500 62,228,283 32,076,500
========== ========== ========== ==========
The accompanying notes are an integral part of these unaudited interim
financial statements.
Discovery Energy Corp.
(an Exploration stage company)
Statements of Cash Flows
(Unaudited)
Cumulative from
Inception
Six Months Ended Six Months Ended May 24, 2006 to
August 31, August 31, August 31,
2012 2011 2012
--------------- --------------- --------------
Cash Flows Used in Operating
Activities
Net loss $ (336,375) $ (36,756) $ (680,284)
Adjustments to reconcile
net loss to net cash
used in operating
activities
Shares issued for
property acquisition - - 11,250
Gain on debt for shares
issued for settlement
of accounts payable - - (17,980)
Unrealized foreign exchang
loss (gain) 250 615 2,746
Services provided by founders
in exchange for shares - - 15,520
Changes in assets and
liabilities:
Prepaid expenses (4,842) (4,842)
Other receivable 2,821 (360) (1,007)
Accounts payable and
accrued liabilities 97,713 (2,957) 150,609
---------- ---------- -----------
Net cash used in operating
activities (240,433) (39,458) (523,988)
---------- ---------- -----------
Cash flows from investing
activities
Acquisition of oil and gas
property (250,000) - (800,000)
----------- ---------- ----------
Net cash flows used in investing
activities (250,000) - (800,000)
Cash flows from financing activities
Common Stock issued 198,750 - 1,408,496
Private placement fees - - (4,713)
Repayments on shareholder
advances (50,000) (50,000)
Advances from shareholders - 37,716 134,061
--------- ---------- ----------
Net cash flows from financing
activities 148,750 37,716 1,487,844
---------- ---------- ----------
Foreigh exchange effect on cash (250) 306 (1,047)
Change in cash during the
period (341,933) (1,436) 162,809
Cash beginning of the period 504,742 1,909 -
---------- ---------- ----------
Cash end of the period $ 162,809 $ 473 $ 162,809
========== ========== ==========
Supplemental disclosures:
Interest Paid in the period $ - $ - $ -
---------- ---------- ----------
Income Taxes Paid in the period - - -
---------- ---------- ----------
Noncash investing and financing activities:
Shares issued for conversion
of debt $ - $ - 85,066
---------- ----------- ----------
Shares issued for O&G
property $ - $ - 180,000
----------- ----------- ----------
The accompanying notes are an integral part of these unaudited interim financial
statements.
Discovery Energy Corp.
(an Exploration stage company)
Notes to the Unaudited Financial Statements
1. Nature of Operations and Basis of Presentation
Discovery Energy Corp. (the "Company") was incorporated in Nevada on May 24,
2006 under the name "Santos Resource Corp." The Company is an Exploration Stage
Company. The Company's principal business is the proposed acquisition,
exploration and development of the Petroleum Exploration License (PEL) 512 (the
"Prospect") in the State of South Australia. The Company has not presently
determined whether the Prospect contains any crude oil and natural gas reserves
that are economically recoverable. While the Company's present focus is on the
Prospect, the Company may consider the acquisition of other attractive oil and
gas properties under the right circumstances. On May 7, 2012, the Company
changed its name to Discovery Energy Corp.
In May 2012, the Company incorporated a wholly-owned Australian subsidiary,
Discovery Energy SA Ltd. for purposes of acquiring the Prospect.
The accompanying unaudited interim financial statements of the Company 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, and should be read in conjunction with the audited financial
statements and notes thereto contained in the Company's February 29, 2012 Annual
Report filed with the SEC on Form 10-K. In the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of financial position and the results of operations for the interim
periods presented 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 end February 29, 2012, as reported on Form 10-K, have
been omitted.
2. Going Concern
The accompanying financial statements have been prepared on a going concern
basis, which implies the Company will continue to realize its assets and
discharge its liabilities in the normal course of business. The Company has not
generated revenues since inception and has never paid dividends and is unlikely
to pay dividends or generate earnings in the immediate or foreseeable future.
The continuation of the Company as a going concern is dependent upon the ability
of the Company to obtain necessary equity or debt financing to continue
operations, the acquisition of the Prospect or one or more alternative oil and
gas properties, and the attainment of profitable operations. As of August 31,
2012, the Company has not generated any revenues and has an accumulated loss of
$680,284 since inception. These factors raise substantial doubt regarding the
Company's ability to continue as a going concern. These financial statements do
not include any adjustments to the recoverability and classification of recorded
asset amounts and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern.
3. Related Party Transactions
a) During the first quarter of fiscal 2013, $50,000 was paid to a related
party pursuant to the Liberty Agreement, as defined herein.
b) At various times during the period April 2006 through December 2011, a
shareholder loaned the Company a total of $85,066. In January 2012, the amount
was repaid through the issuance of 147,000 common shares. The shares were valued
at $0.009 per share.
c) A related party transaction involving our current Chairman of the Board
is discussed in footnote 4 immediately below.
4. Oil and Gas Properties
On September 12, 2011, Keith D. Spickelmier entered into an agreement (the
"Liberty Agreement") with Liberty Petroleum Corporation ("Liberty") granting to
Mr. Spickelmier an exclusive right to negotiate an option to acquire the
Petroleum Exploration License (PEL) 512 (the "License") regarding the Prospect,
which is located in the State of South Australia. The Prospect involves 584,651
gross acres overlaying portions of the Cooper and Eromanga basins. On January
13, 2012, the Company bought Mr. Spickelmier's rights in the Liberty Agreement.
