UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2010
Commission file number 333-138107
LIBERTY ENERGY CORP.
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation or organization)
Church Barn, 3 Church Lane
Barlby, Selby, England YO8 5JG
(Address of principal executive offices, including zip code)
(775)981-9022
(Telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 last 90 days. YES [X] NO [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). YES [ ] NO [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer, "accelerated filer,"
"non-accelerated filer," and "smaller reporting company" in Rule 12b-2 of the
Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). YES [ ] NO [X]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 60,400,000 shares as of March 20,
2010
ITEM 1. FINANCIAL STATEMENTS
The un-audited quarterly financial statements for the period ended January 31,
2010, prepared by the company, immediately follow.
2
GEORGE STEWART, CPA
2301 SOUTH JACKSON STREET, SUITE 101-G
SEATTLE, WASHINGTON 98144
(206) 328-8554 FAX (206) 328-0383
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Liberty Energy, Corp.
I have reviewed the condensed balance sheet of Liberty Energy, Corp. as of
January 31, 2010, and the related condensed statements of operations for the
three and six months ended January 31, 2010 and 2009 and for the period from
June 6, 2006 (inception) to January 31, 2010, and condensed statements of cash
flows for the three months ended January 31, 2010 and 2009 and for the period
from June 6, 2006 (inception) to January 31, 2010. These financial statements
are the responsibility of the company's management.
I conducted my review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with standards
of the Public Company Accounting Oversight Board (United States), the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, I do not express such an opinion.
Based on my review, I am not aware of any material modifications that should be
made to the accompanying interim financial statements for them to be in
conformity with generally accepted accounting principles in the United States of
America.
I have previously audited, in accordance with auditing standards of the Public
Company Accounting Oversight Board (United States), the balance sheet of Liberty
Energy, Corp. as of July 31, 2009, and the related statements of operations,
retained earnings and cash flows for the year then ended (not presented herein);
in my report dated October 19, 2009, I expressed a going concern opinion on
those financial statements. In my opinion, the information set forth in the
accompanying condensed balance sheet as of July 31, 2009, is fairly stated, in
all material respects, in relation to the balance sheet from which it has been
derived.
/s/ George Stewart
- -------------------------------
Seattle, Washington
March 4, 2010
3
LIBERTY ENERGY CORP.
(An Exploration Stage Company)
Balance Sheet
- --------------------------------------------------------------------------------
As of As of
January 31, July 31,
2010 2009
---------- ----------
ASSETS
CURRENT ASSETS
Cash $ 12,266 $ 21,100
---------- ----------
TOTAL CURRENT ASSETS 12,266 21,100
OIL AND GAS PROPERTIES, FULL COST METHOD
Costs subject to amortization 525,000 --
Costs not subject to amortization -- --
---------- ----------
OIL AND GAS PROPERTIES, NET 525,000 --
---------- ----------
TOTAL ASSETS $ 537,266 $ 21,100
========== ==========
CURRENT LIABILITIES
Accounts Payable 300,000 80
Loan Payable - related party 25,000 --
---------- ----------
TOTAL CURRENT LIABILITIES 325,000 80
TOTAL LIABILITIES 325,000 80
STOCKHOLDERS' EQUITY
Common stock, ($0.001 par value, 150,000,000 shares authorized;
60,400,000 and 60,000,000 shares issued and outstanding as of
January 31, 2010 and July 31, 2009 respectively 60,400 60,000
Additional paid-in capital 205,600 6,000
Deficit accumulated during exploration stage (53,734) (44,980)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 212,266 21,020
---------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 537,266 $ 21,100
========== ==========
See Notes to Financial Statements
4
LIBERTY ENERGY CORP.
