UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K12G3
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 16, 2007
COMLINK COMMUNICATIONS COMPANY
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation)
333-117114 30-0220588
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(Commission File Number) (I.R.S. Employer
Identification No.)
4127 S. LAMONTE STREET, SPOKANE, WASHINGTON 99203
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (509) 482-1159
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(Former name, former address and former fiscal year,
if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions.
[_] Written communications pursuant to Rule 425 under the Securities Act (17
CFR240.14d-2(b))
[_] Soliciting material pursuant to Rule 14a-12 under Exchange Act (17
CFR240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR240.13e-4(c))
TABLE OF CONTENTS
SECTION 1. REGISTRANT'S BUSINESS AND OPERATIONS................................2
SECTION 2. FINANCIAL INFORMATION...............................................2
SECTION 3. SECURITIES AND TRADING MARKETS.....................................35
SECTION 4. MATTERS RELATED TO ACCOUNTANTS AND FINANCIAL STATEMENTS............35
SECTION 5. CORPORATE GOVERNANCE AND MANAGEMENT................................35
SECTION 6. ASSET BACKED SECURITIES............................................36
SECTION 7. REGULATION FD .....................................................36
SECTION 8. OTHER EVENTS.......................................................36
SECTION 9. FINANCIAL STATEMENTS AND EXHIBITS..................................36
SIGNATURES....................................................................37
SECTION 1 - REGISTRANT'S BUSINESS AND OPERATIONS
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
The Company entered into an Agreement and Plan of Merger on January 16, 2007,
with shareholders of USA Superior Energy, Inc. ("USA Superior"), USAS
Acquisitions, Inc. ("USAS") and Comlink Communications Company. Under the terms
of the Agreement shareholders of USA Superior Energy, Inc. agreed to receive a
total of 34,000,000 shares of common stock of the Company in exchange for common
shares of USA Superior Energy, Inc., constituting 100% of the issued and
outstanding common stock of USA Superior Energy, Inc. The Agreement required
delivery of audited financial statements of USA Superior Energy, Inc. at time of
closing. The closing occurred on January 16, 2007, and the Company issued
34,000,000 shares of restricted common stock.
SECTION 2 - FINANCIAL INFORMATION
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
The Company has adopted a new business plan in the energy industry with the
acquisition of USA Superior Energy, Inc. as a wholly owned subsidiary.
GENERAL
USA Superior Energy, Inc. ("USA Superior") was formed October 28, 2005.
Hereafter, we may refer to USA Superior Energy, Inc. as "the Company", by the
words are inclusive to the parent Comlink Communications Company. It was a
Delaware corporation organized for the purpose of acquiring and developing oil
and gas properties with a potential for enhanced secondary or tertiary recovery
using modern state of the art, workover and stimulation techniques. USA Superior
acquired Superior Energy, LLC, a Delaware Limited Liability Company in a Share
Exchange in December 2005. Superior Energy, LLC has conducted active oil and gas
properties, acquisition, evaluation, workover and stimulation operations since
October 2003. USA Superior is currently producing five barrels of oil per day.
USA Superior has merged into Company's subsidiary, USAS Acquisition, Inc.
During 2005, USA Superior entered into two agreements to acquire interests in
oil properties. USA Superior currently has entered into 3 agreements with
landowners to develop oil and gas prospects by drilling or redrilling discovered
hydrocarbons. In June 2005 USA Superior entered into a lease agreement in
Navarro County, Texas to develop a 188 acre oil field workover stimulation
project. In October 2005 USA Superior entered into an agreement to drill on a
331 acre tract of land in Zavalla, County, Texas. Additionally, USA Superior has
entered into a limited liability Company, Superior Energy, LLC with IGS Generon,
Inc. (Generon) to utilize proprietary nitrogen gas generation technology to
enhance oil and gas production on the property in Navarro County Texas and is
conducting stimulation efforts currently. Further, USA Superior has entered into
a distribution agreement with Xiom Corporation (Xiom) to distribute Xiom's
patented coatings technology in Texas and Louisiana for oil field use, subject
to adequate capital.
USA Superior Energy, Inc. executive offices are located at 800 Bering Drive,
Suite 100, Houston, Texas 77057, and the telephone number is 713-266-7500 and
the facsimile number is 713-781-3863.
2
CAUTIONARY AND FORWARD LOOKING STATEMENTS
In addition to statements of historical fact, this Form 8K12g3 contains
forward-looking statements. The presentation of future aspects of the Company
found in these statements is subject to a number of risks and uncertainties that
could cause actual results to differ materially from those reflected in such
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's analysis only as of the
date hereof. Without limiting the generality of the foregoing, words such as
"may," "will," "expect," "believe," "anticipate," "intend," or "could" or the
negative variations thereof or comparable terminology are intended to identify
forward-looking statements.
These forward-looking statements are subject to numerous assumptions, risks and
uncertainties that may cause the Company actual results to be materially
different from any future results expressed or implied by the Company in those
statements. Important facts that could prevent the Company from achieving any
stated goals include, but are not limited to, the following:
(a) volatility or decline of the Company's stock price;
(b) potential fluctuation in quarterly results;
(c) failure of the Company to earn revenues or profits;
(d) inadequate capital to continue energy exploration, development or
reworking, inability to raise additional capital or financing to
implement its business plans;
(e) failure to achieve production from leases;
(f) rapid and significant changes in markets;
(g) litigation with or legal claims and allegations by outside parties;
(h) insufficient revenues to cover operating costs.
There is no assurance that the Company will be profitable, the Company may not
be able to successfully develop its energy leases, the Company may not be able
to attract or retain qualified executives and personnel, the Company's products
and services may become obsolete, government regulation may hinder the Company's
business, additional dilution in outstanding stock ownership may be incurred due
to the issuance of more shares, warrants and stock options, or the exercise of
warrants and stock options, and other risks inherent in the Company's
businesses.
The Company undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the date hereof.
3
BUSINESS
USA Superior Energy, Inc. strategy focuses on using nitrogen technology to
recharge and produce from under-pressured partially depleted reservoirs. This
reduces much of the risk of exploring for oil and gas and limits the risk to the
volume of oil one can produce and at what cost.
When an oil reservoir is discovered the initial natural pressure underground is
the force which drives the oil out. Primary production is the initial volume of
oil produced by natural flow or pump. Primary production typically produces from
10 to 40 % of the oil in place, leaving 60% to 90% of the oil still in the
ground. The difference in primary recovery depends on the pressure, porosity and
permeability of rock reservoir and the viscosity of the oil. The deeper a
reservoir is the greater the pressure pushing down on the rock. Rocks with high
porosity, (the holes within the rock filled with fluid) and high permeability,
(the connectivity and friction of those holes) can act like a pipe flowing oil
more easily and rapidly. Deep high pressure reservoirs, easy flow rates, and
thin low viscosity oil allow greater amounts of the oil in ground to be
initially produced allowing up to 40% of the oil in the reservoir to be
produced. Inversely shallow low pressure, or tight poor flow, or thick oil
reduces the amount of oil that is initially produced to the low 10% range.
After primary production, a fluid or gas must be injected into the ground under
pressure to help artificially pressurize and drive additional oil out of the
reservoir. This is called secondary or tertiary production. Primary, secondary
and tertiary production can produce from 60 to 90% of the oil in the reservoir
accessible form the wells in some cases. In the past, only larger oil and gas
companies could afford to pursue the high cost technologies and expertise
involved in secondary and tertiary recovery.
Historically, with a much lower price of oil, large volumes of oil were left
behind all across the United States in shallow tight reservoirs, heavy oil
sands, and small marginal reservoirs. These discovered but poorly exploited oil
fields lie in the ground ready to be produce if the right technology at an
economic cost can be applied. In today's price environment with $50 / BO many of
yesterday's uneconomic wells and reservoirs that were plugged and abandoned
might now be profitable if developed.
Management of the Company has developed tactics to exploit those very same wells
and reservoirs utilizing its combined 170 plus years of oil field experience and
high-tech (Non-Cryogenic) nitrogen generator, compressor and gas-lift equipment
for the purpose of enhancing production on crude oil wells by pressurizing low
pressure oil formations and gas-lifting oil out of the well.
The Company has used nitrogen to increase the production from marginal wells on
its Navarro County prospect and intends to use similar technologies wherever
applicable to stimulate reservoirs to attempt to achieve secondary recovery. The
steps are: First, use nitrogen gas lift to increase the efficiency and volume of
oil and water a well can produce. Second, use nitrogen to increase the pressure
within a formation through injection wells thereby forcing greater volumes of
oil into the well bore of a production well. And last, creating horizontal
lateral spokes radiating out from the well bore through coiled tubing drilling,
allowing a greater area and volume of formation to be more precisely treated and
providing a better conduit for nitrogen and oil to flow to and from the well
bore.
4
To implement the Company strategy for increased production, the Company has
entered into Superior Energy, LLC, a limited liability company with IGS Generon,
Inc. (Generon) to utilize proprietary nitrogen gas generation technology to
enhance and increase oil and gas production on selected prospects. In exchange
for 20% of the cash flow Generon provides the nitrogen generating equipment at
no capital cost. This creates an economic alliance of the Company with one of
the primary producers of nitrogen equipment, technical expertise that
supplements the Company's oil and gas expertise, a built in expansion joint
venture partner, and reduces capital needs to the Company.
SUPERIOR ENERGY, LLC
To reduce upfront cost and secure a source of nitrogen generating equipment, a
Delaware limited liability Company, Superior Energy, LLC was formed with
Generon, a major manufacturer of the nitrogen generating equipment. In return
for Generon's supply the nitrogen extraction equipment they receive 20% of the
revenue from the 200-acre pilot and pay 20% of the cost associated with the
injector wells. USA Superior Energy, Inc. holds 80% of this LLC. Not only did
the arrangement reduce the upfront cost, but the Company reduced the `learning
curve' to use this technology and has a built-in partner to expand it, if
warranted by success.
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Organization Chart
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Comlink Communications Company
(Parent)
/
/
USAS Acquisition, Inc./USA Superior Energy, Inc.
(merged with USAS)
(subsidiary 100% owned by parent)
/
/
Superior Energy, LLC
a Delaware Limited Liability Company
80% owned by USA Superior
20% owned by Generon
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COMPANY PROJECTS:
NAVARRO SHALLOW PROJECT
The Company has begun redevelopment of a shallow (350 ft) oil rich reservoir
discovered 20 years ago in Navarro County, TX. The reservoir lacked any pressure
to flow the oil under ground at that time so the field was abandoned within two
years of discovery.
5
The field was originally discovered in the 1980's. Eight wells were drilled,
completed and put on pump to produce the oil sand. Low pressure in the reservoir
(25 psi) would only push the oil to the pumping wells at a very slow rate. A
well could only pump 1/3 BOPD using the reservoir's natural pressure. The
project was uneconomic at the time and plugged and abandoned after only
producing 200 barrels of oil (BO) over a two-year period.
Confidential information from field personnel of the original 8 wells supplied
the core information and the fact that the wells could only produce 1/3 BOPD on
pump but with a casing swab could produce 6 to 8 BO/day. This is very indicative
of an oil formation capable of flowing if pressure was available. Oil produced
was light green oil with a viscosity of 32 to 38 API.
