UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
April 30, 2012
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number: 000-52687
Alamo Energy Corp.
(Exact name of registrant as specified in its charter)
Nevada
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98-0489669
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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10575 Katy Freeway, Suite 300, Houston, Texas
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77024
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(Address of principal executive offices)
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(Zip Code)
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(832) 436-1832
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(Registrant's Telephone Number, Including Area Code)
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Securities registered under Section 12(b) of the Act:
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Title of each class registered:
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Name of each exchange on which registered:
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None
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None
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Securities registered under Section 12(g) of the Act:
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Common Stock, Par Value $.001
(Title of Class)
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Indicate by check mark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
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Yes
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No
Indicate by check mark if registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
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Yes
x
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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Yes
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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 (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
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Yes
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No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
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Yes
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No
Indicate by check mark whether the registrant is a large accelerated file, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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(Do not check if a smaller reporting company)
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Smaller reporting company
x
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
o
Yes
x
No
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. As of October 31, 2011, approximately $11,683,221.
As of August 13, 2012, there were 79,104,638 shares of the issuer's $.001 par value common stock issued and outstanding.
Documents incorporated by reference. There are no annual reports to security holders, proxy information statements, or any prospectus filed pursuant to Rule 424 of the Securities Act of 1933 incorporated herein by reference.
TABLE OF CONTENTS
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PART I
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Page
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PART II
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PART III
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PART IV
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PART I
Forward-Looking Information
This Annual Report of Alamo Energy Corp. on Form 10-K contains forward-looking statements, particularly those identified with the words, “anticipates,” “believes,” “expects,” “plans,” “intends," “objectives” and similar expressions. These statements reflect management's best judgment based on factors known at the time of such statements. The reader may find discussions containing such forward-looking statements in the material set forth under “Management's Discussion and Analysis and Plan of Operations,” generally, and specifically therein under the captions “Liquidity and Capital Resources” as well as elsewhere in this Annual Report on Form 10-K. Actual events or results may differ materially from those discussed herein. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements. The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.
Item 1. Business.
Our Background.
Alamo Energy Corp. (“Alamo,” “We” or the “Company”), formerly Green Irons Holdings Corp., was incorporated in the State of Nevada on March 29, 2006 as to conduct a business in the golfing industry. On November 18, 2009, we entered into an Asset Purchase and Sale Agreement (“Asset Purchase Agreement”) with Alamo Oil Limited (“Alamo Oil”), pursuant to which we acquired certain oil and gas assets from Alamo Oil (“Asset Purchase”). Following the closing of the Asset Purchase Agreement and pursuant to an Agreement and Plan of Merger (the “Merger”), effective as of November 19, 2009, we merged our newly formed and wholly-owned subsidiary into us, pursuant to which we changed our name to Alamo Energy Corp.
As a result of the Asset Purchase, we changed management, entered the oil and gas business, and ceased all activity in our former business. We are focused on exploration, acquisition, development, production and sale of
crude oil and natural gas primarily from exploration and production areas within North America and the United Kingdom. We are qualified to do business in the State of Texas as “Texas Alamo Energy Corp.” We have not undergone bankruptcy, receivership, or any similar proceeding.
Our Business.
We are an oil and gas company led by an experienced management team and focused on exploration, production and development of oil and natural gas within North America and the United Kingdom. Our business plan is to acquire oil and gas properties for exploration, appraisal and development with the intent to bring the projects to feasibility at which time we will either contract out the operations or joint venture the project with qualified interested parties. Our main priority will be given to projects with near term cash flow potential, although consideration will be given to projects that may not be as advanced from a technical standpoint but demonstrate the potential for significant upside.
In the United States, we have focused on the Appalachian Basin with an operation base in Gray, Kentucky. We are the operator of our wells in Knox County, Kentucky. We also own working interests in properties located in Texas and West Virginia where we are not the operator. In the United Kingdom, we have focused on the Weald Basin in the South of England. We currently have proved reserves in the States of Texas, Kentucky and West Virginia.
The following is a description of our oil and gas interests and operations in Kentucky:
KYTX Interests.
Our operations in Kentucky increased substantially in April 2011, with our acquisition of all of the membership interests of KYTX Oil and Gas, LLC, KYTX Pipeline, LLC, and KYTX Drilling Company, LLC from Range Kentucky Holdings, LLC (“Range”). The acquired interests include: (i) 71 wells located on approximately 4,040 acres in Kentucky, all of which are held by production, (ii) a 23-mile pipeline network capable of handling up to 9,000,000 cubic feet per day and (iii) drilling equipment including one drilling rig, one service rig and additional well-servicing equipment (collectively, the “KYTX Interests”).
As of the date of this Report, approximately 14 of the 71 wells acquired have been drilled but require further work to be completed and commence production. We have devoted a significant portion of our operations to the development of the KYTX Interests and other assets in the southern Appalachian basin.
Taylor TDS Five Well Program.
In March 2010, we entered into an operating agreement ("Operating Agreement") with Boardman Energy Partners, LLC (“Boardman”), for the purchase of participation rights with regard to Boardman’s operation of five wells in the Taylor TDS Five Well Program ("Program") totaling approximately 55 gross acres located on the H.V. In conjunction with the Operating Agreement, we entered into a Subscription and Customer Agreement (“Subscription Agreement”) with Third Coast Energy & Development, LLC, (“Third Coast”) as consideration for our participation in the Operating Agreement, and made a cash payment to Third Coast in the amount of $303,986. We purchased eight Units at the rate of $37,996 per Unit, or a total of $303,986, which means we own a 16% working interest and 12% net revenue interest in the Program. Taylor Lease in the Middle Eastern section of the Gradyville Quadrangle, Adair County, Kentucky, for the purpose of oil and gas exploration and development. Boardman is the operator of the project with full control of all operations.
Work on the wells in the Taylor TDS Five Well Program commenced in June 2010. The wells were not completed because the quantities of oil discovered were non-commercial.
The following is a description of our oil and gas interests and operations in the United Kingdom:
Aimwell Agreement.
In January 2010, we entered into a letter agreement
(the “Participation Agreement”)
with Aimwell Energy Limited, a corporation based in the United Kingdom (“Aimwell”), for the participation rights with regard to Aimwell’s license to operation certain oil and gas properties located on approximately 400 square kilometers in the United Kingdom (the “UK License”). Pursuant to the agreement, Aimwell assigned a 90% interest in the UK License to us in exchange for our payment of 1 pound sterling to Aimwell and Alamo was named the operator of the assets subject to the license. Aimwell retained a 10% interest in the license, though we will pay Aimwell’s proportional costs of operating the license until a field development plan is approved, and after which, the parties will share their costs in proportion to their ownership percentage interests in the license.
As of the date of this Report, pre-existing seismic lines have been procured and reprocessed and technical evaluations of the blocks have been made and an access/route survey has been conducted for a planned two dimensional seismic survey.
On November 14, 2011, we entered into and closed a Farmout Agreement (the “Farmout Agreement”) with Northdown Energy Limited, a U.K. corporation (“Northdown”) pursuant to which we assigned to Northdown 45% of our working interest in the U.K. License in exchange for the purchase price of £60,000. The Farmout Agreement was approved by the United Kingdom Department of Energy and Climate Control (the “DECC”). In connection with the Farmout Agreement, we entered into and closed a Novation and Amendment of Participation Agreement with Northdown and Aimwell (the “Amendment Agreement”) amending the Participation Agreement such that Northdown will pay half of Aimwell’s percentage interest share of all costs, expenses, liabilities and obligations arising from oil operations in the licensed area which are attributable to us pursuant to the Participation Agreement. We also entered into and closed a Joint Operating Agreement with Northbound and Aimwell (the “Joint Operating Agreement”) pursuant to which we will be the sole operator of the joint oil operations in the licensed area under the overall supervision and control of the Joint Operating Committee, as defined in the Joint Operating Agreement.
The following is a description of our oil and gas interests and operations in Texas, West Virginia and Tennessee:
WEJCO Agreement.
In April 2010, we entered into a participation agreement with WEJCO, Inc., located in Texas (“WEJCO”), to acquire participation rights in WEJCO’s working interest in oil, gas and mineral leases represented by a leasehold estate and well on approximately 453 gross acres in Brown County, Texas, in exchange for our cash payment of $18,050 and the future payment of a proportional share of drilling and completion costs in the project. The initial cash payment of $18,050 represents twenty percent (20%) of the total $90,250 cost of the geologic, land and seismic costs attributed to the well project in exchange for an assignment of WEJCO’s interest in the project to us. The subject of the agreement is the Duffer Re-entry Prospect, Hubbard H-1 well, located in Brown County, Texas, and the project involves re-entering the well or drilling a substitute well if the re-entry fails. The agreement also provides for us and WEJCO to enter into an operating agreement whereby WEJCO will be designated the operator of the well, but that we will receive an interest in the net revenue of the project, as
set forth in an exhibit attached to the Agreement. Work on the Hubbard H-1 well commenced in July 2010.
The well produced small quantities of commercial production and was subsequently re-completed to the Duffer zone in March 2012. Additionally, we participated in drilling three shallow oil wells on the acreage adjacent to the Hubbard H-1 well location. The wells were successful and are producing as of the date of this Report.
Valentine Agreement.
In May 2010, we entered into a participation agreement with Allied Energy, Inc. (“Allied”), pursuant to which we acquired an undivided 50% working interest in the Florence Valentine Lease and a working interest and net revenue interest in the Valentine #1 re-entry well. This well is located on approximately 115 acres in Ritchie County, West Virginia within the Burning Springs Anticline. Allied is the operator of the project with full control of all operations. We paid the total drilling and completion costs of $153,500 to earn in the Valentine #1 re-entry well and the Florence Valentine lease before a payout working interest of 70% and net revenue interest of 59.08 (70% x 84.4%) and an after payout working interest of 50% and net revenue interest of 42.2% (50% x 84.4).
Work on the Valentine #1 re-entry well commenced in June 2010 and is currently producing as of date of this Report.
Dillon Agreement.
On August 4, 2010, we entered into a participation agreement with Allied, pursuant to which we acquired an undivided fifty percent (50%) working interest in the M. Dillon Lease and a working interest and net revenue interest in the Dillon #1 re-entry Well. This well is located on approximately 204 acres in Pleasants County, West Virginia. Allied is the operator of the project with full control of all operations. We paid the total drilling and completion costs of $179,125 to earn in the Dillon #1 re-entry well and M. Dillon Lease a before payout working interest of seventy percent (70%) and net revenue interest of 59.08 (70% x 84.4%) and an after payout working interest of fifty percent (50%) and net revenue interest of 42.2% (50% x 84.4%). The participation agreement also provides that we have the option to participate in the re-entry of sixteen additional wells owned by Allied in West Virginia, including, but not limited to, the well WVIC D-12 as described below.
On October 15, 2010, we entered into an amendment to the participation agreement (“Amendment Agreement”) with Allied, the practical effect of which is that we replaced our participation in the Dillon #1 well with participation in the Goose Creek #4 well in Ritchie County, West Virginia. Specifically, the Amendment Agreement amended the following: (i) the Operating Agreement with respect to the Florence Valentine Lease, (ii) the Participation Agreement with respect to the reentry of the Dillon #1 well dated August 2, 2010, and (iii) the Joint Operating Agreement with respect to the M. Dillon Lease in Ritchie County, West Virginia dated August 2, 2010. The Amendment amends the Valentine JOA and the Dillon JOA to include Exhibit C which provides the accounting procedures for the operations. The Amendment also amends the Participation Agreement by replacing all references of the Dillon #1 well in Pleasant County, West Virginia, to the Goose Creek #4 well (API #47-082-06942) in Ritchie County, West Virginia. The Amendment also amends the Dillon JOA by replacing all references of the Dillon #1 well in Pleasant County, West Virginia, to the Goose Creek well #4 (API #47-082-06942). The Amendment also amends the Participation Agreement and the Dillon JOA to delete the Exhibit A to those agreements and replace it with the Exhibit A attached to the Amendment as Appendix 2.
This Goose Creek #4 well is included in the Eco Forrest Lease, which is located on approximately 493 acres in Ritchie County, West Virginia.
On December 15, 2010, we exercised an option to participate in the recompletion of the well WVIC D-12 with Allied, pursuant to the Participation Agreement with Allied, as amended in the Amendment Agreement on October 15, 2010. The well WVIC D-12 is included in the Eco Forrest Lease, which is located on approximately 493 acres in Ritchie County, West Virginia. Allied is the operator of the project with full control of all operations. We are obligated to pay the total drilling and completion costs of $157,575 to earn in the well WVIC D-12 and Eco Forrest Lease a before payout working interest of seventy percent (70%) and net revenue interest of 59.08 (70% x 84.4%) and an after payout working interest of fifty percent (50%) and net revenue interest of 42.2% (50% x 84.4).