(An Exploration Stage Company)
Statement of Operations
- --------------------------------------------------------------------------------
June 6, 2006
Three Months Three Months Six Months Six Months (inception)
Ended Ended Ended Ended through
January 31, January 31, January 31, January 31, January 31,
2010 2009 2010 2009 2010
------------ ------------ ------------ ------------ ------------
REVENUES
Revenues $ -- $ -- $ -- $ -- $ 100
------------ ------------ ------------ ------------ ------------
TOTAL REVENUES -- -- -- -- 100
PROFESSIONAL FEES 3,185 1,400 6,492 5,200 28,589
GENERAL & ADMINISTRATIVE EXPENSES 1,255 920 2,262 3,858 25,245
------------ ------------ ------------ ------------ ------------
TOTAL GENERAL & ADMINISTRATIVE
EXPENSES (4,440) (2,320) (8,754) (9,058) (53,834)
------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (4,440) $ (2,320) $ (8,754) $ (9,058) $ (53,734)
============ ============ ============ ============ ============
BASIC EARNINGS PER SHARE $ (0.00) $ (0.00) $ (0.00) $ (0.00)
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 60,400,000 60,000,000 60,317,391 60,000,000
============ ============ ============ ============
See Notes to Financial Statements
5
LIBERTY ENERGY CORP.
(An Exploration Stage Company)
Statement of Cash Flows
- --------------------------------------------------------------------------------
June 6, 2006
Six Months Six Months (inception)
Ended Ended through
January 31, January 31, January 31,
2010 2009 2010
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (8,754) $ (9,058) $ (53,734)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Changes in operating assets and liabilities:
Accounts Payable 299,920 -- 300,000
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 291,166 (9,058) 246,266
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Oil and Gas Properties (525,000) -- (525,000)
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (525,000) -- (525,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 400 -- 60,400
Additional paid-in capital 199,600 -- 205,600
Loan Payable - related party 25,000 -- 25,000
---------- ---------- ----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 225,000 -- 291,000
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH (8,834) (9,058) 12,266
CASH AT BEGINNING OF PERIOD 21,100 39,033 --
---------- ---------- ----------
CASH AT END OF YEAR $ 12,266 $ 29,975 $ 12,266
========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during year for:
Interest $ -- $ -- $ --
========== ========== ==========
Income Taxes $ -- $ -- $ --
========== ========== ==========
See Notes to Financial Statements
6
LIBERTY ENERGY CORP.
(An Exploration Stage Company)
Notes to Financial Statements
January 31, 2010
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Liberty Energy Corp. (f/k/a DMA Minerals Inc., the "Company") was incorporated
on June 6, 2006 under the laws of the State of Nevada.
The Company carried out exploration on a mineral claim known as the TG Mineral
Claim. The initial phase of exploration included detailed prospecting and
mineralization mapping, followed by hand trenching to obtain clean, fresh
samples. Based on the information available to it from its Phase I exploration
program, it was determined that the TG Mineral Claim did not, in all likelihood,
contain a commercially viable mineral deposit, and it therefore abandoned any
further exploration on the property.
As a result, the Company has acquired several oil and gas properties and
interests and is now focusing on raising additional funding for the exploration
and development of those properties.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The Company reports revenue and expenses using the accrual method of accounting
for financial and tax reporting purposes. The Company has elected a July 31,
year-end.
USE OF ESTIMATES
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles. Those
estimates and assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities, and the reported revenues
and expenses.
PRO FORMA COMPENSATION EXPENSE
No stock options have been issued by Liberty Energy Corp. Accordingly, no pro
forma compensation expense is reported in these financial statements.
MINERAL PROPERTY ACQUISITION AND EXPLORATION COSTS
The Company expenses all costs related to the acquisition and exploration of
mineral properties in which it has secured exploration rights prior to
establishment of proven and probable reserves. To date, the Company has not
established the commercial feasibility of any exploration prospects; therefore,
all costs are being expensed.
7
LIBERTY ENERGY CORP.
