U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
Securities Exchange Act of 1934
May 18, 2006
Date of report (Date of earliest reported event)
Commission File Number 0-51414
LUCAS ENERGY, INC.
(Name of small business issuer in its charter)
Nevada 98-0417780
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
520 S. El Camino Real
Suite #432
San Mateo, CA 94402
(Address of principal executive offices)
(650) 343-4535
(Telephone number, including area code)
James J. Cerna, Jr.
520 S. El Camino Real
Suite #432
San Mateo, CA 94402
Phone: (650) 343-4535 Fax: (650) 240-0259
(Name, address and telephone number of agent for service)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
This report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended. These forward-looking statements are based on current
expectations, estimates and projections about our industry, management's
beliefs, and assumptions made by management. Words such as "anticipates,"
"expects," "intends," "plans," "believes," "seeks," "estimates," variations of
such words and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and are
subject to certain risks, uncertainties and assumptions that are difficult to
predict. Accordingly, actual results may differ materially from those expressed
or forecasted in any such forward-looking statements. Such risks and
uncertainties include those risk factors set forth in this report. We assume no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
INFORMATION TO BE INCLUDED IN THE REPORT
SECTION 1 - REGISTRANT'S BUSINESS AND OPERATIONS
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On May 19, 2006, Lucas Energy, Inc., formerly known as, Panorama Investments,
Corp. (the "Company" or "Lucas Energy") entered into an Acquisition and Share
Exchange Agreement (the "Acquisition Agreement"), pursuant to which the Company
has acquired, through an exchange transaction, all of the issued and outstanding
capital stock of privately held, Lucas Energy Resources, Inc., formerly known as
Lucas Energy, Inc. ("Lucas Energy Resources"), from Lucas Energy Resources'
shareholders. Lucas Energy is an independent oil and gas company that is
building a diversified portfolio of oil and gas assets in the United States. The
transaction was contingent upon the satisfaction of certain circumstances,
including the issuance and transfer of certain Lucas Energy shares to the former
Lucas Energy Resources shareholders and completion of certain corporate actions
by both companies and their shareholders. The terms of the Acquisition Agreement
were satisfied and the transaction was completed on June 16, 2006. In
conjunction with the transaction, Lucas Energy, Inc., has Amended its Articles
of Incorporation to change the Company's name, has forward split it common stock
on a 2.4 to 1 ratio, and has changed its trading symbol on the OTC-BB to "LUCE".
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The terms of the Acquisition Agreement required that of all of the Lucas Energy
Resources shareholders agree to exchange their shares, including preferred and
common classes, for an aggregate of 21,800,011 (forward split adjusted) Lucas
Energy common shares in a specified Closing Transaction which occurred Tuesday,
June 13, 2006. The transaction required transfer of 2,640,000 outstanding
"control" shares to Lucas Energy Resources' private shareholders and required
the issuance of an additional 19,160,011 shares to Lucas Energy Resources'
private shareholders, for a total new issuance relating to the transaction of
21,800,011 common shares.
On May 31, 2006, Lucas Energy, Inc., filed a Preliminary Information Statement
with the Securities and Exchange Commission and delivered the information to its
shareholders. Majority shareholder approval of the transaction was obtained and
the Company implemented the terms of the Acquisition Agreement. Similarly, a
majority of the private company shareholders approved the transaction by written
consent and each Lucas Energy Resources shareholder executed the Acquisition
Agreement and subscribed for the Lucas Energy shares.
As previously disclosed, on June 12, 2006, Lucas Energy, implemented a forward
split of all issued and outstanding common shares on a 2.4 for 1 ratio.
ITEM 1.02 TERMINATION OF MATERIAL DEFINITIVE AGREEMENT.
In conjunction with the Company's change of business and the Acquisition
Agreement, Lucas Energy has terminated its existing agreement previously
disclosed as Exhibit 10.1 to the Company's Annual Report for the fiscal year
ending November 30, 2005, as filed with the Securities and Exchange Commission
on February 14, 2006. The termination is effective as of June 12, 2006. This
agreement was between the Company and a service provider and vendor. The Company
did not generate significant revenues from the agreement. We do not believe that
there will be any adverse effects relating to the termination and there are no
early termination penalties relating to the agreement.
SECTION 2 - FINANCIAL INFORMATION
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
Effective on June 12, 2006, the Company acquired all of the issued and
outstanding capital stock of Lucas Energy Resources, Inc. ("LEI"), a privately
held Nevada corporation, in a share exchange transaction. LEI became a
wholly-owned operating subsidiary of the Company. LEI is an independent oil and
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gas company that is building a diversified portfolio of oil and gas assets in
the United States. A copy of the Share Exchange and Acquisition Agreement was
filed as an exhibit to the Company's Preliminary Information Statement filed
with the Securities and Exchange Commission on May 31, 2006, and is incorporated
into this report by this reference.
LEI, prior to the acquisition by Lucas Energy, had 19 shareholders of record
holding two classes of LEI securities, common and preferred shares. On June 12,
2006, all of the issued and outstanding shares of LEI were exchanged for an
aggregate of 21,800,011 Lucas Energy shares, including 2,640,000 shares held by
Lucas Energy's former controlling shareholders, officers and directors. The
Company issued a total of 19,160,011 new shares of Lucas Energy common stock in
exchange for all of the LEI shares. No material relationship exists between the
Company's former controlling shareholders and management and the source of funds
and consideration for the acquisition transaction.
ITEM 2.01(f) DISCLOSURES.
2.01(f) PART I, ITEM 1. - DESCRIPTION OF BUSINESS.
The Company was incorporated on December 16, 2003 under the name, Panorama
Investments, Corp. We filed a Form 10-SB Registration Statement on May 5, 2005
and subsequently had our securities listed on the OTC-Bulletin Board. Since
inception and throughout our fully reporting history with the Securities and
Exchange Commission, we have been a development stage company with very limited
business operations. We have not generated significant revenues and have
incurred net operating losses.
Prior to effectiveness of the Share Exchange and Acquisition Agreement, the
Company was engaged in the retail apparel and accessories business, which
operated at a net loss and generated nominal revenues. In response to changing
market conditions and the desire to maximize shareholder value, the Company's
management decided to consider options, including a reverse-merger transaction
with an operating company. Eventually, the Board of Directors was presented with
a suitable offer which was submitted to and approved by the Company's
shareholders. On May 23, 2006, we entered into the Share Exchange and
Acquisition Agreement, which was subject to several conditions precedent, all of
which were satisfied, and the transaction closed on June 12, 2006. On June 9,
2006, we changed our name from Panorama Investments Corp., to Lucas Energy,
Inc., to reflect the new business operations. As a result of the transaction, we
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ceased operating our retail apparel and accessory business and commenced
consolidated operations as Lucas Energy, Inc.
Our business is now conducted through a wholly-owned operating subsidiary, Lucas
Energy Resources, Inc., which was incorporated on April 6, 2005 in Nevada. Lucas
Energy, Inc., is the sole shareholder of Lucas Energy Resources, Inc., and the
combined business operations are consolidated into the current parent holding
company and operating subsidiary structure called for in the Share Exchange and
Acquisition Agreement.
Lucas Energy, Inc.'s principal office is located at 3000 Richmond Avenue, Suite
400 Houston, Texas 77040 Phone: (713) 528-1881. We also maintain an executive
office at 520 South El Camino Real #423 San Mateo, California 94402, Phone:
(650) 343-4535 Lucas Energy's subsidiary has been granted a Certificate of
Authority to transact business in the state of Texas and is a bonded operator
with the Texas Railroad Commission.
Lucas Energy, Inc., through its consolidated operations, is an independent oil
and gas company that is building a diversified portfolio of valuable oil and gas
assets in the United States. We are focused on identifying underperforming oil
and gas assets which we believe will continue to increase in value over time
based on the definitive limit to world petroleum reserves and steadily rising
petroleum and gas prices.