Preparatory work completion, including the preparation of an 8,000bbl containment pit, installation of two 100bbl oil storage tanks and delivery of 3,000 ft of production tubing and rods and the running of logs in preparation for a squeeze cement job on the well WVIC D-12 commenced. However, upon further evaluation, the integrity of the casing was in doubt and the squeeze cement job has been postponed. All funds advanced by us are being returned.
Berry Agreement.
On September 3, 2010, we entered into a Subscription Agreement (the “Sub Agreement”) with Berry Resources, Inc. (“Berry”), to purchase 6.5 units of the Berry Prospect #22-A, which includes two (2) wells to be drilled on approximately 300 acres in North Central, Pickett County, Tennessee, in exchange for our cash payment of $97,500. Each unit is equal to approximately 3.33% working interest or approximately 2.33% net revenue interest in each of the two (2) wells to be drilled in North Central, Pickett County, Tennessee. The Sub Agreement also provides for Berry and us to enter into an operating agreement whereby Berry will be designated the operator of the well. Work on the Berry Prospect commenced in September 2010. The first well did not encounter hydrocarbons in commercial quantities and as of the date of this Report, no additional activity in the Berry Prospect is planned.
The Lozano Lease - Frio County, Western Gulf Province, Texas.
In September 2009, Alamo Oil acquired certain oil, gas and mineral leases totaling approximately 110 gross acres, located in Frio County, Texas (the “Lozano Lease”). As a result of the Asset Purchase, we owned a seventy-five percent (75%) working interest in the Lozano Lease. On November 4, 2011, we sold all of our working interest in the Lozano Lease and all wellbores and personal property related thereto to the operator of the Lozano Lease in exchange for $160,000 paid in cash. We retained all sales proceeds attributable to the sales of oil and gas produced from the wells prior to October 1, 2011, and we have no right to any sales of oil and gas produced from the wells after October 1, 2011.
Business Strategy.
Our strategy is to increase shareholder value through strategic acquisitions, appraisal drilling and development. We are focused on the acquisition, appraisal development and exploitation of oil and gas properties. We are also searching for possible joint-ventures and new prospects that fit our strategic focus. In the US, we have focused on the Appalachian Basin. In the UK, we have focused on the Weald Basin in the South of England.
Competition.
We compete with other companies for financing and for the acquisition of new oil and gas properties. Many of the oil and gas exploration companies with whom we compete have greater financial and technical resources than those available to us. Accordingly, these competitors may be able to spend greater amounts on acquisitions of oil and gas properties of merit, on exploration of their properties and on development of their properties. In addition, they may be able to afford more geological and other technical expertise in the targeting and exploration of oil and gas properties. This competition could result in competitors having properties of greater quality and interest to prospective investors who may finance additional exploration and development. This competition could have an adverse impact on our ability to achieve the financing necessary for us to conduct further exploration of our acquired properties.
We will also compete with other junior oil and gas exploration companies for financing from a limited number of investors that are prepared to make investments in junior oil and gas exploration companies. The presence of competing junior oil and gas exploration companies may have an adverse impact on our ability to raise additional capital in order to fund our exploration programs if investors are of the view that investments in competitors are more attractive based on the merit of the oil and gas properties under investigation and the price of the investment offered to investors.
We also compete with other junior and senior oil and gas companies for available resources, including, but not limited to, professional exploration and production, geological and engineering personnel services and supplies, for the drilling completion and production of hydrocarbon resources.
Intellectual Property.
We do not presently own any copyrights, patents or trademarks. We own the Internet domain name
www.alamoenergycorp.com
. Under current domain name registration practices, no one else can obtain an identical domain name, but someone might obtain a similar name, or the identical name with a different suffix, such as “.org”, or with a country designation. The regulation of domain names in the United States and in foreign countries is subject to change, and we could be unable to prevent third parties from acquiring domain names that infringe or otherwise decrease the value of our domain names.
Governmental Regulation.
Our oil and gas operations are subject to various federal, state and local governmental regulations. Matters subject to regulation include discharge permits for drilling operations, drilling and abandonment bonds, reports concerning operations, the spacing of wells, pooling of properties and taxation. From time to time, regulatory agencies have imposed price controls and limitations on production by restricting the rate of flow of oil and gas wells below actual production capacity in order to conserve supplies of oil and gas. The production, handling, storage, transportation and disposal of oil and gas, by-products thereof, and other substances and materials produced or used in connection with oil and gas operations are also subject to regulation under federal, state and local laws and regulations relating primarily to the protection of human health and the environment. To date, we have incurred no cost related to complying with these laws, for remediation of existing environmental contamination and for plugging and reclamation of our oil and gas exploration property. The requirements imposed by such laws and regulations are frequently changed and subject to interpretation, and we are unable to predict the ultimate cost of compliance with these requirements or their effect on our operations.
Our Subsidiaries.
We own and operate the following wholly owned subsidiaries: KYTX Oil and Gas, LLC, KYTX Pipeline, LLC, and KYTX Drilling Company, LLC.
Employees.
As of August 13, 2012
, we have
six
employees. We plan to outsource independent consultant
engineers and geologists on a part time basis to conduct the work programs on our properties in order to carry out our plan of operations.
We also have an advisory board that includes Richard Edmonson, Terry Davis and David Henderson. We have advisory board member agreements with each of Richard Edmonson, Terry Davis and David Henderson.
Facilities.
Our executive offices are located at 10575 Katy Freeway, Suite 300, Houston, Texas 77024, where we
occupy approximately 690 square feet of office space.
We sublease our offices from Allan Millmaker, our officer and director, in exchange for $1,000 per month on a month to month basis. We also maintain an office in London, United Kingdom, where we occupy approximately 130 square feet of office space, which we sublease from Philip Mann, our officer and director, in exchange for £1,500 per month on a month to month basis.
Our subsidiary, KYTX Pipeline LLC, subleases an office from a stockholder (Range), a warehouse building and a yard facility, for $1,500 per month in Gray County, Kentucky.
We believe that our current office space and facilities are sufficient to meet our current needs.
Internet Website.
Our Internet website, which is located at
www.alamoenergycorp.com
, describes each of our oil and gas projects, our management and provides additional information regarding our industry.
Legal Proceedings.
There are no legal actions pending against us nor are any legal actions contemplated by us at this time.
Item 1A. Risk Factors.
An investment in our securities involves a high degree of risk. You should carefully consider the risks described below together with all of the other information included in this report before making an investment decision with regard to our securities. If any of the following risks actually occurs, our business, financial condition, and/or results of operations could be harmed. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. You should only purchase our securities if you can afford to suffer the loss of your entire investment.
Risks Related to our Business:
Since we have a limited operating history in our current line of business, it is difficult for potential investors to evaluate our business.
We entered the oil and gas business in November 2009. Our limited operating history makes it difficult for potential investors to evaluate our business or prospective operations. Since our formation, we have generated only limited and sporadic revenues. As an early stage company, we are subject to all the risks inherent in the financing, expenditures, operations, complications and delays inherent in a new business. Accordingly, our business and success faces risks from uncertainties faced by developing companies in a competitive environment. There can be no assurance that our efforts will be successful or that we will ultimately be able to attain profitability.
We have a history of net losses which will continue and which may negatively impact our ability to achieve our business objectives.
For the period from inception (September 1, 2009) to April 30, 2012, we had oil and gas revenues of $1,021,706 and a net loss of $5,268,905. We cannot guaranty that our future operations will result in net income. We may not ever be able to operate profitability on a quarterly or annual basis in the future. Our failure to increase our revenues will harm our business. If our revenues grow more slowly than we anticipate or our operating expenses exceed our expectations, our operating results will suffer.
Our independent auditors have expressed substantial doubt about our ability to continue as a going concern.
In their report dated August 10, 2012, our current independent registered public accounting firm stated that our financial statements for the year ended April 30, 2012, were prepared assuming that we would continue as a going concern, and that they have substantial doubt about our ability to continue as a going concern. Our auditors’ doubts are based on our ability to obtain sufficient working capital to fund future operations. If we are unable to raise additional capital, our efforts to continue as a going concern may not prove successful.
We will need additional financing to execute our business plan.
The revenues from our current operations are not sufficient to support our operating costs and anticipated drilling programs. We will need substantial additional funds to:
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effectuate our business plan;
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fund the acquisition, exploration, development and production of oil and natural gas in the future;
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fund future drilling programs; and
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hire and retain key employees.
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We may seek additional funds through public or private equity or debt financing, via strategic transactions, and/or from other sources. There are no assurances that future funding will be available on favorable terms or at all. If additional funding is not obtained, we may need to reduce, defer or cancel drilling programs, planned initiatives, or overhead expenditures to the extent necessary. The failure to fund our operating and capital requirements could have a material adverse effect on our business, financial condition and results of operations.
Our exploration appraisal and development activities are subject to many risks which may affect our ability to profitably extract oil reserves or achieve targeted returns. In addition, continued growth requires that we acquire and successfully develop additional oil reserves.
Oil and gas exploration may involve unprofitable efforts, not only from dry wells, but from wells that are productive but do not produce sufficient net revenues to return a profit after drilling, operating and other costs. Completion of a well does not assure a profit on the investment or recovery of drilling, completion and operating costs. In addition, drilling hazards or environmental damage could greatly increase the cost of operations, and various field operating conditions may negatively affect the production from successful wells. These conditions include delays in obtaining governmental approvals or consents, shut-ins of connected wells resulting from extreme weather conditions, insufficient storage or transportation capacity or other geological and mechanical conditions. While diligent well supervision and effective maintenance operations can contribute to maximizing production rates over time, production delays and declines from normal field operating conditions cannot be eliminated and can be expected to negatively affect revenue and cash flow levels to varying degrees.
Our commercial success depends on our ability to find, acquire, develop and commercially produce oil and natural gas reserves.
Without the continual addition of new reserves, any existing reserves and the production therefrom will decline over time as such existing reserves are depleted. A future increase in our reserves will depend not only on our ability to explore and develop any properties we may have from time to time, but also on our ability to select and acquire suitable producing properties or prospects. We cannot guaranty that we will be able to continue to locate satisfactory properties for acquisition or participation. Moreover, if such acquisitions or participations are identified, we may determine that current markets, terms of acquisition and participation or pricing conditions make such acquisitions or participations economically disadvantageous. We cannot guaranty that commercial quantities of oil will be discovered or acquired by us.
Our oil and gas operations are subject to operating hazards that may increase our operating costs to prevent such hazards, or may materially affect our operating results if any of such hazards were to occur.
Oil and natural gas exploration, development and production operations are subject to all the risks and hazards typically associated with such operations, including hazards such as fire, explosion, blowouts, cratering, unplanned gas releases and spills, each of which could result in substantial damage to our wells, production facilities, other property and the environment or in personal injury. Oil and gas production operations are also subject to all the risks typically associated with such operations, including encountering unexpected formations or pressures, premature decline of reservoirs and the invasion of water into hydrocarbon producing formations. Losses resulting from the occurrence of any of these risks could negatively affect our results of operations, liquidity and financial condition.
To date, we have generated limited revenues from production of our oil lease interests. The acquisition of the KYTX properties substantially increased our reserve base and future revenue stream. Our oil and gas exploration and development activities are focused on the exploration and development of our properties which are higher-risk ventures with uncertain prospects for success. Conversely, development of a very mature basin, such as the KYTX properties, offers much lower risk opportunities. In addition, we will not have earnings to support our activities should the wells drilled or properties acquired prove not to be commercially viable. We cannot guaranty that commercial quantities of oil and gas will be successfully produced as a result of our exploration and development efforts. Further there is no guarantee that we will generate sufficient revenues from current production.
Our exploration and development activities will depend in part on the evaluation of data obtained through geophysical testing and geological analysis, as well as test drilling activity.
The results of geophysical testing and geological analysis are subjective, and we cannot guaranty that the exploration and development activities we conduct based on positive analysis will produce oil or gas in commercial quantities or costs. As we perform developmental and exploratory activities, further data required for evaluation of our oil and gas interests will become available. The exploration and development activities that will be undertaken by us are subject to greater risks than those associated with the acquisition and ownership of producing properties. The drilling of development wells, although generally consisting of drilling to reservoirs believed to be productive, may result in dry holes or a failure to produce oil or gas in commercial quantities. Moreover, any drilling of exploratory wells is subject to significant risk of dry holes.
