UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2008
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _____________
Commission file number: 000-53451
BEDROCK ENERGY, INC.
--------------------
(Exact name of registrant as specified in its charter)
Colorado 02-0511381
- ---------------------------------- ------------------------
State or other jurisdiction of I.R.S. Employer
incorporation or organization Identification No.
8950 Scenic Pine Drive, Suite 100, Parker, Colorado 80134
------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class registered Name of each exchange
on which registered
- ---------------------------------- -----------------------
Not Applicable Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
------------
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes |_| No |X|
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. |_|
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. |X|
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check One).
- ------------------------------------------------------- ----------- ---- -------
Large accelerated filer [___] Accelerated filer [___]
- ------------------------------------------------------- ----------- ---- -------
Non-accelerated filer [___] Smaller reporting company [_X_]
- ------------------------------------------------------- ----------- ---- -------
Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |_| No |X|
The aggregate market value of voting stock held by non-affiliates of the
registrant was $0 as of December 31, 2008, since the common stock of the Bedrock
Energy does not trade on any of the markets.
There were 3,495,524 shares outstanding of the registrant's Common Stock as of
March 26, 2009.
TABLE OF CONTENTS
PART I
ITEM 1 Business 1
ITEM 1 A. Risk Factors 9
ITEM 1 B. Unresolved Staff Comments 17
ITEM 2 Properties 17
ITEM 3 Legal Proceedings 17
ITEM 4 Submission of Matters to a Vote of Security Holders 17
PART II
ITEM 5 Market for Registrant's Common Equity, Related Stockholder Matters and
ITEM 6 Selected Financial Data 19
ITEM 7 Management's Discussion and Analysis of Financial Condition and Results of
ITEM 7 A. Quantitative and Qualitative Disclosures About Market Risk 22
ITEM 8 Financial Statements and Supplementary Data 22
ITEM 9 Changes in and Disagreements with Accountants on Accounting and Financial
ITEM 9 A. Controls and Procedures 23
ITEM 9 A(T). Controls and Procedures 23
ITEM 9B Other Information 24
PART III
ITEM 10 Directors, Executive Officers, and Corporate Governance 24
ITEM 11 Executive Compensation 27
ITEM 12 Security Ownership of Certain Beneficial Owners and Management and Related
ITEM 13 Certain Relationships and Related Transactions, and Director Independence
ITEM 14 Principal Accounting Fees and Services 33
PART IV
ITEM 15 Exhibits, Financial Statement Schedules 34
SIGNATURES 35
FORWARD LOOKING STATEMENTS
This document includes forward-looking statements, including, without
limitation, statements relating to Bedrock Energy, Inc. ("Bedrock") plans,
strategies, objectives, expectations, intentions and adequacy of resources.
These forward-looking statements involve known and unknown risks, uncertainties,
and other factors that may cause Bedrock's actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. These
factors include, among others, the following: ability of Bedrock's to implement
its business strategy; ability to obtain additional financing; Bedrock's limited
operating history; unknown liabilities associated with future acquisitions;
ability to manage growth; significant competition; ability to attract and retain
talented employees; and future government regulations; and other factors
described in this registration statement or in other of Bedrock's filings with
the Securities and Exchange Commission. Bedrock is under no obligation, to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.
For further information about these and other risks, uncertainties and factors,
please review the disclosure included in this report under Item 1A "Risk
Factors."
PART I
ITEM 1. BUSINESS
General
The following is a summary of some of the information contained in this
document. Unless the context requires otherwise, references in this document to
"We," Us," or the "Company" are to Bedrock Energy, Inc.
Description of Business
History of Bedrock Energy, Inc.
CellTouch, Inc., now known as Bedrock Energy, Inc., was incorporated in Colorado
on August 11, 2004 and changed its name to Bedrock Energy, Inc. on October 18,
2007. Enviromart.com, Inc. was incorporated in New Hampshire in March 1999. On
September 21, 2004, CellTouch, Inc. and Enviromart.com, Inc. were merged under
the laws of the State of Colorado and CellTouch, Inc. became the surviving
entity. We have been in the development stage since our inception. Activities
through December 31, 2008 include the raising of equity capital and the
formation of a business plan to merge with or acquire and develop assets from a
company in the oil and gas industry.
Company Overview
We had been inactive prior to 2008. We have no recent operating history and no
representation is made, nor is any intended, that we will able to carry on our
activities profitably. The viability of the proposed business effort is
dependent upon sufficient funds being realized from offerings, of which there is
no assurance. Edward Nichols, President, Chief Executive Officer and director,
has prior experience in the acquisition, evaluation, exploration and development
of oil and gas properties. Edward Nichols, Herbert Sears and Ronald Blekicki
devote part-time efforts to our affairs.
1
Bedrock is an oil and gas exploration and development company focused on
creating a portfolio of North American assets, located in the Central and
Western United States that exhibit consistent, predictable, and long-lived
production capabilities. We plan to build value through the acquisition and
development of gas and oil assets that contain proven reserves in domestic areas
where reserves can be economically produced at a low risk to the Company relying
on joint venture partners to supply most of the funds needed to explore or
develop these properties.
Our main emphasis will be to acquire production or revenue generating
opportunities either by lease purchase or farmout, when available, with third
parties and industry partners. We plan to engage in the exploration,
acquisition, development, production, and sale of natural gas and crude oil,
although the Company expects to generate most of its initial revenue from the
production and sale of natural gas.
We have no revenues at this time and anticipate that we will need additional
capital to support the execution of our business plan. Decisions regarding
future participation in acquisitions or other business development activities
will be made on a case-by-case basis.
Our overall growth strategy is to continue building value in our Company through
the development and acquisition of gas and oil assets that exhibit consistent,
predictable, and long-lived production.
On February 12, 2009, we acquired a 100% net revenue interest in 240 acres in
Morgan County Colorado which is located approximately forty five miles north of
Denver, Colorado and lies in what is called the Denver, Julesberg Basin (DJ
Basin). The DJ Basin is the predominant geological structure in Northern
Colorado. The shallow "J" and "D" sand formations of the DJ Basin constitutes a
common source of oil and gas. The acreage in Morgan County has forty (40) acre
drilling and spacing units for the production of oil and gas from the "D" and
"J" sand formations.
The acreage contained within these leases have a 10-year "primary term" (2018),
but may be extended if drilling operations are in progress, or if other
conditions are met. The term of a lease can continue as long as the lessee
produces oil and gas in paying quantities during the term of the lease.
The Morgan County acreage lies a short distance from the western portion of the
prolific Niobrara Beecher Island natural gas trend and deeper Lansing-Kansas
City oil production. Nearby fields include the Frenchman Creek prospect area in
Phillips County, Colorado containing multiple Niobrara structures which could
yield up to 20 billion cubic feet gross of natural gas resource potential, the
DeNova Field, which has produced greater than 30 billion cubic feet (Bcf) of
natural gas to date, and the Republican and Mildred Fields, which have produced
greater than 62 Bcf of natural gas.
We plan on acquiring properties that contain proven gas reserves, some of which
are adjacent to interstate pipeline systems which provide ready access to sales
markets for the gas produced.
We believe our path to success will be built around a three phase growth
strategy as described below:
Phase One of our business plan calls for investing in various lease holdings and
properties with no current production. This program is consistent with our
principal strategy which is to acquire and farm-out small land positions in
major oil and natural gas basins while retaining negotiated carried interests.
Surface geology will be reviewed along with seismic data, when available, which
will aid in subsurface structural interpretation and lead generation for new
acquisition opportunities in areas of interest.
2
Phase Two of our business plan calls for purchasing interests in properties
which contain proven reserves. This growth strategy is partially based on
participation, as it intends to team up with outside strategic partners, and
investors who will assume part or all of the costs associated with the drilling
of additional wells in exchange for part of the revenues derived from the wells
they finance. We expect that implementation of this strategy will reduce the
financial risk to us while retaining an overriding net royalty interest in each
successful well drilled.
Phase Three of our business plan calls for originating, developing and managing
balanced, low-risk, highly-focused developmental drilling programs, with
accredited investors and qualified partners, in areas with low drilling costs
and high success rates. This stage further balances our approach to profitable
energy asset development through low risk, highly focused, predominantly
"development" drilling projects.
This business development plan is expected to be executed in multiple phases.
The pace of the development will obviously depend on the availability of a
viable financing program, lender restrictions, general economic conditions, and
potential other factors relevant to this type of program.
The Market
Natural Gas Supply and Demand:
Natural gas drillers across the United States are idling rigs setting the stage
for supplies to drop faster than demand. Approximately 45% of the rigs in the
United States have been shut down since September 2008. The U.S. Energy
Department expects that production will fall 5.2%, faster than the 1.9% decline
in use.
Bedrock management believes that there are strong indications that the oil and
gas market has bottomed out and as it has reflected stronger market since
January 2009. Bedrock believes that the fall in gas prices, as well as,
decreases in the costs of acreage and drilling provides the Company with a rare
opportunity to position the Company for the future.
The National Petroleum council estimates the U.S. demand for natural gas to
increase from 22 trillion cubic feet (TCF) in 1998 to over 31 TCF by 2015. This
nearly 50% increase in demand for natural gas, coupled with constrained supplies
from conventional sources and storage facilities, suggests an urgent need for
new gas sources. Although conventional gas sources such as high permeability
sandstones supply about 60% of the U.S. demand (13 TCF in 1998), projections
indicate a flat to declining supply through year 2015. The shortfall in
conventional gas supply is expected to be taken up by production from
un-conventional sources such as tight gas sandstones/shales, associated gas, and
Coal Bed Methane (CBM). CBM shows great promise as a future source of natural
gas, with the US Geological Survey estimating some 700 TCF contained in 6 major
CBM basins in the continental US. This constitutes an enormous reserve, almost
the entire US demand for the next 25 years. We plan to acquire leases that lie
within one or more of these sub-basins. We believe the current supply and demand
fundamentals will lead to a strengthening in prices. Consequently, we intend to
continually seek out potential producing properties in these regions of the U.S.
3
CBM Production: CBM production is similar to conventional natural gas production
in terms of the physical production facilities and the product produced.
However, surface mechanics and some production characteristics of CBM wells are
quite different from traditional natural gas production wells. Methane gas is
created as part of the coalification process. Coals vary in their methane gas
content which is defined by the industry as cubic feet of gas per ton of coal.
Conventional natural gas wells assume a porous and permeable reservoir,
hydrocarbon migration and a natural structural or stratigraphic trap. However,
CBM is trapped in the molecular structure of the coal itself until it is
released by pressure changes, resulting from water removal from the coal-bed.
Water completely permeates coal-beds and the natural fracture system or cleats
as they are normally referred. In good production areas, the cleats are
pervasive throughout the coal-beds. CBM gas, principally methane, is adsorbed
onto the grain surfaces of the coal. To produce CBM, the water must be drawn off
first, lowering the pressure so that the methane gas will desorb from the coal
thus allowing gas to flow from the coal into the de-watered cleats that act as
high permeable conduits to the well bore, where gas can be produced at the well
head. These cleats are assumed to have been formed during the coalification and
uplifting processes. If cleat permeability is adequately developed, it may allow
commercial quantities of methane gas to be produced from the well. The qualities
of productive CBM wells include coal quality, the content of natural gas per ton
of coal, thickness of the coal-beds, reservoir pressure, existence of natural
fractures, and overall permeability of the coal-bed.