(An Exploration Stage Company)
Notes to Financial Statements
January 31, 2010
- --------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
DEPRECIATION, AMORTIZATION AND CAPITALIZATION
The Company records depreciation and amortization when appropriate using both
straight-line and declining balance methods over the estimated useful life of
the assets (five to seven years). Expenditures for maintenance and repairs are
charged to expense as incurred. Additions, major renewals and replacements that
increase the property's useful life are capitalized. Property sold or retired,
together with the related accumulated depreciation, is removed from the
appropriate accounts and the resultant gain or loss is included in net income.
OIL AND GAS PROPERTIES
The Company follows the full-cost method of accounting for oil and natural gas
properties. Under this method, all costs incurred in the exploration,
acquisition, and development, including unproductive wells, are capitalized in
separate cost centers for each country. Such capitalized costs include contract
and concessions acquisition, geological, geophysical, and other exploration
work, drilling, completing and equipping oil and gas wells, constructing
production facilities and pipelines, and other related costs.
The capitalized costs of oil and gas properties in each cost center are
amortized on a composite units of production method based on future gross
revenues from proved reserves. Sales or other dispositions of oil and gas
properties are normally accounted for as adjustments of capitalized costs. Gain
or loss is not recognized in income unless a significant portion of a cost
center's reserves is involved. Capitalized costs associated with acquisition and
evaluation of unproved properties are excluded from amortization until it is
determined whether proved reserves can be assigned to such properties or until
the value of the properties is impaired. If the net capitalized costs of oil and
gas properties in a cost center exceed an amount equal to the sum of the present
value of estimated future net revenues from proved oil and gas reserves in the
cost center and the lower of cost or fair value of properties not being
amortized, both adjusted for income tax effects, such excess is charged to
expense.
Since the Company has not produced any oil or gas, a provision for depletion has
not been made.
REVENUE AND COST RECOGNITION
The Company uses the sales method of accounting for natural gas and oil
revenues. Under this method, revenues are recognized based on the actual volumes
of gas and oil sold to purchasers. The volume sold may differ from the volumes
to which the Company is entitled based on our interest in the properties. Costs
associated with production are expensed in the period incurred.
8
LIBERTY ENERGY CORP.
(An Exploration Stage Company)
Notes to Financial Statements
January 31, 2010
- --------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INCOME TAXES
The Company accounts for its income taxes in accordance with ASC No. 740,
"Income Taxes". Under Statement 740, a liability method is used whereby deferred
tax assets and liabilities are determined based on temporary differences between
basis used for financial reporting and income tax reporting purposes. Income
taxes are provided based on tax rates in effect at the time such temporary
differences are expected to reverse. A valuation allowance is provided for
certain deferred tax assets if it is more likely than not, that the Company will
not realize the tax assets through future operations.
FAIR VALUE OF FINANCIAL INSTRUMENTS
ASC No. 825-50-10-1, "Financial Instruments - Overall Disclosure", requires the
Company to disclose, when reasonably attainable, the fair market values of its
assets and liabilities which are deemed to be financial instruments. The
Company's financial instruments consist primarily of cash and certain
investments.
INVESTMENTS
Investments that are purchased in other companies are valued at cost less any
impairment in the value that is other than temporary in nature.
PER SHARE INFORMATION
The Company computes per share information by dividing the net loss for the
period presented by the weighted average number of shares outstanding during
such period.
ADVERTISING
The Company will expense its advertising when incurred. There has been no
advertising since inception.
NOTE 3 - PROVISION FOR INCOME TAXES
The provision for income taxes for the period ended January 31, 2010 represents
the minimum state income tax expense of the Company, which is not considered
significant.
9
LIBERTY ENERGY CORP.
(An Exploration Stage Company)
Notes to Financial Statements
January 31, 2010
- --------------------------------------------------------------------------------
NOTE 4 - COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company is not presently involved in any litigation.
NOTE 5 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Recently issued accounting pronouncements will have no significant impact on the
Company and its reporting methods.