On January 31, 2012, the Company bought an option (the "Option") directly from
Liberty. Under ASC 932, costs incurred to purchase, lease or otherwise acquire
a property (whether unproved or proved) are capitalized when incurred. Per the
terms of the Liberty Agreement, Mr. Spickelmier, a related party, paid $50,000
to Liberty for the exclusive right. In anticipation of the assignment of the
Liberty Agreement to the Company, the Company agreed to pay an additional
$100,000 to extend the exclusive right provided for by the Liberty Agreement,
and an additional $200,000 deposit to modify certain terms. Eventually the
Option was replaced by a Novation Deed. To the extent possible, the original
terms of the Option Agreement were preserved in the Novation Deed. In the event
that the License is not approved or issued, the total consideration will be
refunded to the Company.
As of August 31, 2012, the Company capitalized $980,000 as a deposit for the
acquisition of the License.
The purchase price of Spickelmier's rights in the Liberty Agreement was as
follows:
a) $100,000 payable upon notice from the South Australian
Minister of Regional Development (the "Minister") that the
Minister has granted and issued the License in the name of
the Company;
b) $50,000 payable as of February 29, 2012 for reimbursement, which
was paid during the first quarter of fiscal 2013;
c) 20 million common shares issued at $0.009, total fair value of
$180,000 which is capitalized as a deposit for the
acquisition of the License;
d) 55 million common shares of the Company issuable upon delivery of
the License.
The purchase price for the Option is as follows:
a) $550,000 paid to Liberty as of February 29, 2012 for the
acquisition of the License. An additional $250,000 was paid
to Liberty on June 28, 2012.
b) Two promissory notes issuable upon delivery of the License with an
aggregate principal amount of $650,000:
(i) $500,000 due 6 months after the delivery of the License
(ii) $150,000 due 9 months after the delivery of the License
c) 12 million common shares issuable upon delivery of the
License
The License requires a five-year work commitment involving expenditures of
AU$200,000 in the first year after the acquisition, $1,273,900 in the second
year, and even greater amounts in the subsequent years. The Company's inability
to honor this work commitment may result in the assignment of the Prospect to
Liberty pursuant to the terms of the Novation Deed or its reversion back to the
South Australian Government.
5. Common stock
During the six months ended August 31, 2012, the Company sold an aggregate 1.59
million common shares from a private placement offering at a price of $0.125 per
share for total proceeds of $198,750.
In May 2012, the Company amended its articles of incorporation to increase the
number of authorized common shares to 500 million and to authorize 10 million
preferred shares.
6. Subsequent Events
During October 2012, the Company entered into a service agreement with Chrystal
Capital Partners LLP ("Chrystal"), a corporate finance firm based in London
regulated by the British Financial Services Authority. Chrystal has agreed to
assist us in connections with our efforts to complete a major capital raising
transaction of up to US$15.0 million.
The term of the Engagement Agreement is initially for two months, and it will
continue on a month-to-month basis thereafter until either party terminates it.
In the event of a successful capital raise, the term of the Engagement Agreement
will continue on a year-to-year basis thereafter until either party terminates
it. We hve the right to terminate the Engagement Agreement within its first two
months by paying a termination fee that starts at $33,500 and rises to $100,000
with the fee increasing with the passage of time. After termination of the
Engagement Agreement, Chrystal will be entitled to the success fees described
below for any transaction completed within 18 months after termination with any
prospect presented by Chrystal.
Pursuant to the Engagement Agreement, we agreed to pay the following fees to
Chrystal:
* Monthly fees in the amount of GBP 7,500 (Sterling) (or
approximately US$12,100);
* Cash success fees generally in amounts equal to 7% of the gross
amount of all funds raised, but subject to certain carve outs for
existing contacts and possibilities; and
* A stock success fee represented by a Restricted Share Award
Agreement of 6,472,425 shares of the Company's common stock, which is
subject to reduction or forfeiture in certain circumstances
* Option success fees giving to Chrystal the right for three
years to purchase a number of shares of our common stock equal to
7% of the number of shares issued in the related capital raises at
exercise prices equal to the sale prices of Chrystal shares in such
raises, but subject to certain carve outs for existing contacts and
possibilities.
We will also reimburse Chrystal for its expenses in connection with its
services.
During the first week of September 2012, we initiated a second private placement
seeking up to $2.0 million in capital through the sale of 16.0 million shares of
common stock at a price of $0.125 per share. As of October 12, 2012,
subscriptions valued at $250,000 have been received. These subscriptions will
result in the issuance of 2,000,000 shares of stock . We will continue to try
to raise funds in this financing, but we have no assurance that we will be able
to do so.
In October 2012, we entered into a convertible promissory note agreement with a
non-related party for $25,000. The note is convertible into common shares at
$0.085 per share. The note matures February 4, 2013 and accrues interest at 6%
per annum.
Item 2. Management's Discussion and Analysis.
CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. We have based
these forward-looking statements on our current expectations and projections
about future events. These forward-looking statements are subject to known and
unknown risks, uncertainties and assumptions about us that may cause our actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by such forward-looking statements. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"should," "could," "would," "expect," "plan," "anticipate," "believe,"
"estimate," "continue," or the negative of such terms or other similar
expressions. Factors that might cause or contribute to such a discrepancy
include, but are not limited to, those described in our other Securities and
Exchange Commission filings. The following discussion should be read in
conjunction with our Financial Statements and related Notes thereto included
elsewhere in this report.
General
Our company, Discovery Energy Corp. f/k/a "Santos Resource Corp.," was
incorporated under the laws of the state of Nevada on May 24, 2006. Until
recently, we had not commenced business operations. Our original plan of
business was to explore and develop a 75% interest in and to 18 mineral claims
covering approximately 900.75 hectares (9.01 km2) called the Lourdeau Claims.