CBM production also differs from conventional gas production that normally
starts at its highest production rate and then declines with time. Because
coal-beds have water residing within the cleats, the water needs to be withdrawn
in order to promote production of the adsorbed gases. Thus, for the case of CBM,
initial water production is high and diminishes with time. CBM gas production,
however, starts at a relatively low rate, reaching a peak some months later and
then begins to decline.
CBM production is attractive due to several geological factors: Coal stores six
or seven times as much gas as a conventional natural gas reservoir of equal rock
volume due to the large internal surface area of coal; significant amounts of
coal are accessible at shallow depths, making well drilling and completion
relatively inexpensive; exploration costs are also low since methane occurs in
coal deposits, and the location of the Nation's coal resources is well defined
as indicated in the prominent Western Natural gas fields map shown to the right.
Estimates of the in-place gas resources of the principal coal-bearing basins of
the United States exceed 700 trillion cubic feet. Economically recoverable
resources of coal bed gas are probably less than 100 Tcf. This represents about
a five-year supply at current U.S. consumption rates.
Global Oil Supply and Demand: World demand for oil has fluctuated wildly in the
past year.
While there was much growth in demand - about 40 percent from Asia, into 2008
due mainly to rapidly growing economies in China and India there has been a
dramatic decline in oil demand due to the worldwide recession. In 2004, China
passed Japan as the world's second-largest consumer of oil. It used an average
of 6.63 million barrels of oil every day - about twice what it produces. Its oil
imports doubled between 1999 and 2004. China's demand for oil is expected to
continue to increase each year albeit much more slowly in the recession. If that
happens, China will surpass the United States as the world's largest consumer of
oil by 2015. Similarly, India's oil needs are expected to grow by four to seven
percent a year.
4
Up to this point, the world's oil producers have been able to meet demand.
However, should demand increase substantially, or production decrease for any
reason, there could be a significant spike in the price of oil and possible
shortages. The London-based Oil Depletion Analysis Centre recently released a
study that predicted tight oil supplies through the rest of this decade, even if
all of the new major oil recovery projects scheduled to come on stream over the
next six years meet their targets. The only way to avoid it, the study said, is
for demand to drop sharply, which it did in the last half of 2008.
Increasing Supply: There are two ways to increase oil supply: getting more oil
out of existing wells and finding new sources. Extraction from existing wells
has been getting steadily more efficient; according to The Economist, "A few
decades ago, the average oil recovery rate from reservoirs was 20%; thanks to
remarkable advances in technology, this has risen to about 35%," with future
increases expected. Methods for recovering oil from shale are notable for
continuing to improve. Furthermore new sources, including the continental shelf,
continue to be opened for exploration.
Areas of Interest and Property: We will consider the following criteria when
evaluating whether to acquire an oil and gas prospect:
1) Proximity to existing production;
2) Target zone is less than 4,000 feet in depth;
3) Location in a known producing region;
4) Whether there is well control data from nearby drill sites;
5) Favorable geologic evaluations by local geologists of production
potential;
6) Reasonable cost of acquisition;
7) Term of lease and drilling commitment, if any; and
8) Reasonable drilling cost estimates.
Upon selecting a lease for purchase, a geochemical survey of the property will
be initiated.
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; 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 us.
Most of the domestic natural gas reserves are concentrated in larger U.S. based
companies. In 2005, the top twenty operators (Class 1-10 and 11-20) had sixty
percent of the proven reserves of natural gas. The next two size classes contain
80 and 400 companies and account for 24 and 10 percent of the U.S. natural gas
proved reserves, respectively. The top 20 operators had a 23 percent increase in
their reserves from 200 to 2005. The rest of the operators had a three percent
increase in their reserves during the same period. There were 859 active gas
producing fields in 2005 and approximately 15,000 domestics oil and gas
operators.
Markets: The availability of a ready market for oil and gas discovered, if any,
will depend on numerous factors beyond the control of us, 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 our control. 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.
Since July 2008, oil prices have dropped from $147 to the high $30's and gas
drop from $13 per, MCF to $3 per MCF. With gas production falling at a much
faster rate than usage, the stage is set for a significant price increase in the
near future.
5
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 our gas production, there
is no assurance that we 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.
Governmental Regulations: Regulation of Oil and Natural Gas Production. Our oil
and natural gas exploration, production and related operations, when developed,
are subject to extensive rules and regulations promulgated by federal, state,
tribal and local authorities and agencies. For example, some states in which we
may operate require permits for drilling operations, drilling bonds and reports
concerning operations and impose other requirements relating to the exploration
and production of oil and natural gas. Such states may also have statutes or
regulations addressing conservation matters, including provisions for the
unitization or pooling of oil and natural gas properties, the establishment of
maximum rates of production from wells, and the regulation of spacing, plugging
and abandonment of such wells. Failure to comply with any such rules and
regulations can result in substantial penalties. The regulatory burden on the
oil and gas industry will most likely increase our cost of doing business and
may affect our profitability. Although we believe we are currently in
substantial compliance with all applicable laws and regulations, because such
rules and regulations are frequently amended or reinterpreted, we are unable to
predict the future cost or impact of complying with such laws. Significant
expenditures may be required to comply with governmental laws and regulations
and may have a material adverse effect on our financial condition and results of
operations.
Federal Regulation of Natural Gas: The Federal Energy Regulatory Commission
("FERC") regulates interstate natural gas transportation rates and service
conditions, which may affect the marketing of natural gas produced by us, as
well as the revenues that may be received by us for sales of such production.
Since the mid-1980s, FERC has issued a series of orders, culminating in Order
Nos. 636, 636-A and 636-B ("Order 636"), that have significantly altered the
marketing and transportation of natural gas. Order 636 mandated a fundamental
restructuring of interstate pipeline sales and transportation service, including
the unbundling by interstate pipelines of the sale, transportation, storage and
other components of the city-gate sales services such pipelines previously
performed. One of FERC's purposes in issuing the order was to increase
competition within all phases of the natural gas industry. The United States
Court of Appeals for the District of Columbia Circuit largely upheld Order 636
and the Supreme Court has declined to hear the appeal from that decision.
Generally, Order 636 has eliminated or substantially reduced the interstate
pipelines' traditional role as wholesalers of natural gas in favor of providing
only storage and transportation service, and has substantially increased
competition and volatility in natural gas markets.
The price we may receive from the sale of oil and natural gas liquids will be
affected by the cost of transporting products to markets. Effective January 1,
1995, FERC implemented regulations establishing an indexing system for
transportation rates for oil pipelines, which, generally, would index such rates
to inflation, subject to certain conditions and limitations. We are not able to
predict with certainty the effect, if any, of these regulations on our intended
operations. However, the regulations may increase transportation costs or reduce
well head prices for oil and natural gas liquids.
6
Compliance with Environmental Laws and Regulations: Our operations are subject
to local, state and federal laws and regulations governing environmental quality
and pollution control. To date our compliance with these regulations has had no
material effect on our operations, capital, earnings, or competitive position,
and the cost of such compliance has not been material. We are unable to assess
or predict at this time what effect additional regulations or legislation could
have on our activities.
Effect of Changing Industry Conditions on Drilling Activity: Lower oil and gas
prices have caused a decline in drilling activity in the U.S. from time to time.
However, such reduced activity has also resulted in a decline in drilling costs,
lease acquisition costs and equipment costs, and an improvement in the terms
under which drilling prospects are generally available. We cannot predict what
oil and gas prices will be in the future and what effect those prices may have
on drilling activities in general, or on its ability to generate economic
drilling prospects and to raise the necessary funds with which to drill them.
Regulation and Pricing of Natural Gas: Our 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 us cannot be
determined at this time.
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 us 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.
State Regulations: Our production of oil and gas, if any, will be subject to
regulation by state regulatory authorities in the states in which we 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 of
the Rocky Mountain West.
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.
7
All of our operations 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. We
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, our activities 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 us and delays,
interruptions, or a termination of operations, the extent to which cannot now be
predicted.
Recent Transactions:
We recently acquired 240 acres in Morgan County, Colorado, in a BLM auction. It
is a 100% NRI.
External Growth Strategy: Oil and gas production companies are subject to
international competition, particularly as businesses in this industry becomes
more global in nature.
As a result of these and other factors affecting industry today, such as
deregulation, capital market intervention, and new developments in recovery
technologies, small businesses and large corporations are being forced to adapt
quickly to such transformations in order to thrive or even merely survive.
Many private company managers have concluded that it is timely and prudent to
look at being acquired by a properly capitalized strategic partner in order to
remain competitive in this type of economic environment. This new strategic
alliance could come from a publicly traded company or a privately held
competitor with greater access to equity or debt capital, or one that possesses
enhanced advertising and marketing capabilities, and has capital intensive,
expansive product engineering, and sales and support capabilities.
For these and other reasons, there has been significant energy involving mergers
and acquisitions in the oil and gas industries at present. Many large firms
involved in this industry have established corporate growth strategies that
consistently include acquisitions. These experienced buyers search for companies
that fit their well-defined acquisition criteria, often attempting to buy
companies that are not actively for sale, seeking to generate exponential growth
through the purchase of complimentary businesses.
Production companies are obvious targets of interest partly because they have
established revenue streams and are compatible with our core revenue generating
business model. Service related businesses, such as drillers, are also of
interest because they will allow us to control our recompletion and drilling
schedules on our leased acreage. Therefore, during the coming months, in an
effort to broaden our revenue generating capabilities, we plan to aggressively
explore and pursue these types of strategic acquisition opportunities.
8
Title to Properties.
We are record owner of the BLM leasehold interest in Morgan County, Colorado.
Our prospects 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 we are not
aware of any material title defects or disputes with respect to its undeveloped
acreage, to the extent such defects or disputes exist, we would suffer title
failures.
Backlog of Orders: We currently have no orders for sales at this time.
Government Contracts: We have no government contracts.
Company Sponsored Research and Development: We are not conducting any research.
Number of Persons Employed: As of March 17, 2009, we had no full-time employees.
Officers and Directors work on an as needed part-time basis up to 20 hours per
week.
ITEM 1A. RISK FACTORS
FORWARD LOOKING STATEMENTS
This document includes forward-looking statements, including, without
limitation, statements relating to Bedrock's plans, strategies, objectives,
expectations, intentions and adequacy of resources. These forward-looking
statements involve known and unknown risks, uncertainties, and other factors
that may cause Bedrock's actual results, performance or achievements to be
materially different from any future results, performance or achievements
expressed or implied by the forward-looking statements. These factors include,
among others, the following: ability of Bedrock to implement its business
strategy; ability to obtain additional financing; Bedrock's limited operating
history; unknown liabilities associated with future acquisitions; ability to
manage growth; significant competition; ability to attract and retain talented
employees; and future government regulations; and other factors described in
this Annual Report on Form 10-K or in other of Bedrock filings with the
Securities and Exchange Commission. Bedrock is under no obligation, to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
Risk Factors
GENERAL BUSINESS RISK FACTORS
Our business is a development stage company and unproven and therefore risky.