NOTE 6 - GOING CONCERN
Future issuances of the Company's equity or debt securities will be required in
order for the Company to continue to finance its operations and continue as a
going concern. The Company's present revenues are insufficient to meet operating
expenses.
The consolidated financial statements of the Company have been prepared assuming
that the Company will continue as a going concern, which contemplates, among
other things, the realization of assets and the satisfaction of liabilities in
the normal course of business. The Company has incurred cumulative net losses of
$53,734 since its inception and requires capital for its contemplated
operational activities to take place. The Company's ability to raise additional
capital through the future issuances of common stock is unknown. The obtainment
of additional financing, the successful development of the Company's
contemplated plan of operations, and its transition, ultimately, to the
attainment of profitable operations are necessary for the Company to continue
operations. The ability to successfully resolve these factors raise substantial
doubt about the Company's ability to continue as a going concern. The
consolidated financial statements of the Company do not include any adjustments
that may result from the outcome of these aforementioned uncertainties.
NOTE 7 - RELATED PARTY TRANSACTIONS
At of January 31, 2010, a loan payable in the amount of $25,000 was due Ian A.
Spowart (a director) of which the loan is non-interest bearing with no specific
repayment terms.
Daniel Martinez-Atkinson and Ian A. Spowart, the officers and directors of the
Company may, in the future, become involved in other business opportunities as
they become available, thus they may face a conflict in selecting between the
Company and their other business opportunities. The Company has not formulated a
policy for the resolution of such conflicts.
10
LIBERTY ENERGY CORP.
(An Exploration Stage Company)
Notes to Financial Statements
January 31, 2010
- --------------------------------------------------------------------------------
NOTE 8 - STOCK TRANSACTIONS
Transactions, other than employees' stock issuance, are in accordance with ASC
No. 505. Thus issuances shall be accounted for based on the fair value of the
consideration received. Transactions with employees' stock issuance are in
accordance with ASC No. 718. These issuances shall be accounted for based on the
fair value of the consideration received or the fair value of the equity
instruments issued, or whichever is more readily determinable.
On June 6, 2006 the Company issued a total of 30,000,000 shares of common stock
to one director for cash in the amount of $0.0002 per share for a total of
$6,000.
30,000,000 common shares were issued to 26 investors in the Company's SB-2
offering for the aggregate sum of $60,000 in cash. The Regulation SB-2 offering
was declared effective by the Securities and Exchange Commission on November 8,
2006 and completed on December 4, 2006.
Effective June 11, 2008 the Company effected a forward stock spilt of the
authorized, issued and outstanding shares of common stock on a twenty five new
for one old basis. Authorized capital increased from 75,000,000 common shares to
150,000,000 common shares and par value remained at $.001 per share. These
financial statements have been retroactively restated to reflect these changes.
On September 8, 2009 the Company issued a total of 400,000 shares of common
stock to one director for cash in the amount of $0.50 per share for a total of
$200,000.
As of January 31, 2010 the Company had 60,400,000 shares of common stock issued
and outstanding.
NOTE 9 - STOCKHOLDERS' EQUITY
The stockholders' equity section of the Company contains the following classes
of capital stock as of January 31, 2010:
Common stock, $0.001 par value: 150,000,000 shares authorized; 60,400,000 shares
issued and outstanding.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FORWARD LOOKING STATEMENTS
This report contains forward-looking statements that involve risk and
uncertainties. We use words such as "anticipate", "believe", "plan", "expect",
"future", "intend", and similar expressions to identify such forward-looking
statements. Investors should be aware that all forward-looking statements
contained within this filing are good faith estimates of management as of the
date of this filing. These forward-looking statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from historical results or our predictions.
RESULTS OF OPERATIONS
We are an exploration stage company and have generated $100 in revenues since
inception and have incurred $53,834 in expenses through January 31, 2010. For
the three months ended January 31, 2010 and 2009 we incurred $4,440 and $2,320
in expenses, respectively. These expenses consisted of professional fees and
general and administrative expenses.
