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 SEPTEMBER 30, 2013
Commission file number 333-187648
Annona Energy Inc.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of incorporation or organization)
2316 A Willemar Avenue
Courtenay, B.C. V9N 3M8
annona.energy@yahoo.com
(Address of principal executive offices, including zip code)
(250) 898-8882
(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 [X] NO [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer, "accelerated filer,"
"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: 7,500,000 shares as of November 13,
2013
ITEM 1. FINANCIAL STATEMENTS
ANNONA ENERGY, INC.
(An Exploration Stage Company)
Condensed Balance Sheets
--------------------------------------------------------------------------------
September 30, December 31,
2013 2012
-------- --------
(Audited)
ASSETS
Current Assets
Cash $ 4,552 $ 6,982
-------- --------
Total Current Assets 4,552 6,982
-------- --------
TOTAL ASSETS $ 4,552 $ 6,982
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable $ 1,426 $ --
Officer advances 5,425 425
-------- --------
Total Current Liabilities 6,851 425
-------- --------
TOTAL LIABILITIES 6,851 425
-------- --------
Stockholders' Equity (Deficit)
Common stock, ($0.0001 par value, 75,000,000 shares
authorized; 7,500,000 shares issued and outstanding
as of September 30, 2013 and December 31, 2012 750 750
Additional paid-in capital 6,750 6,750
Deficit accumulated during exploration stage (9,799) (943)
-------- --------
Total Stockholders' Equity (Deficit) (2,299) 6,557
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT) $ 4,552 $ 6,982
======== ========
The accompanying notes are an integral part of
these condesed financial statements.
2
ANNONA ENERGY, INC.
(An Exploration Stage Company)
Condensed Statements of Operations
--------------------------------------------------------------------------------
October 22, 2012
Three Months Nine Months (inception)
Period Ended Period Ended through
September 30, September 30, September 30,
2013 2013 2013
---------- ---------- ----------
Operating Costs
Administrative expenses $ 286 $ 3,341 $ 4,284
Professional fees 1,186 5,515 5,515
---------- ---------- ----------
Total Operating Costs 1,472 8,856 9,799
---------- ---------- ----------
Net Income (Loss) $ (1,472) $ (8,856) $ (9,799)
========== ========== ==========
Basic earnings per share $ (0.00) $ (0.00) $ (0.00)
========== ========== ==========
Weighted average number of
common shares outstanding 7,500,000 7,500,000 7,500,000
========== ========== ==========
The accompanying notes are an integral part of
these condesed financial statements.
3
ANNONA ENERGY, INC.
(An Exploration Stage Company)
Condensed Statements of Cash Flow
--------------------------------------------------------------------------------
October 22, 2012
Nine Months (inception)
Period Ended through
September 30, September 30,
2013 2013
-------- --------
OPERATING ACTIVITIES
Net loss $ (8,856) $ (9,799)
Changes in operating assets and liabilities:
Increase in accounts payable 1,426 1,426
-------- --------
Net cash used in operating activities (7,430) (8,373)
FINANCING ACTIVITIES
Increase in officer advances 5,000 5,425
Issuance of common stock -- 750
Additional paid-in capital -- 6,750
-------- --------
Net cash provided by financing activities 5,000 12,925
Net increase in cash (2,430) 4,552
Cash at beginning of period 6,982 --
-------- --------
Cash at end of period $ 4,552 $ 4,552
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during period for:
Interest $ -- $ --
======== ========
Income Taxes $ -- $ --
======== ========
The accompanying notes are an integral part of
these condesed financial statements.
4
ANNONA ENERGY INC.
Notes to Condensed Financial Statements
(An Exploration Stage Company)
(Unaudited)
September 30, 2013
--------------------------------------------------------------------------------
NOTE 1. NATURE OF OPERATIONS
Annona Energy Inc. ("The Company") was incorporated in the State of Nevada on
October 22, 2012. The Company is an Exploration Stage Company as defined by
Accounting Standards Codification ("ASC") Topic 915 "Development Stage
Entities." The Company's plan of operations anticipates purchasing at least one
oil and gas lease. There is no assurance we will ever be able to acquire an oil
and gas lease, or if we do acquire an oil and gas lease, that the oil and gas
lease will produce any oil or gas.