We have only very recently adopted the business plan described herein-above.
Potential investors should be made aware of the risk and difficulties
encountered by a new enterprise in the energy business, especially in view of
the intense competition from existing businesses in the industry.
9
We have a lack of revenue history and investors cannot view our past performance
since we are a start-up company.
We were formed on March 17, 1999 for the purpose of engaging in any lawful
business and have adopted a plan to engage the acquisition, exploration, and if
warranted, development of natural resource properties. We have had no revenues
in the last five years. We are not profitable and the business effort is
considered to be in an early development stage. We 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.
We can give no assurance of success or profitability to our investors.
There is no assurance that we will ever operate profitably. There is no
assurance that we will generate revenues or profits, or that the market price of
our common stock will be increased thereby.
We may have a shortage of working capital in the future which could jeopardize
our ability to carry out our business plan.
Our capital needs consist primarily of expenses related to geological
evaluation, general and administrative and potential exploration participation
and could exceed $250,000 in the next twelve months. Such funds are not
currently committed, and we have cash as of the date of this Annual Report on
Form 10-K of approximately $10,000.
We have no operating history and no revenues and it may be unlikely that we will
raise that additional working capital from an offering of our equity securities.
Our officers and directors may have conflicts of interest which may not be
resolved favorably to us.
Certain conflicts of interest may exist between us and our officers and
directors. Our Officers and Directors 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 our business. 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 us. See "Directors and Executive
Officers" (page 24), and "Conflicts of Interest" (page 26). Our officers are
spending part-time in this business - up to 20 hours per week.
We will need additional financing for which we have no commitments, and this may
jeopardize execution of our business plan.
We have limited funds, and such funds may not be adequate to carryout the
business plan in the energy business. Our ultimate success depends upon our
ability to raise additional capital. We have not investigated the availability,
source, or terms that might govern the acquisition of additional capital and
will not do so until it determines a need for additional financing. If we need
additional capital, we have no assurance that funds will be available from any
source or, if available, that they can be obtained on terms acceptable to us. If
not available, our operations will be limited to those that can be financed with
our modest capital.
10
We may in the future issue more shares which could cause a loss of control by
our present management and current stockholders.
We may issue further shares as consideration for the cash or assets or services
out of our authorized but unissued common stock that would, upon issuance,
represent a majority of the voting power and equity of our Company. The result
of such an issuance would be those new stockholders and management would control
our Company, and persons unknown could replace our management at this time. Such
an occurrence would result in a greatly reduced percentage of ownership of our
Company by our current shareholders, which could present significant risks to
investors.
We have a minimal operating history, so investors have no way to gauge our long
term performance.
We were formed on March 17, 1999, and only recently adopted a business plan in
the energy industry. As evidenced by the financial reports we have had no
revenue. We must be regarded as a new or development venture with all of the
unforeseen costs, expenses, problems, and difficulties to which such ventures
are subject. Our venture must be considered highly speculative.
We are not diversified and we will be dependent on only one business.
Because of the limited financial resources that we have, it is unlikely that we
will be able to diversify our operations. Our probable inability to diversify
our activities into more than one area will subject us to economic fluctuations
within the energy industry and therefore increase the risks associated with our
operations due to lack of diversification.
We will depend upon management but we will have limited participation of
management.
We currently have three individuals who are serving as our officers for up to 20
hours per week each on a part-time basis. Two of our directors, Messrs. Nichols
and Sears, are also acting as our officers. We will be heavily dependent upon
their skills, talents, and abilities, as well as several consultants to us, to
implement our 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 our business results in a delay in progress toward implementing our business
plan. Once we receive the proceeds from this offering, other consultants may be
employed on a part-time basis under a contract to be determined. Because
investors will not be able to manage our business, they should critically assess
all of the information concerning our officers and directors.
Our officers and directors are not employed full-time by us which could be
detrimental to the business.
Our directors and officers are, or may become, in their individual capacities,
officers, directors, controlling shareholder and/or partners of other entities
engaged in a variety of businesses. Thus, our officers and directors may have
potential conflicts including their time and efforts involved in participation
with other business entities. Each officer and director of our business is
engaged in business activities outside of our business, and the amount of time
they devote as Officers and Directors to our business will be up to 20 hours per
week. As such time as the Company is financially capable of paying salaries, it
is anticipated that management will assume full time roles in the Company's
operations.
We do not know of any reason other than outside business interests that would
prevent them from devoting full-time to our Company, when the business may
demand such full-time participation.
11
Our officers and directors may have conflicts of interests as to corporate
opportunities which we may not be able or allowed to participate in.
Presently there is no requirement contained in our Articles of Incorporation,
Bylaws, or minutes which requires officers and directors of our business to
disclose to us business opportunities which come to their attention. Our
officers and directors do, however, have a fiduciary duty of loyalty to us to
disclose to us any business opportunities which come to their attention, in
their capacity as an officer and/or director or otherwise. Excluded from this
duty would be opportunities which the person learns about through his
involvement as an officer and director of another company. We have no intention
of merging with or acquiring any business opportunity or mineral interest from
any affiliate or officer or director. (See "Conflicts of Interest" at page 26)
RISK FACTORS RELATING TO OUR COMPANY AND OUR 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:
Our business, the oil and gas business, has numerous risks which could render us
unsuccessful.
The search for new 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 we will find or produce oil or gas from
any of the undeveloped acreage farmed out to us or which may be acquired by us,
nor are there any assurances that if we ever obtain any production it will be
profitable.
We have substantial competitors who have an advantage over us in resources and
management.
We are and will continue to be an insignificant participant in the oil and gas
business. Most of our competitors have significantly greater financial
resources, technical expertise and managerial capabilities than us and,
consequently, we will be at a competitive disadvantage in identifying and
developing or exploring suitable prospects. Competitor's resources could
overwhelm our restricted efforts to acquire and explore oil and gas prospects
and cause failure of our business plan.
We will be subject to all of the market forces in the energy business, many of
which could pose a significant risk to our operations.
The marketing of natural gas and oil which may be produced by our prospects will
be affected by a number of factors beyond our control. 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 our profitability of 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 our gas production, there
is assurance that we 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 may, on occasion, be an oversupply of gas in the marketplace or
in pipelines, the extent and duration may affect prices adversely. Such
oversupply may result in reductions of purchases and prices paid to producers by
principal gas pipeline purchasers. (See "Our Business and Competition, Markets,
Regulation and Taxation.")
12
Our business is subject to significant weather interruptions.
Our activities 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 our ability to benefit from
production on such properties or could increase the costs of drilling new wells
because of delays.
We will have significant additional financing requirements to fund our future
activities.
If we find oil and gas reserves to exist on a prospect we will need substantial
additional financing to fund the necessary exploration and development work.
Furthermore, if the results of that exploration and development work are
successful, we will need substantial additional funds for continued development.
We will not have sufficient proceeds from this offering to conduct such work
and, therefore, we will need 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 we will be
successful in obtaining any financing. These various financing alternatives may
dilute the interest of our shareholders and/or reduce our interest in the
properties.
We will have working capital needs for which we have no funding commitments.
Our working capital needs of consist primarily of: lease acquisitions,
geological data acquisition and interpretation, title examination activities and
administration and are estimated to total over $250,000 in the next twelve
months, none of which funds are committed. We have only minimal cash as of the
date of this Annual Report on Form 10-K.
We are subject to significant operating hazards and uninsured risk in the energy
industry.
Our proposed operations will be subject to all of the operating hazards and
risks normally incident to exploring, drilling for and producing oil and gas,
such as encountering unusual or unexpected formations and pressures, blowouts,
environmental pollution and personal injury. We will maintain general liability
insurance but we have not obtained insurance against such things as blowouts and
pollution risks because of the prohibitive expense. Should we sustain an
uninsured loss or liability, or a loss in excess of policy limits, our ability
to operate may be materially adversely affected.
We are subject to Federal Income Tax laws and changes therein which could
adversely impact us.
Federal income tax laws are of particular significance to the oil and gas
industry in which we intend to engage. 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 material adverse effect on our future operations and
on our ability to obtain risk capital which our industry has traditionally
attracted from taxpayers in high tax brackets.
We are subject to substantial government regulation in the energy industry which
could adversely impact us.
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 our earnings potential and cause material changes in the in
our proposed business. We cannot predict what legislation, if any, may be passed
by Congress or state legislatures in the future, or the effect of such
legislation, if any, on us. Such regulations may have a significant affect on
our operating results.
13
We believe investors should consider certain negative aspects of our proposed
operations.
Dry Holes: We may expend substantial funds acquiring and potentially
participating in exploring properties which we later determine not to be
productive. All funds so expended will be a total loss to us.
Technical Assistance: We will find it necessary to employ technical assistance
in the operation of our business. As of the date of this Prospectus, we have not
contracted for any technical assistance. When we need it such assistance is
likely to be available at compensation levels we would be able to pay.
Uncertainty of Title: We will attempt to acquire leases or interests in leases
by option, lease, farmout or 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 our application. We intend to
obtain an oil and gas attorney's opinion of valid title before any significant
expenditure upon a lease.
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 our operations. Compliance with
statutes and regulations governing the oil and gas industry could significantly
increase the capital expenditures necessary to develop our prospects.
Nature of our Business: Our business is highly speculative, involves the
commitment of high-risk capital, and exposes us to potentially substantial
losses. In addition, we will be in direct competition with other organizations
which are significantly better financed and staffed than we are.
General Economic and Other Conditions: Our 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.
We will experience substantial competition for supplies in the energy industry.
We will be required to compete with a large number of entities which are larger,
have greater resources and more extensive operating histories than we do.
Shortages of supplies may result from this competition and will lead to
increased costs and delays in operations which will have a material adverse
effect on us.
We will be subject to many factors beyond our control.
The acquisition, exploration, development, production and sale of oil and gas
are subject to many factors which are outside our 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.
We anticipate substantial competition in our effort to explore oil and gas
properties and may have difficulty in putting together drilling participants and
getting prospects drilled and explored. Established companies have an advantage
over us because of substantially greater resources to devote to property
acquisition and to obtain drilling rigs, equipment and personnel. If we are
unable to compete for capital, participation and drilling rigs, equipment and
personnel, our business will be adversely affected.
14
We have agreed to indemnification of officers and directors as is provided by
Colorado Statute.
Colorado Statutes provide for the indemnification of our 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 on activities our behalf. We will also
bear the expenses of such litigation for any of our directors, officers,
employees, or agents, upon such person's promise to repay us 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 us that we will be unable to recoup.
Our directors' liability to us and shareholders is limited
Colorado Revised Statutes exclude personal liability of our directors and our
stockholders for monetary damages for breach of fiduciary duty except in certain
specified circumstances. Accordingly, we will have a much more limited right of
action against our directors than otherwise would be the case. This provision
does not affect the liability of any director under federal or applicable state
securities laws.
We may depend upon outside advisors, who may not be available on reasonable
terms and as needed.