A two well nitrogen test on the 8 well lease in 1983 had the following results;
after a truckload of nitrogen was pumped in the injector well, the offsetting
producing well had 47 BO the next day and 45 the second day. By the third day
nitrogen pressure was gone.
While having positive results investors decided not to put in the nitrogen
injector due to the high cost of nitrogen generation and the low oil cost at
that time. The wells were plugged without producing any oil.
Others never developed this reservoir, because it is a difficult sand to "see"
in a typical well evaluation program. Rock is low resistivity laminated shale
sand under a hard capping limestone. The low resistivity and shallow depth was
outside of the evaluation range of most of the wells that were drilled in the
area for the Woodbine and deeper (4,000 ft plus). Many of the well logs in the
area show indications of this zone on a 1-inch correlation log but do not show
this zone in the detail log. Without the proprietary information this oil sand
goes undetected. Prospective acreage is over 2,000 plus acres of oil potential
at less than 500 feet. Acreage is open and has no production on it.
The Company is redeveloping as an enhanced recovery project using nitrogen gas
to pressurize the reservoir pushing oil from the injector well to the producers.
This provides an environmentally safe, non-destructive to the formation and its
fluids. Nitrogen is produced at the well-site using molecular sieves that
extract the nitrogen from the atmosphere we breathe. The heated gas produced is
composed of 95% nitrogen and can be a continual source of nitrogen as the field
is developed.
REDEVELOPMENT PLAN
The Company has drilled four wells in 3rd quarter of 2005 in the reservoir. All
four wells penetrated the oil sand at a depth of approximately 350 feet as
expected. Oil sand thickness ranges from 20 to 24 feet with an average porosity
of 22%. Oil is a high gravity, light oil of 34 to 38 API gravity. Currently
about 12 acres of the 200 acres leased has been proven on two acre spacing. The
pilot nitrogen injection program consists of three wells surrounding the
nitrogen injector well. All wells are completed and facilities are in place.
Management expects each well to produce approximately 17,000 barrels of oil. on
every two acres. Assuming a $50/ BO product price, results in each well making
$595,000 of revenue and approximately over $430,000 of cash flow per well on
each two acres. The cash flow generated from each well will payout all capital
and operating expenses within the first 6 months. An individual well needs to
produce only 2,500 barrels of oil to payout. The cash flow from each well is
enough to pay for seven additional wells.
6
The oil wells must first be put on pump and produced using only the reservoirs
natural formation pressure to establish their primary production rate. Currently
the 3 wells pump 1 1/2 BOPD on primary production. After an initial system
integrity pressure test the 3 producing wells had a significant increase in
producing (2 to 3 fold). This is very encouraging and further verifies that when
the field is put on nitrogen injection the wells should make between 5 and 15
BOPD / well.
After a four week period to establish primary production rate, the nitrogen will
be pumped into the center injector well. Injection pressure will initially be
175 PSI. The expected production rate will start off slow at 3 BOPD increasing
to a constant rate of 10 BOPD as the nitrogen begins to pressurize and move the
oil within the reservoir.
On this project the well cost is low, $45,000 to drill and complete. The results
of the pilot program will determine whether the field is developed on a two or
four acre per well drainage spacing. The existing nitrogen generator in place
can support 10 to 20 future injector wells and therefore 30 to 60 additional oil
producers.
PROJECT HAS THREE PHASES:
1) Redrill the original lease with a 5 well nitrogen pilot on 2 acre
spacing (inverted 5 spot). Core sand and capping limestone. Test
nitrogen pressure response and sweep efficiency on 4 corner producing
wells on 2 acre spacing and 4 additional wells on four acre spacing.
Outcome of pressure sweep will determine design of development of
property.
2) Lease an additional 1,000 to 2,000 acres, begin field development of
phase 1 acreage.
3) Expand development to limits of available productive acreage.
ZAVALLA SERPENTINES PROJECTS
The Company has recently begun development of numerous prospects identified in
Zavalla County, Texas.
Fields were discovered in the 1960 to the 1980's with little development since
then. The fields are caused by the intrusion of large masses of volcanic rock.
The volcanic rock has much larger amounts of iron than the surrounding
sedimentary rocks. These large localized "magmatic" masses can be seen on
magnetic surveys much like a compass responding to a large mass of iron.
Airborne magnetic surveys have been flown over much of the county, the result
being the identification of over 14 anomalous "high iron masses" that have not
been drilled. See diagram below.
Due to the tighter permeability of the formation this project can benefit from
nitrogen injection and certainly horizontal laterals. It is questionable whether
40 acres is actually being drained by a single well. Additional potential may
exist in in-fill drilling.
Currently over 331 acres are leased with additional leasing going on.
7
ZAVALLA COUNTY SHOWING SERPENTINE FIELDS
PLEASE SEE EXHIBIT 99.1
8
ZAVALLA GEOLOGIC BACKGROUND
Volcanic lava is pushed up into the overlying beds as serpentine plugs. This
causes structural traps for oil and gas in the sediment above. The San Miguel
formation at a depth of 2,500 ft has three sands which trap oil and gas in these
serpentine induced bumps. The Anacocha lime 1,000 ft below the San Miguel sands
traps gas off the flanks of these bumps.
Directly on the structural top the Anacocha is a thin tight limestone unable to
produce. But off the sides thickness and porosity builds up and significant gas
volumes can be trapped. Many of the existing fields have not drilled down to the
Anacocha lime off the flank off structure leaving untested reservoir. A typical
Anacocha well can do up to 1/2 BCF per well.
The volcanic serpentine plugs have a unique magnetic signature from the iron
within the lava. This signature can be identified from the air with sensitive
magnetometers flown from an airplane see below.
PLEASE SEE EXHIBIT 99.2
9
Airborne magnetics, while identifying the potential traps for oil and gas, the
presence of hydrocarbons in the traps is still in question. Geochemical surveys
can help identify areas that have hydrocarbons leaking to the surface from the
traps below.
Gas samples are extracted from 30 inches underground in a grid pattern every 300
feet. The gas is analyzed using a gas chromatograph capable of reading
individual gas components (Methane [C1], Propane [C2], Ethane [C3], Ethene,
Butane [C4]) to an accuracy of 1/100 of a part per million (PPM). Methane C1 can
be derived from underground and surface accumulations (termites/ dung/ compost)
C2 to C4 is only derived from oil and gas accumulations.
The image below is of the geochemical survey done by Geochemical Exploration
Services, Inc. on the Company's Del Monte lease, number 1 on the Zavalla County
map above.
Each sample station's value is mapped for each individual component (C1 to C4)
to determine area of leaking hydrocarbons. Positive results should show large
values, a clustering of large values within a definable area, and consistent
patterns between the individual component maps (C2 to C4), all of which were
present on the Company's acreage. C2 readings over 0.4 PPM are a strong
indicator of probable oil and gas underground, 72 % of the 131 samples taken had
a C2 reading greater than 0.4 PPM. The individual component (C2 to C4) values
and ratios suggest that the composition of the hydrocarbons trapped underneath
is gas and gas condensate.
PLEASE SEE EXHIBIT 99.3
10
ZAVALLA DEVELOPMENT PLAN
One initial well will be drilled to test the Company's evaluation strategy.
Zavalla Drill Cost
Drill and evaluation $147,840
Complete $ 92,934
Lease Facilities $ 20,000
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Total $260,774
One well will be drilled to test the reevaluation of the project.
SIGNIFICANT TECHNOLOGY
IGS GENERON STIMULATION TECHNOLOGY
In 2005 our predecessor formed a limited liability company, Superior Energy, LLC
with the Generon Division of Innovative Gas Systems (IGS). IGS Generon is one of
the largest producers in the world of custom designed nitrogen and instrument
air membrane generator units.
Generon's truck and skid mounted nitrogen generating units are placed adjacent
to a well that has demonstrated low down-hole pressure. Nitrogen is generated
on-site at high pressures and delivered as a gas at 92 - 99.99% purity.
Nitrogen (N2), an inert gas, can be used in lieu of or in addition to water as a
means to increase the pressure and thereby production of oil beyond primary
production.
1) Nitrogen when used to pressurize a formation can be used to increase oil
production in two processes; across an entire reservoir affecting many wells by
increasing the pressure and flood displacement of oil or 2) to individual wells
as a Huff and Puff process.
The Company's Navarro project uses the first approach. N2 is injected in the
formation slowly displacing and pressurizing the oil in front of it. The oil
rate in the surrounding producing wells increases in direct relationship with
the increase pressure in the formation around the injector well. Due to its
smaller size, N2 can get into and displace fluids from pore spaces difficult for
water to get into. As pressure is reduced the N2 expands forcing oil out into
the more porous and permeable pathways.
Using nitrogen to pressurize the reservoir has several advantages. Nitrogen is
environmentally friendly, 78% of air we breathe is nitrogen. Any spillage of
nitrogen gas is inefficient but uneventful. Nitrogen is inert to most mineral
and rock conditions and will not adversely harm the formation, unlike water
which can `expand and jam up" clays within the formation thereby reducing the
flow capacity of the formation. This provides a safe way to push the oil through
the rock to the producing oil well. Nitrogen has minimal expense; cost from
$1.00 to $2.00 / thousand cubic feet of nitrogen to produce at the well(s) site.
11
Field experience over a six year period has shown a two to four fold increase in
production with only a slight increase of water production at a nitrogen usage
of 1 to 4 MCF of nitrogen for every barrel of oil produced. At a cost of $4.00
to $8.00 for nitrogen produced and $50 per barrel of oil, this represents a very
attractive return on investment.
Management believes it can decrease operating costs and increase production on
such wells by 50 - 70%. Presently, the nitrogen is vented through the system.
Future plans include separation of the nitrogen recovery and the recompressing
it for further lifting. Management believes that lifting as many as four wells
from one Generon unit can be accomplished.
The Company has no significant operating history and no representation is made,
nor is any intended that the Company will able to carry on its activities
profitably. The viability of the proposed business is dependent upon sufficient
funds being raised by the Company, of which there is no assurance. G. Rowland
Carey, President and director has limited prior experience in the acquisition,
evaluation and development of oil and gas properties. Mr. Paul Eads and Mr.
Jerry Witte are career petroleum industry professionals and will devote
full-time efforts to the affairs of the Company.
FACILITIES
Management has established a sales and service facility in Houston, Texas to
support the Xiom sales division.
ACREAGE
GROSS ACRES NET ACRES
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Navarro 188 acres 80% NRI 150.4 acres
Zavalla 331 acres 80% NRI 264.8 acres
The Company will conduct stimulation activities on this acreage not yet
determined. If warranted, the Company would drill other wells on the acreage.
The terms of each of these leases:
The lease has a 20% royalty to the landowner and Superior Energy, LLC, our 80%
owned subsidiary, holds an 80% Net Revenue Interest. The lease term is 5 years,
but if producing, it will be "held by production" until depleted.
The Company will consider the following criteria when evaluating whether to
acquire an oil and gas prospect or property:
12
1) proximity to existing production and/or history of prior
exploration/production;
2) depth of existing production;
3) location in a known producing region;
4) whether there is well control data from nearby drill sites;
5) geologic evaluations by local geologists of production potential;
6) reasonable cost of acquisition;
7) term of lease and any commitment; and
8) reasonable drilling or workover cost estimates.