If we are unable to successfully compete with the large number of oil and natural gas producers in our industry, we may not be able to achieve profitable operations.
Oil and natural gas exploration is intensely competitive in all its phases and involves a high degree of risk. We compete with numerous other participants in the search for and the acquisition of oil and natural gas properties and in the marketing of oil and natural gas. Our competitors include energy companies that have substantially greater financial resources, staff and facilities than us. Our ability to establish additional reserves in the future will depend not only on our ability to explore and develop our existing properties, but also on our ability to select and acquire suitable producing properties or prospects for exploratory drilling. Competitive factors in the distribution and marketing of oil and natural gas include price and methods and reliability of delivery. Competition may also be presented by alternate fuel sources.
We are subject to various regulatory requirements, including environmental regulations, and may incur substantial costs to comply and remain in compliance with those requirements.
Our operations in the United States are subject to regulation at the federal, state and local levels, including regulation relating to matters such as the exploration for and the development, production, marketing, pricing, transmission and storage of oil and gas, as well as environmental and safety matters. Failure to comply with applicable regulations could result in fines or penalties being owed to third parties or governmental entities, the payment of which could negatively impact our financial condition or results of operations. Our operations are subject to significant laws and regulations, which may negatively affect our ability to conduct business or increase our costs. Extensive federal, state and local laws and regulations relating to health and environmental quality in the United States affect nearly all of our operations. These laws and regulations set various standards regulating various aspects of health and environmental quality, provide for penalties and other liabilities for the violation of these standards, and in some circumstances, establish obligations to remediate current and former facilities and off-site locations.
Environmental legislation provides for, among other things, restrictions and prohibitions on spills, releases or emissions of various substances produced in association with oil and gas operations. The legislation also requires that wells and facility sites be operated, maintained, abandoned and reclaimed to the satisfaction of the applicable regulatory authorities. Compliance with such legislation can require significant expenditures and a breach may result in the imposition of fines and penalties, some of which may be material. Environmental legislation is evolving in a manner expected to result in stricter standards and enforcement, larger fines and liability and potentially increased capital expenditures and operating costs. The discharge of oil or other pollutants into the air, soil or water may give rise to liabilities to governments and third parties and may require us to incur costs to remedy such discharge. No assurance can be given that environmental laws will not result in a curtailment of production or a material increase in the costs of production, development or exploration activities or otherwise adversely impact our financial condition, results of operations or prospects. We could incur significant liability for damages, clean-up costs and/or penalties in the event of discharges into the environment, environmental damage caused by us or previous owners of our property or non-compliance with environmental laws or regulations. In addition to actions brought by governmental agencies, we could face actions brought by private parties or citizens groups.
Moreover, we cannot predict what legislation or regulations will be enacted in the future or how existing or future laws or regulations will be administered, enforced or made more stringent. Compliance with more stringent laws or regulations, or more vigorous enforcement policies of the regulatory agencies, could require us to make material expenditures for the installation and operation of systems and equipment for remedial measures, all of which could have a material adverse effect on our financial condition or results of operations.
Our ability to successfully market and sell oil and natural gas is subject to a number of factors that are beyond our control, and that may adversely impact our ability to produce and sell hydrocarbons, or to achieve profitability.
The marketability and price of oil and natural gas that may be acquired or discovered by us will be affected by numerous factors beyond our control. Our ability to market our oil and natural gas may depend upon our ability to acquire space on pipelines that deliver hydrocarbons to commercial markets. We may be affected by deliverability uncertainties related to the proximity of our reserves to pipelines and processing facilities, by operational problems with such pipelines and facilities, and by government regulation relating to price, taxes, royalties, land tenure, allowable production, the export of oil and gas and by many other aspects of the oil and gas business.
Our revenues, profitability and future growth and the carrying value of our oil and gas properties are substantially dependent on prevailing prices of oil and natural gas. Our ability to borrow and to obtain additional capital on attractive terms is also substantially dependent upon oil and natural gas prices. Prices for oil and natural gas are subject to large fluctuations in response to relatively minor changes in the supply of and demand for oil and natural gas, market uncertainty and a variety of additional factors beyond our control. These factors include economic conditions, in the United States and Canada, the actions of the Organization of Petroleum Exporting Countries, governmental regulation, political stability in the Middle East and elsewhere, the foreign supply of oil, the price of foreign imports and the availability of alternative fuel sources. Any substantial and extended decline in the price of oil and natural gas would have an adverse effect on our borrowing capacity, revenues, profitability and cash flows from operations.
Volatile commodity prices make it difficult to estimate the value of producing properties for acquisition and often cause disruption in the market for producing properties, as buyers and sellers have difficulty agreeing on such value. Price volatility also makes it difficult to budget for and project the return on acquisitions and development and exploitation projects.
Natural gas prices have declined substantially in the last year, and are expected to remain depressed for the foreseeable future. Sustained depressed prices of natural gas will adversely affect our assets, development plans, results of operations and financial position, perhaps materially.
Natural gas prices have declined during the past fiscal year 2012. The reduction in prices has been caused by many factors, including recent increases in gas production from non-conventional (shale) reserves, warmer than normal weather and high levels of natural gas in storage. If prices for natural gas remain depressed for long periods, we may be required to write down the value of our oil and gas properties and/or revise our development plans which may cause certain of our undeveloped well locations to no longer be deemed to be proved. In addition, sustained low prices for natural gas will reduce the amounts we would otherwise have available for our operational costs, expenses and to service our indebtedness.
We cannot guarantee that title to our properties does not contain a defect that may materially affect our interest in those properties.
It is our practice in acquiring significant oil and gas leases or interest in oil and gas leases to retain lawyers to fully examine the title to the interest under the lease. In the case of minor acquisitions, we rely upon the judgment of oil lease brokers or landmen who do the field work in examining records in the appropriate governmental office before attempting to place under lease a specific interest. We believe that this practice is widely followed in the energy industry. Nevertheless, there may be title defects which affect lands comprising a portion of our properties which may adversely affect us.
Our properties are held in the form of leases and working interests in operating agreements and leases. If the specific requirements of such licenses, leases and working interests are not met, the instrument may terminate or expire.
All of our properties are held under interests in oil and gas leases and working interests in operating agreements and leases. If we fail to meet the specific requirements of each lease or working interest, especially future drilling and production requirements, the lease may be terminated or otherwise expire. We cannot be assured that we will be able to meet our obligations under each lease and working interest. The termination or expiration of our working interest relating to any lease would harm our business, financial condition and results of operations.
We have substantial capital requirements that, if not met, may hinder our operations.
We anticipate that we will make substantial capital expenditures for the acquisition, exploration, development and production of oil and natural gas in the future and for future drilling programs. If we have insufficient revenues, we may have limited ability to expend the capital necessary to undertake or complete future drilling programs. There can be no assurance that debt or equity financing, or cash generated by operations will be available or sufficient to meet these requirements or for other corporate purposes, or if debt or equity financing is available, that it will be on terms acceptable to us. Moreover, future activities may require us to alter our capitalization significantly. Our inability to access sufficient capital for our operations could have a material adverse effect on our financial condition, results of operations or prospects.
Additional capital may be costly or difficult to obtain.
Additional capital, whether through the offering of equity or debt securities, may not be available on reasonable terms or at all, especially in light of the recent downturn in the economy and dislocations in the credit and capital markets. If we are unable to obtain required additional capital, we may have to curtail our growth plans or cut back on existing business and, further, we may not be able to continue operating if we do not generate sufficient revenues from operations needed to stay in business. We may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we issue, such as convertible notes and warrants, which may adversely impact our financial condition.
Because we are small and have limited access to additional capital, we may have to limit our exploration activity, which may result in a loss of investment.
We have a small asset base and limited access to additional capital. Accordingly, we must limit our exploration activity. As such, we may not be able to complete an exploration program that is as thorough as our management would like. In that event, existing reserves may go undiscovered. Without finding reserves, we cannot generate revenues and investors may lose their investment.
Our reserve estimates are subject to
numerous uncertainties and may be inaccurate.
We currently have proved reserves in
Kentucky,
Texas
and West Virginia
. There are numerous uncertainties inherent in estimating quantities of oil and natural gas reserves and cash flows to be derived therefrom, including many factors beyond our control. In general, estimates of economically recoverable oil and gas reserves and the future net cash flows therefrom are based upon a number of variable factors and assumptions, such as historical production from the properties, production rates, ultimate reserve recovery, timing and amount of capital expenditures, marketability our products, royalty rates, the assumed effects of regulation by governmental agencies and future operating costs, all of which may vary from actual results. All such estimates are to some degree speculative, and classifications of reserves are only attempts to define the degree of speculation involved. For those reasons, estimates of the economically recoverable reserves attributable to any particular group of properties, classification of such reserves based on risk of recovery and estimates of future net revenues expected therefrom prepared by different engineers, or by the same engineers at different times, may vary. Our actual production, revenues, taxes and development and operating expenditures with respect to our reserves will vary from estimates thereof and such variations could be material.
Estimates of proved or unproved reserves that may be developed and produced in the future are often based upon volumetric calculations and upon analogy to similar types of reserves rather than actual production history. Estimates based on these methods are generally less reliable than those based on actual production history. Subsequent evaluation of the same reserves based upon production history and production practices will result in variations in the estimated reserves and such variations could be material.
Failure to generate increased revenues from the KYTX properties and other interests could hinder our ability to expand and to continue our current operations.
Unless we generate increased revenues from the KYTX properties and other interests, or obtain additional funding, we may not be able to implement our business plan, or continue or expand our current operations. Although, we had cash of $80,903 on hand, as of April 30, 2012, we estimated that the cash would not be sufficient for us to continue and expand our current operations for the next twelve months. Therefore, failure to generate increased revenues from the KYTX properties and other interests and failure to obtain additional funding could deter our ability to continue our existing operations.
Current global financial conditions have been characterized by increased volatility which could negatively impact on our business, prospects, liquidity and financial condition.
Current global financial conditions and recent market events have been characterized by increased volatility and the resulting tightening of the credit and capital markets has reduced the amount of available liquidity and overall economic activity. We cannot guaranty that debt or equity financing, the ability to borrow funds or cash generated by operations will be available or sufficient to meet or satisfy our initiatives, objectives or requirements. Our inability to access sufficient amounts of capital on terms acceptable to us for our operations will negatively impact our business, prospects, liquidity and financial condition.
The potential profitability of oil and gas properties depends upon factors beyond our control.
The potential profitability of oil and gas properties is dependent upon many factors beyond our control. For instance, world prices and markets for oil and gas are unpredictable, highly volatile, potentially subject to governmental fixing, pegging, controls, or any combination of these and other factors, and respond to changes in domestic, international, political, social, and economic environments. Additionally, due to worldwide economic uncertainty, the availability and cost of funds for production and other expenses have become increasingly difficult, if not impossible, to project. These changes and events may materially affect our financial performance. In addition, a productive well may become uneconomic in the event that water or other deleterious substances are encountered which impair or prevent the production of oil and/or gas from the well. In addition, production from any well may be unmarketable if it is impregnated with water or other deleterious substances. These factors cannot be accurately predicted and the combination of these factors may result in us not receiving an adequate return on invested capital.
The loss or unavailability of our key personnel for an extended period of time could adversely affect our business operations and prospects.
Our success depends in large measure on certain key personnel, including Allan Millmaker, our Chief Executive Officer. The loss of the services of Mr. Millmaker could significantly hinder our operations. Although we are looking into acquiring key person insurance, we do not currently have such insurance in effect for Mr. Millmaker. In addition, the competition for qualified personnel in the oil industry is intense and there can be no assurance that we will be able to continue to attract and retain all personnel necessary for the development and operation of our business.
Seasonal weather conditions and other factors could adversely affect our ability to conduct drilling activities.
Our operations could be adversely affected by seasonal weather conditions and wildlife restrictions on federal leases. In some areas, certain drilling and other oil and gas activities can only be conducted during limited times of the year, typically during the summer months. This would limit our ability to operate in these areas and could intensify competition during those times for drilling rigs, oil field equipment, services, supplies and qualified personnel, which may lead to periodic shortages. These constraints and the resulting shortages or high costs could delay our operations and materially increase our operating and capital costs, which could have a material adverse effect upon us and our results of operations.
We depend on the services of third parties for material aspects of our operations, including drilling operators, and accordingly if we cannot obtain certain third party services, we may not be able to operate.
We rely on third parties to operate some of the assets in which we possess an interest. The success of our operations, whether considered on the basis of drilling operations or production operations, will depend largely on whether the operator of the property properly fulfills their obligations. As a result, our ability to exercise influence over the operation of these assets or their associated costs may be limited. Our performance will therefore depend upon a number of factors that may be outside of our full control, including the timing and amount of capital expenditures, the operator’s expertise and financial resources, the approval of other participants, the selection of technology, and risk management practices. The failure of third party operators and their contractors to perform their services in a proper manner could adversely affect our operations.