To supplement the business experience of our officers and directors, we may be
required to employ accountants, technical experts, appraisers, attorneys, or
other consultants or advisors. Our Board without any input from stockholders
will make the selection of any such advisors. Furthermore, we anticipate that
such persons will be engaged on an "as needed" basis without a continuing
fiduciary or other obligation to us. In the event we consider it necessary to
hire outside advisors, we may elect to hire persons who are affiliates, if they
are able to provide the required services.
Risk Factors Related to Our Stock
The regulation of penny stocks by SEC and FINRA may discourage the tradability
of our securities.
We are a "penny stock" company. None of our securities currently trade in any
market and, if ever available for trading, 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. Effectively, this discourages broker-dealers from executing trades in
penny stocks. Consequently, the rule will affect the ability of purchasers in
this offering to sell their securities in any market that might develop
therefore because it imposes additional regulatory burdens on penny stock
transactions.
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 our securities constitute "penny stocks" within
the meaning of the rules, the rules would apply to us and to our securities. The
rules will further affect the ability of owners of shares to sell our securities
in any market that might develop for them because it imposes additional
regulatory burdens on penny stock transactions.
15
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. Our
management is aware of the abuses that have occurred historically in the penny
stock market. Although we do 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 our securities.
We will pay no foreseeable dividends in the future.
We have not paid dividends on our common stock and do not ever anticipate paying
such dividends in the foreseeable future.
No public market exists for our common stock at this time, and there is no
assurance of a future market.
There is no public market for our common stock, and no assurance can be given
that a market will develop or that a shareholder ever will be able to liquidate
his investment without considerable delay, if at all. If a market should
develop, the price may be highly volatile. Factors such as those discussed in
the "Risk Factors" section may have a significant impact upon the market price
of the shares offered hereby. Due to the low price of our securities, many
brokerage firms may not be willing to effect transactions in our securities.
Even if a purchaser finds a broker willing to effect a transaction in our
shares, the combination of brokerage commissions, state transfer taxes, if any,
and any other selling costs may exceed the selling price. Further, many lending
institutions will not permit the use of our shares as collateral for any loans.
Rule 144 sales in the future may have a depressive effect on our stock price.
All of the outstanding shares of common stock held by our 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
Shares, these shares 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 six months, under certain conditions, may sell every
three months, in brokerage transactions, a number of shares 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
non-affiliate 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 shares of common stock of
present stockholders, may have a depressive effect upon the price of the common
stock in any market that may develop.
Our investors may suffer future dilution due to issuances of shares for various
considerations in the future.
There may be substantial dilution to our shareholders as a result of future
decisions of the Board to issue shares without shareholder approval for cash,
services, or acquisitions.
16
Our stock will in all likelihood be thinly traded and as a result you may be
unable to sell at or near ask prices or at all if you need to liquidate your
shares.
The shares of our common stock, if listed, may be thinly-traded on the OTC
Bulletin Board, meaning that the number of persons interested in purchasing our
common shares at or near ask prices at any given time may be relatively small or
non-existent. This situation is attributable to a number of factors, including
the fact that we are a small company which is relatively unknown to stock
analysts, stock brokers, institutional investors and others in the investment
community that generate or influence sales volume, and that even if we came to
the attention of such persons, they tend to be risk-averse and would be
reluctant to follow an unproven, early stage company such as ours or purchase or
recommend the purchase of any of our Securities until such time as we became
more seasoned and viable. As a consequence, there may be periods of several days
or more when trading activity in our Securities is minimal or non-existent, as
compared to a seasoned issuer which has a large and steady volume of trading
activity that will generally support continuous sales without an adverse effect
on Securities price. We cannot give you any assurance that a broader or more
active public trading market for our common Securities will develop or be
sustained, or that any trading levels will be sustained. Due to these
conditions, we can give investors no assurance that they will be able to sell
their shares at or near ask prices or at all if they need money or otherwise
desire to liquidate their securities of our Company.
Our business is highly speculative and the investment is therefore risky.
Due to the speculative nature of our business, it is probable that the
investment in shares offered hereby will 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.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not Applicable.
ITEM 2. PROPERTIES
Bedrock operations are principally located at 8950 Scenic Pine Drive, Suite 100,
Parker, Colorado 80134. Bedrock currently pays no monthly rent for the use of
this office space, which is provided by the Company's president.
DESCRIPTION OF PROPERTIES/ASSETS/OIL AND GAS PROSPECTS
- --------- -------------------------- -------------------------------------------
(a) Real Estate None.
(b) Title to properties. None.
(c) Oil and Gas Prospects. On February 12, 2009, the Company bid upon
and acquired 240 acres in Morgan County,
Colorado a the BLM auction located in
Lakewood, Colorado is 100% in this prospect
(d) Patents. None.
- --------- -------------------------- -------------------------------------------
We do not own any property, real or otherwise.
17
ITEM 3. LEGAL PROCEEDINGS
Bedrock anticipates that it (including any future subsidiaries) will from time
to time become subject to claims and legal proceedings arising in the ordinary
course of business. It is not feasible to predict the outcome of any such
proceedings and Bedrock cannot assure that their ultimate disposition will not
have a materially adverse effect on Bedrock's business, financial condition,
cash flows or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the period covered by this report to a vote of
security holders of the Company, through the solicitation of proxies or
otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
There is no public trading market for the common stock at this time. During the
fall of 2008, the Company submitted a Form 15c211 to FINRA to apply for trading
on the Over-the-Counter Bulleting Board. At the time of this filing, the
application was being reviewed by FINRA.
Holders
There are approximately 703 holders of record of Bedrock's common stock as of
December 31, 2008.
Dividend Policy
Holders of Bedrock's common stock are entitled to receive such dividends as may
be declared by Bedrock's board of directors. Bedrock has not declared or paid
any dividends on Bedrock's common shares and it does not plan on declaring any
dividends in the near future. Bedrock currently intends to use all available
funds to finance the operation and expansion of its business.
Shares Eligible for Future Sale
Bedrock had 2,545,524 shares of common stock outstanding as of December 31,
2008. A current shareholder who is an "affiliate" of Bedrock, defined in Rule
144 as a person who directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with Bedrock will be
required to comply with the resale limitations of Rule 144. Of these shares a
total of 559,066 shares have been held for 1 year or more and are eligible for
resale under Rule 144. Sales by affiliates will be subject to the volume and
other limitations of Rule 144, including certain restrictions regarding the
manner of sale, notice requirements, and the availability of current public
information about Bedrock. The volume limitations generally permit an affiliate
to sell, within any three month period, a number of shares that does not exceed
the greater of one percent of the outstanding shares of common stock or the
average weekly trading volume during the four calendar weeks preceding his sale.
A person who ceases to be an affiliate at least three months before the sale of
restricted securities beneficially owned for at least two years may sell the
restricted securities under Rule 144 without regard to any of the Rule 144
limitations.
18
Recent Sales of Unregistered Securities
April 5, 2008 through December 31, 2008
Name Number of Shares $ Value of Shares
- ---- ---------------- -----------------
BIMS LTD 100,000 10,000
Kyle Blekicki 10,000 1,000
Eric Evenstad 10000 1,000
Herbert T. Sears and Ann Sears, 100,000 2,500
Trustees
W. Edward Nichols 200,000 5,000
Exemption From Registration Claimed
All of the sales by Bedrock of its unregistered securities were made in reliance
upon Section 4(2) of the Securities Act of 1933, as amended (the "1933 Act").
The entity and individuals listed above that purchased the unregistered
securities were existing shareholders. Officers and directors, known to the
Company and its management, through pre-existing business relationships, as a
long standing business associates. The entity was provided access to all
material information, which it requested, and all information necessary to
verify such information and was afforded access to Bedrock's management in
connection with the purchases. The purchaser of the unregistered securities
acquired such securities for investment and not with a view toward distribution,
acknowledging such intent to the Company. All certificates or agreements
representing such securities that were issued contained restrictive legends,
prohibiting further transfer of the certificates or agreements representing such
securities, without such securities either being first registered or otherwise
exempt from registration in any further resale or disposition.
Issuer Purchases of Equity Securities
Bedrock did not repurchase any shares of its common stock during the quarter
ended December 31, 2008.
19
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with our unaudited
financial statements and notes thereto included herein. In connection with, and
because we desire to take advantage of, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange Commission. Forward-looking
statements are statements not based on historical information and which relate
to future operations, strategies, financial results or other developments.
Forward looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward looking
statements made by, or on our behalf. We disclaim any obligation to update
forward-looking statements.
PLAN OF OPERATIONS
We had no operations prior to and we had no revenues during the year ended
December 31, 2008. We have minimal capital and minimal cash. We are illiquid and
need cash infusions from investors or shareholders to provide capital, or loans
from any sources.
We are an oil and gas exploration and development company focused on creating a
portfolio of North American assets, located in the central and Western United
States that exhibit consistent, predictable, and long-lived production
capabilities. We plan to build value for its shareholders through the
acquisition and development of gas and oil assets that contain proven reserves
in domestic areas where reserves can be economically produced at a low risk to
us relying on joint venture partners to supply most of the funds needed to
explore or develop these properties.
We intend to participate in oil and gas prospects located in the states of Utah,
Wyoming, Kansas, New Mexico, and Colorado. Our main emphasis will be to acquire
production or revenue generating opportunities either by lease purchase or
farmout, when available, with third parties and industry partners.
Decisions regarding future participation in exploration wells or geophysical
studies or other activities will be made on a case-by-case basis. We may, in any
particular case, decide to participate or decline participation. If
participating, we may pay our proportionate share of costs to maintain our
proportionate interest through cash flow or debt or equity financing. If
participation is declined, we may elect to farmout, non-consent, sell or
otherwise negotiate a method of cost sharing in order to maintain some
continuing interest in the prospect.
We will need substantial additional capital to support our proposed future
energy operations. We have no revenues. We have 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, we may
not be able to carry out our business plan, may never achieve sales or royalty
income, and could fail in business as a result of these uncertainties.
20
In addition, the United States and the global business community is experiencing
severe instability in the commercial and investment banking systems which is
likely to continue to have far-reaching effects on the economic activity in the
country for an indeterminable period. The long-term impact on the United States
economy and the Company's operating activities and ability to raise capital
cannot be predicted at this time, but may be substantial.
RESULTS OF OPERATIONS
For the Year Ended December 31, 2008 Compared to the Year Ended December 31,
2007
During the year ended December 31, 2008 and 2007, we did not recognize any
revenues from our business activities.
During the year ended December 31, 2008, we incurred total operating expenses of
$48,109 compared to $75,729 during the year ended December 31, 2007. The
decrease of $27,612 was a result of the $12,003 increase in professional fees
and the $28,500 decrease in service fees offset by the $3,282 increase in
general and administrative expense and the $9,601 increase in travel expenses.
The decrease in total operating expenses is a result of our efforts during the
year end December 31, 2008 to focus on the procurement of leases and farmout
agreements.
During the year ended December 31, 2008, we incurred a net loss of $48,109
compared to a net loss of $78,097 during the year ended December 31, 2007. The
decrease of $29.988 is a result of the $27,612 decrease in operational expenses
and the $2,368 decrease in other expenses.
LIQUIDITY
At December 31, 2008, we had total assets of $11,662, consisting solely of cash
of $11,662. At December 31, 2008, we had total liabilities of $13,048,
consisting of $2,368 in accounts payables, and $10,680 in loans from affiliates
and shareholders. At December 31, 2008, we had an accumulated deficit of
$392,161.