Lucas Energy Resources began business in 2004 when our founders began
identifying underdeveloped oil and gas operations that we believed had
significant upside potential. In May of 2005, the Company completed its due
diligence and acquired a 100% working interest in two unit wells (670.43 acres)
located in the Pilgrim Field, in Gonzales County, Texas. In August of that year,
we acquired a 100% working interest in the Green field lease in Baylor County,
Texas. This lease consists of 880.7 acres and has two producing wells. In
September 2005, the Company purchased a 100% working interest in the 1100+ acre
Bracero field in Zavala, Texas. The company made slight improvements to the
property and sold it in May of 2006 at a significant profit. In March of 2006 ,
the company completed an acquisition and improvement program of the Wright #1, a
160 acre lease in Gonzales, Texas. We are currently conducting due diligence on
several other high value opportunities.
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Lucas Energy, Inc. acquired a 100% working interest in two unit wells located in
the Pilgrim Field, Gonzales County, Texas. The wells are in two pooled units
consisting of several leases. Ultimately, the net revenue interest to be
acquired should be better than 80%. The acquisition concluded in May 2005. The
Gonzales County wells produce from the Austin Chalk formation. Both wells have
lateral extensions penetrating the Austin Chalk formation in a horizontal
manner. These wells have produced an average of 200,000 barrels of oil each
since they were drilled.
The Bracero Transportation Co lease was acquired by Lucas Energy Resources,
Inc., effective September, 2005. The lease is approximately 640 acres plus some
acreage in an adjoining section. There are three producing wells on the lease
and one salt water disposal well. There are, also, three shut in wells on the
lease. The lease makes an average of 15-16 BOPD from the three wells. The
production is from three different intervals and is reported to the Railroad
Commission of Texas under three different field names. The production depth is
less than 4000 feet with a structural trap caused by a Serpentine Plug uplifted
through the intervals.
Lucas Energy Resources, Inc., acquired the Green lease, Baylor County, Texas
effective September 1, 2005. The lease has two producing wells. Production is
from the Palo Pinto formation. The wells are approximately 3000 feet in depth
and produce from shallow intervals. The Company is considering a workover of one
or both wells to increase production.
RISK FACTORS
RISKS INHERENT IN A NEW START-UP COMPANY
LACK OF PROFITABILITY/LIMITED OPERATING HISTORY. The Company itself has a
limited operating history. Businesses which are starting up or in their initial
stages of development present substantial business and financial risks and may
suffer significant losses from which they cannot recover. The Company will face
all of the challenges of a new business enterprise, including but not limited
to, locating suitable office space, engaging the services of qualified support
personnel and consultants, establishing budgets and implementing appropriate
financial controls and internal operating policies and procedures. The Company
will need to attract and retain a number of key employees and other service
personnel. Further, there is no assurance that the Company will be able to
successfully continue its operations or that it will ever operate profitably.
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LIMITED CAPITAL/NEED FOR ADDITIONAL CAPITAL. The Company presently has limited
operating capital and is dependent upon additional financing and capital raising
efforts to continue expansion and marketing. The amount of capital available to
the Company is limited, and may not be sufficient to enable the Company to fully
continue its business operations without additional fund raising. Additional
financing may be required to meet the Company's objectives and provide more
working capital for expanding its development and marketing capabilities and to
achieve the Company's ultimate plan of expansion and full scale of operations.
There can be no assurance that the Company will be able to obtain such financing
on attractive terms, if at all. The Company has no firm commitments for
additional cash funding beyond the proceeds of the recently completed private
placement.
NO DIVIDENDS. The Company does not currently intend to pay cash dividends on its
common stock and does not anticipate paying any dividends at any time in the
foreseeable future. At present, the Company will follow a policy of retaining
all of its earnings, if any, to finance development and expansion of its
business.
LIMITED LIABILITY OF OFFICERS AND DIRECTORS. The Company has adopted provisions
in its Articles of Incorporation and Bylaws which limit the liability of its
officers and directors and provide for indemnification by the Company of its
officers and directors to the full extent permitted by Nevada corporate law. The
Company's articles generally provide that its officers and directors shall have
no personal liability to the Company or its stockholders for monetary damages
for breaches of their fiduciary duties as directors, except for breaches of
their duties of loyalty, acts or omissions not in good faith or which involve
intentional misconduct or knowing violation of law, acts involving unlawful
payment of dividends or unlawful stock purchases or redemptions, or any
transaction from which a director derives an improper personal benefit. Such
provisions substantially limit the shareholders' ability to hold officers and
directors liable for breaches of fiduciary duty, and may require the Company to
indemnify its officers and directors.
Insofar as indemnification for liability arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Company of expenses incurred or paid by a director, officer or controlling
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person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being offered, the Company will, unless in the
opinion of its counsel, the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
RISKS RELATED TO THE NATURE OF THE PROPOSED BUSINESS
COMPETITION. The Company will be competing against other energy companies, some
of which have considerably greater resources and abilities. These competitors
may have greater marketing and sales capacity, established distribution
networks, significant goodwill and global name recognition.
DEPENDENCE ON THE EFFORTS OF MANAGEMENT. The success of the Company will depend
to a significant degree upon the involvement of its management, who will be in
charge of the Company's strategic planning and operations. The officers and
directors have experience in the oil & gas industry, which will be essential to
the Company's success. However, the Company may need to attract and retain
additional talented individuals in order to carry out its business objectives.
The competition for such persons could be intense and there are no assurances
that these individuals will be available to the Company.
REGULATORY COMPLIANCE. As many of the Company's planned activities will be
subject to federal, state and local regulation, and as these rules are subject
to constant change or amendment, there can be no assurance that the Company's
operations will not be adversely affected by new or different government
regulations, laws or court decisions applicable to the Company's operations.
RISKS RELATED TO THE SECURITIES MARKETS
UNCERTAIN PUBLIC MARKET FOR SHARES. At present, there is an extremely limited
marketplace for the Company's common stock. There is no assurance as to the
depth or liquidity of any such market or the prices at which holders may be able
to sell the securities. An investment in the Shares may be totally illiquid and
investors may not be able to liquidate their investment readily or at all when
the need or desire to sell arises. Furthermore, the Shares are not marginable,
will not be marginable in the near future and it is unlikely that a lending
institution would accept the Company's common stock as collateral for a loan.
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VOLATILITY OF STOCK PRICE. If a public market does develop for the Shares that
would result from conversion, many factors will influence the market prices. The
resulting Shares will be subject to significant fluctuation in response to
variations in operating results of the Company, investor perceptions of the
Company, supply and demand, interest rates, general economic conditions and
those conditions specific to the industry, unusual developments with regard to
the Company's activities, future financial condition and successful management.
CONTINUATION OF MANAGEMENT CONTROL. The Company's present officers, directors
and principal shareholders own a majority of the Company's outstanding common
stock. such persons own a majority of the outstanding voting stock. Therefore,
the Company's present management and principal stockholders will continue to be
able to elect a majority of the directors and otherwise exert control over the
Company, and the investors in the Company's securities will have very limited
ability to remove, control or direct such management.
DILUTION. Investors who purchase the Shares in the market may experience
dilution in the book value of common stock which they could acquire. Dilution
may occur if the Company issues additional shares at a price lower than the
price paid by investors in the market and such issuances may be dilutive.
APPLICABILITY OF LOW-PRICED STOCK RISK DISCLOSURE REQUIREMENTS. The securities
of the Company will be considered low-priced or "designated" securities under
rules promulgated under the Exchange Act. Under these rules, broker/dealers
participating in transactions in low-priced securities must first deliver a risk
disclosure document which describes the risks associated with such stocks, the
broker/dealer's duties, the customer's rights and remedies, certain market and
other information, and make a suitability determination approving the customer
for low-priced stock transactions based on the customer's financial situation,
investment experience and objectives. Broker/dealers must also disclose these
restrictions in writing to the customer and obtain specific written consent of
the customer, and provide monthly account statements to the customer. The likely
effect of these restrictions will be a decrease in the willingness of
broker/dealers to make a market in the stock, decreased liquidity of the stock
and increased transaction costs for sales and purchases of the stock as compared
to other securities.