Risks Related to our Common Stock
The issuance of shares upon conversion of the senior secured convertible promissory notes and the convertible debentures and exercise of outstanding warrants may cause immediate and substantial dilution to our existing stockholders.
If the price per share of our common stock at the time of conversion of our senior secured convertible promissory notes, and exercise of any warrants, options, or any other convertible securities is in excess of the various conversion or exercise prices of these convertible securities, conversion or exercise of these convertible securities would have a dilutive effect on our common stock. As of August 13, 2012, we had (i) outstanding senior secured convertible promissory notes which are convertible into an aggregate of 4,000,000 shares of our common stock at a conversion price of $0.50 per share and (ii) outstanding senior secured convertible promissory notes which are convertible into an aggregate of 860,000 shares of our common stock at a conversion price of $1.00 per share. Further, any additional financing that we secure may require the granting of rights, preferences or privileges senior to those of our common stock and which result in additional dilution of the existing ownership interests of our common stockholders.
We are subject to the reporting requirements of federal securities laws, which is expensive.
We are a public reporting company in the U.S. and, accordingly, subject to the information and reporting requirements of the Exchange Act and other federal securities laws, and the compliance obligations of the Sarbanes-Oxley Act. The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the Securities and Exchange Commission, or SEC, and furnishing audited reports to stockholders causes our expenses to be higher than they would be if we remained a privately-held company.
Our compliance with the Sarbanes-Oxley Act and SEC rules concerning internal controls is time consuming
, difficult and costly.
We are a reporting company with the SEC and therefore must comply with Sarbanes-Oxley Act and SEC rules concerning internal controls. It is time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by Sarbanes-Oxley. In order to expand our operations, we will need to hire additional financial reporting, internal control, and other finance staff in order to develop and implement appropriate internal controls and reporting procedures. If we are unable to comply with Sarbanes-Oxley’s internal controls requirements, we may not be able to obtain the independent accountant certifications that Sarbanes-Oxley Act requires us to obtain.
Failure to maintain the adequacy of our internal controls could impair our ability to provide accurate financial statements and comply with the requirements of the Sarbanes-Oxley Act, which could cause our stock price to decrease substantially.
We have amended certain of our prior periodic reports to include required disclosures that were previously omitted from those periodic reports. The filing of amendments to those periodic reports resulted in a redetermination that our internal controls over financial reporting and disclosure controls and procedures were not effective for those periods. We have committed limited personnel and resources to the development of the external reporting and compliance obligations that are required of a public company. We have taken measures to address and improve our financial reporting and compliance capabilities and we are in the process of instituting changes to satisfy our obligations in connection with being a public company. We plan to obtain additional financial and accounting resources to support and enhance our ability to meet the requirements of being a public company. We will need to continue to improve our financial and managerial controls, reporting systems and procedures, and documentation thereof. If our financial and managerial controls, reporting systems, or procedures fail, we may not be able to provide accurate financial statements on a timely basis or comply with the Sarbanes-Oxley Act of 2002 as it applies to us. Any failure of our internal controls or our ability to provide accurate financial statements could cause the trading price of our common stock to decrease substantially.
Our stock price may be volatile, which may result in losses to our stockholders.
The stock markets have experienced significant price and trading volume fluctuations, and the market prices of companies quoted on the Over-The-Counter Bulletin Board, where our shares of common stock will be quoted, generally have been very volatile and have experienced sharp share-price and trading-volume changes. The trading price of our common stock is likely to be volatile and could fluctuate widely in response to many of the following factors, some of which are beyond our control:
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variations in our operating results;
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changes in expectations of our future financial performance, including financial estimates by securities analysts and investors;
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changes in operating and stock price performance of other companies in our industry;
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additions or departures of key personnel; and
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future sales of our common stock.
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Domestic and international stock markets often experience significant price and volume fluctuations. These fluctuations, as well as general economic and political conditions unrelated to our performance, may adversely affect the price of our common stock. In particular, following initial public offerings, the market prices for stocks of companies often reach levels that bear no established relationship to the operating performance of these companies. These market prices are generally not sustainable and could vary widely. In the past, following periods of volatility in the market price of a public company’s securities, securities class action litigation has often been initiated.
Our common shares are thinly-traded, and in the future, may continue to be thinly-traded, and you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate such shares.
We cannot predict the extent to which an active public market for our common stock will develop or be sustained due to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.
The market price for our common stock may be particularly volatile given our status as a relatively small company and lack of significant revenues that could lead to wide fluctuations in our share price. You may be unable to sell your common stock at or above your purchase price if at all, which may result in substantial losses to you.
The market for our common shares may be characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will be more volatile than a seasoned issuer for the indefinite future. The potential volatility in our share price is attributable to a number of factors. First, as noted above, our common shares may be sporadically and/or thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer that could better absorb those sales without adverse impact on its share price. Secondly, an investment in us is a speculative or “risky” investment due to our lack of revenues or profits to date. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer.
Because we became public by means of a “reverse merger,” we may not be able to attract the attention of major brokerage firm or investors in general.
Additional risks may exist since we will become public through a “reverse merger.” Securities analysts of major brokerage firms may not provide coverage of us since there is little incentive to brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to conduct any secondary offerings on behalf of our company in the future. In addition, the SEC has recently issued an investor bulletin warning investors about the risks of investing in companies that enter the U.S. capital markets through a “reverse merger.” The release of such information from the SEC may have the effect of reducing investor interest in companies, such as us, that enter the U.S. capital markets through a “reverse merger.”
We do not anticipate paying any cash dividends.
We presently do not anticipate that we will pay any dividends on any of our capital stock in the foreseeable future. The payment of dividends, if any, would be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition. The payment of any dividends will be within the discretion of our Board of Directors. We presently intend to retain all earnings, if any, to implement our business plan; accordingly, we do not anticipate the declaration of any dividends in the foreseeable future.
Our common stock may be subject to penny stock rules, which may make it more difficult for our stockholders to sell their common stock.
Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain penny stock rules adopted by the SEC. Penny stocks generally are equity securities with a price of less than $5.00 per share. The penny stock rules require a broker-dealer, prior to a purchase or sale of a penny stock not otherwise exempt from the rules, to deliver to the customer a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules.
Volatility in our common stock price may subject us to securities litigation.
The market for our common stock is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.
We may need additional capital, and the sale of additional shares or other equity securities could result in additional dilution to our stockholders.
We believe that our current cash and cash equivalents and anticipated cash flow from operations will be sufficient to meet our anticipated cash needs for the near future. We may, however, require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our resources are insufficient to satisfy our cash requirements, we will seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity securities could result in additional dilution to our stockholders. The incurrence of additional indebtedness would result in increased debt
service obligations and could result in operating and financing covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.
We have a substantial number of authorized common shares available for future issuance that could cause dilution of our stockholders’ interest and adversely impact the rights of holders of our common stock.
We have a total of 3,000,000,000 shares of common stock authorized for issuance. As of August 13, 2012, we had 2,920,895,362 shares of common stock available for issuance. We have reserved 4,860,000 shares for conversion of our outstanding notes and 2,860,000 shares for issuance upon the exercise of outstanding warrants. We may seek financing that could result in the issuance of additional shares of our capital stock and/or rights to acquire additional shares of our capital stock. We may also make acquisitions that result in issuances of additional shares of our capital stock. Those additional issuances of capital stock would result in a significant reduction of your percentage interest in us. Furthermore, the book value per share of our common stock may be reduced. This reduction would occur if the exercise price of any issued warrants, the conversion price of any convertible notes is lower than the book value per share of our common stock at the time of such exercise or conversion.
The addition of a substantial number of shares of our common stock into the market or by the registration of any of our other securities under the Securities Act may significantly and negatively affect the prevailing market price for our common stock. The future sales of shares of our common stock issuable upon the exercise of outstanding warrants may have a depressive effect on the market price of our common stock, as such warrants would be more likely to be exercised at a time when the price of our common stock is greater than the exercise price.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
Facilities.
Our executive offices are located at 10575 Katy Freeway, Suite 300, Houston, Texas 77024, where we
occupy approximately 690 square feet of office space.
We sublease our offices from Allan Millmaker, our officer and director, in exchange for $1,000 per month on a month to month basis. We also maintain an office in London, United Kingdom, where we occupy approximately 130 square feet of office space, which we sublease from Philip Mann, our officer and director, in exchange for £1,500 per month on a month to month basis.
Our subsidiary, KYTX Pipeline LLC, subleases an office from a stockholder (Range), a warehouse building and a yard facility for $1,500 per month in Gray County
, Kentucky.
We believe that our current office space and facilities are sufficient to meet our current needs.
A description of our oil and gas properties is included in “Item 1. Business” of this Annual Report and is incorporated into this Item 2. by reference.
Proved Reserves.
The following reserve schedule summarizes the Company's net ownership interests in estimated quantities of proved oil and gas reserves and changes in its proved reserves, all of which are located in the continental United States. All reserve estimates for crude oil and natural gas were internally prepared by the Company and estimated by Nova Resource, Inc. (“Nova”), independent petroleum engineers. In accordance with SEC guidelines, Nova's estimates of future net revenues from our properties, and the PV-10 and standardized measure thereof, were determined to be economically producible under existing economic conditions, which requires the use of the 12-month average price for each product, calculated as the unweighted arithmetic average of the first-day-of-the-month price for the period May 2010 through April 2011, except where such guidelines permit alternate treatment, including the use of fixed and determinable contractual price escalations. The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries are more imprecise than those of currently producing oil and gas properties. Accordingly, we anticipate that these oil and gas reserve estimates will change as future information becomes available.
The technical person at Nova is responsible for preparing the reserves estimates presented herein and meets the requirements regarding qualifications, independence, objectivity, and confidentiality set forth in the Standards Pertaining to the Estimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers. Allan Millmaker, our officer and director, acted as the liaison with the technical person at Nova. Mr. Millmaker's technical qualifications are described in the section entitled Management in this Annual Report.
Reserve Technologies.
Proved reserves are those quantities of oil and natural gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations. The term “reasonable certainty” implies a high degree of confidence that the quantities of oil and/or natural gas actually recovered will equal or exceed the estimate. To achieve reasonable certainty, Nova employed technologies that have been demonstrated to yield results with consistency and repeatability. The technologies and economic data used in the estimation of our proved reserves include, but are not limited to, well logs, geologic maps and available down well and production data, seismic data, well test data.
Oil and Gas Reserve Information (Unaudited).
The following reserve quantities and future net cash flow information for our proved reserves located in the United States have been estimated as of April 30, 2012. The determination of oil and gas reserves is based on estimates, which are highly complex and interpretive. The estimates are subject to continuing change as additional information becomes available.