During the year ended December 31, 2008, we used net cash of $37,109 in
operational activities. During the year ended December 31, 2008, we recognized a
net loss of $48,109, which was adjusted for a non-cash activity of $11,000 in
common stock that was issued for services.
During the year ended December 31, 2008, we issued 90,000 shares of our
restricted common stock at a price of $0.10 per share in order to pay for
services totaling $9,000 of directors. We authorized the issuance of 30,000
shares of common stock to each of our three Board members in exchange for
services rendered during the year 2007 in the amount of $1,500 and during the
year 2008 in the amount of $7,500 for a total of $9,000.
During the year ended December 31, 2008, we issued 20,000 shares of our
restricted common stock at a price of $0.10 per share in order to pay for
services totaling $2,000 of a third party.
During the year ended December 31, 2007, we used net cash of $11,229 in
operational activities. During the year ended December 31, 2007, net losses of
$78,097 were adjusted for $52,500 in common stock issued for services and
$12,000 issuance of debt for services. During the year ended December 31, 2007,
accounts payable and accruals increased by $2,368.
During the years ended December 31, 2008 and 2007, we did not use or receive
cash from our investing activities.
21
During the year ended December 31, 2008, we received $30,000 from our financing
activities, which included $2,500 from related parties and $27,500 from the sale
of shares of our common stock as discussed below. During the year ended December
31, 2007, we received $30,000 from the sale of shares of our common stock as
discussed below.
On August 2, 2007, the Company authorized the sale in a private placement of
1,000,000 shares of common stock (pre-reverse stock split) at a price of $.05
per share under an exemption from registration provision of the Securities Act
of 1933. The funds have been used to pay the costs associated with its
administration and payment of professional fees to bring the Company to a fully
reporting company within compliance of the Securities Act of 1933 and 1934 and
during the three months ended September 30, 2008, the Company effectively became
a fully reporting company. During the year ended December 31, 2008, we issued
500,000 shares of our common stock for cash of $27,500 and during the year ended
December 31, 2007, we issued 600,000 shares for cash of $30,000.
We have minimal cash at December 31, 2008 and no other assets, and we will be
reliant upon shareholder loans or private placements of equity to fund any kind
of operations. We have secured no sources of loans or private placements at this
time.
Capital Resources
We have only common stock as our capital resource.
We have no material commitments for capital expenditures within the next year,
however if operations are commenced, substantial capital will be needed to pay
for participation, investigation, exploration, acquisition and working capital.
Need for Additional Financing
We do not have capital sufficient to meet our cash needs. We will have to seek
loans or equity placements to cover such cash needs. Once exploration commences,
our needs for additional financing is likely to increase substantially.
No commitments to provide additional funds have been made by our management or
other stockholders. Accordingly, there can be no assurance that any additional
funds will be available to us to allow it to cover our expenses as they may be
incurred.
CRITICAL ACCOUNTING POLICIES
Bedrock has identified the policies below as critical to its business operations
and the understanding of Tombstone's results from operations. The impact and any
associated risks related to these policies on the Company's business operations
is discussed throughout Management's Discussion and Analysis of Financial
Conditions and Results of Operations where such policies affect Bedrock's
reported and expected financial results. For a detailed discussion on the
application of these and other accounting policies, see Note 1 in the Notes to
the Financial Statements for the years ended December 31, 2008 and 2007. Note
that Bedrock's preparation of this document requires Bedrock to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of Tombstone's
financial statements, and the reported amounts of expenses during the reporting
periods. There can be no assurance that actual results will not differ from
those estimates.
22
Fair Value of Financial Instruments
The Company's financial instruments, including cash, other assets and payables
approximate fair value due to the short-term nature of those instruments.
Income Taxes
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Under the asset and
liability method of SFAS No. 109, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. Deferred tax assets and liabilities
are measured using enacted tax rates in effect for the year in which those
temporary differences are expected to be recovered or settled.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Bedrock's operations do not employ financial instruments or derivatives which
are market sensitive. Short term funds are held in non-interest bearing accounts
and funds held for longer periods are placed in interest bearing accounts. Large
amounts of funds, if available, will be distributed among multiple financial
institutions to reduce risk of loss. Our cash holdings do not generate interest
income.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The audited financial statements of Bedrock Energy, Inc. for the year ended
December 31, 2008, period from March 17, 1999 (inception) through December 31,
2008, and period from March 17, 1999 through December 31, 2007, at the end of
this document.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
The Company maintains a system of disclosure controls and procedures that are
designed for the purposes of ensuring that information required to be disclosed
in our SEC reports is recorded, processed, summarized, and reported within the
time periods specified in the SEC rules and forms, and that such information is
accumulated and communicated to our management, including the Chief Executive
Officer as appropriate to allow timely decisions regarding required disclosure.
Management, after evaluating the effectiveness of the Company's disclosure
controls and procedures as defined in Exchange Act Rules 13a-14(c) as of
December 31, 2008 (the "Evaluation Date") concluded that as of the Evaluation
Date, the Company's disclosure controls and procedures were effective to ensure
that material information relating to the Company would be made known to them by
individuals within those entities, particularly during the period in which this
annual report was being prepared and that information required to be disclosed
in our SEC reports is recorded, processed, summarized, and reported within the
time periods specified in the SEC's rules and forms.
23
ITEM 9A(T). CONTROLS AND PROCEDURES
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting for the company in accordance with as defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control
over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles. Our internal control over financial reporting includes
those policies and procedures that:
(1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of
our assets;
(2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that our receipts
and expenditures are being made only in accordance with authorizations
of our management and directors; and
(3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of our assets that
could have a material effect on our financial statements.
Management's assessment of the effectiveness of the registrant's internal
control over financial reporting is as of the year ended December 31, 2008. We
believe that internal control over financial reporting is effective. We have not
identified any, current material weaknesses considering the nature and extent of
our current operations and any risks or errors in financial reporting under
current operations.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
This annual report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit the Company to provide only management's
report in this annual report.
There was no change in our internal control over financial reporting that
occurred during the fiscal quarter ended December 31, 2008, that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
ITEM 9B. OTHER INFORMATION
Not applicable.
24
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth information as to persons who currently serve as
Bedrock's directors or executive officers, including their ages as of December
31, 2008.
Name Age Position Term
- ---------------------------- ------------------------- ---------------------------- -------------------------
W. Edward Nichols 66 President, CEO, Secretary/ Annual
and Director
Herbert T. Sears 62 Chief Financial Officer Annual
Ronald Blekicki (1) 56 Vice President Annual
(1) )Mr. Blekicki was President/CEO and a director of the Company from January
1, 2008 until March 12, 2008 and became Vice President effective March 1, 2009.
Bedrock officers are elected by the board of directors at the first meeting
after each annual meeting of Bedrock shareholders and hold office until their
successors are duly elected and qualified under Bedrock's bylaws.
The directors named above will serve until the next annual meeting of Bedrock's
stockholders. Thereafter, directors will be elected for one-year terms at the
annual stockholders' meeting. Officers will hold their positions at the pleasure
of the board of directors absent any employment agreement. There is no
arrangement or understanding between the directors and officers of Bedrock and
any other person pursuant to which any director or officer was or is to be
selected as a director or officer.
Biographical Information
Our officers are spending up to 20 hours per week on our business at this time.
At such time as the Company is financially capable of paying salaries, it is
anticipated that management will assume full time roles in the Company's
operations and be paid accordingly.
W. Edward Nichols: President, CEO, Secretary, Director and Chairman of the
Board: Mr. Nichols is currently a practicing attorney with Nichols & Nichols in
Denver, Colorado. He is authorized to practice in the states of Colorado and
Kansas, the United States Federal Courts, and Supreme Court of the United
States. He is also Managing Director of Nichols & Company LLC, a management
consulting firm and has worked as a private investment banker and consultant
with venture capital companies in the U.S. and Europe. Mr. Nichols grew up in
the oil patch and has owned and operated gas processing plants in Kansas and
Wyoming. He has also co-owned and operated oil drilling, production and gas
gathering companies in Kansas.
Herbert T. Sears: Chief Financial Officer, Treasurer and Director: Mr. Sears is
a seasoned attorney with more than thirty years of international experience
specializing in contracts, claims, and corporate restructuring. He was formerly
a Vice President and Counsel to Stone & Webster, an international multi-billion
dollar engineering and construction firm. Mr. Sears currently is the court
appointed Trustee for the Stone and Webster Liquidating Trust with
responsibility for liquidating the global assets of the former Stone & Webster
operating companies. In addition, he advises global engineering companies with
respect to their international legal activities. He has also been actively
involved in a variety of major engineering and construction projects during the
past two decades in Europe, Scandinavia, Asia and the Middle East.
25
Mr. Sears graduated from Boston University School of Management with a B.S/B.A
in International Business and earned his law degree from Washington University
School of Law.
Ronald Blekicki, Vice President: Ronald served as the President, Chief Executive
Officer and a director of the Company from January 1, 2008 through March 12,
2008. On March 1, 2009, he was appointed the Vice President of the Company.
Ronald is a results-oriented senior executive with more than 25 years of
business development and investment banking experience. He currently serves as
President and Chief Executive Officer of Hanover Financial Services (HFS), a
business development-consulting firm that he founded in 1984.
During his tenure with Hanover, Mr. Blekicki has created and directed the
development of comprehensive strategic plans supporting the application of
management systems, operating procedures, as well as the integration of and
compliance with defined performance objectives. In addition to finding financing
resources and supervising long-range planning, Hanover Financial Services
provides their clients with scalable business plans to function as an operating
public company.
Ronald has extensive experience as a negotiator. In 2000 through 2001, Ronald
was a senior vice president with a distributor and marketer of petroleum
products in the Southwestern United States.
Prior to joining Meteor Industries, Ronald spent five years in the investment
banking industry, from 1995 through the end of 2000 as a senior vice-president
involved in merger and acquisition activities, capital formation and
institutional equity sales. In 1989 through 1991, Ronald served as Chairman of
the Board for Mia International, Inc., an international commodities logistics
company. From 1987 through 1989, Ronald served as President and CEO of Franklin
Marketing Services, a financial advisory firm and a wholly owned subsidiary of
the Franklin Group. In 2002, Mr. Blekicki was sanctioned and fined by the NASD
now FINRA, for failure to disclose compensation and surrendered his license.
Ronald returned to HFS as its President and CEO in 2002 which continues to
provide business development consulting services to clients across the U.S. and
around the world in the wind, solar and energy industries, working with
management to achieve competitive positions in their respective industries.
Our officers are spending up to 20 hours per week on our business at this time.
At such time as the Company is financially capable of paying salaries, it is
anticipated that management will assume full time roles in the Company's
operations and be paid accordingly.
Committees of the Board of Directors
Bedrock is managed under the direction of its board of directors.
Executive Committee
The Company does not have a separate executive committee. The Board as a whole
functions as the Executive Committee for Bedrock.
26
Audit Committee
At this time, the Bedrock does not have an audit committee. The independent
directors of the Board of Directors serve as an informal audit committee, as
required by the Securities Exchange Act of 1934, as amended, which Bedrock
refers to as the Securities Exchange Act.