IN ADDITION TO THE RISK FACTORS SET FORTH ABOVE, THE COMPANY IS SUBJECT TO
NUMEROUS OTHER RISKS SPECIFIC TO THE PARTICULAR BUSINESS OF THE COMPANY, AS WELL
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AS GENERAL BUSINESS RISK. INVESTORS ARE URGED TO CONSIDER ALL OF THE RISKS
INHERENT IN THE COMPANY'S SECURITIES PRIOR TO PURCHASING OR MAKING AN INVESTMENT
DECISION. THE COMPANY'S SECURITIES ARE HIGHLY SPECULATIVE AND INVOLVE A VERY
HIGH DEGREE OF RISK.
2.01(f) PART I, ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION.
Over the next twelve months we intend to take advantage of the current industry
conditions that present unusual opportunities in the energy sector. The
continuing divestiture of smaller assets held by large companies has created an
opportunity to acquire undervalued properties with significant upside potential.
While integrated resource companies focus largely on major reserve additions, we
will focus on the development of the industry's non-core assets which are often
poorly exploited. This strategy will offer us both significant returns and
decreased risk as we will be not focused on uncertain exploration activities.
Our emphasis will be on developing current assets and we intend to enter into
several joint ventures for the drilling of additional wells in Texas. We will
identify these prospects in the near future. Currently, the focus is on areas of
South Texas with a total prospect and drilling cost of $500,000 per well or
less.
The Company continues to review acquisition candidates. At present, we are
searching out proposals for acquisitions from small independent oil and gas
operators in Texas. Management will review each proposal on its merits to
determine if a project meets our standards and offers the necessary economics
and potential upside which the Company is seeking. We are also considering
outside financing through a joint venture and/or mezzanine finance group in
order to provide additional working capital which we require to implement our
development and acquisition plans over the next year.
Production improvement for existing wells will be in three stages. The first
step is to perform soapy water wash on the wells to restore permeability into
the formation and through the wellbore. Second, a separator and heater/treater
will be purchased and installed to clean and increase yield of the oil produced.
Finally, horizontal laterals may be drilled, as necessary.
TECHNOLOGY
Technology in the oil and gas business is now widespread allowing access to even
the newest innovations by the smallest of companies willing to invest in
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development of natural resources. In exploration, it may be 3-D seismic. In
drilling, it may be the horizontal lateral. In production, it may be something
else. But almost all of the new technology is now available to the small
independent producer.
We are particularly interested in, and our personnel are experienced in,
drilling, completion and production technology. Company personnel have
contributed to such areas of the industry technology as sand control, well
completions and stimulation, and production technology.
We will focus on mature oil fields that have "proven" un-recovered reserves of
30% to 50% of the original oil in place. These fields typically will have lost
sufficient reservoir pressure to drive the oil through the rock and sand and
into the wellbores of the producing wells. Our goal is to utilize lower-cost,
advanced secondary and tertiary oil recovery technologies such as waterflood,
nitrogen lift, thermal, chemical, and microbial methods to significantly
increase production. According to the U.S. Dept. of Energy, the use of these
technologies by independent domestic producers will add an estimated 2 Billion
Barrels to U.S. production over a 20 year span.
LUCAS ENERGY'S COMPETITIVE ADVANTAGES
The Company has several distinct competitive advantages in the industry. These
areas are size, experience, and contacts. These competitive advantages are
brought to the company in the form of its technical and management personnel,
and the short-term focus established by management at this point in time. In the
current oil and gas market where prices of the commodities have risen so fast
and so high within the past two years, other definitive advantages may be more
important.
In implementing our business model we aim to use our small size to an advantage.
Our strength in technology, industry knowledge and a strong local network allows
us to implement our approach effectively. Our size creates two important
advantages for the company. First, being a small company looking for small
acquisitions is a decided advantage in the oil and gas industry today. Larger
companies, and most mid-size companies, are searching for large acquisitions to
make a successful increase in the size of their company. However, large
acquisitions go for a premium; and are difficult to locate. Even smaller
acquisitions are hard to find; but a good deal on a smaller acquisition is
easier to find than one on a larger acquisition and we intend to consolidate
smaller acquisitions which might be overlooked or deemed to be too insignificant
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for our larger competitors. In this sense, as a small company, we are able to
operate at a level which is potentially extremely profitable but which is not
considered substantial enough by our competition.
Experience is the most important factor in the location of acquisitions,
evaluating the acquisitions, and in the clean-up and improvement of the
acquisitions. Producers such as us can make money in the oil and gas industry by
finding a good acquisition, at a good price, with the potential for improvement.
We will make the improvement possible with talent and expertise to evaluate the
improvement needed, to know the method of improvement, and to have the ability
to implement the workover programs. Such expertise is a core commitment for us
and we will continue to engage experienced personnel.
Management in the oil and gas industry is critical. The most important
management factor for a small company is the hands on experience to manage wells
at the field level. The improvement and protection of assets for a small oil and
gas company is essential. Breakdown of equipment, formation hydraulics, and
oilfield theft are all part of the management day, and the Company has the
management experience to make this work.
2.01(f) PART I, ITEM 3. - DESCRIPTION OF PROPERTY.
In May of 2005, we acquired a 100% working interest in two unit wells (670.43
acres) located in the Pilgrim Field, in Gonzales County, Texas. We acquired a
100% working interest in two unit wells located in the Pilgrim Field, Gonzales
County, Texas. The wells are in two pooled units consisting of several leases.
Ultimately, the net revenue interest to be acquired should be better than 80%.
The acquisition concluded in May 2005. The Gonzales County wells produce from
the Austin Chalk formation. Both wells have lateral extensions penetrating the
Austin Chalk formation in a horizontal manner. These wells have produced an
average of 200,000 barrels of oil each since they were drilled.
In August of 2005, we acquired a 100% working interest in the Green field lease
in Baylor County, Texas, which consists of 880.7 acres and has two producing
wells. Lucas Energy Resources, Inc., acquired the Green lease, Baylor County,
Texas effective September 1, 2005. The lease has two producing wells. Production
is from the Palo Pinto formation. The wells are approximately 3000 feet in depth
and produce from shallow intervals. The Company is considering a workover of one
or both wells to increase production.
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In September 2005, the Company purchased a 100% working interest in the 1100+
acre Bracero field in Zavala, Texas. Currently, the Bracero field in Zavala,
Texas has 3 producing wells and 3 shut in wells. The Bracero Transportation Co
lease was acquired by Lucas Energy Resources, Inc., effective September, 2005.
The lease is approximately 640 acres plus some acreage in an adjoining section.
There are three producing wells on the lease and one salt water disposal well.
Minor improvments were made to the property and the property was subsequently
sold at a profit in May of 2006.
In March of 2006, the company completed an acquisition and improvement program
of the Wright #1, a 160 acre lease in Gonzales, Texas. Lucas Energy acquired a
60% working interest in the Wright #1 and performed all of the work to clean up
the well and improve production. Rework included replacing the downhole pump,
acidizing the well, and replacing the water pump on the natural gas engine.
Additional immediate work on the well will include replacing the defective
heater treater. Future work may include a rework of the well bore to improve
production or the drilling of a new lateral in the Austin Chalk.
2.01(f) PART I, ITEM 4. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Security Ownership of Certain Beneficial Owners.
Title Name and Address Amount and Nature Percent
of Class of Beneficial Owner of Beneficial Owner of Class
- -------- ------------------- ------------------- --------
common James J. Cerna Revocable Trust 3,377,210 12.31%
TTEE James J. Cerna, Jr.