The following table provides selected financial data about our company for the
periods ended January 31, 2010 and 2009.
Balance Sheet Data: 1/31/10 1/31/09
------------------- ------- -------
Cash $ 12,266 29,975
Total assets $537,266 29,975
Total liabilities $325,000 5,000
Shareholders' equity $212,266 24,975
Cash provided by financing activities since inception through January 31, 2010
was $66,000, $6,000 from the sale of shares to our officer and director in June
2006 and $60,000 resulting from the sale of our common stock in our initial
public offering to 26 independent investors in December 2006. On September 8,
2009 the Company issued a total of 400,000 shares of common stock to one
director for cash in the amount of $0.50 per share for a total of $200,000.
As of January 31, 2010 the Company had 60,400,000 shares of common stock issued
and outstanding.
LIQUIDITY AND CAPITAL RESOURCES
Our cash balance at January 31, 2010 was $12,266, with $325,000 in outstanding
liabilities. If we experience a shortfall of cash our director has agreed to
loan us additional funds for operating expenses, however he has no legal
obligation to do so. Total estimated net expenditures over the next 12 months
are expected to be approximately $2,850,000. We are an exploration stage company
and have generated no revenue to date.
11
PLAN OF OPERATION
The company carried out exploration on a mineral claim known as the TG Mineral
Claim. The initial phase of exploration included detailed prospecting and
mineralization mapping, followed by hand trenching to obtain clean, fresh
samples at a cost of $4,950. Based on the information available to us from our
Phase I exploration program, we determined that the TG Mineral Claim did not, in
all likelihood, contain a commercially viable mineral deposit, and we therefore
abandoned any further exploration on the property.
As a result, we began investigating several other business opportunities to
enhance shareholder value in the oil and gas industry with the acquisition of
oil and natural gas assets both in Bulgaria and the United States. Subject to
completing due diligence and funding sources being available we intend to pursue
business opportunities in the oil and gas business. We may require additional
funding to proceed. We cannot provide investors with any assurance that we will
be able to raise sufficient funds to fund continued work in the oil and gas
business.
BULGARIA PROJECT
On September 22, 2009, we entered into a Purchase and Sales Agreement with
William C Athens, Located at 1924 S. Utica Avenue Suite 1201, Tulsa, Oklahoma,
74104. We agreed to acquire from him, in 4 equal transactions, a total of 1/16th
of 1% of 8/8ths ORRI (over riding royalty interest) for a total price of
$400,000 (4 x $100,000). The interest is the A-Lovech exploration block in
Bulgaria. Aforementioned payments and Assignments are able to be made in four
separate $100,000 closings spaced roughly 30 days apart, from the date we signed
the agreement. As at the date hereof we have made one payment totaling $100,000
and carry the remaining $300,000 as an account payable.
The A-Lovech exploration block covers 1,830 square miles or 1,171,200 acres. On
the block, there was a primary well (Deventci-R1) drilled and logged in 2008.
Total depth is 5,888 meters (19,313 ft.) in the Lower Triassic Alexandrovo
formation. The well is on a geological feature known as the West Koynare
structure, which covers around 15-20 sq km. The Deventci-R1 is the deepest well
drilled in Bulgaria in the last 30 years and testing was planned in the Lower
Jurassic sandstones of the Bachiishte and Ozirovo formations. During a 12-hour
shut-in period, the indicated bottom hole pressure was about 11,500 psi. The
well encountered gas saturated reservoirs in the Dolni Dabnik member of the
Middle Triassic Doirentsi formation. Other potential reservoirs are in the Upper
Triassic Rusinovdel and the Lower Jurassic Ozirovo formations. Casing was run to
5,876 meters (19,280 ft.).