COMPETITION, MARKETS, REGULATION AND TAXATION
COMPETITION.
There are a large number of companies and individuals engaged in the exploration
for minerals and oil and gas and seeking post primary recovery prospects;
accordingly, there is a high degree of competition for desirable properties.
Many of the companies and individuals so engaged have substantially greater
technical and financial resources than the Company.
MARKETS.
The availability of a ready market for oil and gas discovered, if any, will
depend on numerous factors beyond the control of the Company, including the
proximity and capacity of refineries, pipelines, and the effect of state
regulation of production and of federal regulations of products sold in
interstate commerce, and recent intrastate sales. The market price of oil and
gas are volatile and beyond the control of the Company. The market for natural
gas is also unsettled, and gas prices have increased dramatically in the past
four years with substantial fluctuation, seasonally and annually.
There generally are only a limited number of gas transmission companies with
existing pipelines in the vicinity of a gas well or wells. In the event that
producing gas properties are not subject to purchase contracts or that any such
contracts terminate and other parties do not purchase the Company's gas
production, there is no assurance that the Company will be able to enter into
purchase contracts with any transmission companies or other purchasers of
natural gas and there can be no assurance regarding the price which such
purchasers would be willing to pay for such gas. There presently exists an
oversupply of gas in the certain areas of the marketplace due to pipeline
capacity, the extent and duration of which is not known. Such oversupply may
result in restrictions of purchases by principal gas pipeline purchasers.
EFFECT OF CHANGING INDUSTRY CONDITIONS ON DRILLING ACTIVITY.
Lower oil and gas prices have caused fluctuations in energy activity in the U.S.
from time to time. However, such changing activity has also resulted in severe
fluctuations in costs prospects, acquisition costs and equipment costs, and
restrictions in the terms under which workover/stimulation prospects are
generally available. The Company cannot predict what oil and gas prices will be
in the future and what effect those prices may have on activity in general, or
on its ability to generate economic workover/stimulation prospects and to raise
the necessary funds with which to drill them.
13
COMPANY'S PERCEPTION OF THE OPPORTUNITY.
The Company has put together a team of experts in their fields with over 170
years of experience; from the initial drilling, completion, operations, and
problem solving.
By enhancing partially developed or under-pressured reservoirs limits the risk
associated with exploring for and "FINDING" oil reservoirs. Developing with
nitrogen previously found oil pools that have had poor production due to their
shallow nature and low pressure, has several advantages; shallow equates to low
cost to drill, if oil drilling rigs are not available, water well rigs can drill
these wells. Most drilling hazards are well known, usually near infrastructure,
environmentally friendly, safe, and with possible tax benefits.
As an incentive to increase oil production, the State of Texas gives a 50%
reduction of the 4.6% Severance Tax to qualifying enhanced recovery projects.
The Company's Navarro project qualifies for this tax incentive and has currently
filed the necessary paper work with the Texas Railroad Commission and is now
awaiting final approval.
The Company's arrangement with Generon, one of the foremost providers of
nitrogen generating equipment, provides the Company with a means to put high
tech expensive equipment on its projects with no capital outlay. If the projects
are successful, this would give Generon a vested interest in the expansion of
existing and future projects.
Part of the Company's strategy is to have personnel in the community where it
has operations at a grassroots level. Experienced and respected, overseeing each
project on a day-to-day basis this person provides a valuable network,
maintaining and assuring production, and finding the best subcontractors at
competitive prices. These individuals are also actively looking for additional
potential, be it taking over old wells or finding new projects. Evidence of this
is a recent negotiated 5-year lease, of 331 acres in Zavalla County, Texas for a
10% royalty burden, resulting in 90% of the revenue going to the Company.
Typically a lease burden of 12.5 to 25% is considered good, leaving the leasor
with 75 to 87.5% of the revenue.
THE DEPARTMENT OF ENERGY. The Department of Energy Organization Act (Pub. L. No.
95-91) became effective October 1, 1977. Under this Act various agencies,
including the Federal Energy Administration (FEA) and the Federal Power
Commission (FPC), have been consolidated to constitute the cabinet-level
Department of Energy (DOE). The Economic Regulatory Administration (ERA), a
semi-independent administration within the DOE, now administers most of the
regulatory programs formerly managed by the FEA, including oil pricing and
allocation. The Federal Energy Regulatory Commission (FERC), an independent
agency within the DOE, has assumed the FPC's responsibility for natural gas
regulation.
REGULATION AND PRICING OF NATURAL GAS. The Company's operations may be subject
to the jurisdiction of the Federal Energy Regulatory Commission (FERC) with
respect to the sale of natural gas for resale in interstate and intrastate
commerce. State regulatory agencies may exercise or attempt to exercise similar
powers with respect to intrastate sales of gas. Because of its complexity and
broad scope, the price impact of future legislation on the operation of the
Company cannot be determined at this time.
14
CRUDE OIL AND NATURAL GAS LIQUIDS PRICE AND ALLOCATION REGULATION.
Pursuant to Executive Order Number 12287, issued January 28, 1981, President
Reagan lifted all existing federal price and allocation controls over the sale
and distribution of crude oil and natural gas liquids. Executive Order Number
12287 was made effective as of January 28, 1981, and consequently, sales of
crude oil and natural gas liquids after January 27, 1981 are free from federal
regulation. The price for such sales and the supplier-purchaser relationship
will be determined by private contract and prevailing market conditions. As a
result of this action, oil which may be sold by the Company will be sold at
deregulated or free market prices. At various times, certain groups have
advocated the reestablishment of regulations and control on the sale of domestic
oil and gas, and have advocated reimposing of "windfall profits" taxes. The
impacts of any such new regulation or taxation are certain to be negative on the
Company.
STATE REGULATIONS.
The Company's production of oil and gas if any will be subject to regulation by
state regulatory authorities in the states in which the Company may produce oil
and gas. In general, these regulatory authorities are empowered to make and
enforce regulations to prevent waste of oil and gas and to protect correlative
rights and opportunities to produce oil and gas as between owners of a common
reservoir. Some regulatory authorities may also regulate the amount of oil and
gas produced by assigning allowable rates of production.
PROPOSED LEGISLATION.
A number of legislative proposals have been and probably will continue to be
introduced in Congress and in the legislatures of various states, which, if
enacted, would significantly affect the petroleum industries. Such proposals and
executive actions involve, among other things, the imposition of land use
controls such as prohibiting drilling activities on certain federal and state
lands in roadless wilderness areas. At present, it is impossible to predict what
proposals, if any, will actually be enacted by Congress or the various state
legislatures and what effect, if any, such proposals will have. However,
President Clinton's establishment of numerous National Monuments by executive
order has had the effect of precluding drilling across vast areas.
ENVIRONMENTAL LAWS.
Oil and gas exploration and development are specifically subject to existing
federal and state laws and regulations governing environmental quality and
pollution control. Such laws and regulations may substantially increase the
costs of exploring for, developing, or producing oil and gas and may prevent or
delay the commencement or continuation of a given operation.
15
All operations by the Company involving the exploration for or the production of
any minerals are subject to existing laws and regulations relating to
exploration procedures, safety precautions, employee health and safety, air
quality standards, pollution of stream and fresh water sources, odor, noise,
dust, and other environmental protection controls adopted by federal, state and
local governmental authorities as well as the right of adjoining property
owners. The Company may be required to prepare and present to federal, state or
local authorities data pertaining to the effect or impact that any proposed
exploration for or production of minerals may have upon the environment. All
requirements imposed by any such authorities may be costly, time consuming, and
may delay commencement or continuation of exploration or production operations.
It may be anticipated that future legislation will significantly emphasize the
protection of the environment, and that, as a consequence, the activities of the
Company may be more closely regulated to further the cause of environmental
protection. Such legislation, as well as future interpretation of existing laws,
may require substantial increases in equipment and operating costs to the
Company and delays, interruptions, or a termination of operations, the extent to
which cannot now be predicted.
TITLE TO PROPERTIES.
The Company is not the record owner of its interest in its properties and relies
instead on contracts with the owner or operator of the property, pursuant to
which, among other things, the Company has the right to have its interest placed
of record. As is customary in the oil and gas industry, a preliminary title
examination will be conducted at the time unproved properties or interests are
acquired by the Company. Prior to commencement of drilling operations on such
acreage and prior to the acquisition of proved properties, a title examination
will usually be conducted and significant defects remedied before proceeding
with operations or the acquisition of proved properties, as appropriate.
The properties are subject to royalty, overriding royalty and other interests
customary in the industry, liens incident to agreements, current taxes and other
burdens, minor encumbrances, easements and restrictions. Although the Company is
not aware of any material title defects or disputes with respect to its
undeveloped acreage, to the extent such defects or disputes exist, the Company
would suffer title failures.
BACKLOG OF ORDERS.
There are currently no orders for sales at this time.
GOVERNMENT CONTRACTS.
None at this time.
COMPETITIVE CONDITIONS.
There are numerous competitors in the Oil and Gas Industry with far greater
resources, financial and marketing, to exploit new oil and gas prospects which
might compete with the Company Energy, Inc. Such resources could overwhelm the
Company's efforts to acquire oil and gas workover/stimulation prospects and
cause failure of Company. (see "Risk Factors")
16
COMPANY SPONSORED RESEARCH AND DEVELOPMENT.
No research is being conducted. (See "Use of Proceeds.")
GOVERNMENTAL REGULATION AND ENVIRONMENTAL CONSIDERATION.
Oil and Gas: The oil and gas business in the United States is subject to
regulation by both federal and state authorities, particularly with respect to
pricing, allowable rates of production, marketing and environmental matters.
The production of crude oil and gas has, in recent years, been the subject of
increasing state and federal controls. No assurance can be given that newly
imposed or changed federal laws will not adversely affect the economic viability
of any oil and gas properties the Company may acquire in the future. Federal
income and "windfall profit" taxes have in the past affected the economic
viability of such properties.
NUMBER OF PERSONS EMPLOYED.
As of December 31, 2006, USA Superior Energy, Inc. had 4 full-time employees.
Other Officers and Directors work on an as needed part-time basis.
RISK FACTORS RELATING TO THE COMPANY AND BUSINESS
Any person or entity contemplating an investment in the securities offered
hereby should be aware of the high risks involved and the hazards inherent
therein. Specifically, the investor should consider, among others, the following
risks:
HIGH RISKS OF THE OIL AND GAS BUSINESS.
The search for oil and gas reserves frequently results in unprofitable efforts,
not only from dry holes, but also from wells which, though productive, will not
produce oil or gas in sufficient quantities to return a profit on the costs
incurred. There is no assurance that any production or profit will be obtained
from any of the prospects owned or to be acquired by the Company, nor are there
any assurances that if such production is obtained it will be profitable. When
drilling offset wells to abandoned energy wells, there is a very high risk of
encountering non-commercial shows of oil and gas due to pressure depletion of
the reservoir. (See "Business and Properties")
COMPETITION.