The Lourdeau Claims are located in the La Grande geological area of Quebec,
Canada, in the James Bay Territory about 620 miles (1,000 km) north of Montreal,
Quebec. We abandoned this original plan of business, and had been looking for
another business opportunity. Until the completion of the acquisition described
herein, we had been a "shell company" as defined in the Rule 405 of the
Securities Act of 1933, as amended (the "Securities Act"), and Rule 12b-2 of the
Securities Exchange Act of 1934 (the "Exchange Act"), as amended. For reasons
given hereinafter, we have adopted a significant change in our corporate
direction. We have decided to focus our efforts on the acquisition of an
attractive crude oil and natural gas prospect located in Australia, and the
exploration, development and production of oil and gas on this prospect.
We are now pursuing a new business plan involving the development of the
Petroleum Exploration License (PEL) 512 (the "Prospect") in the State of South
Australia. The Prospect involves 584,651 gross acres overlaying portions of the
geological system generally referred to as the Cooper and Eromanga basins. The
Prospect is flanked by offset production totaling more than 4.2 million barrels
since 2001. Other nearby fields have produced more than 16.3 million barrels of
oil. Since the early 1980s, the oil fairway on which the Prospect sits has
produced over 23.6 million barrels of oil. The Prospect features access to
markets via existing and expanding pipeline capacity. During the late 1980s and
again during 2005-2006, various operators in the extreme southeast corner of the
Prospect drilled 11 wells. Reports filed with the South Australian government
indicate that some of these wells exhibited "oil shows" but none were completed
to enable production. As discussed herein, we are currently actively working to
acquire the Prospect.
In the remainder of this Report, Australian dollar amounts are prefaced by
"AU$" while United States dollar amounts are prefaced simply by "$" or (when
used in close proximity to Australian dollar amounts) by "US$." When United
States dollar amounts are given as equivalents of Australian dollar amounts,
such United States dollar amounts are approximations only and not exact figures.
The dollar amounts in the official work commitment are Australian currency. The
US dollar amounts contained herein are approximate and are based on the
September 28, 2012 closing quoted exchange rate of AU$1.00/US$1.0464. The US
dollar costs actually incurred in the future will be a function of the exchange
rate that exists between the two currencies when expenditures are made. During
the past year, that exchange rate has varied from a low of AU$1.00/US$0.9500 to
a high of AU$1.0593/US$1.00.
Recent Events
In connection with the change in our business focus, the following events
have occurred:
* Change of the Control and Management. A change of the control of our
company occurred effective on January 13, 2012 pursuant to the terms,
provisions and conditions of a Common Stock Purchase Agreement dated
as of such date (the "Stock Agreement") by and between (a) Shih-
Yi Chuang, Richard Bruce Pierce, Andrew Lee Smith, David W. Smalley
and Robert Birarda, as sellers (collectively "Sellers"), and (b)
Keith J. McKenzie. In connection with the closing of the
transactions provided for by the Stock Agreement, Mr. McKenzie,
William E. Begley and Michael D. Dahlke (collectively "Purchasers")
acquired an aggregate of 25,310,000 shares of our common stock
("Transferred Shares"), $.001 par value, theretofore owned
separately by Sellers at a price of $0.0001 per Transferred
Share. This number of Transferred Shares represented 78.9% of our
outstanding shares of our common stock prior to taking into account
the other transactions described below, and 41.5% of our outstanding
shares of our common stock after taking into account the issuances of
20.0 million shares to Keith D. Spickelmier and 10,070,000 shares
in connection with a private placement (both issuances of which
are described below).
At the time of the sale and purchase of the Transferred Shares,
the number of directors constituting our Board of Directors was
initially expanded from one to two, and Keith J. McKenzie was
elected to our Board of Directors to fill the newly created vacancy.
Eventually, our Board of Directors was expanded to three persons;
Richard Bruce Pierce resigned from his seat on such board; and Keith
D. Spickelmier and William E. Begley were elected to fill the two
vacant seats. Moreover, at the time of the sale and purchase of
the Transferred Shares, all our then serving officers resigned from
their positions as such. The following persons were elected (some
upon the preceding resignations, some later) to the one or more
offices of our company set forth opposite their respective names
below as our new slate of officers:
Keith D. Spickelmier Chairman of the Board
Keith J. McKenzie Chief Executive Officer
Michael D. Dahlke President and Chief Operating Officer
William E. Begley Chief Financial Officer and Treasurer
Mark S. Thompson Secretary
* Acquisition of Rights Under the Liberty Agreement. Pursuant to the
terms, provisions and conditions of an assignment (the
"Assignment") dated effective January 13, 2012 executed by Keith
D. Spickelmier in our favor, we acquired all of Mr. Spickelmier's
rights in a legal document (as amended and restated, the "Liberty
Agreement") between Liberty Petroleum Corporation ("Liberty")
and Mr. Spickelmier dated September 12, 2011. In the Liberty
Agreement, Liberty granted to Mr. Spickelmier an right to
negotiate an option (the "Option") to acquire the Prospect upon
Liberty's acquisition of rights in it. Liberty was the winning
bidder for the Prospect. Per the terms of the Liberty Agreement,
Mr. Spickelmier paid to Liberty a $50,000 initial deposit. In
anticipation of the assignment of the Liberty Agreement to us,
we paid an additional $100,000 deposit to extend the exclusive
right provided for by the Liberty Agreement, and an additional
$200,000 deposit to modify certain terms of the Liberty Agreement,
including the further extension of the exclusive right. The
preceding amounts will be applied to the Option's exercise
price upon exercise, or (as discussed below) will be refunded
if the Option is not exercised for various reasons.