520 S. El Camino Real
Suite #423
San Mateo, CA 94402
common William A. Sawyer 1,063,497 3.87%
3000 Richmond Ave #400
Houston, TX 77040
common NPX Corp. 2,467,963 8.99%
4343 Roosevelt Wy., NE
# 506
Seattle, WA 98105
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common Monaco Ventures 2,597,853 9.47%
C/o Lucas Energy, Inc.
3000 Richmond Ave #400
Houston, TX 77040
common Richard Thomas, LLC 2,572,656 9.37%
5348 Vegas Dr.
Las Vegas, NV 89108
common LGA, Inc. 7,273,992 26.51%
377 S. Nevada St.
Carson City, NV 89703
common Eric Wold 290,096 1.05%
520 S. El Camino Real
Suite #423
San Mateo, CA 94402
common Rick Schmid 51,959 0.02%
3000 Richmond Ave #400
Houston, TX 77040
common R. Gordon Jones 0
1393 N. Bennett Circle
Farmington, UT 84025
common All Directors as a Group* 13.55%
- ----------
* Includes 3,377,210 shares beneficially held by James J. Cerna, Jr., through
the James J. Cerna Revocable Trust.
2.01(f) PART I, ITEM 5. - DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS.
The Company's current officers and Directors are:
James J. Cerna, Jr., 37, President, CEO, Director
William A. Sawyer, 57, Chief Operating Officer, Director
R. Gordon Jones, 51, CPA, Chief Financial Officer, Director
Eric Wold, CFA, 33, Director
Rick Schmid, 55, Director
JAMES J. CERNA, JR., CEO, PRESIDENT, DIRECTOR
Mr. Cerna was appointed to his position as Director and principal executive
officer on May 19, 2006 and was appointed as President on June 12, 2006. Mr.
Cerna is a successful company leader with experience in the energy industry and
publicly traded companies. Prior to joining Lucas Energy Inc., Jim was the Chief
Oil and Gas Analyst and CFO of Petroleum Partners, Inc., an energy development
company operating a 2000 acre field in the Barnett Shale, Texas. Jim was the
founder and CEO of NetCurrents, Inc., (NASDAQ: NTCS), an organization that
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focuses on Internet information monitoring and analysis, competitive
intelligence, and strategic counsel in the business-to-business market sector.
Jim was responsible for successfully growing the company from a start up with an
initial valuation of $500,000 to a Nasdaq Small Cap listed company with a market
cap of $330 million upon his retirement. Prior to NetCurrents, Jim was the
manager of the GT Global/AIM Funds performance analysis group in San Francisco.
Earlier, he was an international equity analyst with Bailard, Biehl, and Kaiser
in San Mateo, California. Jim has received five certificates of achievement from
the Institute of Chartered Financial Analysts. He is honored by Strathmore's
Who's Who for leadership and achievement in the Finance Industry. The Company
will implement and adopt the current employment agreement in place between Mr.
Cerna and Lucas Energy Resources, Inc.
WILLIAM A. SAWYER, CHIEF OPERATING OFFICER, DIRECTOR
Mr. Sawyer's appointment to his positions with the Company was effective on June
13, 2006. Mr. Sawyer is proven hands-on energy executive with over 30 years of
diversified experience in the energy industry with firms such as; ARCO, Houston
Oil & Minerals, Superior Oil (Mobil), and ERCO. Mr. Sawyer founded the petroleum
consulting firm of Exploitation Engineers, Inc. The firm has served the oil and
gas industry for more than eighteen years. Sawyer's clients have included
private investors, independent oil companies, banking institutions, major energy
and chemical companies, and the US government. The firm has evaluated and
managed large projects such as a private trust, which included interests in
several hundred producing and non-producing oil and gas properties. This
background as a consultant has given Mr. Sawyer the superior technical and
business skills necessary to evaluate mineral interests and to prepare fair
market value appraisals of both minerals interests and sub-surface storage
interests. Mr. Sawyer has been an expert witness in federal court, state court,
and before several state agencies in Texas and Oklahoma. Mr. Sawyer has
testified as to the fair market value of mineral interests and sub-surface
storage interests on several occasions. The Company will implement and adopt the
current employment agreement in place between Mr. Sawyer and Lucas Energy
Resources, Inc.
14
R. GORDON JONES, CPA - CHIEF FINANCIAL OFFICER, DIRECTOR
Gordon Jones, a Certified Public Accountant (CPA), brings 28 years of financial
and Oil & Gas industry auditing experience to his role as CFO. Prior to his
appointment as CFO, Jones served as a founding member of J&J Consultants LLC,
which consults to small public and private companies on accounting and income
tax issues. J&J Consultants aids its clients in the compliance with governmental
regulations and in their preparation of financial statements that are in
accordance with Generally Accepted Accounting Principles (GAAP). From 1983 to
2000, Jones owned a CPA firm, Jones, Jensen & Company, which specialized in
auditing small and medium-sized publicly traded companies, including those in
the Oil & Gas and Mining industries. Mr. Jones will have an employment package
implemented within the next fiscal quarter.
ERIC WOLD, CFA - DIRECTOR, FINANCE COMMITTEE, ETHICS COMMITTEE
Eric Wold is a Managing Director, Equity Research at Merriman Curhan Ford & Co.,
where he is responsible for covering the Restaurant and Specialty Consumer
sectors. He joined the firm in March 2002. For 2004, Mr. Wold was ranked number
two in the nation by both The Wall Street Journal's "Best on the Street" and the
Forbes/StarMine surveys for the Restaurant industry.
Prior to joining Merriman Curhan Ford & Co., Mr. Wold served as Director of
Corporate Finance with NightFire Software, a privately-held telecommunications
software company based in Oakland, California. In this capacity, he oversaw the
company's corporate finance activities, including a Series D equity financing
and multiple debt restructurings. From 1997 through 2000, Mr. Wold served as
Vice President and Senior Research Analyst at First Security Van Kasper, where
he was responsible for the Restaurant and Branded Consumer sectors. Prior to Van
Kasper, Mr. Wold began his career on the buy-side with Research Analyst
positions with both Polynous Capital Management (a hedge fund that he co-founded
in 1996) and GT Global Financial Services.
Mr. Wold received his Chartered Financial Analyst (CFA) designation in 1997 and
a BS in Finance from the University of California at Berkeley.
RICK SCHMID - DIRECTOR, ETHICS COMMITTEE
A graduate of Colorado School of Mines, Rick Schmid has actively worked in many
arenas in the Oil and Gas Industry. He has managed technical programming groups,
geophysical processing companies, development groups and exploration and
15
production companies for over 32 years. He brings with him technical expertise
that can help guide and monitor the direction Lucas Energy will choose to take.
Rick is a Certified Geophysicist in the State of Texas and a member of SEG,
AAPG, HGS, & GSH.
Current officers serve at the leisure of the Board of Directors and each
Director will stand for election at the next annual or special meeting of
shareholders. The Company will adopt a new Director's compensation plan within
the next fiscal quarter.
To the best managements' knowledge, no director, executive officer or control
person of the Company, during the past five years has had any of the following
occur; (1) A bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time; (2) Any conviction in a
criminal proceeding or been subject to a pending criminal proceeding (excluding
traffic violations and other minor offenses); (3) Been subject to any order,
judgment, or decree, not subsequently reversed, suspended or vacated, of any
court of competent jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of business,
securities or banking activities; or (4) Been found by a court of competent
jurisdiction (in a civil action), the Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities or commodities
law, and the judgment has not been reversed, suspended, or vacated.
2.01(f) PART I, ITEM 6. - EXECUTIVE COMPENSATION.
Due to the nature of the holding company structure, the Company does not
currently have direct employment agreements. All relationships with personnel
are presently under the subsidiary operating company, Lucas Energy Resources,
Inc., and the Company anticipates that it shall continue to engage and pay
employees and executives through the operating subsidiary and not through the
parent.