NOTE 2. GOING CONCERN
The accompanying unaudited condensed financial statements have been prepared on
a "going concern" basis, which assumes that the Company will continue to realize
its assets and discharge its liabilities in the normal course of business. As of
September 30, 2013, the Company had cash of $4,552 and incurred a net loss of
$9,799 for the period from October 22, 2012 (inception) to September 30, 2013.
These factors raise substantial doubt regarding the Company's ability to
continue as a going concern. These condensed financial statements do not include
any adjustments to the recoverability and classification of recorded asset
amounts and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.
The Company plans to conduct a public offering of up to 6,000,000 shares of
common stock at a price of $0.01 per share or $60,000 (minimum of 3,000,000
shares or $30,000). However, there is no assurance that the offering will be
completed.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with accounting principles generally accepted in the U.S. ("GAAP")
for interim financial information and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information required by GAAP for
complete annual financial statement presentation. Operating results for the
three and nine month period ended September 30,2013 are not necessarily
indicative of the results to be expected for other interim periods or for the
full year ended December 31, 2013. These unaudited condensed financial
statements should be read in conjunction with the financial statements and
accompanying notes thereto included in the Company's Annual Report on Form 10-K
for the year ended December 31, 2012, as filed with the Securities Exchange
Commission.
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CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. As of September 30,
2013, the Company has no cash equivalents.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally accepted
accounting principles requires that management makes estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the condensed financial
statements and the reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
FINANCIAL INSTRUMENTS
The carrying values of the Company's financial instruments, consisting of cash,
accounts payable and officer advances approximate their fair value because of
the short maturity of these instruments. The Company's operations are outside
the United States and some of its future assets and liabilities may have
exposure to market risks from changes in foreign currency rates. The Company's
financial risk is the risk that arises from fluctuations in foreign exchange
rates and the degree of volatility of those rates. Currently, the Company does
not use derivative instruments to reduce its exposure to foreign currency risk.
BASIC AND DILUTED NET LOSS PER SHARE
The Company computes net income (loss) per share in accordance with ASC 260,
"Earnings per Share" which requires presentation of both basic and diluted
earnings per share ("EPS") on the face of the income statement. Basic EPS is
computed by dividing net income (loss) available to common shareholders
(numerator) by the weighted average number of common shares outstanding
(denominator) during the period. Diluted EPS gives effect to all dilutive
potential common shares outstanding during the period including stock options,
using the treasury stock method; and convertible preferred stock, using the
if-converted method. In computing diluted EPS, the average stock price for the
period is used in determining the number of shares assumed to be purchased from
the exercise of stock options or warrants. Diluted EPS excludes all dilutive
potential common shares if their effect is anti-dilutive. As of September 30,
2013, there were no dilutive securities.
EXPLORATION STAGE COMPANY
The Company complies with Financial Accounting Standards Codification ("ASC")
915 and Securities and Exchange Commission Act Guide 7 for its characterization
of the Company as development stage enterprise.
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INCOME TAXES
Income taxes are provided in accordance with ASC No. 740, Accounting for Income
Taxes. The Company follows the accrual method of accounting for income taxes.
Under this method, deferred income tax assets and liabilities are recognized for
the estimated tax consequences attributable to differences between the financial
statement carrying values and their respective income tax basis (temporary
differences). The effect on the deferred income tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. As of September 30, 2013, a full deferred tax asset valuation
allowance has been recorded against the deferred tax asset comprising net
operating loss carry-forwards due to the uncertainty surrounding their
realization within the expiration period.
NOTE 4. RECENT ACCOUNTING PRONOUCEMENTS
Liquidation Basis of Accounting. The objective of ASU No. 2013-07 is to clarify
when an entity should apply the liquidation basis of accounting and to provide
principles for the measurement of assets and liabilities under the liquidation
basis of accounting, as well as any required disclosures. The amendments in this
standard are effective prospectively for entities that determine liquidation is
imminent during annual reporting periods beginning after December 15, 2013, and
interim reporting periods therein. We are evaluating the effect, if any,
adoption of ASU No. 2013-07 will have on our financial statements.