The purchase price for the assignment of Mr. Spickelmier's rights in
the Liberty Agreement is as follows:
* $50,000 in cash, which was paid during the quarter ended
May 31, 2012
* $100,000 payable upon notice from the South Australian
Minister of Regional Development (the "Minister") that
the Minister has granted and issued in our name a
petroleum exploration license allowing the exploration
and drilling rights related to the Prospect (the
"License")
* 20.0 million shares of our common shares issued upon
delivery of the Assignment
* 55.0 million shares of our common shares issued upon
notice from the Minister that the Minister has
granted and issued the License in our name.
In the Assignment (as amended), Mr. Spickelmier agreed that, if the Minister
ever definitively decides not to grant and issue the License in our name, or has
failed to grant and issue the License in our name prior to November 30, 2012,
whichever occurs first, then Mr. Spickelmier shall return immediately to us the
20.0 million shares issued to him in connection with the delivery of the
Assignment.
* Optioning of the Prospect. On January 31, 2012, per the Liberty
Agreement, we entered into an Option to Purchase and Sale and
Purchase Agreement (the "Option Agreement") with Liberty. The
Option Agreement provides for the sale and transfer of the Prospect.
The Option Agreement reflects the results of negotiations between us
and Liberty, including certain adjustments agreed to in June 2012.
The Option Agreement supersedes the Liberty Agreement.
The Option Agreement provides that the Option's exercise price for
the Prospect is a deemed total of $3.95 million payable as
follows:
* Cash in the amount of $800,000 - As of the date of this Report,
all of the $800,000 cash amount has been deposited with
Liberty; accordingly, once the License is issued to us, we
will owe Liberty no further up-front cash amounts.
* Two promissory notes with an aggregate principal amount of
$650,000, one in the amount of $500,000 becoming due six
months after our acquisition of the Prospect, and the other in
the amount of $150,000 becoming due nine months after our
acquisition of the Prospect. These notes will feature
prepayment discounts if we pay the notes earlier than
required. At best, these prepayment discounts could save us
$150,000 if the notes are paid within 60 days after the License
is issued
* Twelve million shares of our common stock, of which Liberty has
agreed not to sell more than 10% in any three-month
period
After any exercise of the Option, Liberty would retain a 7.0%
royalty interest.
If the Minister does not grant the License allowing the
exploration of and drilling on the Prospect within a certain
period of time, we will have the option to cancel the transaction,
and Liberty is required to refund all moneys paid to it.
The License involves a five-year work commitment involving
expenditures of AU$200,000 (US$209,300) in the first year after the
acquisition, AU$1.25 million (US$1,308,000) in the second year, and
even greater amounts in subsequent years. Our inability to honor this
work commitment could result in the reversion of the License to
Liberty pursuant to the terms of the Option Agreement.
In addition to the matters described above, the Option
Agreement features various other agreements, representations,
warranties and indemnities that we believe are customary and are
commercially reasonable.
Effective May 15, 2012, Liberty and we entered into a Novation
Deed, which is intended to supersede the Option Agreement. The
Novation Deed attempts to place us (through our newly formed
Australian subsidiary, Discovery Energy SA Ltd, referred to
hereinafter as the "Subsidiary") in a direct contractual
relationship with regard to the License and the Prospect for all
purposes. For example, instead of the License's being issued to
Liberty and then assigned to us, Liberty and we will strive to
have the License issued directly in the Subsidiary's name. The
rationale for this action was to try to avoid regulatory delays in
having documents and rights subsequently assigned to us, and to avoid
transfer taxes that would result upon such assignments. The
Novation Deed was intended to change only the form of our
transaction with Liberty and not its substance. Accordingly, when
possible, the original terms of the Option Agreement were
preserved in the Novation Deed. The approach provided by the
Novation Deed required approval by the appropriate regulatory
agencies. On June 4, 2012, we received notice that the substitution
of the Subsidiary for Liberty regarding the License was approved
by the Executive Director of the Energy Resources Division of the
Department form Manufacturing, Innovation, Trade Resources and
Energy, which acts as a delegate of the Minister for Minerals and
Energy Resources.
We need no further up-front funds to acquire the License.
Nevertheless, we will need to raise additional funds to satisfy
the deferred payments to Liberty incurred in connection with the
acquisition of the License, our obligations under the work commitment
with respect to the License and other amounts required to explore and
develop the Prospect, and other working capital needs. We have no
assurance that we will be able to raise funds to satisfy the
preceding amounts.
* Native Title Agreement. On September 3, 2012, our Australian
subsidiary (the "Subsidiary") completed the execution of an
agreement titled "Deed (Pursuant to Section 31 of the Native
Title Act 1993)" (referred to hereinafter as the "Native Title
Agreement") with (a) the State of South Australia, (b)
representatives of the Dieri Native Title Holders (the "Native
Title Holders") on behalf of the Native Title Holders, and
(c) the Dieri Aboriginal Corporation. The Native Title Holders
have certain historic rights on the lands covered by the License,
which we are seeking to have issued to the Subsidiary. The Native
Title Agreement memorializes the agreement of the Native Title
Holders and the Association to the issuance of the License and
the Subsidiary's activities with respect to the License. The terms,
provisions and conditions of the Native Title Agreement are
described in a Current Report on Form 8-K that we filed with the
SEC on September 7, 2012. In connection with the entry into the
Native Title Agreement, the Subsidiary entered into a similar
agreement with other Aboriginal native titleholders and claimants
with respect to a comparatively small amount of land also covered
by the License. For all practical purposes, the terms of this
additional agreement are the same as those contained in the Native
Title Agreement.
* License Grant Offer. On September 6, 2012, the related South
Australian government agency formally offered to grant the
License to the Subsidiary. The Native Title Agreement, and a
similar agreement with other Aboriginal native titleholders and
claimants with respect to a comparatively small amount of land
also covered by the License were preconditions to this offer. This
offer must be accepted within 60 days, and a nominal annual fee
must accompany the acceptance. The Company intends to cause the
Subsidiary to accept the offer timely. Once the offer is accepted
and the License is issued, the Company will report these events in a
subsequent Current Report on Form 8-K, giving further information
regarding the issued License. Although we expect the License to be
issued to the Subsidiary, we have no assurance of this.