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Crude Oil
(Bbls)
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Natural Gas
(Mcf)
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PROVED DEVELOPED AND UNDEVELOPED RESERVES:
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April 30, 2010
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16,009
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|
|
|
-
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|
|
|
|
|
|
|
|
|
|
|
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Revision of previous estimates
|
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|
|
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|
|
|
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Purchase of reserves
|
|
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19,558
|
|
|
|
12,355,996
|
|
|
Extensions, discoveries, and other additions
|
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1,357
|
|
|
|
153,480
|
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|
Sale of reserves
|
|
|
|
|
|
|
|
|
|
Production
|
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|
(9,286)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2011
|
|
|
27,638
|
|
|
|
12,509,476
|
|
|
|
|
|
|
|
|
|
|
|
|
Revision of previous estimates
|
|
|
18,151
|
|
|
|
(6,073,677
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)
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Purchase of reserves
|
|
|
|
|
|
|
|
|
|
Extensions, discoveries, and other additions
|
|
|
4,814
|
|
|
|
10,547,460
|
|
|
Sale of reserves
|
|
|
(5,777
|
)
|
|
|
|
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|
Production
|
|
|
(1,807
|
)
|
|
|
(124,216
|
)
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2012
|
|
|
43,019
|
|
|
|
16,859,043
|
|
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PROVED DEVELOPED RESERVES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 30, 2010
|
|
|
8,804
|
|
|
|
-
|
|
|
April 30, 2011
|
|
|
10,651
|
|
|
|
1,608,975
|
|
|
April 30, 2012
|
|
|
26,167
|
|
|
|
2,578,660
|
|
Standardized Measure
The standardized measure of discounted future net cash flows relating to proved oil and natural gas reserves is as follows:
|
|
|
Years Ended April 30,
|
|
|
|
|
2012
|
|
|
2011
|
|
|
Future cash inflows
|
|
$
|
71,668,651
|
|
|
$
|
63,764,737
|
|
|
Future production costs
|
|
|
(22,027,861
|
)
|
|
|
(15,628,515
|
)
|
|
Future development costs
|
|
|
(17,582,000
|
)
|
|
|
(14,103,000
|
)
|
|
Future income tax expense
|
|
|
|
|
|
|
-
|
|
|
Future net cash flows
|
|
|
32,058,790
|
|
|
|
34,033,222
|
|
|
10% annual discount for estimated timing of cash flows
|
|
|
(28,454,210
|
)
|
|
|
(27,184,770
|
)
|
|
Standardized measure of discounted future net cash flow related to proved reserves
|
|
$
|
3,604,580
|
|
|
$
|
6,848,452
|
|
A summary of the changes in the standardized measure of discounted future new cash flow applicable to proved oil and natural reserves is as follows:
Change in Standardized Measure
|
|
|
Years Ended April 30,
|
|
|
|
|
2012
|
|
|
2011
|
|
|
Balance, beginning of period
|
|
$
|
6,848,452
|
|
|
$
|
328,686
|
|
|
Sales of oil and gas, net
|
|
|
(539,961
|
)
|
|
|
(123,672)
|
|
|
Net change in prices and production costs
|
|
|
(3,863,187
|
)
|
|
|
(18,886)
|
|
|
Net change in future development costs
|
|
|
(841,000
|
)
|
|
|
|
|
|
Extensions and discoveries
|
|
|
871,780
|
|
|
|
187,002
|
|
|
Revisions of previous quantity estimates
|
|
|
220,272
|
|
|
|
(28,678
|
|
|
Previously estimated development costs incurred
|
|
|
580,639
|
|
|
|
-
|
|
|
Net change in income taxes
|
|
|
|
|
|
|
-
|
|
|
Accretion of discount
|
|
|
448,161
|
|
|
|
-
|
|
|
Purchase of minerals in place
|
|
|
|
|
|
|
6,504,000
|
|
|
Sales of reserves
|
|
|
(120,576
|
)
|
|
|
-
|
|
|
Balance, end of period
|
|
$
|
3,604,580
|
|
|
$
|
6,848,452
|
|
The standardized measure of discounted future net cash flows as of April 30, 2012 and 2011 was calculated using the following Average Fiscal-Year prices:
|
|
|
2012
|
|
|
2011
|
|
|
Average crude oil price per barrel
|
|
$
|
88.59
|
|
|
$
|
76.180
|
|
|
Average gas price per MCF
|
|
$
|
4.025
|
|
|
$
|
4.929
|
|
The standardized measure of discounted future net cash flows is provided using the 12-month unweighted arithmetic average. The oil price used as of April 30, 2012 was $88.59 per Bbl of oil and $4.025 per Mcf of gas. Future production costs are based on year-end costs and include severance and ad valorem taxes of approximately 4.5%. Each property that is leased by the Company is also charged with field-level overhead in the reserve calculation. The present value of future cash inflows is based on a 10% discount.
The Company used discounted future net cash flows, which is calculated without deducting estimated future income tax expenses, and the present value thereof as one measure of the value of the Company's current proved reserves and to compare relative values among peer companies without regard to income taxes. While future net revenue and present value are based on prices, costs and discount factors which are consistent from company to company, the standardized measure of discounted future net cash flows is dependent on the unique tax situation of each individual company. As of April 30, 2012, the present value of discounted future net cash flows and the standardized measure of discounted future net cash flows are equal because the effects of estimated future income tax expenses are zero.
Production
During the year ended April 30, 2012, we produced approximately 1,807 bbls of oil on a net basis and 124,216 Mcf of gas on a net basis. Based on the net production for the year ended April 30, 2012, our average sales price per barrel was $80.06 on a net basis and the average sales price per Mcf was $2.66 on a net basis.
For the year ended April 30, 2012, we had production from our interests the Valentine #1 well the KYTX properties in Kentucky and the Lozano and Brown County wells in Texas.
|
|
|
|
Crude Oil
(Bbls)
|
|
|
|
Natural Gas
(Mcf)
|
|
|
Production by State:
|
|
|
|
|
|
|
|
|
|
Kentucky
|
|
|
129
|
|
|
|
111,206
|
|
|
West Virginia
|
|
|
969
|
|
|
|
12,454
|
|
|
Texas
|
|
|
709
|
|
|
|
160
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Production
|
|
|
1,807
|
|
|
|
124,216
|
|
Drilling Activity.
During the period from inception (September 1, 2009) through April 30, 2012, we did not participate or conduct any drilling activity in
Kentucky
or
West Virginia. We performed 11 recompletions in Kentucky and, 1 in Texas and participated in drilling 3 shallow old wells in Texas.
Delivery Commitments.
We are not obligated to provide a fixed and determinable quantity of oil or gas in the near future under existing contracts or agreements in Kentucky, Texas or West Virginia.
Gross and Net Productive Wells.
|
|
September 1, 2009 (Inception) through April 30, 2012
|
|
|
|
Oil
|
|
Gas
|
|
|
|
Gross
|
|
Net
|
|
Gross
|
|
Net
|
|
|
Kentucky
|
|
|
|
|
82
|
|
69.01
|
|
|
Texas
|
6
|
|
1.2
|
|
|
|
|
|
|
West Virginia
|
1
|
|
0.7
|
|
|
|
|
|
|
Total gross and net productive wells
|
7
|
|
1.9
|
|
82
|
|
69.01
|
|
Gross and Net Developed Acreage.
|
|
September 1, 2009 (Inception) through April 30, 2012
|
|
|
|
Oil
|
|
Gas
|
|
|
|
Gross
|
|
Net
|
|
Gross
|
|
Net
|
|
|
Kentucky
|
|
|
|
|
1,640
|
|
1,380
|
|
|
Texas
|
500
|
|
100
|
|
|
|
|
|
|
West Virginia
|
115
|
|
77
|
|
|
|
|
|
|
Total gross and net developed acreage
|
615
|
|
177
|
|
1,640
|
|
1,380
|
|
Gross and Net Undeveloped Acreage.
|
|
September 1, 2009 (Inception) through April 30, 2012
|
|
|
|
Oil
|
|
Gas
|
|
|
|
Gross
|
|
Net
|
|
Gross
|
|
Net
|
|
|
Kentucky
|
|
|
|
|
4,900
|
|
4,228
|
|
|
Texas
|
-
|
|
-
|
|
|
|
|
|
|
West Virginia
|
-
|
|
-
|
|
|
|
|
|
|
Total gross and net undeveloped acreage
|
-
|
|
-
|
|
4,900
|
|
4,228
|
|
Item 3. Legal Proceedings.
We are not currently a party to any legal proceedings.
Item 4. (Removed and Reserved).
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information.
Our common shares are not listed on any stock exchange, but are quoted on the OTCQB under the symbol “ALME.” The following table sets forth, for the time period indicated, the high and low closing sales price of our common stock as quoted on the OTCQB.
|
|
High ($)
|
|
|
Low ($)
|
|
Fiscal Year 2012
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
1.25
|
|
|
$
|
0.80
|
|
Second Quarter
|
|
$
|
0.87
|
|
|
$
|
0.33
|
|
Third Quarter
|
|
$
|
0.37
|
|
|
$
|
0.10
|
|
Fourth Quarter
|
|
$
|
0.13
|
|
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2011
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
1.73
|
|
|
$
|
0.96
|
|
Second Quarter
|
|
$
|
1.27
|
|
|
$
|
0.90
|
|
Third Quarter
|
|
$
|
1.76
|
|
|
$
|
1.00
|
|
Fourth Quarter
|
|
$
|
1.73
|
|
|
$
|
1.01
|
|
Holders.
The approximate number of stockholders of record at August 13, 2012 was 25. The number of stockholders of record does not include beneficial owners of our common stock, whose shares are held in the names of various dealers, clearing agencies, banks, brokers and other fiduciaries.
Dividend Policy.
We have never declared or paid a cash dividend on our capital stock. We do not expect to pay cash dividends on our common stock in the foreseeable future. We currently intend to retain our earnings, if any, for use in our business. Any dividends declared in the future will be at the discretion of our Board of Directors.
Securities Authorized For Issuance Under Equity Compensation Plans.
As of April 30, 2012, we had no compensation plans under which our equity securities were authorized for issuance.
Recent sales of unregistered securities.
The following sales of unregistered securities by us occurred during the years ended April 30, 2012, 2011 and 2010:
Eurasian Notes and Warrants.
On November 18, 2009, we entered into the First Financing Agreement with Eurasian pursuant to which Eurasian agreed to lend up to $2,000,000 to us in multiple installments in exchange for senior secured convertible promissory notes with a conversion price of $0.50 per share (“Notes”) and five-year warrants to acquire shares of common stock at an exercise price of $1.00 per share (“Warrants”) in the amount of each installment. The Warrants expire five years from the date of the investment. The Notes are due on November 18, 2012, or upon default, whichever is earlier, and bear interest at the annual rate of 8%. The Notes have an optional conversion feature by which this lender can convert the principal and accrued interest into shares of our common stock at a conversion price of $0.50 per share. This brief description of the Second Financing Agreement is only a summary of all material terms of the Second Financing Agreement, and is qualified in its entirety by reference to the full text of the agreement, filed as Exhibit 10.8 to our Current Report on Form 8-K filed on November 24, 2009. Pursuant to the First Financing Agreement, we issued the following Notes and Warrants to Eurasian on the following dates:
|
Date of Note
|
Amount
of Note
|
Number of Warrants
|
|
|
November 18, 2009
|
$334,905
|
334,905
|
|
|
February 5, 2010
|
$80,000
|
80,000
|
|
|
March 4, 2010
|
$300,000
|
300,000
|
|
|
March 25, 2010
|
$100,000
|
100,000
|
|
|
April 15, 2010
|
$250,000
|
250,000
|
|
|
July 22, 2010
|
$175,000
|
175,000
|
|
|
August 12, 2010
|
$ 25,000
|
25,000
|
|
|
August 18, 2010
|
$150,000
|
150,000
|
|
|
September 7, 2010
|
$ 70,000
|
70,000
|
|
|
September 24, 2010
|
$40,000
|
40,000
|
|
|
December 2, 2010
|
$25,000
|
25,000
|
|
|
December 15, 2010
|
$75,000
|
75,000
|
|
|
February 8, 2011
|
$100,000
|
100,000
|
|
|
March 1, 2011
|
$160,000
|
160,000
|
|
|
April 12, 2011
|
$115,095
|
115,095
|
|
|
Total
|
$2,000,000
|
2,000,000
|
|
The issuances were made pursuant to Regulation S promulgated by the SEC. We believe that exemptions were available because (iii) the sales were made to eligible non-U.S. persons as that term is defined for purposes of Regulation S, and with regard to all transactions, (iii) transfers were restricted in accordance with the requirements of the Securities Act (including by legending of certificates representing the securities). We are obligated to register the shares of common stock underlying the Notes and the shares of common stock underlying the Warrants for resale.
On April 12, 2011, we entered into a second note and warrant purchase agreement with Eurasian (“Second Financing Agreement”), whereby Eurasian agreed to lend up to $2,400,000 to us multiple installments in exchange for senior secured convertible promissory notes with a conversion price of $1.00 per share (“New Notes”) and five-year warrants to acquire shares of common stock at an exercise price of $1.25 per share (“New Warrants”) in the amount of each installment. The New Warrants expire five years from the date of the investment. The New Notes are due on April 12, 2014, or upon default, whichever is earlier, bears interest at the annual rate of 8%. The New Notes have an optional conversion feature by which Eurasian can convert the principal and accrued interest into shares of our common stock at a conversion price of $1.00 per share. This brief description of the Second Financing Agreement is only a summary of all material terms of the Second Financing Agreement, and is qualified in its entirety by reference to the full text of the agreement, filed as Exhibit 10.10 to our Current Report on Form 8-K filed on April 13, 2011. Pursuant to the Second Financing Agreement, we issued the following New Notes and New Warrants to Eurasian on the following dates:
|
Date of New Note
|
Amount of
New Note
|
Number of New Warrants
|
|
|
April 12, 2011
|
$410,000
|
410,000
|
|
|
May 24, 2011
|
$50,000
|
50,000
|
|
|
June 21, 2011
|
$400,000
|
400,000
|
|
|
Total
|
$860,000
|
860,000
|
|
The New Notes and New Warrants were issued in a transaction which we believe satisfies the requirements of that exemption from the registration and prospectus delivery requirements of the Securities Act, which exemption is specified by the provisions of Regulation S promulgated pursuant to that act by the SEC. We are obligated to register the shares of common stock underlying the New Notes and the shares of common stock underlying the New Warrants for resale.