At present, none of the Company's officers or directors have employment
agreements with the Company. The Company has no pension, health, annuity, bonus,
insurance, stock options, profit sharing or similar benefit plans; however, the
Company intends to adopt such plans in the near future, likely within the next
fiscal quarter. There are presently no personal benefits available for
directors, officers or employees of the Company. The officers and directors of
the Company do not intend to receive cash remuneration or salaries for their
efforts unless and until the Company's business operations are successfully
16
implemented through the public company, at which time salaries and other
remuneration will be established by the Board of Directors, as appropriate.
Key personnel involved in the actual operations of the Company's interests are
typically paid on a contract basis or as sub-contractors of vendors and service
providing companies not owned directly by the Company. Such sub-contracting
engagement and per job payments are commonplace in the Company's business. The
Company will continue to pay such service providers and third party contractors
for running its operations.
2.01(f) PART I, ITEM 7. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company's new executive officers and directors have been involved in
negotiating the terms of the Share Exchange and Acquisition Agreement which
resulted in the reverse merger transaction between Lucas Energy, Inc., and Lucas
Energy Resources, Inc. Formerly privately held, Lucas Energy Resources, Inc., is
now the wholly owned operating subsidiary of the parent public company and the
management of the two companies is the same. The formerly private company
shareholders now hold a majority interest in the Company and also control its
operations through control of all executive positions and all Board seats.
Current management and directors of the Company were parties to the Share
Exchange and Acquisition Agreement as private company shareholders of Lucas
Energy Resources, Inc., and as management of the private company which was
acquired by Lucas Energy, Inc. In each case, the current directors and executive
officers have a direct material interest in the agreement commensurate with
their present share ownership interest in the Company.
The James Cerna Revocable Trust, whose trustee is the Company's President and
CEO, and Anthony Cerna, the brother of the Company's President and CEO, were
parties to the Share Exchange and Acquisition Agreement and have a direct
material interest in the agreement commensurate with their present share
ownership interest in the Company.
2.01(f) PART I, ITEM 8. - DESCRIPTION OF SECURITIES.
Lucas Energy, Inc., has 110,000,000 million shares of capital stock authorized
for issuance, of which 100,000,000 are common shares, par value $0.001 per share
and 10,000,000 are preferred shares, par value $0.001 per share.
As of the date of the filing of this Report, and after giving effect to the
forward split of the Company's common stock which was effective on June 12,
17
2006, Lucas Energy, Inc., has a total of 27,160,083 shares of its common stock
issued and outstanding. The Company presently has no shares of preferred stock
outstanding.
2.01(f) PART II, ITEM 1. - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock is dually quoted on the Pinksheets, LLC and the
Over-the-Counter Bulletin Board and trades under the symbol: "LUCE". There is no
recent price history for the shares.
2.01(f) PART II, ITEM 2. - LEGAL PROCEEDINGS.
We are not currently involved in any legal proceedings nor do we have any
knowledge of any threatened litigation.
2.01(f) PART II, ITEM 3. - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
Since inception, Lucas Energy, Inc., formerly known as Panorama Investments,
Corp., has not changed accountants and has utilized the services of Morgan &
Company, Chartered Accountants. During that period, there have been no
disagreements with the accountants regarding accounting and financial
disclosure.
Lucas Energy Resources, Inc., the recently acquired subsidiary company, has
previously engaged the services of Moore & Associates, Chartered, at 2675 S.
Jones Boulevard, Suite 109, Las Vegas, NV 89146 (702) 253-7511, as its auditor.
Moore & Associates shall be the Company's auditor going forward. The Company has
dismissed Morgan & Company as its independent auditor, effective with this
filing.
2.01(f) PART II, ITEM 4. - RECENT SALES OF UNREGISTERED SECURITIES.
On June 12, 2006, the Company completed a private placement of its common stock
("the Offering"). Pursuant to the terms of the Offering, the Company sold
2,000,000 shares of its restricted common stock at a price of $0.50 per share.
Proceeds in the aggregate amount of $1,000,000.00 were paid in cash to the
Company. The Offering was placed by the Company's officers and directors on a
"best efforts basis" with no underwriters and there were no underwriting
discounts, commissions, selling expenses or fees paid in connection with the
sales. The Offering was made only to "Accredited Investors" as defined in Rule
501 of Regulation D. The shares were sold without registration, pursuant to an
18
exemption from registration under Rule 505 of regulation D of the Securities Act
of 1933, and are "restricted Securities" as defined by Rule 144 of the Act.
2.01(f) PART II, ITEM 5. - INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Company's Articles of Incorporation limits the liability of its directors to
the Company or the Company's stockholders for monetary damages arising from a
breach of fiduciary duty owed to the Company or the Company's stockholders to
the fullest extent permitted by Nevada Law.
The Company's Bylaws provide for indemnification by the Company of each person
who is or was a director or officer to the fullest extent permitted or
authorized by law, including attorneys' fees.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers, and controlling persons pursuant to the
statutory provisions of Nevada law or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
SECTION 5 - CORPORATE GOVERNANCE AND MANAGEMENT
ITEM 5.01 - CHANGES IN CONTROL OF REGISTRANT.
In connection with the Acquisition Agreement, Lucas Energy has undergone a
change of control. Effective on the Closing of the Acquisition Agreement, the
Company issued an aggregate of 19,160,011 new common shares to nineteen (19)
private company shareholders, and the former controlling shareholders of the
Company transferred 2,640,000 outstanding Lucas Energy, Inc., shares to certain
private company shareholders. As a result if the change in control, the former
Lucas Energy Resources shareholders now hold a combined voting interest of
approximately 80.2% of the issued and outstanding shares of Lucas Energy.
Following the share exchange and the change in control, the business activities
of both the Company and its subsidiary, Lucas Energy Resources, will be under
the management and supervision of the private company's management. Lucas Energy
Resources will continue to operate as a wholly-owned subsidiary of Lucas Energy
and the current retail apparel operations of the Company will be ceased. Thus,
the Company will become a holding company with its primary operations being that
of its wholly-owned subsidiary, Lucas Energy Resources, Inc.
19
ITEM 5.02 - DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF PRINCIPAL OFFICERS.
On May 19, concurrent with the entry into the Acquisition Agreement referenced
in Item 1.01, above, the Company's Board of Directors appointed James J. Cerna,
Jr., to a vacant Board position as Interim Director and principal operating
officer. Mr. Cerna accepted the appointment and agreed to serve in such capacity
until the next annual or special meeting of shareholders of the Company, at
which time Mr. Cerna will be required to stand for election by the Shareholders.
Effective on the Closing of the Acquisition Agreement each of the current
directors, the principal officers of the Company, with the exception of the
newly appointed James J. Cerna, Jr., submitted their resignation to the Board of
Directors and resigned all executive positions with the Company. Concurrent with
the resignations of Ms. Connie Linder, Serena Tan and Mr. Steven Bekropoulos,
the Company's remaining Director has appointed Lucas Energy Resources' current
board of directors, as directors of the Company, effective as of the Closing of
the Acquisition Agreement.
ITEM 5.03 - AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL
YEAR.
On June 1, 2006, Lucas Energy filed an amendment to its Articles of
Incorporation. The amendment was previously disclosed in the Company's
Preliminary Information Statement pursuant to Section 14c of the Securities
Exchange Act of 1934, as filed with the Securities and Exchange Commission on
May 31, 2006. The amendment to the Articles of Incorporation changed the
Company's name and implemented a 2.4 for 1 forward split of the Company's common
stock. The effective date of the amendment was June 9, 2006 or upon NASDAQ
approval, which was subsequently given on June 13, 2006, the date upon which the
Company's stock symbol changed and the split was implemented by NASDAQ on the
OTC-BB. The Certificate of Amendment is attached as an exhibit to the Company's
Preliminary Information Statement filed on May 31, 2006 which is incorporated by
this reference.
ITEM 5.06 - CHANGE IN SHELL COMPANY STATUS.