NOTE 5. RELATED PARTY TRANSACTIONS
Lawrence Jean, the Company president, provides management and office premises to
the Company for no compensation. He will not be paid for any underwriting
services that he performs on behalf of the Company with respect to the Company's
upcoming S-1 offering. He will also not receive any interest on any funds that
he loans to the Company. Mr. Jean has loaned funds to the Company in the amount
of $5,425 as of September 30, 2013.
NOTE 6. COMMON SHARES
On November 21, 2012, the Company authorized the issue of 7,500,000 common
shares of the Company at par value of $.001 to Lawrence H. Jean, Director and
President, for net cash proceeds of $7,500.
As of September 30, 2013 there are total of 7,500,000 common shares of the
Company issued and outstanding.
NOTE 7. SUBSEQUENT EVENTS
In accordance with ASC 855, Subsequent Events, the Company has evaluated
subsequent events and transactions for potential recognition or disclosure
through November 14, 2013, the date the financial statements were issued, and
concluded there were none.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
Certain statements in this quarterly report on Form 10-Q contain or may contain
forward-looking statements that are subject to known and unknown risks,
uncertainties and other factors which may cause actual results, performance or
achievements to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. These
forward-looking statements were based on various factors and were derived
utilizing numerous assumptions and other factors that could cause our actual
results to differ materially from those in the forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this report. Except for our
ongoing obligations to disclose material information under the Federal
securities laws, we undertake no obligation to release publicly any revisions to
any forward-looking statements, to report events or to report the occurrence of
unanticipated events. For any forward-looking statements contained in any
document, we claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.
RESULTS OF OPERATIONS
We are a development stage company and have generated no revenues since
inception (October 22, 2012) and have incurred $9,799 in expenses through
September 30, 2013. For the three month period ended September 30, 2013 we
incurred $286 in general and administrative expenses and $1,186 in professional
fees. As we were incorporated on October 22, 2012 there are no prior period
comparisons available.
For the nine month period ended September 30, 2013 we incurred $3,341 in general
and administrative expenses and $5,515 in professional fees.
The following table provides selected financial data about our company at
September 30, 2013.
Balance Sheet Data: 9/30/13
------------------- -------
Cash $ 4,552
Total assets $ 4,552
Total liabilities $ 6,851
Shareholders' equity $(2,299)
Cash provided by financing activities since inception through September 30, 2013
was $7,500 from the sale of 7,500,000 shares of common stock to Lawrence Jean,
our officer and director, in November 2012, and $5,425 from funds loaned to the
company by Mr. Jean.
LIQUIDITY AND CAPITAL RESOURCES
Our cash balance at September 30, 2013 was $4,552, with $6,851 in outstanding
liabilities, consisting of $1,426 in accounts payable and $5,425 in a long-term
note payable to a related party. 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 expenditures over the next 12 months
are expected to be approximately $30,000.
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PLAN OF OPERATION
We are a start-up, exploration stage company and have not yet generated or
realized any revenues from our business operations. An exploration stage company
is one engaged in the search for oil and gas reserves which are not in either
the development or production stage.
Our auditors have issued a going concern opinion. This means that there is
substantial doubt that we can continue as an on-going business for the next
twelve months unless we obtain additional capital to pay our bills. This is
because we have not generated any revenues and no revenues are anticipated until
we begin selling oil and gas. Accordingly, we must raise cash from sources other
than the sale of oil and gas. Our only other source for cash at this time is
investments by others in our current offering. We must raise cash to implement
our project and stay in business. The minimum amount of the current offering
will allow us to operate for at least one year. Our success or failure will be
determined by what we find under the ground. The more money we raise, the more
oil and gas leases we can acquire. We will not acquire an oil and gas lease
until we raise money from our current offering.
We believe we will need to raise the minimum amount of our current offering of
$30,000 in order to acquire one lease with at least one drilled well bore that
is currently non-producing and rework it on the property. If we are able to
raise more than the minimum offering this would allow us to acquire one or more
leases. We have targeted the geographical area of Caddo and Bossier Parishes in
northwest Louisiana.