The Company is and will continue to be an insignificant participant in the oil
and gas business. Most of the Company's competitors have significantly greater
financial resources, technical expertise and managerial capabilities than the
Company and, consequently, the Company will be at a competitive disadvantage in
identifying suitable prospects. Such resources could overwhelm the Company's
efforts to acquire oil and gas prospects and cause failure of the Company.
17
MARKETS.
The marketing of natural gas and oil which may be produced by the Company's
prospects will be affected by a number of factors beyond the control of the
Company. These factors include the extent of the supply of oil or gas in the
market, the availability of competitive fuels, crude oil imports, the world-wide
political situation, price regulation, and other factors. Recently, there have
been dramatic fluctuations in oil prices. Any significant decrease in the market
prices of oil and gas could materially affect the profitability of the Company's
oil and gas activities.
There generally are only a limited number of gas transmission companies with
existing pipelines in the vicinity of a gas well or wells. In the event that
producing gas properties are not subject to purchase contracts or that any such
contracts terminate and other parties do not purchase the Company's gas
production, there is assurance that the Company will be able to enter into
purchase contracts with any transmission companies or other purchasers of
natural gas and there can be no assurance regarding the price which such
purchasers would be willing to pay for such gas. There presently exists an
oversupply of gas in the marketplace, the extent and duration of which is not
known. Such oversupply may result in reductions of purchases by principal gas
pipeline purchasers. (See "Business of the Company" and Competition, Markets,
Regulation and Taxation.")
WEATHER INTERRUPTIONS.
Activities of the Company may be subject to periodic interruptions due to
weather conditions. Weather-imposed restrictions during certain times of the
year on roads accessing properties could adversely affect the ability of the
Company to benefit from production on such properties or could increase the
costs of drilling new wells because of delays.
ADDITIONAL FINANCING REQUIREMENTS.
If adequate oil and gas reserves are found to exist on a prospect, substantial
additional financing may be needed to fund the necessary development work.
Furthermore, if the results of that exploration and development work are
successful, substantial additional funds will be necessary for continued
development. The Company will not have sufficient proceeds to conduct such work
and, therefore, will be required to obtain the necessary funds either through
debt or equity financing, some form of cost-sharing arrangement with others, or
the sale of all or part of the property. There is no assurance that the Company
will be successful in obtaining any financing. These various financing
alternatives may dilute the interest of the Company's shareholders and/or reduce
the Company's interest in the properties. (See "Use of Proceeds" and "Business
of the Company.")
WORKING CAPITAL.
The working capital needs of the Company consist primarily of: prospects
acquisitions, evaluation workover and stimulation activities and salaries and
administration and are estimated to total over $1,000,000 in the next twelve
months, none of which funds are committed; although an equity private placement
offering in the amount of $1,000,000 is being commenced. The Company has only
minimal cash as of the date of this filing.
18
NO REVENUES.
The Company has achieved NO revenues in the last five years.
OPERATING HAZARDS AND UNINSURED RISK.
The Company's operations will be subject to all of the operating hazards and
risks normally incident to drilling for and producing oil and gas, such as
encountering unusual or unexpected formations and pressures, blowouts,
environmental pollution and personal injury. The Company will maintain general
liability insurance but it has not obtained insurance against such things as
blowouts and pollution risks because of the prohibitive expense. Should the
Company sustain an uninsured loss or liability, or a loss in excess of policy
limits, its ability to operate may be materially adversely affected.
FEDERAL INCOME TAXATION.
Federal income tax laws are of particular significance to the oil and gas
industry. Legislation has eroded various benefits of oil and gas producers and
subsequent legislation could continue this trend. Congress is continually
considering proposals with respect to Federal income taxation which could have a
materially adverse effect on the Company`s future operations and on its ability
to obtain risk capital which the industry has traditionally attracted from
taxpayers in high tax brackets.
GOVERNMENT REGULATION.
The production and sale of oil and gas are subject to regulation by state and
federal authorities, the spacing of wells and the prevention of waste. There are
both federal and state laws regarding environmental controls which may
necessitate significant capital outlays, resulting in extended delays,
materially affect the Company's earnings potential and cause material changes in
the Company's proposed business. It cannot be predicted what legislation, if
any, may be passed by Congress or state legislatures in the future, or the
effect of such legislation, if any, on the Company. Such regulation may have a
significant affect on the operating results of the Company.
PROPOSED OPERATIONS - NEGATIVE CONSIDERATIONS.
Expansion Expenditures: the Company may expend substantial funds acquiring and
exploring properties which are later determined not to be productive. All funds
so expended will be a total loss to the Company.
Technical Assistance: It may be necessary or desirable to employ technical
assistance in the operation of the Company's business. As of this date, the
Company has not contracted for any technical assistance. When needed by the
Company such assistance is likely to be available to compensation levels the
Company would be able to pay.
Uncertainty of Title: The Company will attempt to acquire property or interest
in property by option, lease, and by purchase. The validity of title to oil and
gas property depends upon numerous circumstances and factual matters (many of
which are not discoverable of record or by other readily available means) and is
subject to many uncertainties of existing law and its application. The Company
will obtain an oil and gas attorney's opinion of valid title before any
significant expenditure upon a lease.
19
Government Regulations: The area of exploration of natural resources has become
significantly regulated by state and federal governmental agencies, and such
regulation could have an adverse effect on the operations of the Company.
Compliance with statutes and regulations governing the oil and gas industry
could significantly increase the capital expenditures necessary to develop
property of the Company.
Nature of Proposed Business: The Company's proposed business is highly
speculative, involves the commitment of high-risk capital, and exposes the
Company to potentially substantial losses. In addition, the Company will be in
direct competition with other organizations which are significantly better
financed and staffed than the Company.
General Economic and Other Conditions: The Company's business may be adversely
affected from time to time by such matters as changes in general economic,
industrial and international conditions; changes in taxes; oil and gas prices
and costs; excess supplies and other factors of a general nature.
COMPETITION FOR SUPPLIES.
The Company will be required to compete with a large number of entities which
are larger, have greater resources and more extensive operating histories than
the Company. Shortages may result from this competition and may lead to
increased costs and delays in operations which may have a material adverse
effect on the Company.
FACTORS BEYOND CONTROL OF COMPANY.
The acquisition, exploration, development, production and sale of oil and gas
are subject to many factors which are outside the Company's control. These
factors include general economic conditions, proximities to pipelines, oil
import quotas, supply and price of other fuels and the regulation of
transportation by federal and state governmental authorities.
The Company anticipates substantial competition in its effort to acquire oil and
gas properties and may have difficulty in obtaining drilling rigs and equipment
and experienced personnel to operate them. Established companies have an
advantage over the Company because of substantially greater resources to devote
to property acquisition and to obtain drilling rigs, equipment and personnel. If
the Company is unable to compete for properties and drilling rigs, equipment and
personnel, the Company's business would be adversely affected.
CONFLICTS OF INTEREST.
Certain conflicts of interest may exist between the Company and its officers and
directors. They have other business interests to which they devote their
attention, and may be expected to continue to do so although management time
should be devoted to the business of the Company. As a result, conflicts of
interest may arise that can be resolved only through exercise of such judgment
as is consistent with fiduciary duties to the Company.
20
NEED FOR ADDITIONAL FINANCING.
The Company has very limited funds, and such funds will not be adequate to
carryout the business plan. The ultimate success of the Company may depend upon
its ability to raise additional capital. The Company has investigated the
availability, source, and terms that might govern the acquisition of additional
capital and is commencing a private placement offering to raise $1,000,000. If
additional capital is needed, there is no assurance that funds will be available
from any source or, if available, that they can be obtained on terms acceptable
to the Company. If not available, the Company's operations will be limited to
those that can be financed with its modest capital.
REGULATION OF PENNY STOCKS.
The Company's securities will be subject to a Securities and Exchange Commission
rule that imposes special sales practice requirements upon broker-dealers who
sell such securities to persons other than established customers or accredited
investors. For purposes of the rule, the phrase "accredited investors" means, in
general terms, institutions with assets in excess of $5,000,000, or individuals
having a net worth in excess of $1,000,000 or having an annual income that
exceeds $200,000 (or that, when combined with a spouse's income, exceeds
$300,000). For transactions covered by the rule, the broker-dealer must make a
special suitability determination for the purchaser and receive the purchaser's
written agreement to the transaction prior to the sale. Consequently, the rule
may affect the ability of broker-dealers to sell the Company's securities and
also may affect the ability of investors to sell their securities in any market
that might develop therefore.
In addition, the Securities and Exchange Commission has adopted a number of
rules to regulate "penny stocks". Such rules include Rules 3a51-1, 15g-1, 15g-2,
15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities and Exchange
Act of 1934, as amended. Because the securities of the Company may constitute
"penny stocks" within the meaning of the rules, the rules would apply to the
Company and to its securities. The rules may further affect the ability of
owners of securities to sell the securities of the Company in any market that
might develop for them.
Shareholders should be aware that, according to Securities and Exchange
Commission, the market for penny stocks has suffered in recent years from
patterns of fraud and abuse. Such patterns include (i) control of the market for
the security by one or a few broker-dealers that are often related to the
promoter or issuer; (ii) manipulation of prices through prearranged matching of
purchases and sales and false and misleading press releases; (iii) "boiler room"
practices involving high-pressure sales tactics and unrealistic price
projections by inexperienced sales persons; (iv) excessive and undisclosed
bid-ask differentials and markups by selling broker-dealers; and (v) the
wholesale dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired consequent investor losses. The
Company's management is aware of the abuses that have occurred historically in
the penny stock market. Although the Company does not expect to be in a position
to dictate the behavior of the market or of broker-dealers who participate in
the market, management will strive within the confines of practical limitations
to prevent the described patterns from being established with respect to the
Company's securities.
21
LACK OF REVENUE HISTORY.
The Company was formed on October 28, 2005 for the purpose of exploring for,
acquiring and developing mineral properties with a potential for production. The
Company has had minimal revenues in the last five years. The Company is not
profitable and the business effort is considered to be in an early development
stage. The Company must be regarded as a new or development venture with all of
the unforeseen costs, expenses, problems, risks and difficulties to which such
ventures are subject.
NO ASSURANCE OF SUCCESS OR PROFITABILITY.
There is no assurance that the Company will ever operate profitably. There is no
assurance that it will generate revenues or profits, or that the market price of
the Company's Common Stock will be increased thereby.
LACK OF DIVERSIFICATION.
Because of the limited financial resources that the Company has, it is unlikely
that the Company will be able to diversify its operations. The Company's
probable inability to diversify its activities into more that one area will
subject the Company to economic fluctuations within a particular business or
industry and therefore increase the risks associated with the Company's
operations.
DEPENDENCE UPON MANAGEMENT. LIMITED PARTICIPATION OF MANAGEMENT.
The Company currently has three individuals who are serving as its officers and
directors on a part time basis. The Company will be heavily dependent upon their
skills, talents, and abilities, as well as consultants to the Company, to
implement its business plan, and may, from time to time, find that the inability
of the officers, directors and consultants to devote their full time attention
to the business of the Company results in a delay in progress toward
implementing its business plan. See "Officers and Directors."
INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Delaware General Corporation Laws provide for the indemnification of its
directors, officers, employees, and agents, under certain circumstances, against
attorney's fees and other expenses incurred by them in any litigation to which
they become a party arising from their association with or activities on behalf
of the Company. The Company will also bear the expenses of such litigation for
any of its directors, officers, employees, or agents, upon such person's promise
to repay the Company therefore if it is ultimately determined that any such
person shall not have been entitled to indemnification. This indemnification
policy could result in substantial expenditures by the Company that it will be
unable to recoup.
22
DIRECTOR'S LIABILITY LIMITED.
Nevada Revised Statutes exclude personal liability of its directors to the
Company and its stockholders for monetary damages for breach of fiduciary duty
except in certain specified circumstances. Accordingly, the Company will have a
much more limited right of action against its directors that otherwise would be
the case. This provision does not affect the liability of any director under
federal or applicable state securities laws.
DEPENDENCE UPON OUTSIDE ADVISORS.
To supplement the business experience of its officers and directors, the Company
may be required to employ accountants, technical experts, appraisers, attorneys,
or other consultants or advisors. The Company's Management, without any input
from stockholders, will make the selection of any such advisors. Furthermore, it
is anticipated that such persons may be engaged on an "as needed" basis without
a continuing fiduciary or other obligation to the Company. In the event the
President of the Company considers it necessary to hire outside advisors, he may
elect to hire persons who are affiliates, if they are able to provide the
required services.
NO FORESEEABLE DIVIDENDS.
The Company has not paid dividends on its Common Stock and does not anticipate
paying such dividends in the foreseeable future.
LOSS OF CONTROL BY PRESENT MANAGEMENT AND STOCKHOLDERS.
The Company may issue further Shares as consideration for the cash or assets or
services out of the Company's authorized but unissued Common Stock that would,
upon issuance, represent a majority of the voting power and equity of the
Company. The result of such an issuance would be those new stockholders and
management would control the Company, and persons unknown could replace the
Company's management at this time. Such an occurrence would result in a greatly
reduced percentage of ownership of the Company by its current shareholders.
RULE 144 SALES.
All of the outstanding Units of Common Stock held by present officers,
directors, and affiliate stockholders are "restricted securities" within the
meaning of Rule 144 under the Securities Act of 1933, as amended. As restricted
Units, these Units may be resold only pursuant to an effective registration
statement or under the requirements of Rule 144 or other applicable exemptions
from registration under the Act and as required under applicable state
securities laws. Rule 144 provides in essence that a person who has held
restricted securities for one year may, under certain conditions, sell every
three months, in brokerage transactions, a number of Units that does not exceed
the greater of 1.0% of a company's outstanding common stock or the average
weekly trading volume during the four calendar weeks prior to the sale. There is
no limit on the amount of restricted securities that may be sold by a
nonaffiliate after the owner has held the restricted securities for a period of
two years. A sale under Rule 144 or under any other exemption from the Act, if
available, or pursuant to subsequent registration of Units of Common Stock of
present stockholders, may have a depressive effect upon the price of the Common
Stock in any market that may develop.
23
HAZARDS OF OPERATION. In post primary recovery prospects unexpected pressures,
impermeable formations and other operating conditions may be encountered which
could result in a loss to the Company such as blow-out, fire, pollution, saline
infiltrations, insufficient pressure for gas or oil flows, high paraffin content
of oil or other adverse situations limiting or preventing production or proving
to be a physical hazard to the Company and its employees. The Company will not
be able to protect itself from any such risks through insurance either because
such insurance coverage is unavailable, because of high premiums or for other
reasons.
DIVIDENDS. The Company has paid no dividends and proposes for the foreseeable
future to utilize all available funds for the development of its business.
SHORTAGE OF DRILLING RIGS AND RELATED EQUIPMENT. The oil and gas industry is
presently facing a shortage of drilling rigs, equipment, materials, supplies and
services which has delayed current drilling activities in many instances by
independent oil and gas operators. The inability to drill on acreage blocks may
delay development of properties in which the Company acquires an interest and
certain leases could expire as a result.
PRICE VOLATILITY. Oil and gas prices are volatile and an extended decline in
prices could hurt the Company's business prospects. The future profitability and
rate of growth and the anticipated carrying value of the Company's oil and gas
properties will depend heavily on then prevailing market prices for oil and gas.
The Company expects the markets for oil and gas to continue to be volatile. If
the Company is successful in establishing production, any substantial or
extended decline in the price of oil or gas could:
- have a material adverse effect on its results of operations;
- limit its ability to attract capital;
- make the formations it is targeting significantly less economically
attractive;
- reduce its cash flow and borrowing capacity; and
- reduce the value and the amount of any future reserves.
Various factors beyond the Company's control will affect prices of oil and gas,
including:
- worldwide and domestic supplies of oil and gas;
- the ability of the members of the Organization of Petroleum Exporting
Countries to agree to and maintain oil price and production controls;
- political instability or armed conflict in oil or gas producing
regions;
- the price and level of foreign imports;
- worldwide economic conditions;
- marketability of production;
- the level of consumer demand;
- the price, availability and acceptance of alternative fuels;
- the availability of processing and pipeline capacity, weather
conditions; and
- actions of federal, state, local and foreign authorities.
These external factors and the volatile nature of the energy markets make it
difficult to estimate future prices of oil and gas. In addition, sales of oil
and gas are seasonal in nature, leading to substantial differences in cash flow
at various times throughout the year.
24
RISK FACTORS
SPECULATIVE NATURE OF INVESTMENT.
Due to the speculative nature of the Company's business, it is likely that the
investment in the Stock may result in a total loss to the investor. Investors
should be able to financially bear the loss of their entire investment.
Investment should, therefore, be limited to that portion of discretionary funds
not needed for normal living purposes or for reserves for disability and
retirement.
BURDEN TO INVESTORS.
The financial risk of the Company's proposed activities will be borne primarily
by investors, who over time will have contributed a significantly greater
portion of the Company's capital.
REPORTING INFORMATION.
The Company is subject to the reporting requirements under the Securities and
Exchange Act of 1934. As a result, shareholders will have ready access to the
information required to be reported by publicly held companies under the
Securities and Exchange Act and the regulations thereunder. The Company intends
to provide its shareholders with annual reports containing financial information
prepared in accordance with generally accepted accounting principles audited by
independent certified public accountants and may register under the Securities
and Exchange Act in the future.
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
CAUTIONARY AND FORWARD LOOKING STATEMENTS
In addition to statements of historical fact, this Form 8K12g3 contains
forward-looking statements. The presentation of future aspects of USA Superior
Energy, Inc., ("the Company") found in these statements is subject to a number
of risks and uncertainties that could cause actual results to differ materially
from those reflected in such statements. Readers are cautioned not to place
undue reliance on these forward-looking statements, which reflect management's
analysis only as of the date hereof. Without limiting the generality of the
foregoing, words such as "may," "will," "expect," "believe," "anticipate,"
"intend," or "could" or the negative variations thereof or comparable
terminology are intended to identify forward-looking statements.
These forward-looking statements are subject to numerous assumptions, risks and
uncertainties that may cause the Company actual results to be materially
different from any future results expressed or implied by the Company in those
statements. Important facts that could prevent the Company from achieving any
stated goals include, but are not limited to, the following:
25
(a) volatility or decline of the Company's stock price;
(b) potential fluctuation in quarterly results;
(c) failure of the Company to earn revenues or profits;
(d) inadequate capital to continue energy exploration, development or
reworking, inability to raise additional capital or financing to
implement its business plans;
(e) failure to achieve production from leases;
(f) rapid and significant changes in markets;
(g) litigation with or legal claims and allegations by outside parties;
(h) insufficient revenues to cover operating costs.
There is no assurance that the Company will be profitable, the Company may not
be able to successfully develop, manage or market its products and services, the
Company may not be able to attract or retain qualified executives and personnel,
the Company's products and services may become obsolete, government regulation
may hinder the Company's business, additional dilution in outstanding stock
ownership may be incurred due to the issuance of more shares, warrants and stock
options, or the exercise of warrants and stock options, and other risks inherent
in the Company's businesses.
The Company undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the date hereof.
PLAN OF OPERATIONS
No operations were conducted prior to 2006 and no revenues were generated in the
fiscal year 2006. The Company had no income in the year ended December 31, 2005.
The Company has minimal capital, minimal cash, and only its intangible assets
consisting of lease assignments, work in progress for field stimulation and
proprietary work product. The Company is illiquid and needs cash infusions from
investors or shareholders to provide capital, or loans from any sources.
The Company plan of operations is as follows:
MILESTONES
1st Quarter 2007 - Operations for Evaluation and Development of Stimulation
Program of Company prospects.
2nd Quarter 2007 - Continuation of Stimulation Operations.
3rd Quarter 2007 - Continuation of Stimulation Operations.
26
The Company Budget for operations in next year is as follows:
--------------------------------------
Zavalla prospect $ 250,000
--------------------------------------
Corsicano business $ 250,000
Navarro prospect $ 250,000
Working Capital $ 250,000
--------------------------------------
TOTAL $1,000,000
The Company reserves the right to change any or all of the budget categories in
the execution of its business attempts without purchaser approval. None of the
line items is to be considered fixed or unchangeable in the budget.
The Company will need substantial additional capital to support its budget. The
Company has NO revenues. The Company has NO committed source for any funds as of
date here. No representation is made that any funds will be available when
needed. In the event funds cannot be raised when needed, the Company may not be
able to carry out its business plan, may never achieve production or royalty
income, and could fail in business as a result of these uncertainties.
Decisions regarding future participation in exploration wells or geophysical
studies or other activities will be made on a case-by-case basis. The Company
may, in any particular case, decide to participate or decline participation. If
participating, the Company will pay its proportionate share of costs to maintain
its proportionate interest through Company cash flow or debt or equity
financing. If participation is declined, the Company may elect to farm out,
non-consent, sell or otherwise negotiate a method of cost sharing in order to
maintain some continuing interest in the prospect.
LIMITED FINANCING.
Assuming that $1,000,000 is achieved in a private placement being now commenced,
the monies may not be sufficient for the continued operations of the Company.
There is no assurance that additional monies or financing will be available in
the future or, if available, will be at terms favorable to the Company. In the
event that at least the $1,000,000 is received, the Company will be able to act
on their business plan by stimulation efforts on the Company's oil field leases.
(See "Company Business Summary")
The Company may borrow money to finance its future operations, although it does
not currently contemplate doing so. Any such borrowing will increase the risk of
loss to the investor in the event the Company is unsuccessful in repaying such
loans.
The Company may issue additional shares to finance its future operations,
although it does not currently contemplate doing so. Any such issuance will
reduce the control of previous investors (see "Risk Factor - Control") and may
result in substantial additional dilution to existing investors.
The Company may attempt to conserve its available funds by acquiring properties
through options or long-term purchase contracts. If the Company is financially
unable to exercise options or make contract payments when due, the Company could
be forced to forfeit all of its interest in such properties.
27
CAPITAL RESOURCES
The only capital resources of the Company are its common stock.
As of the date of this filing, the Company has no material commitments for
capital expenditures within the next year, however substantial capital will be
needed to pay for evaluation, acquisition, workover and stimulation of its
prospects and working capital.