Previous "Blank Check" or "Shell" Company Involvement
Management of Bedrock has not been involved in prior private "blank-check" or
"shell" companies.
Conflicts of Interest - General.
Our directors and officers are, or may become, in their individual capacities,
officers, directors, controlling shareholder and/or partners of other entities
engaged in a variety of businesses. Thus, there exist potential conflicts of
interest including, among other things, time, efforts and corporation
opportunity, involved in participation with such other business entities. While
each officer and director of our business is engaged in business activities
outside of our business, the amount of time they devote to our business will be
up to approximately 15 hours per week.
Conflicts of Interest - Corporate Opportunities
Presently no requirement contained in our Articles of Incorporation, Bylaws, or
minutes which requires officers and directors of our business to disclose to us
business opportunities which come to their attention. Our officers and directors
do, however, have a fiduciary duty of loyalty to us to disclose to us any
business opportunities which come to their attention, in their capacity as an
officer and/or director or otherwise. Excluded from this duty would be
opportunities which the person learns about through his involvement as an
officer and director of another company. We have no intention of merging with or
acquiring an affiliate, associate person or business opportunity from any
affiliate or any client of any such person.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to officers and board
members during the fiscal years ended December 31, 2008 and 2007. The table sets
forth this information for Bedrock, including salary, bonus, and certain other
compensation to the Board members and named executive officers for the past two
fiscal years and includes all Board Members and Officers as of December 31,
2008.
SUMMARY EXECUTIVES COMPENSATION TABLE
Non-equity Non-qualified
incentive deferred
Stock Option plan compensation All other
Salary Bonus awards awards compensation earnings compensation Total
Name & Position Year ($) ($) ($) ($) ($) ($) ($) ($)
- ------------------- -------- ---------- ------- -------- -------- --------------- -------------- -------------- ------------
W. Edward
Nichols,
President,
Secretary and CEO 2008 $0 0 0 0 0 0 $3,000 $3,000
2007 $6,000 0 0 0 0 0 0 $6,000
Herbert T. Sears, 2008 $0 0 0 0 0 $3,000 $3,000
CFO
2007 $6,000 0 0 0 0 0 0 $6,000
Ronald Blekicki, 2008 $0 0 0- 0 0 0 $3,000 $3,000
Vice President (1)
2007 0 0 0 0 0 0 0 $0
27
(1) Mr. Blekicki was President/CEO from January 1, 2008 until March 12, 2008 and
became Vice President effective March 1, 2009. (2) During the year ended
December 31, 2008, the Company issued 30,000 shares of its restricted common
stock to each director for services for a total of 90,000 shares (30,000 shares
each). The shares were issued at $0.10 per share, for a total compensation
expense of $9,000 ($3,000 per director). The price per share was set by the
Company based on the price Bedrock sells it shares to the public.
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
The following table sets forth certain information concerning outstanding equity
awards held by the President and our most highly compensated executive officers
for the year ended December 31, 2008 (the "Named Executive Officers"):
Option Awards Stock awards
Equity
incentive
Equity plan
incentive Equity awards:
plan incentive Market
awards: plan or
Number of Number of Number of Number Market awards: payout
securities securities securities of value Number value of
underlying underlying underlying shares of of unearned
unexercised unexercised unexercised Option Option or shares unearned shares,
options options (#) unearned exercise expiration units of shares, units or
Name (#) unexercisable options price date of units units or others
exercisable (#) ($) stock of other rights
that stock rights that
have that that have not
not have have not vested
vested not vested ($)
(#) vested (#)
($)
- --------------- ------------ -------------- ------------ --------- ---------- -------- -------- ---------- ----------
W. Edward 0 0 0 0 0 0 0 0 0
Nichols,
President
Herbert T. 0 0 0 0 0 0 0 0 0
Sears, CFO
Ronald 0 0 0 0 0 0 0 0 0
J. Blekicki (1)
(1)Mr. Blekicki was President/CEO from January 1, 2008 until March 12, 2008 and
became Vice President effective March 1, 2009.
Employment Agreements and Termination of Employment and Change-In-Control
Arrangements
As of March 1, 2009, the Company entered into an Employment Agreement
("Employment Agreement") with W. Edward Nichols for services as President, Chief
Executive Officer and Secretary for $1,250 per month. The Employment Agreement
provides for the fees to be pre-paid by the issuance of 250,000 shares of the
Company's restricted common stock.
28
Also as of March 1, 2009, the Company entered into an Employment Agreement with
Herbert T. Sears for services as Chief Financial Officer and Treasurer for
$500per month. The Employment Agreement provides for the fees to be pre-paid by
the issuance of 100,000 shares of the Company's restricted common stock.
Both employment agreements terminate on December 31, 2009, but renew annually if
no notice of termination is given 90 days prior to the annual termination. Both
Employment Agreements provided for termination by Bedrock for cause and in the
case of a change of control. A change in control means: (a) the consummation of
a merger or consolidation of the Company with or into another entity or any
other transaction, in which the stockholders of the Company immediately after
such merger, consolidation or other transaction own or beneficially own
immediately after such merger, consolidation or other transaction less than 50
percent or more of the voting power of the outstanding securities (i) in the
continuing or surviving entity and (ii) any direct or indirect parent entity of
such continuing or surviving entity (b) the sale, transfer or other disposition
of all or substantially all of the Company's assets to a Person which is not
owned or controlled by the Company or its stockholders immediately prior to such
sale, transfer or other dispositions.
The Company has no pension, health, annuity, bonus, insurance, stock options,
profit sharing or similar benefit plans; however, the Company may adopt such
plans in the future. There are presently no personal benefits available for
directors, officers, or employees of the Company.
Compensation Committee Interlocks and Insider Participation
The Bedrock board of directors in its entirety acts as the compensation
committee for Bedrock. Mr. Nichols is the Chief Executive Officer and Chairman
of the Company.
Director Compensation
The following table sets forth certain information concerning compensation paid
to our directors for services as directors, but not including compensation for
services as officers reported in the "Summary Executives Compensation Table"
during the year ended December 31, 2008:
Non-qualified
Non-equity deferred
Fees incentive plan compensation All other
earned Stock Option compensation ($) earnings compensation Total
Name or paid awards ($) awards ($) ($) ($)
in cash ($)
($)
- ------------ ---------- ------------ --------- ----------------- ----------------- ----------------- ---------
W. Edward $ -0- $3,000(1) $ -0- $ -0- $ -0- $ -0- $3,000
Nichols
Herbert T. $ -0- $3,000(1) $ -0- $ -0- $ -0- $ -0- $3,000
Sears
Ronald J. $ -0- $3,000(1) $ -0- $ -0- $ -0- $ -0- $3,000
J. Bleckiki
29
(1) During the year ended December 31, 2008, the Company issued 30,000
shares of its restricted common stock to each director for services for
a total of 90,000 shares (30,000 shares each). The shares were issued
at $0.10 per share, for a total compensation expense of $9,000 ($3,000
per director). The price per share was set by the Company based on the
price Bedrock sells it shares to the public.
All of our officers and/or directors will continue to be active in other
companies. All officers and directors have retained the right to conduct their
own independent business interests.
It is possible that situations may arise in the future where the personal
interests of the officers and directors may conflict with our interests. Such
conflicts could include determining what portion of their working time will be
spent on our business and what portion on other business interest. To the best
ability and in the best judgment of our officers and directors, any conflicts of
interest between us and the personal interests of our officers and directors
will be resolved in a fair manner which will protect our interests. Any
transactions between us and entities affiliated with our officers and directors
will be on terms which are fair and equitable to us. Our Board of Directors
intends to continually review all corporate opportunities to further attempt to
safeguard against conflicts of interest between their business interests and our
interests.
We have no intention of merging with or acquiring an affiliate, associated
person or business opportunity from any affiliate or any client of any such
person.
Directors receive no compensation for serving.
Limitation on Liability and Indemnification
The Colorado Business Corporation Act requires us to indemnify officers and
directors for any expenses incurred by any officer or director in connection
with any actions or proceedings, whether civil, criminal, administrative, or
investigative, brought against such officer or director because of his or her
status as an officer or director, to the extent that the director or officer has
been successful on the merits or otherwise in defense of the action or
proceeding. The Colorado Business Corporation Act permits a corporation to
indemnify an officer or director, even in the absence of an agreement to do so,
for expenses incurred in connection with any action or proceeding if such
officer or director acted in good faith and in a manner in which he or she
reasonably believed to be in or not opposed to the best interests of us and such
indemnification is authorized by the stockholders, by a quorum of disinterested
directors, by independent legal counsel in a written opinion authorized by a
majority vote of a quorum of directors consisting of disinterested directors, or
by independent legal counsel in a written opinion if a quorum of disinterested
directors cannot be obtained.
The Colorado Business Corporation Act prohibits indemnification of a director or
officer if a final adjudication establishes that the officer's or director's
acts or omissions involved intentional misconduct, fraud, or a knowing violation
of the law and were material to the cause of action. Despite the foregoing
limitations on indemnification, the Colorado Business Corporation Act may permit
an officer or director to apply to the court for approval of indemnification
even if the officer or director is adjudged to have committed intentional
misconduct, fraud, or a knowing violation of the law.
The Colorado Business Corporation Act also provides that indemnification of
directors is not permitted for the unlawful payment of distributions, except for
those directors registering their dissent to the payment of the distribution.
According to our bylaws, we are authorized to indemnify our directors to the
fullest extent authorized under Colorado Law subject to certain specified
limitations.
30
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and persons controlling
us pursuant to the foregoing provisions or otherwise, we are advised that, in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
EQUITY COMPENSATION PLAN INFORMATION
The Company has not established an equity compensation plan or Incentive Stock
Option Plan.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The following table sets forth information with respect to the beneficial
ownership of Bedrock's outstanding common stock by:
o each person who is known by Bedrock to be the beneficial owner of five
percent (5%) or more of Bedrock's common stock;
o Bedrock's chief executive officer, its other executive officers, and each
director as identified in the "Management -- Executive Compensation"
section; and
o all of the Company's directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock and options, warrants
and convertible securities that are currently exercisable or convertible within
60 days of the date of this document into shares of Bedrock common stock are
deemed to be outstanding and to be beneficially owned by the person holding the
options, warrants or convertible securities for the purpose of computing the
percentage ownership of the person, but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.
31
The information below is based on the number of shares of Bedrock's common stock
that Bedrock believes was beneficially owned by each person or entity as of
December 31, 2008.
Title of Class Name and Address of Amount and Percent of Class(2)
Beneficial Owner Nature of
Beneficial Owner
- -------------------- ----------------------------- ------------------ ---------------------
Common shares Susan Blekicki (1)(3) 305,000 11.98%
Common shares Ronald Blekicki (1)(4) 25,000 0.98%
Common shares Brian Healey (1) 242,310 9.5%
Common shares Michael A. Littman 250,000 9.8%
Common shares W. Edward Nichols (1)(5) 478,554 18.77%
Common shares Herbert T. Sears (1)(6) 466,578 18.33%
------------------
TOTAL (3 1,517,442,494 59%
individuals)
(1) Address is c/o Bedrock Energy, Inc., 8950 Scenic Pine Drive, Suite 100,
Parker, Colorado 80134.