Any oil and gas that may be produced on our lease would be distributed through
oil and gas gathering companies in the area. The local operator who we will hire
would make the arrangements with the trucking or gathering companies. If we do
find a lease with a drilled well bore that is currently non-producing and are
able to rework the well, the distribution agreements for oil generally provides
for it to be picked up and trucked to point of sale. We would then be paid for
our oil at the market price at the time of delivery less any transportation
charges from the trucking or gathering company. These charges can range from 5%
upward of the market value of the gas, depending on the competition among
transmission companies in the area of the wells.
If we are able to find a drilled well bore that is non-producing and is not able
to rework it, we would have to suspend operations until we raised more money. If
we are unable to raise more money, we may have to cease operations. We do not
intend to hire additional employees at this time. All of the work on the
property will be conducted by unaffiliated independent operators that we will
hire. The independent operators will be responsible for reworking the wellbore
on the lease and distributing and selling any oil or gas found.
In the event we complete our exploration program prior to the end of one year,
and it is anticipated we will do so as reflected in the milestones that follow,
if we find oil and/or gas, we will spend the balance of the year creating a
program for development of the property. If we do not find oil and/or gas on the
property, we will attempt to locate a new property, raise additional money, and
explore the new property.
Our plan of operation for the twelve months following the date of this
prospectus is to raise funds from our current offering, secure a lease on a
property and complete the re-work and production program while also searching
for other affordable leases. Our offering expires on April 2, 2014. Once we
receive funding it will take three to four months to secure a lease and get the
well operational.
If we are able to raise the full $60,000 from our current offering we anticipate
spending $6,000 for the purchase of the lease and the estimated cost of $16,000
for the rework program, we anticipate spending an additional $2,400 (approx.
$400 per month) for monthly maintenance fees once the well is operational
9
(anticipated to begin in month 6), $5,000 on professional fees, including fees
payable for complying with reporting obligations. If all proceeds as planned we
will also look into purchasing a second lease for $6,000 and the rework and
monthly maintenance fees would be comparable to those with our first well. We
anticipate having approximately $6,200 in working capital in this scenario.
Total expenditures over the next 12 months are expected to be approximately
$60,000. We will require the funds from our current offering to proceed.
If we are only able to raise $30,000 to $50,000 we would not purchase a second
well lease and our costs would be limited to $6,000 for the lease, $16,000 for
rework, $2,400 for maintenance, $5,000 for professional fees and the remainder
being working capital.
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements.
GOING CONCERN
Our auditors have issued a going concern opinion. This means that there is
substantial doubt that we can continue as an on-going business for the next
twelve months unless we obtain additional capital to pay our bills. This is
because we have not generated any revenues and no revenues are anticipated until
we begin selling oil and gas.
ITEM 4. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Management maintains "disclosure controls and procedures," as such term is
defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the
"Exchange Act"), that are designed to ensure that information required to be
disclosed in our Exchange Act reports is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission rules and forms, and that such information is accumulated and
communicated to management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure.
In connection with the preparation of this quarterly report on Form 10-Q, an
evaluation was carried out by management, with the participation of the Chief
Executive Officer and the Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Exchange Act) as of September 30, 2013.
Based on that evaluation, management concluded, as of the end of the period
covered by this report, that our disclosure controls and procedures were
effective in recording, processing, summarizing, and reporting information
required to be disclosed, within the time periods specified in the Securities
and Exchange Commission's rules and forms.
CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
As of the end of the period covered by this report, there have been no changes
in the internal controls over financial reporting during the quarter ended
September 30, 2013, that materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting subsequent to
the date of management's last evaluation.
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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 Registration
Statement on Form S-1, filed under SEC File Number 333-187648, 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
101 Interactive data files pursuant to Rule 405 of Regulation S-T
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.
Annona Energy Inc.
Registrant
Date November 13, 2013 By: /s/ Lawrence Jean
------------------------------------------
Lawrence Jean, Chief Executive Officer,
Chief Financial and Accounting Officer and
Sole Director
11