Prior to June 13, 2006, the Company voluntarily reported itself as a "shell
company" as defined in Rule 12b-2 under the Exchange Act of 1934. On June 13,
2006, the Company completed a transaction that had the effect of causing the
Company to cease being a "shell company". The Share Exchange & Acquisition
Agreement was previously disclosed in the Company's Preliminary Information
Statement filed with the Securities and Exchange Commission on May 31, 2006, and
is incorporated by this reference.
20
SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired.
MOORE & ASSOCIATES, CHARTERED
ACCOUNTANTS AND ADVISORS
PCAOB REGISTERED
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Lucas Energy, Inc
Las Vegas, Nevada
We have audited the accompanying balance sheet of Lucas Energy, Inc as of March
31, 2006, and the related statements of operations, stockholders' equity and
cash flows for the period from inception on April 6, 2005 through March 31,
2006. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lucas Energy, Inc as of March
31, 2006 and the results of its operations and its cash flows for the period
from inception on April 6, 2005 through March 31, 2006, in conformity with
accounting principles generally accepted in the United States of America.
/s/ Moore & Associates, Chartered
- ----------------------------------------
Moore & Associates Chartered
Las Vegas, Nevada
April 21, 2006
2675 S. Jones Blvd. Suite 109, Las Vegas, NV 89146
(702) 253-7511 Fax (702) 253-7501
21
LUCAS ENERGY, INC.
Balance Sheet
March 31,
2006
--------
ASSETS
CURRENT ASSETS
Cash $ 59,232
Oil and gas receivable 30,222
Other current assets 8,614
--------
Total Current Assets 98,068
--------
OIL AND GAS PROPERTIES, full cost method
Costs subject to amortization 61,255
Costs not subject to amortization 531,197
--------
Oil and Gas Properties, net 592,452
--------
OTHER ASSETS
Long-term deposits and bonds 30,266
--------
Total Other Assets 30,266
--------
TOTAL ASSETS $720,786
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 42,045
Income taxes payable 4,845
--------
Total Current Liabilities 46,890
--------
NON-CURRENT LIABILITIES
Note payable 125,000
--------
Total Liabilities 171,890
--------
STOCKHOLDERS' EQUITY
Preferred stock, series A; 1,666,667 shares authorized
of $0.01 par value, 344,250 shares issued and outstanding 344
Common stock; 10,000,000 shares authorized of $0.001 par value,
8,000,000 shares issued and outstanding 8,000
Additional paid-in capital 478,236
Retained earnings 62,316
--------
Total Stockholders' Equity 548,896
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $720,786
========
The accompanying notes are an integral part of these financial statements.
22
LUCAS ENERGY, INC.
Income Statement
From Inception on
April 6, 2005
Through March 31,
2006
-----------
REVENUES
Oil and gas revenues $ 302,500
Lease operating expenses 132,798
Depreciation and depletion 38,815
-----------
Gross Profit 130,887
-----------
EXPENSES
Professional fees 24,181
General and administrative 31,259
-----------
Total Expenses 55,440
-----------
INCOME FROM OPERATIONS 75,447
-----------
OTHER EXPENSES
Interest income 11
Interest expense (8,297)
-----------
Total Other Expenses (8,286)
-----------
NET INCOME BEFORE INCOME TAXES 67,161
INCOME TAX EXPENSE 4,845
-----------
NET INCOME $ 62,316
===========
BASIC INCOME PER SHARE $ 0.01
===========
FULLY DILUTED INCOME PER SHARE $ 0.01
===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 8,000,000
===========
FULLY DILUTED AVERAGE NUMBER OF SHARES OUTSTANDING 8,344,250
===========
The accompanying notes are an integral part of these financial statements.
23
LUCAS ENERGY, INC.
Statement of Stockholders' Equity
Preferred Stock Common Stock Additional
------------------ -------------------- Paid-In Retained
Shares Amount Shares Amount Capital Earnings
------ ------ ------ ------ ------- --------
Balance at inception on April 6, 2005 -- $ -- -- $ -- $ -- $ --
Common shares issued for cash at
$0.01 per share -- -- 5,200,000 5,200 49,800 --
Common shares issued for cash
paid for oil leases at $0.08 per share -- -- 2,800,000 2,800 222,230 --
Preferred shares issued for cash at
$0.60 per share 325,000 325 -- -- 194,675 --
Preferred shares issued for services
rendered at $0.60 per share 19,250 19 -- -- 11,531 --
Net income for the period from inception
on April 6, 2005 through March 31, 2006 -- -- -- -- -- 62,316
------- ----- --------- ------ -------- -------
Balance, March 31, 2006 344,250 $ 344 8,000,000 $8,000 $478,236 $62,316
======= ===== ========= ====== ======== =======
The accompanying notes are an integral part of these financial statements.
24
LUCAS ENERGY, INC.
Statement of Cash Flows
From Inception on
April 6, 2005
Through
March 31,
2006
---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 62,316
Adjustments to reconcile net loss to
net cash used by operating activities:
Preferred stock issued for services 11,550
Depreciation and depletion 38,815
Changes in operating assets and liabilities
Increase in accounts receivable (30,222)
Increase in other current assets (8,614)
Increase in other assets (30,266)
Increase in accounts payable and accrued expenses 46,890
---------
Net Cash Provided by Operating Activities 90,469
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of operating interest 147,539
Purchase of property and equipment (778,806)
---------
Net Cash Used by Investing Activities (631,267)
---------
CASH FLOWS FROM FINIANCING ACTIVITIES
Proceeds from the sale of common stock 280,030
Proceeds from the sale of preferred stock 195,000
Repayment of note payable (150,000)
Proceeds from note payable 275,000
---------
Net Cash Provided by Financing Activities 600,030
---------
NET INCREASE IN CASH 59,232
CASH AT BEGINNING OF PERIOD --
---------
CASH AT END OF PERIOD $ 59,232
=========
SUPPLIMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR:
Interest $ --
Income Taxes $ --
NON-CASH FINANCING ACTIVITIES
Preferred stock issued for services $ 11,550
The accompanying notes are an integral part of these financial statements.
25
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
Lucas Energy, Inc. ("the Company") was originally incorporated in the State of
Nevada on April 6, 2005 for the purpose of acquiring and operating certain oil
and gas leases in the state of Texas. Currently, the Company operates eight
separate oil and gas leases.
b. Accounting Method
The Company uses the successful efforts method of accounting for oil and gas
producing activities. Costs to acquire mineral interests in oil and gas
properties, to drill and equip exploratory wells used to find proved reserves,
and to drill and equip development wells are capitalized. Costs incurred in
drilling exploratory wells that do not find proved reserves, geological and
geophysical costs, and costs of carrying and retaining unproved properties are
expensed.
The Company has elected a March 31 year-end.
c. Basic Income per Share of Common Stock
The basic income per share of common stock is based on the weighted average
number of shares issued and outstanding at the date of the financial statements.
For the Year
Ended March 31,
2006
----------
Numerator:
Income from operations $ 62,316
Basic Income Per Share $ 0.01
Denominator - weighted average shares 8,000,000
Fully Diluted Income Per Share $ 0.01
Denominator - fully diluted weighted average shares 8,344,250
The Company's shares of preferred stock are convertible to common stock on a one
share for one share basis. Accordingly, the preferred shares are common stock
equivalents for purposes of computing the fully diluted loss per share.
26
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
d. Provision for Taxes
Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss and tax
credit carry forwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized.
Deferred tax assets and accrued tax liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
The income tax provision differs from the amount of income tax determined by
applying the U.S. federal income tax rates to pretax income operations for the
year ended March 31, 2006 due to the following:
March 31,
2006
--------
Book income $ 10,074
Excess of percentage depletion
over book depletion (5,229)
Income tax expense/ payable $ 4,845
e. Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
f. Accounts Receivable
Accounts receivable are carried at the expected net realizable value. The
allowance for doubtful accounts is based on management's assessment of the
collect ability of specific customer accounts and the aging of the accounts
receivables. If there were a deterioration of a major customer's
creditworthiness, or actual defaults were higher than historical experience, our
estimates of the recoverability of the amounts due to us could be overstated,
which could have a negative impact on operations.