* Private Placement of Common Stock. We completed a private placement
as of May 1, 2012 in which we sold an aggregate of 10,070,000 shares
at a price of US$0.125 per share. The cash offering resulted in
US$1,258,750 in proceeds to us. The shares were issued to a
total of 23 investors, all of whom were accredited.
* Name Change. We changed our corporate name from "Santos Resource
Corp." to "Discovery Energy Corp." effective May 7, 2012.
* Engagement of Financial Adviser. During October 2012, we engaged the
services of Chrystal Capital Partners LLP ("Chrystal"), a corporate
finance firm based in London regulated by the British Financial
Services Authority. Chrystal has agreed to assist us in
connections with our efforts to complete a major capital raising
transaction of up to US$15.0 million. We have no assurance that
we will be successful in completing this type of transaction.
* Change in Shell Status. As a result of the acquisition of the events
described above, we are no longer a shell corporation as that term is
defined in Rule 405 of the Securities Act and Rule 12b-2
under the Exchange Act.
Plan of Operation
General
We intend to engage primarily in the exploration and development of oil and
gas on the Prospect in an effort to develop oil and gas reserves. Our principal
products will be crude oil and natural gas. Our development strategy will be
directed in the multi-pay target areas of South Australia, with principal focus
on the prolific Cooper/Eromanga Basin, towards initiating and rapidly expanding
production rates and proving up significant reserves primarily through
exploratory drilling. Our mission will be to generate superior returns for our
stockholders by working with industry partners, suppliers and the community to
build a focused exploration and production company with strong development
assets in the oil and gas sector.
In the right circumstances, we might assume the entire risk of the drilling
and development of the Prospect. More likely, we will determine that the
drilling and development of the Prospect can be more effectively pursued by
inviting industry participants to share the risk and the reward of the Prospect
by financing some or all of the costs of drilling wells. Such arrangements are
frequently referred to as "farm-outs." In such cases, we may retain a carried
working interest or a reversionary interest, and we may be required to finance
all or a portion of our proportional interest in the Prospect. Although this
approach will reduce our potential return should the drilling operations prove
successful, it will also reduce our risk and financial commitment to a
particular prospect. Prospective participants regarding possible "farm-out"
arrangements have already approached us.
There can be no assurance that we will be successful in our exploratory and
production activities. The oil and gas business involves numerous risks, the
principal ones of which are listed in our 2012 Annual Report on Form 10-K in
"Item 1A. Risk Factors - RISKS RELATING TO OUR INDUSTRY - PARTICIPANTS IN THE
OIL AND GAS INDUSTRY ARE SUBJECT TO NUMEROUS RISKS." As we become more involved
in the oil and gas exploration and production business, we will give more detail
information regarding these risks.
Although our primary focus is on the acquisition and development of the
Prospect, we have received information about, and have had discussion regarding
possible acquisition of or participation in, other oil or gas opportunities.
None of these discussions has led to any agreement in principle. Nevertheless,
given an attractive opportunity and our ability to consummate the same, we could
acquire one or more other crude oil and natural gas properties, or participant
in one or more other crude oil and natural gas opportunities.
Proposed Initial Activities
Currently, we are striving to close the acquisition of the Prospect. In
this connection, we have raised sufficient funds, completed the execution of
virtually all documentation, and received a governmental offer of a grant of a
petroleum exploration license allowing the exploration and drilling rights
related to the Prospect (the "License"). To be granted the License, we need
only accept the offer timely and pay a nominal annual fee. Although we intend
to accept the offer timely and expect the License to be issued to the
Subsidiary, we have no assurance of this.
We have just begun the initial phase of our plan of operation. To date we
have not commenced any drilling or other exploration activities on any
properties, and thus we do not have any estimates of oil and gas reserves.
Consequently we have not reported any reserve estimates to any governmental
authority. We cannot assure anyone that we will find commercially producible
amounts of oil and gas. Moreover, at the present time, we cannot finance the
initial phase of our plan of operation solely through our own current resources.
Consequently, we plan on undertaking certain financing activities described in
"Liquidity and Capital Resources" below. The success of the initial phase of our
plan of operation depends upon our ability to obtain additional capital to
acquire seismic data with respect to the Prospect, and to drill exploratory and
developmental wells. We cannot assure anyone that we will obtain the necessary
capital.
The initial phase of our plan of operation will involve the acquisition of
the Prospect. For the terms of this acquisition, see the section captioned
"Optioning of the Prospect" above. If this acquisition is completed, the
Prospect will be subject to a five-year work commitment, which involves the
following:
* Year 1 - AU$200,000 ((US$209,300) must be expended for
geological studies and interpretation of existing seismic
* Year 2 - AU$1,250,000 (US$1,308,000) must be expended to shoot
250 square kilometers (approximately 97 square miles) of
new 2D seismic
* Year 3 - AU$5,000,000 (US$5,232,000) must be expended to shoot
400 square kilometers (approximately 154 square miles) of
new 3D seismic and AU$3,600,000 (US$3,767,000) must be
expended to drill two wells
* Year 4 - AU$9,000,000 (US$9,418,000) must be expended to drill
five wells
* Year 5 - AU$9,000,000 (US$9,418,000) must be expended to drill
five wells
The prices of the equipment and services that we must employ to fulfill the
work commitment also vary based on both local and international demand for such
products by others involved in exploration for and production of oil and gas.