CASH FLOWS:
The Company has achieved no cash flows to date.
CHANGES IN FINANCIAL CONDITION
The predecessor, Comlink Communications, Inc. and USA Superior Energy, Inc. have
entered into and completed an Agreement and Plan of Merger, which has
effectively accomplished a recapitalization. The total assets of $373,694 of USA
Superior Energy, Inc. are now consolidated into the parent company Comlink. Of
these assets $367,117 constitutes capitalized costs of acquired oil field
properties. (See "Consolidated Pro Forma Financial Statements" attached hereto
as Exhibit "B"). Also, the Company has forward split its shares on a 2 for 1
basis, and concurrently with the closing hereof has retired a total of
45,000,000 shares of common stock. As part of the closing of the acquisition of
USA Superior Energy, Inc., under the Agreement and Plan of Merger, the Company
has issued 34,000,000 shares of common stock for the acquisition of 100% of USA
Superior Energy, Inc.
The acquired company, USA Superior Energy, Inc. was founded October 27, 2005 and
operates as a holding company and owns 80% of Superior Energy, LLC, a Delaware
Limited Liability Company through which it operates its mineral prospect
activities. The remaining 20% of the Superior Energy, LLC subsidiary is owned by
a non-affiliate, Generon, which supplies certain technology and equipment for
the outfield workover efforts for which Generon receives a 20% ownership in the
profits and losses of the LLC, Superior Energy, LLC. For all purposes involving
financial statements, Superior Energy, LLC is consolidated and treated as a
wholly owned subsidiary without deduction for the minority interest.
The discussion of the Results of Operations treats the acquisition transaction
of USA Superior Energy, Inc. as a recapitalization and using "Reverse Takeover
Accounting." The prior operating results and balance sheets of Comlink have been
eliminated (See "Consolidated Pro Forma Financial Statements" attached hereto as
Exhibit "B".
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006
USA Superior Energy, Inc. nor its subsidiary had any operations prior to 2006.
For the nine months ended September 30, 2006, USA Superior had no revenues,
however it has expended $312,133 in general and administrative expenses and
miscellaneous which included salaries, consulting fees, rent, travel,
investigative costs, legal and accounting.
28
The Company had a net loss for the nine month period of ($312,133). The Company
expects the losses to continue at an increased rate for the next several
quarters, as the two oil fields held are worked over and as the Company attempts
to commence production therefrom.
The Company has expended $367,711 in development costs of its oil and gas
properties, which it has capitalized since it is preporatory for production,
however these capitalized costs are not included in computing its operations
expenses. Should the properties for which these costs are capitalized prove non
productive or uneconomical, the Company would have to write off all or part of
such capitalized costs, thereby increasing the losses in the periods in which
written off.
LIQUIDITY
The Company had no liquid assets at September 30, 2006, nor at December 31, 2006
except for cash of $1,625 and accounts receivable of $2,898 as of September 30,
2006. The Company had capitalized costs of investment in its oil field
properties of $367,117, however absent consistent future oil production
achievement, such capitalized investment is highly illiquid, and would be deemed
unrecoverable if no economic production is achieved.
The Company's sole source of liquidity at this time is its capital stock, or
through loans, if such are available. There is a private placement offering
being commenced for $1,000,000 of common stock, at $.40 per Unit for 2,500,000
Units consisting of one Share and one Warrant. There are no committed sources of
capital at this time.
SHORT TERM.
On a short-term basis, the Company does not generate revenue sufficient to cover
operations. Based on prior experience, the Company believes it will continue to
have insufficient revenue to satisfy current and recurring liabilities as it
seeks explore. For short term needs the Company will be dependent on receipt, if
any, of private placement proceeds.
LONG TERM.
The Company has no cash commitments to fund its long-term prospects and has no
plan in place to resolve this issue. Failure to obtain long-term capital could
result in failure of the Company.
NEED FOR ADDITIONAL FINANCING
In order to carry out its business plan, or to be competitive in the energy
extraction business, the Company will need to raise substantial additional
capital through private or public offerings, in addition to the $1,000,000 in a
private placement offering now being commenced. There is no committed source for
any such future financing and there is no assurance any such financing will be
available, if and when needed or desired.
29
DESCRIPTION OF PROPERTIES/ASSETS/OIL AND GAS PROSPECTS
(a) Real Estate. None.
(b) Title to properties. None.
(c) Oil and Gas Prospects. See discussion of Prospects in
Zavalla and Navarro counties
contained at page 5 hereof.
(d) Patents. None.
PRINCIPAL SHAREHOLDERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AS OF DECEMBER
31, 2006. (POST-TRANSACTION)
There are currently 52,360,000 common Shares outstanding (Post-Transaction).
The following sets forth information with respect to the Company's Common Stock
beneficially owned by each Officer and Director, and by all Directors and
Officers as a group as of December 31, 2006, and by the holders of 5% or more of
the Company's common stock:
Title of Class Name and Address Amount and Nature Percent of
Of Beneficial Owner* of Beneficial Ownership Class
- -------------- --------------------- ----------------------- ----------
Common Stock G. Rowland Carey 30,980,000 59%
President & Director
Common Stock Jerry D. Witte 1,190,000 2.2%
Secretary & Director
Common Stock Paul T. Eads 1,190,000 2.2%
Director
All Directors and Executive 33,360,000 63.40%
Officers as a Group (3 persons)
- -----------------------------
* The beneficial owner's address is the same as the Company's principal office.
30
DIRECTORS AND EXECUTIVE OFFICERS
OFFICERS AND DIRECTORS
OFFICERS
NAME AGE POSITION
- ----------------------- --- -----------------------------
G. Rowland Carey 65 President
Jerry D. Witte 54 Secretary
- ----------------
G. ROWLAND CAREY, is the President and a Director of the Company. Mr. Carey is
graduated from Univ. of North Carolina. Prior to becoming President of the
Company he was the Managing Member of USA Superior, LLC. From May 1990 to
present he has been the President and CEO of Coast Capital, LLC. Coast provided
equipment financing to oil and gas companies. From June 1983 to August 1985 he
was the Co-founder and President of Gardner-Carey, Inc. specializing in the
development of rural land into subdivisions.
JERRY D. WITTE, is the Secretary and a Director of the Company. Mr. Witte is
graduated from University of Southern Florida. Prior to becoming Secretary of
the Company, Mr. Witte was President and technical scientist of TriLucent
Technologies, a public company that utilized remote sensing and radar based
hydrocarbon identification for resource development. From 1985 to 1998 Mr. Witte
was a senior project manager for SONAT Exploration where he was involved in
numerous projects. From 1979 to present Mr. Witte has consulted in areas
including but not limited to geophysics, geochemistry, petrophysics and the
development of enhancement technologies in the oil and gas industry.
The following individuals comprise the management and consultant team as of
December 31, 2006. Additional staff and consultants will be added as the Company
grows.
BOARD OF DIRECTORS
NAME AGE POSITION
- ---------------------------- --- --------
G. Rowland Carey (1) 65 Director
Jerry D. Witte (1) 54 Director
Paul T. Eads 67 Director
- ----------------------------
(1) See biographical information listed above.
PAUL T. EADS, is a Director of the Company. Mr. Eads is graduated from the Univ.
of Houston in 1962 with a Bachelor of Science degree. Prior to joining the
Company from 1994 to 1999 Mr. Eads was President of XL Lift Systems, Inc. which
specialized in providing gas lift consulting services to major oil and gas
companies throughout the world. From 1993 to present Mr. Eads was an independent
consultant providing gas lift equipment and services to companies including,
Exxon, Amoco and Camlow S.A.I.C. (Argentina). Mr. Eads has chaired sessions for
the Society of Petroleum Engineers as has written and presented numerous papers
and computer programs on gas lift designs and technology.
31
KEY EMPLOYEES / CONSULTANTS FOR THE COMPANY
NAME AGE POSITION
- -------------------- --- ----------------------------------------
Ben Terral 74 Consultant - Field Operations Specialist
Randy Holifield 58 Employee - Navarro County Operations
Bob Robinson 79 Consultant - South Texas Geology
BEN TERRAL- Field Operations Specialist-
Over 50 years oil field equipment, Mr. Terral holds a total of twenty seven
patents pertaining to downhole tools, mandrels and wireline tools. Expertise in
solving operational problems as well as engineering equipment to solve problems.
Mr. Terral has worked for the companies including CAMCO Inc. (Dept Chief),
Wireline Equipment Manufacturing Co. (VP Engineering), MACCO/Schlumberger
(Product Mgr), McMurry/Brown/Hughes (Snr. V.P. Engineering).
RANDY HOLIFIELD- East Texas (Navarro) Field Operations
Over 29 years oil field operations in Texas and Gulf Coast States, Oklahoma,
Kentucky and Tennessee for NORAM (Texas Operation Mgr) PAMCO, Crystal Services,
and SHWJ Oil. Experience includes operations and completions for several
thousand wells, several hundred well drilled, water flood and heavy oil
production.
BOB ROBINSON- South Texas Geology-over 40 years of oil field experience,
specializing in airborne magnatics geophysical recon and serpentine.
COMPENSATION
EXECUTIVE AND DIRECTORS COMPENSATION
SUMMARY OF SCHEDULED EXECUTIVE COMPENSATION
ANNUAL COMPENSATION
- ------------------------------------- --------- ------------ ------------ ------------------- ------------- --------------
Name & Principal Position Fiscal Salary ($) Bonus ($) Other Annual Restricted Securities
Year Compensation ($) Stock Underlying
2006 Award(s) ($) Options/
SARS (#)
- ------------------------------------- --------- ------------ ------------ ------------------- ------------- --------------
G. Rowland Carey, President $100,000 $0 $0 $0 0
- ------------------------------------- --------- ------------ ------------ ------------------- ------------- --------------
Jerry D. Witte, Secretary $60,000 $0 $0 $0 0
- ------------------------------------- --------- ------------ ------------ ------------------- ------------- --------------
Paul T. Eads, Director $60,000 $0 $0 $0 0
- ------------------------------------- --------- ------------ ------------ ------------------- ------------- --------------
EMPLOYEES STOCK COMPENSATION PLAN:
The Company has a stock compensation plan for employees which provide schedules
of earnout and vesting based upon longevity of service.
32
(a) The following table furnishes the information concerning the
directors of the Company as of December 31, 2006. The directors of the Company
are elected every year and serve until their successors are elected and qualify.
DIRECTORS
NAME AGE TITLE
- ----------------------- --- ------------------
G. Rowland Carey 65 Director
Jerry D. Witte 54 Director
Paul T. Eads 67 Director
- -----------------------
The term of office for each director is one (1) year, or until his/her successor
is elected at the Company's annual meeting and qualified. The term of office for
each officer of the Company is at the pleasure of the board of directors.
The board of directors has no nominating, auditing committee or a compensation
committee. Therefore, the selection of person or election to the board of
directors was neither independently made nor negotiated at arm's length.
(b) Compensation of Certain Significant Employees/Consultants.
There are several employees other than the executive officers and consultants
disclosed above who make, or are expected to make, significant contributions to
the business of the Company.