27
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. Recent Accounting Pronouncements
On December 16, 2004 the FASB issued SFAS No. 123(R), Share-Based Payment, which
is an amendment to SFAS No. 123, Accounting for Stock-Based Compensation. This
new standard eliminates the ability to account for share-based compensation
transactions using Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees, and generally requires such
transactions to be accounted for using a fair-value-based method and the
resulting cost recognized in our financial statements. This new standard is
effective for awards that are granted, modified or settled in cash in interim
and annual periods beginning after June 15, 2005. In addition, this new standard
will apply to unvested options granted prior to the effective date. The Company
will adopt this new standard effective for the fourth fiscal quarter of 2005,
but has not yet determined what impact this standard will have on the Company's
financial position or results of operations.
In November 2004, the FASB issued SFAS No. 151, Inventory Costs - an amendment
of ARB No. 43, Chapter 4. This Statement amends the guidance in ARB No. 43,
Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal amounts
of idle facility expense, freight, handling costs, and wasted material
(spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that ". . .
under some circumstances, items such as idle facility expense, excessive
spoilage, double freight, and rehandling costs may be so abnormal as to require
treatment as current period charges. . . ." This Statement requires that those
items be recognized as current-period charges regardless of whether they meet
the criterion of "so abnormal." In addition, this Statement requires that
allocation of fixed production overheads to the costs of conversion be based on
the normal capacity of the production facilities. This statement is effective
for inventory costs incurred during fiscal years beginning after June 15, 2005.
Management does not believe the adoption of this Statement will have any
immediate material impact on the Company.
In December 2004, the FASB issued SFAS No. 152, Accounting for Real Estate
Time-sharing Transactions, which amends FASB statement No. 66, Accounting for
Sales of Real Estate, to reference the financial accounting and reporting
guidance for real estate time-sharing transactions that is provided in AICPA
Statement of Position (SOP) 04-2, Accounting for Real Estate Time-Sharing
Transactions. This statement also amends FASB Statement No. 67, Accounting for
Costs and Initial Rental Operations of Real Estate Projects, to state that the
guidance for (a) incidental operations and (b) costs incurred to sell real
estate projects does not apply to real estate time-sharing transactions. The
accounting for those operations and costs is subject to the guidance in SOP
04-2. This Statement is effective for financial statements for fiscal years
beginning after June 15, 2005. Management believes the adoption of this
Statement will have no impact on the financial statements of the Company.
28
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
g. Recent Accounting Pronouncements (Continued)
In December 2004, the FASB issued SFAS No.153, Exchange of Non monetary Assets.
This Statement addresses the measurement of exchanges of non monetary assets.
The guidance in APB Opinion No. 29, Accounting for Non monetary Transactions, is
based on the principle that exchanges of non monetary assets should be measured
based on the fair value of the assets exchanged. The guidance in that Opinion,
however, included certain exceptions to that principle. This Statement amends
Opinion 29 to eliminate the exception for non monetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of non
monetary assets that do not have commercial substance. A non monetary exchange
has commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. This Statement is effective
for financial statements for fiscal years beginning after June 15, 2005. Earlier
application is permitted for non monetary asset exchanges incurred during fiscal
years beginning after the date of this statement is issued. Management believes
the adoption of this Statement will have no impact on the financial statements
of the Company.
h. Fair Value of Financial Instruments
As at March 31, 2006, the fair value of cash and accounts and advances payable,
including amounts due to and from related parties, approximate carrying values
because of the short-term maturity of these instruments.
NOTE 2 - PROPERTY AND EQUIPMENT
Productive Gas Wells
The following summarizes the Company's productive oil and gas wells as of March
31, 2006. Productive wells are producing wells and wells capable of production.
Gross wells are the total number of wells in which the Company has an interest.
Net wells are the sum of the Company's fractional interests owned in the gross
wells. The cost of the wells is depleted over the estimated number of barrels in
reserve at the time the well is purchased. The Company recorded depletion
expense of $31,688 for the period ended March 31, 2006.
Gross Net
----- ---
Productive oil wells, Texas 9 8
==== ====
Tangible equipment purchased along with the wells is recorded as cost. Major
additions and improvements are capitalized. Minor replacements, maintenance and
repairs that do not extend the useful life of the assets are expensed as
incurred. Depreciation of property and equipment is determined using the
straight-line method over their useful lives, primarily 7 years. The Company
recorded depreciation of $7,127 for the period ended March 31, 2006.
29
NOTE 3 - NOTES PAYABLE
During the period ended September 30, 2005, the Company entered into a
Promissory Note in the amount of $275,000 with JCASL, LLC, an Indiana limited
liability company related by common management. In December 2005 the Company
repaid $150,000 of the Promissory Note and the balance of the note was purchased
from JCASL. LLC by an unrelated third party. The note bears interest at a rate
of 6.75% per annum and all principal and interest is due in full on November 29,
2006. Accrued interest on the note at March 31, 2006 totaled $8,297.
NOTE 4 - COMMON STOCK ACTIVITY
During the period from inception on April 6, 2005 the Company issued 5,200,000
shares of its previously unissued common stock for $55,000 in cash, or $0.01 per
share. In addition, the Company issued 2,800,000 shares of common stock as
consideration for the cash used to purchase certain oil leases. The shares were
issued for $225,030 or $0.08 per share.
NOTE 5 - SERIES A PREFERRED STOCK ACTIVITY
During the period from inception through March 31, 2006 the Company issued
325,000 shares of Series A Preferred stock for cash at $0.60 per share. The
total cash received relating to this preferred stock issuance was $195,000. In
addition, the Company issued 19,250 shares of Series A Preferred stock as
consideration for services rendered at $0.60 per share.
In August 2005, the Company distributed a Private Placement Memorandum to issue
a maximum of 1,666,667 shares of Series A Preferred stock, in order to raise
$1,000,000 or more for the Company. The sale price of the preferred shares was
set to be $0.60 per share. The holders of the Series A Preferred stock are
entitled to receive non cumulative dividends in preference to the holders of
common stock at an annual rate of 7.5% of the Purchase Price per share from
legally available funds and when and if declared by the Board of Directors.
Liquidation rights and preferences of the Series A Preferred stock is senior to
those of the common stock. Holders of the Series A Preferred stock have the
right to convert their respective Preferred shares into shares of common stock
at any time at a conversion rate of one-to-one. The Preferred shares are
non-redeemable.
S.F.A.S. 69 SUPPLEMENTAL DISCLOSURES (UNAUDITED)
(1) Capitalized Costs Relating to Oil and Gas Producing Activities:
For the Period Ended
March 31,
2006
---------
Proved oil and gas producing properties and related
lease and well equipment $ 562,885
Unproved oil and gas properties --
Accumulated depreciation and depletion (31,688)
---------
Net Capitalized Costs $ 531,197
=========
30
(2) Costs Incurred in Oil and Gas Property Acquisition, Exploration, and
Development Activities:
For the Period Ended
March 31,
2006
--------
Acquisition of Properties
Proved $778,806
Unproved --
Exploration Costs --
Development Costs --
The Company does not have any investments accounted for by the equity method.
(3) Results of Operations for Producing Activities: For the Period Ended
March 31,
2006
---------
Sales $ 302,500
Production costs (132,798)
Depreciation and depletion (38,815)
Income tax expense (4,845)
---------
Results of operations for producing activities
(excluding the activities of the pipeline transmission
operations, corporate overhead and interest costs) $ 130,887
=========
(4) Reserve Quantity Information
Oil Gas
BBL CF
------- ------
Proved developed and undeveloped reserves
Inception on April 6, 2005 -- --
Revisions of previous estimates improved recovery -- --
Purchases of minerals in place 83,530 --
Extensions and discoveries 21,983 52,792
Production (5,940) --
Sales of minerals in place -- --
------- ------
March 31, 2006 99,573 52,792
======= ======
Proved developed reserves:
Oil Gas
BBL CF
------- ------
March 31, 2006 99,573 52,792
31
During the period from inception on April 6, 2005 through March 31, 2006, the
Company had reserve studies and estimates prepared on its various properties.