Recent high worldwide energy prices have resulted in growing demand, and
frequent higher prices charged by suppliers. Therefore, we have no assurance
that the steps in the work plan (e.g. shooting 250 square kilometers) can be
accomplished at the cost estimates included in Liberty's original License bid,
which has been accepted by the South Australian government.
Based on our technical analysis to date, we believe that acceleration of
the PEL 512 work plan can be justified. Hence, we have begun outlining a more
aggressive schedule for the first license year. It is expected this plan will
involve an earlier 2D/3D seismic campaign ($US6.3 - 8.9 million) and exploratory
well drilling ($US5.5 - 7.3 million). Subject to the availability of funds plus
proper equipment and personnel, management feels that US$15.0 million or more
can be productively invested within the first two years. Not only is this
program contingent on our procurement of sufficient funds therefore, it may also
be subject to governmental approval to vary the work commitment already in
place.
We intend to seek a joint venture partner that might act as the operator of
our wells. If we are unsuccessful in procuring such a partner, we will engage
the services of a third party once we have identified a proposed drilling site.
Management foresees no problem in procuring the services of one or more
qualified operators and drillers in connection with the initial phase of our
plan of operation, although a considerable increase in drilling activities in
the area of our properties could make difficult (and perhaps expensive) the
procurement of operating and drilling services. In all cases, the operator will
be responsible for all regulatory compliance regarding the well, including any
necessary permitting for the well. In addition to regulatory compliance, the
operator will be responsible for hiring the drilling contractor, geologist and
petroleum engineer to make final decisions relative to the zones to be targeted,
well design, and bore-hole drilling and logging. Should the well be successful,
the operator would thereafter be responsible for completing the well, installing
production facilities and interconnecting with gathering or transmission
pipelines if economically appropriate we expect to pay third party operators
(i.e. not joint venture partner with us) commercially prevailing rates.
The operator will be the caretaker of the well once production has
commenced. Additionally, the operator will formulate and deliver to all interest
owners an operating agreement establishing each participant's rights and
obligations in that particular well based on the location of the well and the
ownership. The operator will also be responsible for paying bills related to the
well, billing working interest owners for their proportionate expenses in
drilling and completing the well, and selling the production from the well.
Unless each interest owner sells its production separately, the operator will
collect sale proceeds from oil and gas purchasers, and, once a division order
has been established and confirmed by the interest owners, the operator will
issue the checks to each interest owner in accordance with its appropriate
interest. The operator will not perform these functions when each interest owner
sells its production separately, in which case the interest owners will
undertake these activities separately. After production commences on a well, the
operator also will be responsible for maintaining the well and the wellhead site
during the entire term of the production or until such time as the operator has
been replaced.
The principal oil, natural gas and gas liquids transportation hub for the
region of South Australia surrounding the Prospect is located in the vicinity of
Moomba. This processing and transportation center is approximately 60 km (36
miles) due east of the Prospect's eastern boundary. Large diameter pipelines
deliver oil and gas liquids from Moomba south to Port Bonython (Whyalla).
Natural gas is also moved south to Adelaide or east to Sydney. A gas
transmission pipeline also connects Moomba to Ballera, which is located
northeastward in the State of Queensland. From Ballera gas can be moved to
Brisbane and Gladstone, where a Liquefied Natural Gas (LNG) project is under
development. The Moomba treating and transportation facilities and the southward
pipelines were developed and are operated by a producer consortium led by Santos
Limited (no relation to us).
We cannot accurately predict the costs of transporting our production until
we locate our first successful well. The cost of installing infrastructure to
deliver our production to Moomba or elsewhere will vary depending upon distance
traversed, negotiated handling/treating fees, and pipeline tariffs.
Results of Operations
General
Financial results for the quarter and six months ended August 31, 2012 are
not directly comparable to financial results for the quarter and six months
ended August 31, 2011. During January 2012, we changed our business focus. This
change in focus resulted in an elevated level of business activity and a
corresponding increase in expenses.
We did not earn any revenues for the three months ended August 31, 2012 and
2011. We do not anticipate earning revenues until such time as we have entered
into commercial production of oil and natural gas. We are presently in the
exploration stage of our business, and we can provide no assurance that we will
discover commercially exploitable levels of hydrocarbons on our properties, or
if such resources are discovered, that we will enter the commercial production.
Our results of operation for the three and six months periods ended August
31, 2012 and 2011 are summarized in the table below:
Three months Three months Six months Six months
Ended August 31, Ended August 31, Ended August 31, Ended August
2012 2011 2012 31, 2011
Revenue $ - $ - $ - $ -
Operating
Expenses 205,327 1,510 344,098 36,141
Other (income)
/expenses (6,480) - (7,723) (615)
Net Loss 198,847 1,510 336,375 36,756
Our operating expenses for the three and six months periods ended August
31, 2012 and 2011 are outlined in the table below:
Three months Three months Six months Six months
Ended August 31, Ended August 31, Ended August 31, Ended August
2012 2011 2012 31, 2011
General and
Admini-
strative $ 10,232 $ 28 $ 32,470 $ 74
Mineral
Property
Costs 123,080 - 170,592 29,740
Professional
Fees 69,931 1,482 133,723 6,327
Travel 980 - 4,143 -
Rent 1,104 - 3,170 -
Total $ 205,327 $ 1,510 $ 344,098 $ 36,141
---------------------------------------------------------------
Results of Operations for the Three-Month Periods Ended August 31, 2012 and 2011
Expenses. The expenses for the three-month period ending August 31, 2012
were dramatically higher than for the corresponding period one year ago. The
difference of $197,337 generally reflects the change of our activities from that
of a shell company to those associated with the multiple initiatives begun at
the end of our last fiscal year to repurpose the Company as an oil and gas
exploration and production enterprise. Growth in Mineral Property Costs during
the current reporting periods accounted for over half of our increased expenses
These costs reflect the ongoing geologic evaluation and analysis of our optioned
South Australian exploration area. Elevated Professional Fees accounted for most
of the remaining increase in our expenses and were associated primarily with
legal services required for the processes of acquiring the South Australian
exploration license, privately placing stock and regulatory reporting of company
developments. General and Administrative expenses during the current reporting
period reflect in part the costs associated with changing the Company's name and
establishing its Australian subsidiary.