(2) Based on 2,545,524 shares of common stock issued and outstanding on
December 31, 2008.
(3) Wife of Ronald Blekicki, Vice President. Ms. Blekicki owns 305,000 shares,
directly and 25,000 shares indirectly through her husband, Mr. Blekicki.
(4) Mr. Blekicki owns 25,000 shares directly and 305,000 shares indirectly
through his wife.
(5) Mr. Nichols owns 361,995 shares of common stock directly, 17,596 shares of
common stock jointly with his wife and 98,963 shares indirectly through his
wife.
(6) Mr. Sears owns 405,469 shares of common stock directly, 59,784 shares
indirectly through his wife and 1,325 shares indirectly through family
trusts
Rule 13d-3 under the Securities Exchange Act of 1934 governs the determination
of beneficial ownership of securities. That rule provides that a beneficial
owner of a security includes any person who directly or indirectly has or shares
voting power and/or investment power with respect to such security. Rule 13d-3
also provides that a beneficial owner of a security includes any person who has
the right to acquire beneficial ownership of such security within sixty days,
including through the exercise of any option, warrant or conversion of a
security. Any securities not outstanding which are subject to such options,
warrants or conversion privileges are deemed to be outstanding for the purpose
of computing the percentage of outstanding securities of the class owned by such
person. Those securities are not deemed to be outstanding for the purpose of
computing the percentage of the class owned by any other person. Included in
this table are only those derivative securities with exercise prices that
Bedrock believes have a reasonable likelihood of being "in the money" within the
next sixty days.
32
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 24, 2009, Bedrock entered into an Advisory and Consulting Agreement
with Hanover Financial Services, Inc.(Hanover) The Advisory and Consulting
Agreement has a term of 6 months and will renew with notice from Bedrock. The
Agreement provides for Hanover to provide business development consulting
services to the Company in the following areas: mineral interest acquisitions
for exploration and development, and in the implementation of debt and equity
funding programs. In return for such services, Bedrock has agreed to pay Hanover
a monthly fee of $5,000 to be paid in the form of 100,000 shares of the
Company's restricted common stock. Mr. Bleckiki, an officer of the Company is
the Chief Executive Officer of Hanover.
During the years ended December 31, 2007 and December 31, 2008, the following
directors of Bedrock received shares in the amounts set forth below:
Number of Shares $ Value of Shares
---------------- -----------------
December 31, 2007
W. Edward Nichols 321,754 $16,088
Herbert T. Sears 260,000 $13,000
Number of Shares $ Value of Shares
---------------- -----------------
December 31, 2008
W. Edward Nichols 30,000 $3,000
Herbert T. Sears 30,000 $3,000
Ron Blekicki 30,000 $3,000
On December 29, 2008, an officer loaned the Company $2,500 and the Company
issued an unsecured seven (7%) percent promissory note with principal and all
accrued and unpaid interest due and payable on December 29, 2009. Therefore, as
of December 31, 2008 and 2007, the Company owes the officers a total of $6,930
and $4,430 respectively plus as of December 31, 2008 and 2007, a total of $2,368
in accrued interest on the below Notes.
During the years ended December 31, 2007 and 2006, two officers of Bedrock each
earned for services rendered fees in the amount of $6,000 and $18,000
respectively and these fees were recorded as accounts payable. Thus, as of April
30, 2007, the Company had an accounts payable balance of $84,000 or a total of
$42,000 per officer. Subsequently, the Company issued promissory notes dated May
1, 2007 to each of its two officers in exchange for payment of these accounts
payable as of April 30, 2007 in the amount of $42,000 for a total of $84,000 in
Notes (the "Notes"). Each of these seven percent (7%) unsecured convertible
Notes due April 30, 2008 could be converted into shares of common stock at the
rate of ten (10) shares for each dollar of principal converted. Thereafter, on
September 24, 2007, the Company and the officers mutually agreed pursuant to the
terms of the Notes to issue 840,000 shares of common stock in exchange for
payment of the $84,000 in Notes.
33
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
GENERAL. Larry O'Donnell, CPA, P.C. ("O'Donnell") is the Company's principal
auditing accountant firm. The Company's Board of Directors has considered
whether the provisions of audit services are compatible with maintaining
O'Donnell's independence.
The following table represents aggregate fees billed to the Company for the
years ended December 31, 2008 and December 31, 2007 by Larry O'Donnell, CPA,
P.C.
Year Ended December 31,
2008 2007
----------------------------- ----------------------------
Audit Fees $3,200 $0
Audit-related Fees $ 750 $0
Tax Fees $0 $0
All Other Fees $0 $0
----------------------------- ----------------------------
Total Fees $3,950 $0
All audit work was performed by the auditors' full time employees.
34
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The following is a complete list of exhibits filed as part of this Form 10K.
Exhibit number corresponds to the numbers in the Exhibit table of Item 601 of
Regulation S-K.
(a) Audited financial statements for years ended December 31, 2008 and 2007
(b) Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation (1)
3.2 Amended Articles of Incorporation (1)
3.7 Bylaws of Bedrock Energy, Inc. (1)
10.1 Farmout Agreement with Sun River Energy, Inc. (1) Cancelled
10.2 BLM Lease (2)
10.3 Advisory and Consulting Agreement with Hanover Financial
Services, January 24, 2009
10.4 Employment Agreement with Edward Nichols, dated March 1,
2009(2)
10.5 Employment Agreement with Herbert Sears, dated March 1,
2009 (2)
31.1 Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act (2)
31.2 Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act (2)
32.1 Certification of Principal Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act (2)
32.2 Certification of Principal Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act (2)
(1) Incorporated by reference from the exhibits included in the Company's
S-1 Registration Statement filed with the Securities and Exchange
Commission (www.sec.gov), on June 3, 2008. A copy can be provided by
mail, free of charge, by sending a written request to Bedrock Energy,
Inc., 8950 Scenic Pine Drive, Suite 100, Parker, Colorado 80134.
(2) Filed herewith.
35
Larry O'Donnell, CPA, P.C.
Telephone (303) 745-4545 2228 South Fraser Street
Fax (303)369-9384 Unit I
Email larryodonnellcpa@msn.com Aurora, Colorado 80014
www.larryodonnellcpa.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Bedrock Energy, Inc.
I have audited the accompanying balance sheets of Bedrock Energy, Inc. as of
December 31, 2008 and 2007, and the related statements of operations, changes in
stockholders' equity and cash flows for each of the years then ended and for the
period from inception February 28, 1997 to December 31, 2008. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audits.
I conducted my audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit 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. I believe that my audits provide a reasonable
basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Bedrock Energy, Inc. as of December
31, 2008 and 2007, and the results of its operations and their cash flows for
each of the years then ended and for the period from inception March 17, 1999 to
December 31, 2008, in conformity with generally accepted accounting principles
in the United States of America.
/s/Larry O'Donnell
- --------------------------
Larry O'Donnell, CPA, P.C.
March 19, 2008
F-1
BEDROCK ENERGY, INC.
(A Development Stage Company)
BALANCE SHEETS
December 31,
2008 2007
------------- ------------
ASSETS
CURRENT ASSETS:
Cash in Bank $ 11,662 $ 18,771
------------- -----------
TOTAL ASSETS $ 11,662 $ 18,771
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable $ 2,368 $ 2,368
Loan from Affiliates 3,750 3,750
Loan from Shareholders 6,930 4,430
------------- ------------
Total Current Liabilities 13,048 10,548
------------- ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' (DEFICIT) EQUITY:
Preferred shares, no par value, non voting: 10,000,000
shares authorized; no shares issued and outstanding - -
Common shares, $.001 par value, voting: 200,000,000
shares authorized; 2,845,524 and 2,235,524 issued 2,845 2,235
and outstanding, respectively
Additional paid in capital 387,930 350,040
Deficit accumulated during the development stage (392,161) (344,052)
------------- ------------
Total Shareholders' (Deficit) Equity (1,386) 8,223
------------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY $ 11,662 $ 18,771
============= ============
The accompanying notes are an integral part of these statements.
F-2
BEDROCK ENERGY, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
Period From
(Inception)
For the Years Ended March 17, 1999
December 31, through
2008 2007 December 31, 2008
----------------------- ----------------------- ----------------------
OPERATING EXPENSES:
Salaries and related expenses $ - $ - $ 112,128
Professional fees 24,053 36,056 89,283
Rent - - 3,801
Service fees 11,000 39,500 182,275
Travel 9,601 - 33,196
General and administrative 3,455 173 31,619
----------------------- ----------------------- ----------------------
Total Operating Expenses 48,109 75,729 452,302
----------------------- ----------------------- ----------------------
Operating loss (48,109) (75,729) (452,302)
OTHER INCOME (EXPENSES):
Other Income (Expenses), net - (2,368) 60,141
----------------------- ----------------------- ----------------------
NET LOSS
BEFORE INCOME TAXES (48,109) (78,097) (392,161)
Provision for income taxes - - -
----------------------- ----------------------- ----------------------
NET LOSS $ (48,109) $ (78,097) $ (392,161)
======================= ======================= ======================
Basic and diluted
(loss) per common share $ (0.02) $ (0.06)
======================= =======================
Basic and diluted
weighted-average number
of common shares outstanding 2,467,511 1,207,832
======================= =======================
The accompanying notes are an integral part of these statements.
F-3
BEDROCK ENERGY, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN SHAREHOLDERS' (DEFICIT) EQUITY From
(Inception) March 17, 1999 through December 31, 2008
Common Shares Preferred Shares Additional
$.001 Par Value No Par Value Paid-in
Shares Amount Shares Amount Capital
----------------------------- ------------------------------ ------------
BALANCES, Inception, March 17, 1999 $ - - - $ - $ -
Issuance of shares for services and cash 950,706 950 - - 43,825
Net loss - - - - -
----------------------------- ------------------ ---------- ------------
BALANCES, December 31, 1999 950,706 950 - - 43,825
Issuance of shares for debt, services and cash 39,818 40 - - 140,960
Net loss - - - - -
----------------------------- ------------------ ---------- ------------
BALANCES, December 31, 2000 990,524 990 - - 184,785
Net income - - - - -
----------------------------- ------------------ ---------- ------------
BALANCES, December 31, 2001 990,524 990 - - 184,785
Net income - - - - -
----------------------------- ------------------ ---------- ------------
BALANCES, December 31, 2002 990,524 990 - - 184,785
Net loss - - - - -
----------------------------- ------------------ ---------- ------------
BALANCES, December 31, 2003 990,524 990 - - 184,785
Net loss - - - - -
----------------------------- ------------------ ---------- ------------
BALANCES, December 31, 2004 990,524 990 - - 184,785
Net loss - - - - -
----------------------------- ------------------ ---------- ------------
BALANCES, December 31, 2005 990,524 990 - - 184,785
Net loss - - - - -
----------------------------- ------------------ ---------- ------------
BALANCES, December 31, 2006 990,524 990 - - 184,785
Issuance of shares for debt, services and cash 1,245,000 1,245 - - 165,255
Net loss - - - - -
----------------------------- ------------------ ---------- ------------
BALANCES, December 31, 2007 2,235,524 2,235 - - 350,040
Issuance of shares for services and cash 610,000 610 - - 37,890
Net loss - - - - -
----------------------------- ------------------ ---------- ------------
BALANCES, December 31, 2008 2,845,524 $ 2,845 - $ $ 387,930
================= ========== ================== ========================
The accompanying notes are an integral part of these statements.