- ------------------------------------- --------- ------------ ------------ ------------------- ------------- --------------
Name Fiscal Salary ($) Bonus ($) Other Annual Restricted Securities
Year Compensation ($) Stock Underlying
2006 Award(s) ($) Options/
SARS (#)
- ------------------------------------- --------- ------------ ------------ ------------------- ------------- --------------
Randy Holifield $48,000 $0 $0 $0 0
- ------------------------------------- --------- ------------ ------------ ------------------- ------------- --------------
Rob Robinson $36,000 $0 $0 $0 0
- ------------------------------------- --------- ------------ ------------ ------------------- ------------- --------------
Ben Terral $12,000 $0 $0 $0 0
- ------------------------------------- --------- ------------ ------------ ------------------- ------------- --------------
(c) Family Relationships. None.
CONFLICTS OF INTEREST
All of the Company's Officers and Directors have been in the past and may
continue to be active in the natural resource business with other companies and
on their own behalf. All Officers and Directors have retained the right to
conduct their own independent business interests. These activities could give
rise to potential conflicts with the interests of the Company. Pursuant to a
resolution of the Board of Directors of the Company, the Officers have agreed
that if a business opportunity in the natural resources industry comes to the
33
attention of its Officers, such opportunity will be made available to the
Company and the Company shall have a right of first refusal with regard to such
opportunity. Another resolution of the Board of Directors sets forth that if a
business opportunity comes to the attention of a Director and such opportunity
is located within an area of interest and defined by resolution of the Board of
Directors or if an opportunity is presented to a Director in his capacity as
such, it must be disclosed to the Company and made available to it. As of the
date of this Memorandum, the only areas of interest defined by the Company's
Board of Directors relate to the immediate vicinity surrounding the Company's
existing prospects. Any future designated areas of interest will be determined
by the Company's Board of Directors after appropriate discussion and
deliberation. If an Officer or Director owes a fiduciary duty to another entity
similar to the duty owed to the Company, it is possible that the conflict may be
impossible to resolve in a manner that is equitable to both entities.
A majority of disinterested Directors may reject a corporate opportunity for
various reasons, including geologic, geographic and economic considerations,
among others. If the Company rejects such opportunity, of it is rejects an area
of interest and later an opportunity is presented to a Director or Officer
within such area of interests, then any Director or Officer may avail himself or
themselves of such opportunity. In addition, if a prospect or other opportunity
is presented to the Company, and one or more of the Company's Officers or
Directors has an outside interest in the opportunity, the opportunity will be
reviewed at a meeting of the Board of Directors and the interested Director(s)
will not vote on issues relating to such opportunity.
To the best ability and in the best judgment of the Officers and Directors of
the Company, any conflicts of interests between the Company and the personal
interests of the Officers and Directors of the Company will be resolved in a
fair manner which will protect the interests of the Company.
The Company has no current plans to acquire any interest in any oil and gas
properties in which any of the Company's officers or directors have any direct
or indirect interest by security holdings, contracts, options or otherwise.
However, such acquisitions may occur in the future if the directors of the
Company determine that any such acquisition is in the best interest of the
Company. Further, the Company may, and it reserves the right to, enter into or
form joint ventures, partnerships, or other types of associations customary in
the oil and gas industry with one or more of its directors or their affiliates,
for the acquisition, exploration or development of a specific oil and gas
interest if the Board of Directors of the Company deems such arrangement to be
proper and in the best interests of the Company. If such arrangements are
entered into, they could constitute a benefit to the interested director or
affiliate and such benefits could be substantial. The Company has no current
plans to engage in drilling activities on properties near properties in which
any of the Company's officers or directors have any direct or indirect interest.
However, such drilling may occur in the future and the Company does not have a
policy which would prohibit such activity.
34
SECTION 3 - SECURITIES AND TRADING MARKETS
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES
The Company issued a total of 34,000,000 restricted common shares to the
shareholders of USA Superior Energy, Inc. in exchange for 100% of the issued and
outstanding shares of USA Superior Energy, Inc. pursuant to the exemptions from
registration under Sections 4(2) and 4(6) of the Securities Act of 1933,
pursuant to the Agreement and Plan of Merger with Comlink Communications
Company.
In connection with the acquisition, Comlink will enter into a consulting
agreement with The Regency Group, LLC. for the provision of services relating to
investor relations, public relations agreement and public company website
maintenance, pursuant to which The Regency Group shall be compensated by the
issuance of 500,000 fully paid and non-assessable common shares of Comlink under
Rule 144, WHICH SHARES WILL BE SUBJECT TO RESTRICTIONS FROM TRADING, SALE OR
TRANSFER UNLESS REGISTERED OR PURSUANT TO RULE 144.
SECTION 4 - MATTERS RELATED TO ACCOUNTANTS AND FINANCIAL STATEMENTS.
Not Applicable.
SECTION 5 - CORPORATE GOVERNANCE AND MANAGEMENT
ITEM 5.01 CHANGES IN CONTROL OF REGISTRANT
Comlink experienced a change of control in its acquisition of USA Superior
Energy, Inc. USA Superior's principal shareholders received 34,000,000 common
shares constituting 64.9% of the total outstanding shares of Comlink immediately
after the share exchange transaction with the shareholders of USA Superior
Energy, Inc. and Messrs. Ball and Brailey returned a total of 45,000,000 shares
to Company for retirement to treasury.
ITEM 5.02 DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS
As a result of the merger, Daniel Brailey resigned as President, Chief Financial
Officer, Chief Executive Officer and Director of the Company. The Company
appointed Rowland Carey as President and Director effective immediately. James
Bell resigned as Secretary of the Company as a result of the merger. Jerry Witte
was immediately appointed Secretary and a Director.
35
SECTION 6 - ASSET BACKED SECURITIES
Not Applicable.
SECTION 7 - REGULATION FD
Not Applicable.
SECTION 8 - OTHER EVENTS
ITEM 8.01 OTHER EVENTS
Comlink Communications Company has adopted a new Business Plan in the oil and
gas sector, through its acquisition of USA Superior Energy, Inc. (See Item 2.01
and Item 2.03)
SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
a) Financial Statements of business acquired -
Audited Financial Statements of USA Superior Energy, Inc. as of
September 30, 2006.
b) Pro Forma Information -
Consolidated Pro Forma Balance Sheet
(Post Transaction with USA Superior Energy, Inc.)
c) Shell Company transactions - None
d) Exhibits-
3.1 - Articles of Incorporation of USA Superior Energy, Inc.
3.2 - Bylaws of USA Superior Energy, Inc.
3.3 - Certificate of Formation - Superior Energy, LLC
10.1 - Agreement and Plan of Merger
10.2 - Operating Agreement of Superior Energy, LLC
99.1 - Graph - Page 7
99.2 - Graph - Page 8
99.3 - Graph - Page 9
36
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COMLINK COMMUNICATIONS COMPANY
---------------------------
(Registrant)
Dated: January 17, 2007
/s/G. Rowland Carey
______________________________
G. Rowland Carey, President
37
EXHIBIT "A"
AUDITED FINANCIAL STATEMENTS OF USA SUPERIOR ENERGY, INC.
JASPERS + HALL, PC
CERTIFIED PUBLIC ACCOUNTANTS
9175 Kenyon Avenue, Suite 100
Denver, CO 80237 303-796-0099
Report of Independent Registered Public Accounting Firm
To the Board of Directors
Superior Energy, Inc.
We have audited the accompanying consolidated balance sheets of Superior Energy,
Inc. as of September 30, 2006 and October 27, 2005, and the related consolidated
statements of operations, stockholder's equity, and cash flows for the period
from October 27, 2005 to September 30, 2006. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Superior Energy, Inc. as of
September 30, 2006 and October 27, 2005, and the results of its operations, and
changes in stockholder's equity and cash flows for the period from October 27,
2005 to September 30, 2006, in conformity with accounting principles generally
accepted in the United States.
Jaspers + Hall, PC
Denver, Colorado
December 15, 2006
USA SUPERIOR ENERGY, INC.
CONSOLIDATED BALANCE SHEET
September 30, October 27,
2006 2005
------------------ --------------
ASSETS
Current Assets
Cash $ 1,625 $ -
Accounts receivable 2,898 -
------------------ ---------------
Total Current Assets 4,523 -
Unproved oil and gas properties - uncompleted wells
development costs 367,117 -
-
Fixed assets - net 1,304 -
Other asset - deposit 750 -
------------------
TOTAL ASSETS $ 373,694 $ -
================== ==============
LIABILITIES & STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable $ 93,122 $ -
Long Term Liabilities 19,589 -
Minority Interest 6 -
Stockholder's Equity
Common Stock 100,000 authorized, $0.10 par value 10,000 100
Subscriptions receivable (100) (100)
Paid-in Capital 563,210 -
Accumulated Deficit (312,133)
------------------ --------------
Total Stockholder's Equity 260,977 -
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 373,694 $ -
================== ==============
The accompanying notes are an integral part of these financial statements
USA SUPERIOR ENERGY, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
October 27,
2005
to
September 30,
2006
------------------
REVENUES
Oil & Gas revenues $ -
EXPENSES
Exploration expenses -
Depreciation 745
Accretion expense 558
General & administrative expenses 310,830
------------------
Total Expenses 312,133
------------------
NET (LOSS) - BEFORE MINORITY INTEREST $ (312,133)
==================
Minority Interest in net (loss) of consolidation subsidiary -
NET (LOSS) $ (312,133)
==================
The accompanying notes are an integral part of these financial statements
USA SUPERIOR ENERGY, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
Deficit
Common Stock Accumulated
---------------------------- Additional During
Number of Paid-in Development
Shares Amount Capital Stage Total
----------------------------------------------------------------------
Balance, October 27, 2005 1,000 $ 100 $ - $ - $ -
Acquisition of Superior Energy LLC 99,000 9,900 563,210 573,110
Net loss for period - - - (312,133) (312,133)
----------------------------------------------------------------------
Balance, September 30, 2006 100,000 $ 10,000 $563,210 $ (312,133) $ 260,977
======================================================================
The accompanying notes are an integral part of these financial statements
USA SUPERIOR ENERGY, INC.
CONSOLIDATED STATEMENT CASH FLOWS
FROM OCTOBER 27, 2005 TO SEPTEMBER 30, 2006
CASH FLOWS USED IN OPERATING ACTIVITIES
Net loss for the period $ (312,133)
Adjustment to reconcile net loss to net cash from operating
activities
Depreciation 745
Accretion expense 558
Changes in assets and liabilities
Accounts receivable (2,898)
Accounts payable 93,122
-----------------
Net cash used in operating activities $ (220,606)
-----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in fixed assets (2,607)
Increase in other assets (750)
Increase in oil and gas properties (367,117)
Increase in minority interest 6
-----------------
Net cash used in investing activities $ (370,468)
-----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions 573,110
Increase in Long Term Liabilities 19,589
-----------------
Net cash provided by financing activities $ 592,699
-----------------
Net increase in cash $ 1,625
Cash, Beginning of Period -
-----------------
Cash, End of Period $ 1,625
=================
Supplemental Information
Interest paid $ 335
=================
Income taxes paid $ -
=================
The accompanying notes are an integral part of these financial statements
USA SUPERIOR ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
NOTE 1 - BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
USA Superior Energy, Inc. (the "Company"), a Delaware corporation, was formed on
October 27, 2005. The Company was originally authorized to issue 1,000 shares of
stock at a stated par value of $0.10 per share. In December of 2005 the share
authorization was increased to 100,000.