The difficulties and uncertainties involved in estimating proved oil and gas
reserves makes comparisons between companies difficult. Estimation of reserve
quantities is subject to wide fluctuations because it is dependent on judgmental
interpretation of geological and geophysical data.
(5) Standardized Measure of Discounted Future Net Cash Flows Relating to Proved
Oil and Gas Reserves
At March 31, 2006
-----------------
Future cash inflows $ 6,205,374
Future production, development costs and income
tax expense (2,566,128)
-----------
Future net cash flows 3,639,246
Discounted for estimated timing of cash flows (1,430,830)
-----------
Standardized measure of discounted future net cash flows $ 2,208,416
===========
Future income taxes were determined by applying the statutory income tax rate to
future pre-tax net cash flow relating to proved reserves.
The following schedule summarizes changes in the standardized measure of
discounted future net cash flow relating to proved oil and gas reserves:
For the Period Ended
March 31,
2006
-----------
Standardized measure, beginning of period $ --
Oil and gas sales, net of production costs (169,702)
Sales of mineral in place (147,539)
Purchases 2,038,099
Net change due to revisions in quantity estimates 487,558
Accretion of discount items --
-----------
Standardized measure, end of period $ 2,208,416
===========
The above schedules relating to proved oil and gas reserves, standardized
measure of discounted future net cash flows and changes in the standardized
measure of discounted future net cash flows have their foundation in engineering
estimates of future net revenues that are derived from proved reserves and
prepared using the prevailing economic conditions. These reserve estimates are
made from evaluations conducted by independent geologists, of such properties
and will be periodically reviewed based upon updated geological and production
data. Estimates of proved reserves are inherently imprecise. The above
standardized measure does not include any restoration costs due to the fact the
Company does not own the land.
Subsequent development and production of the Company's reserves will necessitate
revising the present estimates. In addition, information provided in the above
schedules does not provide definitive information as the results of any
particular year but, rather, helps explain and demonstrate the impact of major
factors affecting the Company's oil and gas producing activities. Therefore, the
Company suggests that all of the aforementioned factors concerning assumptions
and concepts should be taken into consideration when reviewing and analyzing
this information.
32
(b) Pro Forma Financial Information
PANORAMA INVESTMENTS CORP / LUCAS ENERGY, INC.
UNAUDITED CONDENSED COMBINED PRO FORMA BALANCE SHEET
Panorama Lucas
Investments Energy, Inc. Adjusted
----------- ----------- Combined Pro Forma Pro Forma
as of March 31, 2006 Totals Adjustments Totals
--------------------------- ------ ----------- ------
ASSETS
Current Assets:
Cash $ 21,672 $ 59,232 $ 80,904 $ (21,672) (5) $ 59,232
Prepaid expenses 471 8,614 9,085 -- 9,085
Oil and gas receivable -- 30,222 30,222 -- 30,222
--------- --------- --------- --------- ---------
Total Current Assets 22,143 98,068 120,211 (21,672) 98,539
--------- --------- --------- --------- ---------
Fixed Assets, Net: -- 592,452 592,452 -- 592,452
Other Assets
Long-term deposits and bonds -- 30,266 30,266 -- 30,266
--------- --------- --------- --------- ---------
Total Other Assets -- 30,266 30,266 -- 30,266
--------- --------- --------- --------- ---------
TOTAL ASSETS $ 22,143 $ 720,786 $ 742,929 $ (21,672) $ 721,257
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable $ 4,887 $ 42,045 $ 46,932 $ -- $ 46,932
Income taxes payable -- 4,845 4,845 -- 4,845
--------- --------- --------- --------- ---------
Total Current Liabilities 4,887 46,890 51,777 -- 51,777
--------- --------- --------- --------- ---------
Long-Term Liabilities:
Notes payable -- 125,000 125,000 -- 125,000
--------- --------- --------- --------- ---------
Total Long-Term Debt -- 125,000 125,000 -- 125,000
--------- --------- --------- --------- ---------
Total Liabilities 4,887 171,890 176,777 -- 176,777
--------- --------- --------- --------- ---------
Stockholders' Equity (Deficit):
Common stock 2,500 8,000 10,500 (8,000) (1) 25,160
7,983 (4)
14,677 (6)
Preferred stock 344 344 (344) (2) --
Additional paid-in capital 51,000 478,236 529,236 8,000 (1) 457,004
-- (7,983) (4)
-- (21,672) (5)
-- 344 (2)
-- (36,244) (3)
-- (14,677) (6)
Accumulated deficit (36,244) 62,316 26,072 36,244 (3) 62,316
--------- --------- --------- --------- ---------
Total Stockholders' Equity (Deficit) 17,256 548,896 566,152 (21,672) 544,480
--------- --------- --------- --------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 22,143 $ 720,786 $ 742,929 $ (21,672) $ 721,257
========= ========= ========= ========= =========
ENTRIES FOR PROFORMA CONSOLIDATION
(1) To eliminate the common stock of Lucas Energy, Inc.
(2) To eliminate the preferred stock of Lucas Energy, Inc.
(3) To eliminate the accumulated deficit of Panorama Investments Corp
(4) To record the issuance of 7,983,334 common shares for the acquisition of
Lucas Energy, Inc.
(5) To record estimated costs of reorganization
(6) To record 2.4 for 1 forward stock split
33
PANORAMA INVESTMENTS CORP/ LUCAS ENERGY, INC.
UNAUDITED CONDENSED COMBINED PRO FORMA STATEMENT OF OPERATIONS
For the Year Ended March 31, 2006
Panorama Lucas Adjusted
Investments Energy, Inc. Pro Forma
----------- ----------- Combined Combined
For the Year Ended Totals Adjustments Totals
--------------------------- ------ ----------- ------
REVENUES
Sales $ -- $ 302,500 $ 302,500 $ -- $ 302,500
--------- --------- --------- ------- ---------
Total Revenues -- 302,500 302,500 -- 302,500
--------- --------- --------- ------- ---------
COST OF SALES -- 132,798 132,798 -- 132,798
--------- --------- --------- ------- ---------
GROSS PROFIT -- 169,702 169,702 -- 169,702
--------- --------- --------- ------- ---------
OPERATING EXPENSES
General and administrative 23,253 55,440 78,693 -- 78,693
Depreciation and amortization -- 38,815 38,815 -- 38,815
--------- --------- --------- ------- ---------
Total Operating Expenses 23,253 94,255 117,508 -- 117,508
--------- --------- --------- ------- ---------
OPERATING LOSS (23,253) 75,447 52,194 -- 52,194
--------- --------- --------- ------- ---------
OTHER INCOME (EXPENSE)
Interest expense and loan discount fees -- (8,297) (8,297) -- (8,297)
Other income -- 11 11 -- 11
--------- --------- --------- ------- ---------
Total Other Income (Expense) -- (8,286) (8,286) -- (8,286)
--------- --------- --------- ------- ---------
NET INCOME BEFORE INCOME TAXES (23,253) 67,161 43,908 -- 43,908
INCOME TAX EXPENSE -- 4,845 4,845 -- 4,845
--------- --------- --------- ------- ---------
NET INCOME BEFORE INCOME TAXES $ (23,253) $ 62,316 $ 39,063 $ -- $ 39,063
========= ========= ========= ======= =========
34
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: June 16, 2006 LUCAS ENERGY, INC.
By: /s/ James J. Cerna, Jr.
--------------------------------
James J. Cerna, Jr., President
35