As this ORRI is operated by DPE, Liberty is currently uninvolved in any ongoing
development operations or exploration of the block. That being said, Liberty's
ORRI does entitle the company to its royalty interest on all future revenues and
reserves located on the block, at no further cost to the company. It is
anticipated that the Deventci development will be tied into the Aglen field,
21km away. First sales are expected after the completion of the pipeline in
2011.
12
Initial results show that gas and natural gas condensate are of a very high
quality with low sulphur content.
Upon completion of the transactions in the purchase and sale agreement, we plan
to commence a thorough search and review of other assets in this part of Europe,
with a view to engaging in similar low risk opportunities.
TEXAS PROJECT
On October 1, 2009, we entered into the Lease Purchase and Sale Agreement with
Trius Energy LLC, a Texas company, to acquire 4 oil and gas leases in Texas for
$125,000. 100% WI (Working Interest) at a 75% NRI (Net revenue Interest) in the
Dahlstrom Lease, 2% WI at 75% NRI in the Ratliff lease and 100% WI at a 70% NRI
in the Lockhart Project, consisting of 2 leases, the Anton lease (1 tract) and
Alexander Lease (3 tracts). Upon completion of the transactions described under
this Lease Purchase and Sale Agreement, we intend to continue existing
production, and also to conduct an aggressive exploration and appraisal program
on the leases acquired over the next 12 months.
The Dahlstrom lease in Jackson County, Texas has one existing well. This is a
productive gas well, which will provide the company with small but sustainable
quantities of natural gas sales. The lease does not currently have any further
spacing for more wells to be drilled, but it holds the Master Meter where all
wells in the area tie into (to sell their gas) which would give us possible
revenue with future wells drilled and/or re-entered. Liberty may also look to
re-enter the current well, and perform workover operations, once it has been
determined whether production could be reasonably increased, and a decent upside
achieved.
The Ratliff lease in Jackson County, Texas currently has 4 wells on it, and also
has spacing to drill another well. We will conduct geological studies to
ascertain the risk and worth of such expenditure. We are also interested in the
redevelopment of the 4 existing wells. 3 of them are expected to be viable for
economic production of oil and gas, and the 4th is also permitted to facilitate
a commercial disposal facility. This salt water disposal well could provide a
significant monthly revenue stream from companies disposing of their salt water
that their wells produce around us, plus in addition, gives us monthly oil
revenue by "skimming" the oil from the salt water that we dispose. The three
wells expected to produce oil and gas, and the disposal well need various works
as detailed below.
One of the wells needs a sand-lock and tubing tested, another well needs
additional perforations and tubing tested, another well needs tubing tested and
the last well needs tubing tested, which is planned to be a salt water disposal
well.
Lockhart Northeast Project in Caldwell County, Texas (2 leases) consists of 4
land tracts containing 8 wells, spread over roughly 848 acres. 5 of the wells
are re-entry wells, and there are 3 shut in wells. With the amount of acreage
held, the operator has informed the company that we are able to space a further
282 new wells.
13
The following proposed plan of action is made based on a best efforts study of
geological and production data that have been acquired, but do not represent a
thorough study of the area by petroleum engineers, geologists, or geophysicist.
1. Schedule an inspection on entire leased acreage; gather equipment list
& survey
2. Carry out extensive geological study examining both risk and reward of
proposed works
3. Increase operator bond to operate wells
4. Schedule swabbing to be performed on shut-in wells for oil production
5. Put AFE (Authorization For Expenditure) together for
equipping/re-working (3) shut-in wells
6. Put AFE together for re-entering (5) wells
7. Perform complete evaluation on drilling program
8. Put AFE together for new well locations
9. Drill & Complete new wells
10. Develop Field up to 282 newly drilled wells
There are (4) main geological pay zones in this area that our wells could
produce from - the Serpentine, Dale Lime, Austin Chalk & Buda. That being said,
new field discoveries are possible in the Buda, Serpentine and Dale Lime on
these leases based on logged but undeveloped shows. We feel that these leases
could potentially be extremely profitable, if we develop each lease and well
correctly. With new technology and countless new ways to complete/produce wells
we are excited for what lies ahead.