Discount Debentures and Series Warrants.
On August 1, 2011, we closed a securities purchase agreement, dated July 26, 2011 (the “Securities Purchase Agreement”) with certain institutional investors (the “Investors” or, individually, the “Investor”) and issued to the Investors an aggregate principal value of approximately $1,310,621 of original issue discount convertible debentures (the “Debentures” or, individually, the “Discount Debenture”) and three series of warrants, the Series A Warrants, the Series B Warrants and the Series C Warrants, to purchase an aggregate of 2,621,241 shares of our common stock (collectively, the “Series Warrants” and the shares issuable upon exercise of the Series Warrants, collectively, the “Series Warrant Shares”) at an exercise price of $1.25 for the Series A and C Warrants and $1.00 for the Series B Warrants. The Series A Warrants grant each Purchaser the right to purchase up to a number of shares of common stock equal to 50% of the shares underlying the principal amount of the Discount Debenture issued to such Purchaser, are exercisable immediately upon issuance and have a term of exercise equal to five years. The Series B Warrants grant each Purchaser the right to purchase up to a number of shares of common stock equal to 100% of the shares underlying the principal amount of the Discount Debenture issued to such Purchaser, are exercisable immediately upon issuance and have a term of exercise equal to twelve months. The Series C Warrants grant each Purchaser the right to purchase up to a number of shares of common stock equal to 50% of the shares underlying the principal amount of the Discount Debenture issued to such Purchaser, vest and are exercisable ratably commencing on the exercise of the Series B Warrants held by each Purchaser (or its assigns) and have a term of exercise equal to five years. We are obligated to register the shares of common stock underlying the Discount Debentures and the shares of common stock underlying the Series Warrants for resale.
In connection with the Securities Purchase Agreement, we also closed a Placement Agent Agreement on June 20, 2011 with our placement agent (the “Placement Agent Agreement”) and issued Series A Warrants to purchase 91,743 shares of our common stock at an exercise price of $1.25 per share to our placement agent
for services provided to us
in connection with the Securities Purchase Agreement.
The securities sold pursuant to the Securities Purchase Agreement and the Placement Agent Agreement were issued in transactions which we believe satisfies the requirements of that exemption from the registration and prospectus delivery requirements of the Securities Act, which exemption is specified by the provisions of Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated pursuant to that act by the SEC.
The foregoing description of the Securities Purchase Agreement, the Discount Debentures, the Series Warrants and the Placement Agent Agreement is only a summary of the material terms of each document and is qualified in its entirety by reference to the full text of each document. Copies of the Form of Securities Purchase Agreement, the Form of Discount Debenture, the Form of Series A Warrant, the Form of Series B Warrant, the Form of Series C Warrant, and the Placement Agent Agreement are attached as Exhibits 10.1, 10.2, 10.3, 10.4, 10.5, and 10.8, respectively, to our Current Report on Form 8-K filed on August 1, 2011 and are incorporated herein by reference.
On November 15, 2011, one of the Purchasers elected to convert a portion of its outstanding Discount Debenture into shares of our common stock. The Purchaser elected to convert $5,000 of the outstanding principal due on its Discount Debenture into 10,000 shares of our common stock, or approximately $0.50 per share. On November 21, 2011, the same Purchaser elected to convert $20,000 of the outstanding principal due on its Discount Debenture into 40,000 shares of our common stock, or approximately $0.50 per share. On November 23, 2011, the same Purchaser elected to convert $75,000 of the outstanding principal due on its Discount Debenture into 150,000 shares of our common stock, or approximately $0.50 per share. On November 30, 2011, the same Purchaser elected to convert $135,300 of the outstanding principal due on its Discount Debenture into 270,600 shares of our common stock, or approximately $0.50 per share.
On December 6, 2011 and January 6, 2012, we issued 64,471 shares and 78,192 shares, respectively, to pay the interest due January 1, 2012 on the outstanding principal of the Discount Debentures to the Purchasers. These interest conversion shares were calculated by dividing the applicable interest amount due to each Investor by the interest conversion rate of $0.1062 per share (90% of the 20-day VWAP for the 20-day VWAP for the 20 trading days prior to January 1, 2012), pursuant to the Discount Debentures.
On April 2, 2012, we issued 91,885 shares to pay the interest due April 1, 2012 on the outstanding principal of the Discount Debentures to the Purchasers. These interest conversion shares were calculated by dividing the applicable interest amount due to each Investor by the interest conversion rate of $0.1110 per share (90% of the 20-day VWAP for the 20-day VWAP for the 20 trading days prior to April 1, 2012), pursuant to the Discount Debentures.
Range Kentucky Holdings LLC.
On April 12, 2011, pursuant to the Range Agreement, we issued 8,500,000 shares of our common stock to Range Kentucky Holdings, LLC. The shares of our common stock were issued in a transaction which we believe satisfies the requirements of that exemption from the registration and prospectus delivery requirements of the Securities Act, which exemption is specified by the provisions of Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated pursuant to that act by the SEC.
On October 12, 2011, we satisfied the downside price protection provision of the Additional Shares Agreement dated April 12, 2011 with Range and issued Range an additional 1,389,353 shares of our common stock. The shares of our common stock were issued in a transaction which we believe satisfies the requirements of that exemption from the registration and prospectus delivery requirements of the Securities Act, which exemption is specified by the provisions of Section 4(2) of the Securities Act.
Employees and Consultants.
On April 29, 2011, we issued 64,257 shares of our common stock to two independent contractors in exchange for services provided to us. The shares of our common stock were issued in transactions which we believe satisfies the requirements of that exemption from the registration and prospectus delivery requirements of the Securities Act, which exemption is specified by the provisions of Section 4(2) of the Securities Act.
On August 4, 2011, we issued 30,000 shares of our common stock to an employee and two independent contractors in exchange for services provided to us. The shares of our common stock were issued in a transaction which we believe satisfies the requirements of that exemption from the registration and prospectus delivery requirements of the Securities Act, which exemption is specified by the provisions of Section 4(2) of the Securities Act.
On August 12, 2011, we issued 25,000 shares of our common stock to one of our officers in exchange for services provided to us. The shares of our common stock were issued in a transaction which we believe satisfies the requirements of that exemption from the registration and prospectus delivery requirements of the Securities Act, which exemption is specified by the provisions of Section 4(2) of the Securities Act.
On September 22, 2011, we issued 30,000 shares of our common stock to an employee and two independent contractors in exchange for services provided to us. The shares of our common stock were issued in a transaction which we believe satisfies the requirements of that exemption from the registration and prospectus delivery requirements of the Securities Act, which exemption is specified by the provisions of Section 4(2) of the Securities Act.
On September 22, 2011, we issued 43,207 shares of our common stock to a consultant in exchange for consulting services provided to us. The shares of our common stock were issued in a transaction which we believe satisfies the requirements of that exemption from the registration and prospectus delivery requirements of the Securities Act, which exemption is specified by the provisions of Section 4(2) of the Securities Act.
On November 23, 2011, we issued 25,000 shares of our common stock to one of our officers in exchange for services provided to us. The shares of our common stock were issued in a transaction which we believe satisfies the requirements of that exemption from the registration and prospectus delivery requirements of the Securities Act, which exemption is specified by the provisions of Section 4(2) of the Securities Act.
On November 23, 2011, we issued 30,000 shares of our common stock to an employee and two independent contractors in exchange for services provided to us. The shares of our common stock were issued in a transaction which we believe satisfies the requirements of that exemption from the registration and prospectus delivery requirements of the Securities Act, which exemption is specified by the provisions of Section 4(2) of the Securities Act.
On November 23, 2011, we issued 41,545 shares of our common stock to a consultant in exchange for consulting services provided to us. The shares of our common stock were issued in a transaction which we believe satisfies the requirements of that exemption from the registration and prospectus delivery requirements of the Securities Act, which exemption is specified by the provisions of Section 4(2) of the Securities Act.
On February 2, 2012, we issued 25,000 shares of our common stock to one of our officers in exchange for services provided to us. The shares of our common stock were issued in a transaction which we believe satisfies the requirements of that exemption from the registration and prospectus delivery requirements of the Securities Act, which exemption is specified by the provisions of Section 4(2) of the Securities Act.
On February 2, 2012, we issued 30,000 shares of our common stock to an employee and two independent contractors in exchange for services provided to us. The shares of our common stock were issued in a transaction which we believe satisfies the requirements of that exemption from the registration and prospectus delivery requirements of the Securities Act, which exemption is specified by the provisions of Section 4(2) of the Securities Act.
On February 2, 2012, we issued 109,034 shares of our common stock to a consultant in exchange for services provided to us. The shares of our common stock were issued in a transaction which we believe satisfies the requirements of that exemption from the registration and prospectus delivery requirements of the Securities Act, which exemption is specified by the provisions of Section 4(2) of the Securities Act.
On May 9, 2012, we issued 25,000 shares of our common stock to one of our officers in exchange for services provided to us. The shares of our common stock were issued in a transaction which we believe satisfies the requirements of that exemption from the registration and prospectus delivery requirements of the Securities Act, which exemption is specified by the provisions of Section 4(2) of the Securities Act.
On May 9, 2012, we issued 30,000 shares of our common stock to an employee and two independent contractors in exchange for services provided to us. The shares of our common stock were issued in a transaction which we believe satisfies the requirements of that exemption from the registration and prospectus delivery requirements of the Securities Act, which exemption is specified by the provisions of Section 4(2) of the Securities Act.
On May 9, 2012, we issued 161,792 shares of our common stock to a consultant in exchange for services provided to us. The shares of our common stock were issued in a transaction which we believe satisfies the requirements of that exemption from the registration and prospectus delivery requirements of the Securities Act, which exemption is specified by the provisions of Section 4(2) of the Securities Act.
Purchases of Equity Securities.
None.
Use of Proceeds of Registered Securities.
There were no sales or proceeds during the calendar year ended April 30, 2012, from the sale of registered securities.
Penny Stock Regulation.
Shares of our common stock will probably be subject to rules adopted the SEC that regulate broker-dealer practices in connection with transactions in “penny stocks”. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in those securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, deliver a standardized risk disclosure document prepared by the SEC, which contains the following:
●
|
a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading;
|
●
|
a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to violation to such duties or other requirements of securities’ laws;
|
●
|
a brief, clear, narrative description of a dealer market, including "bid" and "ask” prices for penny stocks and the significance of the spread between the "bid" and "ask" price;
|
●
|
a toll-free telephone number for inquiries on disciplinary actions;
|
●
|
definitions of significant terms in the disclosure document or in the conduct of trading in penny stocks; and
|
●
|
such other information and is in such form (including language, type, size and format), as the SEC shall require by rule or regulation.
|
Prior to effecting any transaction in penny stock, the broker-dealer also must provide the customer the following:
●
|
the bid and offer quotations for the penny stock;
|
●
|
the compensation of the broker-dealer and its salesperson in the transaction;
|
●
|
the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and
|
●
|
monthly account statements showing the market value of each penny stock held in the customer’s account.
|
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for a stock that becomes subject to the penny stock rules. Holders of shares of our common stock may have difficulty selling those shares because our common stock will probably be subject to the penny stock rules.
Purchases of Equity Securities.
None during the period covered by this report.
Item 6. Selected Financial Data.
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition Results of Operation.
Critical Accounting Policy and Estimates.
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. In addition, our accounting policies are described at relevant sections in this discussion and analysis and in the notes to the financial statements included in our Annual Report on Form 10-K for the year ended April 30, 2012.
Overview.
We are an oil and gas company led by an experienced management team and focused on exploration, production and development of oil and natural gas within North America and the United Kingdom. Our business plan is to acquire oil and gas properties for exploration, appraisal and development with the intent to bring the projects to feasibility at which time we will either contract out the operations or joint venture the project with qualified interested parties. Our main priority will be given to projects with near term cash flow potential, although consideration will be given to projects that may not be as advanced from a technical standpoint but demonstrate the potential for significant upside.
In the United States, we have focus on the Appalachian Basin with an operation base in Gray, Kentucky. We are the operator of our wells in Knox County, Kentucky. We also own working interests in properties located in
Texas
and West Virginia where we are not the operator. In the United Kingdom, we have focus on the Weald Basin in the South of England. We currently have proved reserves in the States of
Texas, Kentucky and West Virginia
.