Other (income)/expenses. Our other income was derived from adjustments to
prior periods offset to some extent by the cost of translating US$ to AU$ to
meet local expenses in Australia.
Net loss. In view of the increase in expenses during the three-month
period ending August 31, 2012, our net loss during the period increased to
$198,847 (or $0.00 per-share) compared to our net loss during the same period in
fiscal 2012 of $1,510 (or $0.00 per-share).
Results of Operations for the Six-Month Periods Ended August 31, 2012 and 2011
Expenses. The expenses for the six-month period ending August 31, 2012
were dramatically higher than for the corresponding periods one year ago. The
difference of $299,169 generally reflect the change of our activities from that
of a shell company to those associated with the multiple initiatives begun at
the end of our last fiscal year to repurpose the Company as an oil and gas
exploration and production enterprise. Growth in Mineral Property Costs during
the current reporting periods accounted for over half of our increased expenses
These costs reflect the ongoing geologic evaluation and analysis of our optioned
South Australian exploration area. Elevated Professional Fees accounted for most
of the remaining increase in our expenses and were associated primarily with
legal services required for the processes of acquiring the South Australian
exploration license, privately placing stock and regulatory reporting of company
developments. General and Administrative expenses during the current reporting
period reflect in part the costs associated with changing the Company's name and
establishing its Australian subsidiary.
Other (income)/expenses. Our other income reflects the receipt of a
Canadian sales tax refund associated with the company's activities in Fiscal
Year 2012, adjustments to prior periods offset by the cost of translating US$ to
AU$ to meet local expenses in Australia
Net loss. In view of the increase in expenses during the six-month period
ending August 31, 2012, our net loss during the period increased to $336,375 (or
$0.01 per-share) compared to our net loss during the same period in fiscal 2012
of $36,756 (or $0.00 per-share).
Off-Balalnce Sheet Arrangements
The Company has no off-balance sheet arrangements.
Liquidity and Capital Requirements
As of August 31, 2012, we had cash in the amount of $162,809, and we had
working capital of $1,016,730. Earlier in this fiscal year, we completed a round
of financing in which we raised "seed" capital in the amount of US$1,258,750.
This has been our source of cash so far this fiscal year. We need to raise
additional funds for operating expenses. In this connection, during the first
week of September 2012, we initiated a second private placement seeking up to
$2.0 million in capital through the sale of 160 million shares of common stock
at a price of $0.125 per share. As of October 12, 2012, subscriptions valued at
$250,000 have been received. These subscriptions will result in the issuance of
2,000,000 shares of stock . We will continue to try to raise funds in this
financing, but we have no assurance that we will be able to do so.
We will also need to obtain additional financing before we can implement
the initial phase of our current plan of operation. To acquire the Prospect, we
will incur a deferred payment in the form of two promissory notes in the
aggregate amount of US$650,000 payable to Liberty, one becoming due six months
after our acquisition of the Prospect, and the other becoming due nine months
after our acquisition of the Prospect. Furthermore, the acquisition of the
Prospect will obligate us to pay US$100,000 in cash to Keith D. Spickelmier for
his assignment to us of the ability to acquire the Prospect. Moreover, after the
acquisition, we will have a work commitment with respect to the Prospect
requiring us to expend AU$200,000 (US$209,300) in the first year after the
acquisition and AU$1.25 million (US$1,308,000) in the second year. Some of these
amounts will become due before we are able to commence production on the
Prospect. Accordingly, some of these amounts must be raised. Moreover, we expect
to need a substantial amount of funds to develop the Prospect. In addition to
the preceding, we will need working capital in amounts not now determinable.
We believe at least US$3.0 million of additional capital will be required
to satisfy our obligations in connection with the acquisition of the Prospect
and for two years after the Prospect is acquired, but this amount would not
allow us to develop the Prospect in any meaningful way. About US$1.0 million
would need to be raised within about the next 12 months to satisfy amounts
becoming due within such time period, while the remaining US$2.0 million amount
would need to be raised within about the next 24 months to satisfy amounts
becoming due near the end of such time period.
During October 2012, we engaged the services of Chrystal Capital Partners
LLP ("Chrystal"), a corporate finance firm based in London regulated by the
British Financial Services Authority. Chrystal has agreed to assist us in
connections with our efforts to complete a major capital raising transaction of
up to US$20.0 million. We have no assurance that we will be successful in
completing this type of transaction. If Chrystal is successful in raising funds
for us, we will owe to Chrystal the fees described in footnote 6 to the
financial statements contained in this Report.
Another source of funding under investigation is the sale of a portion of
our post-acquisition interest in the Prospect to a joint venture partner for a
cash payment and/or a work commitment. We have had very preliminary discussions
with several companies to become joint venture partners. To obtain the maximum
combination of cash and work commitment in connection with the sale of an
interest in the Prospect, we may seek to add value by completing a 3D seismic
survey over a portion of the property and/or re-processing existing seismic data
related to the Prospect.
If required financing is not available on acceptable terms, we could be
prevented from satisfying our debt obligations or developing the Prospect. In
such event, we would be forced to seek an extension of the due date of the
amount owed to Liberty, or else default on one or more of these amounts. If a
default occurs, Liberty could exercise the rights of an unsecured creditor and
possibly levy encumbrances on all or a large part of our assets. Moreover, our
failure to honor our work commitment could result in our loss of the Prospect.