F-4
BEDROCK ENERGY, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN SHAREHOLDERS' (DEFICIT) EQUITY From
(Inception) March 17, 1999 through December 31, 2008
Total
Shareholders'
Equity
Deficit (Deficit)
------------ ----------------
BALANCES, Inception, March 17, 1999 $ - $ -
Issuance of shares for services and cash - 44,775
Net loss (29,784) (29,784)
------------ ----------------
BALANCES, December 31, 1999 (29,784) 14,991
Issuance of shares for debt, services and cash - 141,000
Net loss (215,994) (215,994)
------------ ----------------
BALANCES, December 31, 2000 (245,778) (60,003)
Net income 9,233 9,233
------------ ----------------
BALANCES, December 31, 2001 (236,545) (50,770)
Net income 49,137 49,137
------------ ----------------
BALANCES, December 31, 2002 (187,408) (1,633)
Net loss (890) (890)
------------ ----------------
BALANCES, December 31, 2003 (188,298) (2,523)
Net loss (5,657) (5,657)
------------ ----------------
BALANCES, December 31, 2004 (193,955) (8,180)
Net loss (36,000) (36,000)
------------ ----------------
BALANCES, December 31, 2005 (229,955) (44,180)
Net loss (36,000) (36,000)
------------ ----------------
BALANCES, December 31, 2006 (265,955) (80,180)
Issuance of shares for debt, services and cash - 166,500
Net loss (78,097) (78,097)
------------ ----------------
BALANCES, December 31, 2007 (344,052) 8,223
Issuance of shares for services and cash - 38,500
Net loss (48,109) (48,109)
------------ ----------------
BALANCES, December 31, 2008 $(392,161) $ (1,386)
============ ================
The accompanying notes are an integral part of these statements.
F-5
BEDROCK ENERGY, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
Period From
(Inception)
For the Years Ended March 17, 1999
December 31, Through
2008 2007 December 31, 2008
-------------------- -------------------- ---------------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $ (48,109) $ (78,097) $ (392,161)
Adjustments to reconcile net loss to net cash
used in operating activities:
Issuance of common shares for services 11,000 52,500 123,275
Issuance of debt for services - 12,000 12,000
Debt forgiveness - - (62,509)
Increase in accounts payable and accruals - 2,368 125,945
--------------------------------------------- ---------------------
Net cash used in operating activities (37,109) (11,229) (193,450)
-------------------- -------------------- ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party payable 2,500 - 21,612
Sale of common shares 27,500 30,000 183,500
-------------------- -------------------- ---------------------
Net cash provided by financing activities 30,000 30,000 205,112
-------------------- -------------------- ---------------------
NET (DECREASE) INCREASE IN CASH (7,109) 18,771 11,662
CASH, BEGINNING OF PERIOD 18,771 - -
-------------------- -------------------- ---------------------
CASH, END OF PERIOD $ 11,662 $ 18,771 $ 11,662
==================== ==================== =====================
NONCASH ACTIVITIES:
Issuance of common shares for debt $ - $ 84,000 $ 84,000
==================== ==================== =====================
The accompanying notes are an integral part of these statements.
F-6
BEDROCK ENERGY, INC.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company was incorporated in Colorado on August 11, 2004 with its name
changed to Bedrock Energy, Inc. on October 18, 2007 from CellTouch, Inc.
Enviromart.com, Inc. was incorporated in New Hampshire in March of 1999. On
September 21, 2004 CellTouch, Inc. and Enviromart.com, Inc. (collectively the
"Company") were merged under the laws of the State of Colorado and CellTouch,
Inc. became the surviving entity. The Company has been in the development stage
since its inception. Activities through December 31, 2008 include the raising of
equity capital and the formation of a previous business plan to sell
environmental products over the Internet as well as the current business plan to
merge with or acquire and develop assets from a company in the oil and gas
industry.
Statement of Cash Flows
For purposes of the statements of cash flows, cash includes deposits in
commercial bank accounts.
Income Taxes
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Under the asset and
liability method of SFAS No. 109, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. Deferred tax assets and liabilities
are measured using enacted tax rates in effect for the year in which those
temporary differences are expected to be recovered or settled.
Income Per Share
Income per share requires presentation of both basic and diluted income per
common share. Common share equivalents are not included in the weighted average
calculation since their effect would be anti-dilutive.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect the reported amount of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates,
and such differences may be material to the financial statements.
F-7
BEDROCK ENERGY, INC.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair Value of Financial Instruments
The Company's financial instruments, including cash, other assets and payables
approximate fair value due to the short-term nature of those instruments.
NOTE 2 - SHAREHOLDERS' EQUITY
Common Share
The Company is authorized to issue 200,000,000 shares of $.001 voting common
stock. Effective March 24, 2008 the Company, as a result of shareholder
approval, implemented a one for two share reverse stock split and therefore as
of December 31, 2008 and 2007 there were a total of 2,845,524 and 2,235,524
shares of common stock issued and outstanding respectively.
Included in the 610,000 shares issued during 2008 are 200,000 shares sold as
part of a private placement as noted below for $20,000 or at $.10 per share,
110,000 shares issued for consulting services valued at $11,000 or at $.10 per
share and 300,000 shares sold to officers for $7,500 or $.025 per share.
Further, included in the 110,000 shares issued for consulting services are
90,000 shares issued to officers and directors at a value of $9,000 or $.10 per
share (See Note 3).
There were a total of 2,490,000 shares of common stock issued during the year
ended December 31, 2007 Included in the 2,490,000 shares are 600,000 shares sold
as part of a private placement as noted below for $30,000 at $.05 per share,
1,050,000 shares issued for consulting services valued at $52,500 or $.05 per
share and 840,000 shares issued as payment of debt in the amount of $84,000 (See
Note 3).
On August 2, 2007, the Company authorized the sale in a private placement of
1,000,000 shares of common stock (pre-reverse stock split) at a price of $.05
per share under an exemption from registration provision of the Securities Act
of 1933. The funds have been used to pay the costs associated with its
administration and payment of professional fees to bring the Company to a fully
reporting company within compliance of the Securities Act of 1933 and 1934 and
during the year ended December 31, 2008 the Company effectively became a fully
reporting company. As of December 31, 2008 and 2007, the Company sold a total of
900,000 and 600,000 shares of common stock respectively (pre reverse stock
split) as part of this private placement for a total of $45,000 and $30,000
respectively in cash.
Preferred Share
The Company is authorized to issue 10,000,000 shares of no par value preferred
stock. As of December 31, 2008 and 2007, the Company has no shares issued and
outstanding.
F-8
BEDROCK ENERGY, INC.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - RELATED PARTY TRANSACTIONS
On December 29, 2008, an officer loaned the Company $2,500 and the Company
issued an unsecured seven (7%) percent promissory note with principal and all
accrued and unpaid interest due and payable on December 29, 2009. Therefore, as
of December 31, 2008 and 2007, the Company owes the officers a total of $6,930
and $4,430 respectively plus as of December 31, 2008 and 2007 a total of $2,368
in accrued interest on the below Notes.
In addition, during the year ended December 31, 2008, the Company issued 30,000
shares of common stock respectively to each of its three Board members for a
total of 90,000 shares of common stock in exchange for services rendered during
the year ended December 31, 2008 in the amount of $2,500 per Board member and
during the year ended December 31, 2007 in the amount of $500 per Board member
for a total value of $9,000 or $.10 per share.
During the years ended December 31, 2007 and 2006 two officers of the Company
each earned for services rendered fees in the amount of $6,000 and $18,000
respectively and these fees were recorded as accounts payable. Thus, as of April
30, 2007, the Company had an accounts payable balance of $84,000 or a total of
$42,000 per officer. Subsequently, the Company issued promissory notes dated May
1, 2007 to each of its two officers in exchange for payment of these accounts
payable as of April 30, 2007 in the amount of $42,000 for a total of $84,000 in
Notes (the "Notes"). Each of these seven percent (7%) unsecured convertible
Notes due April 30, 2008 could be converted into shares of common stock at the
rate of ten (10) shares for each dollar of principal converted. Thereafter, on
September 24, 2007, the Company and the officers mutually agreed pursuant to the
terms of the Notes to issue 840,000 shares of common stock in exchange for
payment of the $84,000 in Notes.
NOTE 4 - INCOME TAXES
As of December 31, 2008 and 2007, the Company had net operating loss
carryforwards for income tax and financial reporting purposes of approximately
$306,000 and $258,000, respectively, expiring in the years 2014 through 2028.
The deferred tax assets that result from such operating loss carryforwards of
approximately $92,000 and $78,000 at December 31, 2008 and 2007, respectively
have been fully reserved for in the accompanying financial statements. During
the years ended December 31, 2008 and 2007, the valuation allowance established
against the net operating loss carryforwards increased by $14,000 and $23,000,
respectively.
NOTE 5 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONTINGENCIES
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company has suffered recurring losses from
operations that raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans in this regard are to raise capital
through the issuance of common shares as well as seek a merger partner. The
accompanying financial statement do not include any adjustments relating to the
recovery and classification of recorded asset amounts or the amount and
classification of liabilities that might be necessary should the Company
discontinue operations.
F-9
BEDROCK ENERGY, INC.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - RECENT ACCOUNTING PRONOUCEMENTS
There are no new accounting pronouncements affecting the Company during the
years ended December 31, 2008 and 2007.
NOTE 7 - SUBSEQUENT EVENTS
On January 24, 2009, the Company entered in to a six month agreement with a
consulting service whereby the company will be provided certain services in
exchange for a monthly consulting fee of $5,000 which monthly fee will be paid
in the form of 100,000 shares of the Company's common stock or $.05 per share.
On February 12, 2009, the Company purchased a ten year lease on 240 acres
located in Morgan County Colorado from the Bureau of Land Management for $1,120
and the Company intends to develop this oil and gas acreage.
The Company entered into a ten month services agreement effective March 1, 2009
with both of its officers at the rate of $12,500 and $5,000 for the ten month
period respectively whereby the Company agreed to issue upon execution of the
agreement 250,000 and 100,000 shares of its common stock respectively at a value
of $.05 per share.
F-10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Bedrock Energy, Inc.
Dated: March 30, 2009
By: /s/ W. Edward Nichols
---------------------------------------------
W. Edward Nichols,
President, Chief Executive Officer,
Secretary/ and Chairman
By: /s/ Herbert T. Sears
---------------------------------------------
Chief Financial Officer, Treasurer and
Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Dated: March 30, 2009
Bedrock Energy, Inc.
/s/ W. Edward Nichols
----------------------------------------------------
W. Edward Nichols, President, Chief Executive
Officer, Secretary and Chairman
/s/ Herbert T. Sears
----------------------------------------------------
Herbert T. Sears, Chief Financial Officer,
Treasurer and Director
36