Our operations in Kentucky increased substantially in April 2011, with our acquisition of all of the membership interests of KYTX Oil and Gas, LLC, KYTX Pipeline, LLC, and KYTX Drilling Company, LLC from Range Kentucky Holdings, LLC (“Range”). The acquired interests include: (i) 71 wells located on approximately 4,040 acres in Kentucky, all of which are held by production, (ii) a 23-mile pipeline network capable of handling up to 9,000,000 cubic feet per day and (iii) drilling equipment including one drilling rig, one service rig and additional well-servicing equipment (collectively, the “KYTX Interests”). We have devoted a significant portion of our operations to the development of the KYTX Interests and other assets in the southern Appalachian basin.
The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements for the period from inception (September 1, 2009) through April 30, 2012, together with notes thereto as included in this Annual Report on Form 10-K.
For the year ended April 30, 2012, as compared to the year ended April 30, 2011.
Results of Operations.
Revenues.
We had oil and gas revenues of $704,938 for the year ended April 30, 2012, as compared to oil and gas revenues of $251,337 for the year ended April 30, 2011. Those revenues were generated from our interest in the
Lozano lease and Hubbard Lease in Texas
, the Valentine lease in West Virginia and the KYTX leases in Kentucky. We expect the lease revenues from the Valentine and KYTX leases will continue with slow decline for the foreseeable future.
Our revenues have been negatively impacted by declining market prices of natural gas during the year ended April 30, 2012 and we expect that natural gas prices will remain low for the foreseeable future.
To implement our business plan during the next twelve months, we need to generate increased revenues from the
KYTX properties
and other interests. Our failure to do so will hinder our ability to increase the size of our operations and to generate additional revenues. If we are not able to generate additional revenues to cover our operating costs, we may not be able to expand our operations.
Operating Expenses.
For the year ended April 30, 2012, our total operating costs and expenses were $2,008,489, which was comprised of lease operating costs of $100,767, production costs of $194,512, depletion, depreciation and amortization costs of $313,236, wage related expenses of $426,736, professional fees of $360,378 and general and administrative expenses of $612,860. By comparison, our total operating costs and expenses were $901,256 for the year ended April 30, 2011 which was comprised of lease operating costs of $103,331, production costs of $24,334, depletion, depreciation and amortization costs of $26,622, wage related expenses of $207,572, professional fees of $234,451 and general and administrative expenses of $304,946. The increases in total operating costs and expenses from 2011 to 2012 was directly related to increases in production costs, wage related expenses and general administrative expenses for the year ended April 30, 2012.
Operating Loss
. For the year ended April 30, 2012, our total loss from operations was $1,303,551, as compared to a total loss from operations of $649,919 for the year ended April 30, 2011. We will continue to incur significant general and administrative expenses, but also expect to generate increased revenues after further developing our oil and gas assets.
Other Income and Expense
. For the year ended April 30, 2012, our net other expense was $1,658,924, which was comprised of interest expense of $350,514, debt discount amortization of $1,308,765 and other income of $355. The total other expenses is attributed to the interest expense and debt discount which resulted from the senior secured convertible promissory note financing. In comparison, for the year ended April 30, 2011, our net other expense was $1,154,250, which was comprised of interest expense of $266,743 debt discount amortization of $903,711 and other income of $16,204.
Net Loss.
For the year ended April 30, 2012, our net loss was $2,962,475, as compared to a net loss of $1,804,169 for the year ended April 30, 2011. The significant increase in our net loss between the comparable periods was directly related to the increase in operating expenses and net other expense for the year ended April 30, 2012. We hope to generate additional revenues from our projects to cover out operating costs, which will reduce our net loss in the future. We cannot guaranty that we will be able to generate additional revenues or, if that we do generate additional revenues, that such increased revenues will reduce our net loss in future periods.
Financial Condition, Liquidity and Capital Resources.
We had cash of $80,903 and accounts receivable of $49,220 as of April 30, 2012, making our total current assets $130,123. We also had $6,991,119 in net property and equipment, which consists of oil and gas properties of $5,305,263, property and equipment of $2,034,542, net of accumulated depreciation, depletion and amortization of $348,686, and goodwill of $1,394,215. Therefore, our total assets as of April 30, 2012 were $8,515,457.
Our total liabilities were $3,140,010 as of April 30, 2012. This was comprised of total current liabilities of $2,364,726, represented by accounts payable and accrued expenses of $4,024 and accrued interest of $604,472. We had total long-term liabilities of $775,284, represented by senior secured convertible promissory notes, net of discount of $1,147,737. We had total stockholders’ equity of $5,375,447. We had no other liabilities and no long term commitments or contingencies as of April 30, 2012.
The following is a description of events affecting our financial condition, liquidity and capital resources for the year ended April 30, 2012.
Eurasian Notes and Warrants.
On November 18, 2009, we entered into and closed a note and warrant purchase agreement (the “First Financing Agreement”) with Eurasian Capital Partners Limited (“Eurasian”), whereby Eurasian agreed to lend up to $2,000,000 to us in multiple installments in exchange for senior secured convertible promissory notes with a conversion price of $0.50 per share (“Notes”) and five-year warrants to acquire shares of common stock at an exercise price of $1.00 per share (“Warrants”) in the amount of each installment. The Warrants expire five years from the date of the investment. The Notes are due on November 18, 2012, or upon default, whichever is earlier, and bear interest at the annual rate of 8%. The Notes have an optional conversion feature by which this lender can convert the principal and accrued interest into shares of our common stock at a conversion price of $0.50 per share.
In connection with the First Financing Agreement, we issued the following Notes and Warrants to Eurasian on the following dates:
|
Date of Note
|
Amount
of Note
|
Number of Warrants
|
|
|
November 18, 2009
|
$334,905
|
334,905
|
|
|
February 5, 2010
|
$80,000
|
80,000
|
|
|
March 4, 2010
|
$300,000
|
300,000
|
|
|
March 25, 2010
|
$100,000
|
100,000
|
|
|
April 15, 2010
|
$250,000
|
250,000
|
|
|
July 22, 2010
|
$175,000
|
175,000
|
|
|
August 12, 2010
|
$25,000
|
25,000
|
|
|
August 18, 2010
|
$150,000
|
150,000
|
|
|
September 7, 2010
|
$70,000
|
70,000
|
|
|
September 24, 2010
|
$40,000
|
40,000
|
|
|
December 2, 2010
|
$25,000
|
25,000
|
|
|
December 15, 2010
|
$75,000
|
75,000
|
|
|
February 8, 2011
|
$100,000
|
100,000
|
|
|
March 1, 2011
|
$160,000
|
160,000
|
|
|
April 12, 2011
|
$115,095
|
115,095
|
|
|
Total
|
$2,000,000
|
2,000,000
|
|
On April 12, 2011, we entered into and closed a second Note and Warrant Purchase Agreement with Eurasian (“Second Financing Agreement”), whereby Eurasian agreed to lend up to $2,400,000 to us multiple installments in exchange for senior secured convertible promissory notes with a conversion price of $1.00 per share (“New Notes”) and five-year warrants to acquire shares of common stock at an exercise price of $1.25 per share (“New Warrants”) in the amount of each installment. The New Warrants expire five years from the date of the investment. The New Notes are due on April 12, 2014, or upon default, whichever is earlier, bears interest at the annual rate of 8%. The New Notes have an optional conversion feature by which Eurasian can convert the principal and accrued interest into shares of our common stock at a conversion price of $1.00 per share.
In connection with the Second Financing Agreement, we issued the following New Notes and New Warrants to Eurasian on the following dates:
|
Date of New Note
|
Amount of
New Note
|
Number of New Warrants
|
|
|
April 12, 2011
|
$410,000
|
410,000
|
|
|
May 24, 2011
|
$50,000
|
50,000
|
|
|
June 21, 2011
|
$400,000
|
400,000
|
|
|
Total
|
$860,000
|
860,000
|
|
Discount Debentures and Series Warrants.
On August 1, 2011, we closed a securities purchase agreement, dated July 26, 2011 (the “Securities Purchase Agreement”) with certain institutional investors (the “Investors” or, individually, the “Investor”) and issued to the Investors an aggregate principal value of approximately $1,310,621 of original issue discount 5% convertible debentures (the “Discount Debentures” or, individually, the “Discount Debenture”) and three series of warrants, the Series A Warrants, the Series B Warrants and the Series C Warrants, to purchase an aggregate of 2,621,241 shares of our common stock (collectively, the “Series Warrants” and the shares issuable upon exercise of the Series Warrants, collectively, the “Series Warrant Shares”) at an exercise price of $1.25 for the Series A and C Warrants and $1.00 for the Series B Warrants. In addition, we also issued warrants to purchase 91,743 shares of our common stock at an exercise price of $1.25 per share to its placement agent in connection with the Securities Purchase Agreement. We will need to make interest payments at the rate of 5% per annum on the Discount Debentures while they are outstanding. These notes are due July 29, 2013.
On November 15, 2011, one of the Investors elected to convert a portion of its outstanding Discount Debenture into shares of our common stock. The Investor elected to convert $5,000 of the outstanding principal due on its Discount Debenture into 10,000 shares of our common stock, or approximately $0.50 per share. On November 21, 2011, the same Investor elected to convert $20,000 of the outstanding principal due on its Discount Debenture into 40,000 shares of our common stock, or approximately $0.50 per share. On November 23, 2011, the same Investor elected to convert $75,000 of the outstanding principal due on its Discount Debenture into 150,000 shares of our common stock, or approximately $0.50 per share. On November 30, 2011, the same Investor elected to convert $135,300 of the outstanding principal due on its Discount Debenture into 270,600 shares of our common stock, or approximately $0.50 per share.
On December 6, 2011 and January 6, 2012, we issued 64,471 shares and 78,192 shares, respectively, to pay the interest due January 1, 2012 on the outstanding principal of the Discount Debentures to the Investors. These interest conversion shares were calculated by dividing the applicable interest amount due to each Investor by the interest conversion rate of $0.1062 per share (90% of the 20-day VWAP for the 20-day VWAP for the 20 trading days prior to January 1, 2012), pursuant to the Discount Debentures.
On April 2, 2012, we issued 91,885 interest conversion shares and $4,250.11 in cash to pay the interest due April 1, 2012 on the outstanding principal of the Discount Debentures to the Investors. The interest conversion shares were calculated by dividing the applicable interest amount due to each Investor by the interest conversion rate of $0.1110 per share (90% of the 20-day VWAP for the 20-day VWAP for the 20 trading days prior to April 1, 2012), pursuant to the Discount Debentures.
Range Kentucky Holdings LLC.
On October 12, 2011, we satisfied the downside price protection provision of the Additional Shares Agreement dated April 12, 2011 with Range and issued Range an additional 1,389,353 shares of our common stock.
On December 9, 2011, we entered into an amendment to the Additional Shares Agreement dated April 12, 2011 with Range pursuant to which we agreed to extend the amount of time in which Range must provide notice of their election to adjust the per share price of the shares received pursuant to the Membership Interest Purchase Agreement dated April 12, 2011 from 30 days to 150 calendar days.
On April 12, 2012, we entered into an second amendment to the Additional Shares Agreement dated April 12, 2011 with Range pursuant to which we agreed to extend the amount of time in which Range must provide notice of their election to adjust the per share price of the shares received pursuant to the Membership Interest Purchase Agreement dated April 12, 2011 from
150 days to 240 calendar days.
Employees and Consultants.
On August 4, 2011, we issued 30,000 shares of our common stock to an employee and two independent contractors in exchange for services provided to us valued at $19,500, or $0.65 per share.
On August 12, 2011, we issued 25,000 shares of our common stock to one of our officers in exchange for services provided to us valued at $17,000, or $0.68 per share.
On September 22, 2011, we issued 30,000 shares of our common stock to an employee and two independent contractors in exchange for services provided to us valued at $15,300, or $0.51 per share.
On September 22, 2011, we issued 43,207 shares of our common stock to a consultant in exchange for consulting services provided to us valued at $22,036, or $0.51 per share.
On November 23, 2011, we issued 25,000 shares of our common stock to one of our officers in exchange for services provided to us valued at $4,000 or $0.16 per share.
On November 23, 2011, we issued 30,000 shares of our common stock to an employee and two independent contractors in exchange for services provided to us valued at $4,800 or $0.16 per share.
On November 23, 2011, we issued 41,545 shares of our common stock to a consultant in exchange for consulting services provided to us valued at $6,647 or $0.16 per share.
On February 2, 2012, we issued 25,000 shares of our common stock to one of our officers in exchange for services provided to us valued at $3,000 or $0.12 per share.
On February 2, 2012, we issued 30,000 shares of our common stock to an employee and two independent contractors in exchange for services provided to us valued at $3,600 or $0.12 per share.