The current business of the Company is to develop, own and operate prospects and
energy projects in East and Southwest Texas.
Principles of Consolidation. The financial statements include the accounts of
its 100% owned subsidiary Superior Energy, LLC. and its 80% interest in the
subsidiary Skyrider Energy, LLC.
USE OF ESTIMATES. Management uses estimates and assumptions in preparing the
financial statements in accordance with U.S. generally accepted accounting
principles. Those estimates and assumptions affect the reported amounts of
assets, liabilities, revenues and expenses in the financial statements, and the
disclosure of contingent assets and liabilities. Actual results could differ
materially from these estimates.
REVENUE RECOGNITION. For the twelve months ended September 30, 2006, the Company
had not recorded any oil and gas revenues. When the Company begins to record oil
and gas revenues fro the sale of natural gas and oil produced are recognized
upon the passage of title, net of royalties. Revenues from natural gas
production are recorded using the sales method.
CASH AND CASH EQUIVALENTS. The Company considers cash on hand, cash on deposit
in banks, money market funds and highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. At September 30, 2006
the Company had $1,625 in cash and cash equivalents on a consolidated basis.
USA SUPERIOR ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
SUCCESSFUL EFFORTS METHOD OF ACCOUNTING. The Company follows the "successful
efforts" method of accounting of its costs of acquisition, exploration and
development of oil and gas properties. Under this method, oil and gas lease
acquisition costs and intangible drilling costs associated with exploration
efforts that result in the discovery of proved reserves and costs associated
with development drilling, whether or not successful, are capitalized when
incurred. Certain costs of exploratory wells are capitalized pending
determinations that proved reserves have been found. If the determination is
dependent upon the results of planned additional wells and required capital
expenditures to produce the reserves found, the drilling costs will be
capitalized as long as sufficient reserves have been found to justify completion
of the exploratory well and additional wells are underway for firmly planned to
complete the evaluation of the well. All costs related to unsuccessful
exploratory wells are expensed when such wells are determined to be
nonproductive or at the one year anniversary of completion of the well if proved
reserves have not been attributed and capital expenditures as described in the
preceding sentence are not required. We assess our capitalized exploratory wells
pending evaluation each quarter to determine whether costs should remain
capitalized or should be charged to earnings. Other exploration costs, including
geological and geophysical, are expensed as incurred. Seismic costs incurred to
select development locations within a productive oil and gas field are typically
treated as development costs and capitalized. Judgment is required to determine
when the seismic programs are not within proved reserve areas and therefore
would be charged to expense as exploratory. We recognize gains or losses on the
sale of properties, should they occur, on a field by field basis.
As of September 30, 2006, property and equipment consists primarily of oil and
gas properties of which the balance represents leasehold and drilling costs. The
Company also has office equipment which is stated at cost and is depreciated on
a straight-line basis over the estimated 3 year useful life of the assets.
Maintenance and repairs are expensed as incurred. Replacements, upgrades or
expenditures which improve and extend life of the assets are capitalized. When
assets are sold, retire or otherwise disposed, the applicable costs and
accumulated depreciation and amortization are removed from the appropriate
accounts and the resulting gain or loss is recorded.
ENVIRONMENTAL. The Company is subject to environmental laws and regulations of
various U.S. jurisdictions. These laws, which are constantly changing, regulate
the discharge of materials into the environment and may require the Company to
remove or mitigate the environmental effects of the disposal or release of
petroleum or chemical substances at various sites.
USA SUPERIOR ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
Environmental costs that relate to current operations are expensed or
capitalized as appropriate. Costs are expensed when they relate to an existing
condition caused by past operations and will not contribute to current or future
revenue generation. Liabilities related to environmental assessments and/or
remedial efforts are accrued when property or services are provided or can be
reasonably estimated.
ASSET RETIREMENT OBLIGATION. The Company adopted Statement of Financial
Accounting Standards No. 143 ("SFAS 143"), "Accounting for Asset Retirement
Obligations", as of January 1, 2005. SFAS 143 requires the Company to record the
fair value of a liability for an asset retirement obligation ("ARO") in the
period in which it is incurred. When the liability is initially recorded, a
company increases the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its present value each period, and the
capitalized cost is depreciated over the useful life of the related asset. Upon
settlement of the liability, an entity either settles the obligation for its
recorded amount or incurs a gain or loss upon settlement. Activities related to
the Company's ARO for the twelve months ended September 30, 2006 are as follows:
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 2006
Initial ARO as of October 27, 2005 0
Liabilities incurred during period 19,031
Accretion expense 558
------
Balance of ARO as of September 30, 2006 19,589
NOTE 2 - PREPAID AND OTHER CURRENT ASSETS.
As of September 30, 2006 there were no prepaid assets or other current assets.
NOTE 3 - INVESTMENTS.
On December 5, 2005 the Company issued 99,000 shares of common stock in exchange
for 100% of the equity interests of Superior Energy, LLC, a private entity
specializing in oil and gas exploration and development.
USA SUPERIOR ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
Superior Energy, LLC entered into an agreement dated August 11, 2005 resulting
in an eighty percent ownership interest in Skyrider Energy, LLC (Skyrider). The
Superior Energy, LLC serves as Manager of Skyrider until such time as it resigns
or is removed by the unanimous consent of the Members of Skyrider. The Superior
Energy, LLC's cost to drill or work over wells through casing, set up cost of
the corporation, engineering expense, etc for the Benton/Guidry and Craig leases
located in Navarro County, Texas are considered capital contributions to
Skyrider. As a result, the Superior Energy, LLC's recording of the investment in
Skyrider is eliminated in the consolidation of the financial statements and
reported as part of the oil and gas properties amount described above. As of
September 30, 2006 the amount of unproved oil and gas properties included in the
consolidated balance sheets was $367,117.
NOTE 4 - AFFILIATE AND RELATED PARTY TRANSACTIONS.
The Company has recorded accounts receivables in the amount of $2,898 due from
related parties as of September 30, 2006. Of this amount $204 represents office
supplies and $2,693 represents principal and interest payments for a vehicle
financed by the related party.
NOTE 5 - INCOME TAXES.
Since the Company is organized as a Subchapter S corporation, it pays no income
taxes as any income or losses are attributed to the stockholders of the
corporation.
NOTE 6 - COMMITMENTS AND CONTINGENCIES.
The Company leases office space in Houston, Texas under a twelve-month renewable
operating lease which includes the use of office space, office equipment and
office furniture. The Company also leases office space in San Antonio, Texas for
one of the Company's officers. This lease is renewable on a month to month or
six month basis. Presented below are our contractural commitments for the
periods indicated:
Year Amount
Office Lease 2006 23,746
------
Total 23,746
USA SUPERIOR ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2006
NOTE 7 - RESULTS OF OPERATIONS.
As of September 30, 2006, the majority of oil and gas property was in the
work-in progress stage. As a result, no depletion has been recorded as of
September 30, 2006.
NOTE 8 - SUBSEQUENT EVENT
An Agreement and Plan of Merger was finalized on January 16, 2007, with
shareholders of USA Superior Energy, Inc. ("USA Superior"), USAS Acquisitions,
Inc. ("USAS") and Comlink Communications Company. Under the terms of the
Agreement shareholders of USA Superior Energy, Inc. agreed to receive a total of
34,000,000 shares of common stock of the Company in exchange for common shares
of USA Superior Energy, Inc., constituting 100% of the issued and outstanding
common stock of USA Superior Energy, Inc.
EXHIBIT "B"
CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(POST TRANSACTION WITH USA SUPERIOR ENERGY, INC.)
COMLINK COMMUNICATIONS/USA SUPERIOR ENERGY, INC.
CONSOLIDATED PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 2006
ASSETS
Current Assets
Cash $ 2,563
Accounts receivable 2,898
--------------
Total Current Assets 5,461
Unproved oil and gas properties - uncompleted wells
development costs 367,117
Fixed assets - net 1,304
Other asset - deposit 750
--------------
Total Assets $ 374,632
==============
LIABILITIES & STOCKHOLDER'S EQUITY
Current Liabilities
Accounts payable $ 93,122
Shareholder's loan 22,700
--------------
Total Current Liabilities 115,822
Long Term Liabilities 19,589
Minority Interest 6
Stockholder's Equity
Common Stock 75,000,000 authorized, $0.0001 par value 43,180
Subscriptions receivable (100)
Paid-in Capital 236,877
Accumulated Deficit (40,742)
--------------
Total Stockholder's Equity 239,215
Total Liabilities and Stockholder's Equity $ 374,632
==============
COMLINK COMMUNICATIONS/USA SUPERIOR ENERGY, INC.
CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
AS OF SEPTEMBER 30, 2006
REVENUES
Oil & Gas revenues $ -
EXPENSES
Exploration expenses -
Depreciation 745
Accretion expense 558
General & administrative expenses 332,026
--------------
Total Expenses 333,329
--------------
NET (LOSS) $ (333,329)
==============
COMLINK COMMUNICATIONS/USA SUPERIOR ENERGY, INC.
CONSOLIDATED PRO FORMA STATEMENT CASH FLOWS
FOR THE 9 MONTHS ENDED SEPTEMBER 30, 2006
CASH FLOWS USED IN OPERATING ACTIVITIES
Net loss for the period $ (333,329)
Adjustment to reconcile net loss to net cash from operating
activities
Depreciation 745
Accretion expense 558
Changes in assets and liabilities
Prepaid expenses and other 45,255
Accounts payable (22,541)
-----------------
Net cash used in operating activities $ (309,312)
-----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to oil and gas properties (101,434)
-----------------
Net cash used in investing activities $ (101,434)
-----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions 422,705
Shareholders loan 22,200
Repayment of short term notes payable (32,832)
-----------------
Net cash provided by financing activities $ 412,073
-----------------
Net increase in cash $ 1,327
Cash, Beginning of Period 1,236
-----------------
Cash, End of Period $ 2,563
=================
Supplemental Information
Interest paid $ 335
=================
Income taxes paid $ -
=================
COMLINK COMMUNICATIONS COMPANY
(A Development Stage Enterprise)
PROFORMA STATEMENT OF STOCKHOLDERS' EQUITY
Deficit
Common Stock Accumulated
---------------------------- Additional During
Number of Paid-in Development
Shares Amount Capital Stage Total
- -------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 2006 31,680,000 $ 31,680 $ (12,700) $ (40,742) $ (21,762)
Proposed retirement of stock (22,500,000) (22,500) 22,500 -
Proposed acquisition 34,000,000 34,000 227,077 261,077
----------------------------------------------------------------------
Proforma balance after acquisition 43,180,000 $ 43,180 $236,877 $ (40,742) $239,315
======================================================================
Forward split 2 : 1 at time of acquisition 86,360,000 $ 86,360 $193,597 $ (40,742) $239,215
======================================================================
Note: Concurrent with the acquisition the Company will authorize an increase in
the authorized number of shares to 150,000,000 or other number acceptable to the
stockholders.