If any of the preceding events were to occur, we could be forced to cease our
new business plan altogether, which could result in a complete loss of
stockholders' equity.
If we do not obtain additional financing through an equity or debt
offering, we may be constrained to attempt to sell some portion of the Prospect
under unfavorable circumstances and at an undesirable price. However, we cannot
assure anyone that we will be able to find interested buyers or that the funds
received from any such sale would be adequate to fund our activities. Our future
liquidity will depend upon numerous factors, including the success of our
business efforts and our capital raising activities.
We are currently developing a more aggressive work plan for the Prospect
than has been included in the License bid. This plan is expected include
acceleration in the shooting of new 2D/3D seismic (US$6.3 -8.9 million) and
early (versus the bid work plan) exploratory drilling (US$5.5-7.3 million).
Assuming availability of funding, timely governmental approvals, and access to
proper equipment and trained personnel, we feel that US$ 15.0 million or more
can be productively invested within the Prospect during the first two years
following the issuance of the License.
If we are successful with the early wells, we will continue with a full
development plan, the scope of which is now uncertain but will be based on
technical analysis of acquired seismic data collected and/or reprocessed, field
drilling reports and well log reports. However, all of the preceding plans are
subject to the availability of sufficient funding and the procurement of all
governmental approvals. We do not now have sufficient available funds to
undertake these tasks, and will need to procure a joint venture partner or raise
additional funds as described above. The failure to procure a joint venture
partner or raise additional funds will preclude us from pursuing our business
plan, as well as exposing us to the loss of the Prospect, as discussed
immediately above. Moreover, if our business plan proceeds as just described,
but our first wells do not prove to hold producible reserves, we could be forced
to cease our exploration efforts on the Prospect.
Production from our exploration and drilling efforts would provide us with
cash flow. The proven reserves associated with production would increase the
value of our rights in the Prospect. This, in turn, should enable us to obtain
bank financing (after the wells have produced for a period of time to satisfy
the related lender). Both of these results would enable us to continue with our
initial drilling activities. In fact, cash flow and conventional bank financing
are as critical to our plan of operation in the long run as the procurement of a
joint venture partner or completion of a significant institutional financing.
Management believes that, if our plan of operation progresses (and production is
realized) as planned, sufficient cash flow and conventional bank financing will
be available for purposes of properly pursuing our plan of operation, although
we can make no assurances in this regard.
To conserve on our cash requirements, we may try to satisfy our obligations
by issuing shares of our common stock, which will result in dilution to our
existing stockholders.
Item 4T. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we
have evaluated the effectiveness of the design and operation of its disclosure
controls and procedures pursuant to Exchange Act Rule 13a-15(e) and Rule
15d-15(e) as of the end of the period covered by this quarterly report. Based on
that evaluation, the principal executive officer and principal financial officer
have identified that the lack of segregation of accounting duties as a result of
limited personnel resources is a material weakness of its financial procedures.
Other than for this exception, the principal executive officer and principal
financial officer believe the disclosure controls and procedures are effective
to ensure that information required to be disclosed by us in the reports we file
or submit under the Exchange Act is recorded, processed, summarized, and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms and that our disclosure and controls are designed
to ensure that information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is accumulated and communicated to our
management, including our principal executive officer and principal financial
officer, or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure. There were no significant changes in
our internal controls or in other factors that could significantly affect
internal controls subsequent to the date of their evaluation and there were no
corrective actions with regard to significant deficiencies and material
weaknesses.
Limitations on Effectiveness of Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial
Officer, does not expect that our disclosure controls and procedures or our
internal controls will prevent all error and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within our company have been detected. These inherent
limitations include, but are not limited to, the realities that judgments in
decision-making can be faulty and that breakdowns can occur because of simple
error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management
override of the control. The design of any system of controls also is based in
part upon certain assumptions about the likelihood of future events and there
can be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions; over time, control may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate.
Changes in Internal Controls over Financial Reporting
There have not been any changes in our internal control over financial
reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act, during the period of this report that have materially affected, or
are reasonably likely to materially affect our internal control over financial
reporting.
PART II OTHER INFORMATION
ITEM 6. Exhibits.
(a) The following exhibits are filed with this Quarterly Report or are
incorporated herein by reference:
Exhibit
Number Description
31.01 Certification pursuant to Rule 13a-14(a) of the Securities Exchange
Act of 1934.
31.02 Certification pursuant to Rule 13a-14(a) of the Securities Exchange
Act of 1934.
32.01 Certification Pursuant to 18 U.S.C. Section 1350, as pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.02 Certification Pursuant to 18 U.S.C. Section 1350, as pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS* XBRL Instance Document
101.SCH* XBRL Taxonomy Extension Schema
101.CAL* XBRL Taxonomy Extension Calculation Linkbase
101.DEF* XBRL Taxonomy Extension Definition Linkbase
101.LAB* XBRL Taxonomy Extension Labels Linkbase
101.PRE* XBRL Taxonomy Extension Presentation Linkbase
* XBRL information is furnished and not filed or a part of a registration
statement or prospectus for purposes of sections 11 or 12 of the Securities Act
of 1933, as amended, is deemed not filed for purposes of section 18 of the
Securities Exchange Act of 1934, as amended, and otherwise is not subject to
liability under these sections.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
duly caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
DISCOVERY ENERGY CORP.
(Registrant)
By: /s/ Keith J. McKenzie
--------------------------------
Keith J. McKenzie,
Chief Executive Officer
(Principal Executive Officer)
By: /s/ William E. Begley
--------------------------------
William E. Begley,
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
October _____, 2012