Presently, we feel that we should be able to get a considerable amount of
(flush) production from the (3) shut-in wells by swabbing each well a few times
a month. This will enable us to use revenue to proceed with developing the
field. With the application of acid/fracture jobs and/or far-out perforating
(new completion technology) it is believed that we would be able to increase
production and possibly access undeveloped reservoirs that could produce at
significantly higher daily rates and overall total production.
Historically, we have been able to raise a limited amount of capital through
private placements of our equity stock, but we are uncertain about our continued
ability to raise funds privately. If we are unable to secure adequate capital to
continue our oil and gas exploration and development business our shareholders
will lose some or all of their investment and our business will likely fail.
Over the next twelve months we expect to expend funds as follows:
ESTIMATED NET EXPENDITURES DURING THE NEXT TWELVE MONTHS
General, Administrative, and Corporate Expenses $ 100,000
Operating Expenses $ 250,000
Exploration $1,500,000
Redevelopment $1,000,000
----------
TOTAL $2,850,000
==========
14
We have suffered recurring losses from operations. The continuation of our
company is dependent upon our company attaining and maintaining profitable
operations and raising additional capital as needed. In this regard we have
raised additional capital through the equity offerings noted above.
The continuation of our business is dependent upon obtaining further financing,
a successful program of exploration and/or development, and, finally, achieving
a profitable level of operations. The issuance of additional equity securities
by us could result in a significant dilution in the equity interests of our
current stockholders. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash commitments.
There are no assurances that we will be able to obtain further funds required
for our continued operations. As noted herein, we are pursuing various financing
alternatives to meet our immediate and long-term financial requirements. There
can be no assurance that additional financing will be available to us when
needed or, if available, that it can be obtained on commercially reasonable
terms. If we are not able to obtain the additional financing on a timely basis,
we will be unable to conduct our operations as planned, and we will not be able
to meet our other obligations as they become due. In such event, we will be
forced to scale down or perhaps even cease our operations
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements.
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including
our principal executive officer and the principal financial officer, we have
conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities and Exchange Act of 1934, as of the end of the period
covered by this report. Based on this evaluation, our principal executive
officer and principal financial officer concluded as of the evaluation date that
our disclosure controls and procedures were effective such that the material
information required to be included in our Securities and Exchange Commission
reports is accumulated and communicated to our management, including our
principal executive and financial officer so that it may be recorded, processed,
summarized and reported within the time periods specified in SEC rules and forms
relating to our company, particularly during the period when this report was
being prepared.
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CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
There have been no changes in our internal control over financial reporting that
occurred during the last fiscal quarter ended January 31, 2010 that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS
The following exhibits are included with this quarterly filing. Those marked
with an asterisk and required to be filed hereunder, are incorporated by
reference and can be found in their entirety in our original Form SB-2
Registration Statement, filed under SEC File Number 333-138107, at the SEC
website at www.sec.gov:
Exhibit No. Description
----------- -----------
3.1 Articles of Incorporation*
3.2 Bylaws*
31.1 Sec. 302 Certification of Principal Executive Officer
31.2 Sec. 302 Certification of Principal Financial Officer
32.1 Sec. 906 Certification of Principal Executive Officer
32.2 Sec. 906 Certification of Principal Financial Officer
SIGNATURES
Pursuant to the requirements of Section 13(a) 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.
/s/ Ian Spowart March 20, 2010
- ------------------------------------ -------------
Ian Spowart, President Date
(Chief Executive Officer & Director)
/s/ Daniel Martinez-Atkinson March 20, 2010
- ------------------------------------ --------------
Daniel Martinez-Atkinson Date
(Chief Financial Officer, Principal
Accounting Officer & Director)
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