On February 2, 2012, we issued 109,034 shares of our common stock to a consultant in exchange for services provided to us valued at $13,084 or $0.12 per share.
On May 9, 2012, we issued 25,000 shares of our common stock to one of our officers in exchange for services provided to us valued at $1,750 or $0.07 per share.
On May 9, 2012, we issued 30,000 shares of our common stock to an employee and two independent contractors in exchange for services provided to us valued at $2,100 or $0.07 per share.
On May 9, 2012, we issued 161,792 shares of our common stock to a consultant in exchange for services provided to us valued at $11,325 or $0.07 per share.
Other Events.
On November 15, 2011, we submitted a bid to purchase from a bankruptcy trustee substantially all the assets of an unrelated, third party oil and gas entity. Per the requirements of the bid process, we placed a deposit with the trustee. The bid process was withdrawn by the trustee and all deposits have been returned.
On November 16, 2011, we entered into a Farm-Out Agreement with Northdown Energy ("Northdown") to further develop our four UK onshore license blocks located in the Weald basin. The agreement provides that (i) Northdown obtained a 45% working interest in exchange for $93,000 paid to us, (ii) we retained a 45% working interest and (iii) Aimwell Energy retained its 10% working interest in the blocks. The agreement has received approval from the UK Department of Energy and Climate Change (DECC).
On November 4, 2011, we sold all of our working interest in the Lozano Lease, which totals approximately 110 gross acres located in Frio County, Texas, and all wellbores (“Wells”) and personal property related thereto to the operator of the Lozano Lease in exchange for $160,000 paid in cash. We retained all sales proceeds attributable to the sales of oil and gas produced from the Wells prior to October 1, 2011, and we have no right to any sales of oil and gas produced from the Wells after October 1, 2011.
On December 2, 2011, we purchased a 20% working interest in three wells, including the surface and downhole equipment associated with the wells, in Brown County, Texas in exchange for $58,400.
As of April 30, 2012, we had cash of $80,903. As discussed above, we received $1,114,000 in proceeds from sales of debentures and warrants in July 2011. We estimate that our cash on hand will not be sufficient for us to continue our current operations for the next twelve months. We will need additional cash to expand our operations, including the development of the KYTX Interests. Our forecast for the period for which our financial resources will be adequate to support our operations involves risks and uncertainties and actual results could differ as a result of a number of factors. In addition to generating revenues from our current operations, we will need to raise additional capital to expand our operations to the point at which we are able to operate profitably.
We have been, and intend to continue, working toward identifying and obtaining new sources of financing. No assurances can be given that we will be successful in obtaining additional financing in the future. Any future financing that we may obtain may cause significant dilution to existing stockholders. Any debt financing or other financing of securities senior to common stock that we are able to obtain will likely include financial and other covenants that will restrict our flexibility. Any failure to comply with these covenants would have a negative impact on our business, prospects, financial condition, results of operations and cash flows.
If adequate funds are not available, we may be required to delay, scale back or eliminate portions of our operations or to obtain funds through arrangements with strategic partners or others that may require us to relinquish rights to certain of our assets. Accordingly, the inability to obtain such financing could result in a significant loss of ownership and/or control of our assets and could also adversely affect our ability to fund our continued operations and our expansion efforts with respect to the KYTX Interests.
Recent Events
. On July 10, 2012, we entered into a third amendment to the Additional Shares Agreement dated April 12, 2011 with Range pursuant to which we agreed to extend the amount of time in which Range must provide notice of their election to adjust the per share price of the shares received pursuant to the Membership Interest Purchase Agreement dated April 12, 2011 from
240 calendar days to 330 calendar days.
On July 10, 2012, we participated in an oilfield equipment auction held by Kruse Energy and Equipment. On August 6, 2012, we received $226,796, net of all expenses, for the equipment that was auctioned.
On August 1, 2012, we issued
16,724,329
shares to the Investors in exchange for all of the outstanding Discount Debentures and Series Warrants held by the Investors. The number of shares issued in exchange for the Discount Debentures was calculated by dividing the applicable principal and interest due on the Discount Debentures by the conversion rate of $0.07 per share. The number of shares issued in exchange for the Series Warrants was equal to the number of shares underlying the Series A Warrants.
Following such consummation, the Discount Debentures and the Series Warrants are no longer outstanding, and we extinguished $1,076,612.52 in principal and accrued and unpaid interest due under the Discount Debentures and 1,344,150 shares of common stock underlying the Series Warrants.
On August 1, 2012, we issued an aggregate of 523,483 shares of the Investors holding only Series A Warrants in exchange for the Series A Warrants held by those Investors.
The number of shares issued in exchange for the Series A Warrants was equal to the number of shares underlying the Series A Warrants.
Following such consummation, the Series A Warrants are no longer outstanding, and we extinguished 523,483 shares of common stock underlying the Series A Warrants.
During the fiscal year ending 2012, we expect that the legal and accounting costs of being a public company will continue to impact our liquidity. We also expect to make future payments related to certain of our oil and gas projects as discussed above. Other than the anticipated increases in legal and accounting costs due to the reporting requirements of being a reporting company and future payments related to certain of our oil and gas projects, we are not aware of any other known trends, events or uncertainties, which may affect our future liquidity.
We are not currently conducting any research and development activities. We do not anticipate conducting such activities in the near future. In the event that we expand our operations, then we may need to hire additional employees or independent contractors as well as purchase or lease additional equipment. Our management believes that we do not require the services of independent contractors to operate at our current level of activity. However, if our level of operations increases beyond the level that our current staff can provide, then we may need to supplement our staff in this manner.
Off-Balance Sheet Arrangements.
We have no off-balance sheet arrangements.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 8. Financial Statements and Supplementary Data.
The financial statements required by Item 8 are presented in the following order:
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
There have been no changes in or disagreements with our accountants since our formation required to be disclosed pursuant to Item 304 of Regulation S-K.
Item 9A. Controls and Procedures.
Evaluation of disclosure controls and procedures.
We maintain controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosures. Based upon their evaluation of those controls and procedures performed as of the end of the period covered by this report, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective.
Management's annual report on internal control over financial reporting.
Our Chief Executive Officer and our Chief Financial Officer are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
●
|
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
|
●
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management and our directors; and
|
●
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
|
Because of its inherent limitations, our internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our Chief Executive Officer and our Chief Financial Officer assessed the effectiveness of our internal control over financial reporting as of April 30, 2012. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in
Internal Control — Integrated Framework.
Based on our assessment, our Chief Executive Officer and our Chief Financial Officer believe that, as of April 30, 2012, our internal control over financial reporting is not effective based on those criteria, due to the following:
●
|
lack of proper segregation of functions, duties and responsibilities with respect to our cash and control over the disbursements related thereto due to our very limited staff, including our accounting personnel.
|
In light of this conclusion and as part of the preparation of this report, we have applied compensating procedures and processes as necessary to ensure the reliability of our financial reporting. Accordingly, management believes, based on its knowledge, that (1) this report does not contain any untrue statement of a material fact or omit to state a material face necessary to make the statements made not misleading with respect to the period covered by this report, and (2) the financial statements, and other financial information included in this report, fairly present in all material respects our financial condition, results of operations and cash flows for the years and periods then ended.
This report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this report.
Changes in internal control over financial reporting.
There were no significant changes in our internal control over financial reporting during the fourth quarter of the year ended April 30, 2012, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Executive Officers and Directors.
Our directors and principal executive officers are as specified on the following table:
Name
|
Age
|
Position
|
Allan Millmaker
|
60
|
Chief Executive Officer, President, Director
|
Donald Sebastian
|
59
|
Chief Financial Officer
|
Philip Mann
|
25
|
Secretary, Director
|
Directors are elected to serve until the next annual meeting of stockholders and until their successors are elected and qualified. Our Bylaws specify that we shall have at least two and not more than seven directors. The number of directors may be increased or decreased from time to time by the Board of Directors.
Officers are elected by the Board of Directors and serve until their successors are appointed by the Board of Directors. Biographical resumes of each officer and director are set forth below.
Allan Millmaker.
Mr. Millmaker, our Chief Executive Officer and President since April 13, 2012 (previously our Chief Executive Officer and President from November 19, 2009 to December 14, 2011) and one of our directors since November 19, 2009, has over thirty years of experience in the oil and gas industry. From 2005 to the present, Mr. Millmaker has worked as an independent project generator specializing in the development of quality oil and gas projects and oil service business ventures. From 2002 to 2005, Mr. Millmaker worked for Bluewater Offshore Production Systems (U.S.A.), Inc., one of Europe’s leading providers to the offshore oil industry, where he was responsible for operations in North and South America. Bluewater Offshore Production Systems, Inc. (“Bluewater”) specializes in the design, development, lease and operation of tanker-based production and storage systems, owns and operates a number of floating production storage and offloading systems, and provides single point mooring systems. Bluewater has working interest in oil and gas properties. Mr. Millmaker was instrumental in acquiring oil and gas properties for Bluewater.
From 1995 to 2001, Mr. Millmaker worked for Navion ASA (“Navion”) as Senior Vice President for the Floating Production Business. His division was responsible for developing business for the Multipurpose Shuttle Tankers and establishing Navion as a Floating Production Storage and Offloading (FPSO) supplier. During his tenure, Navion won contracts for the Navion Munin FPSO, operating at the Lufeng 22-1 field in the South China Sea and the Berge Hugin FPSO, which is producing at the Pierce field in the UK sector of the North Sea. From 1991 to 1995, he acted as an independent consultant for Kerr McGee in the UK on the Gryphon project and later for Shell on the Troll and Draugen projects.
From 1979 to 1986, he worked for Mobil Exploration Norway Inc.’s (“Mobil”) engineering team, helping to bring the Statfjord “A” wells on-stream, and later became Offshore Production Supervisor. In 1983, he joined Mobil’s operations team where he was Operations Superintendent for the Statfjord “A” platform and in 1986, Platform Manager for Statfjord “B” platform. When the operatorship of the Statfjord field was transferred to Statoil, Mr. Millmaker accepted the offer to continue with Statoil and from 1987 was seconded to Shell as Deputy Project Manager on the Troll Phase 1 Project. In 1989 he joined Shell as Operations Manager on the Northwest Shelf Gas Project in Western Australia.
From 1974 to 1979, Mr. Millmaker served as a production engineer for British Petroleum (BP) in Abu Dhabi, where he worked in the production and drilling departments. He obtained a first class honors and Bachelors of Science. Degree in Production Engineering and Management from the University of Strathclyde, Glasgow in 1974.
Mr. Millmaker’s long term of service in the oil and gas industry and his management skills exhibited, and experience obtained were material considerations that led the Board of the Directors to conclude that Mr. Millmaker should serve as one of our directors. Mr. Millmaker is not an officer or director of any other reporting company.
Donald Sebastian.
Mr. Sebastian has been our Chief Financial Officer since May 1, 2011. Prior to joining our Company, Mr. Sebastian served as Chief Financial Officer, Principal Accounting Officer and Vice President of Velocity Energy Inc. (OTCBB: VYCE) from June 2008 to April 2011. From 2004 to 2008, Mr. Sebastian served as Vice President of Onshore Operations and Business Development with Michael Baker Corporation (NYSE Amex: BKR). From 1979 to 2004, he served in various executive capacities including Senior Vice President responsible for the Gulf Coast Onshore and Offshore Business Unit and Chief Financial Officer of J. M. Huber Corporation. He has over 37 years of experience in the oil and gas industry and has the financial and accounting expertise traditionally associated with Chief Financial Officers as well as substantial onshore and offshore operating expertise. Mr. Sebastian earned a Bachelor of Science Degree in Business Administration from Trinity University in 1974.
Philip Mann.
Mr. Mann has been our Secretary and one of our directors since November 19, 2009. Mr. Mann also served as our Chief Financial Officer from November 2009 to May 2011. Mr. Mann currently devotes approximately 40 to 50 hours per week to us. Mr. Mann has approximately five years of experience with companies in the oil and gas industry. From August 2008 to July 2009, Mr. Mann worked as an independent consultant, providing accounting and financial services to several public and private oil companies. From June to August 2008, Mr. Mann worked for Aker Floating Production ASA in Singapore working on the conversion of the Dhirubhai-1 Floating Production Storage and Offloading vessel as a member of the site team, where Mr. Mann’s role included commercial and accounting work related to overseeing and managing purchase orders and work order claims. Mr. Mann did not provide any other accounting and financial services to Aker Floating Production ASA. From 2006 to 2007, Mr. Mann worked for Capital Shipbrokers Ltd., a leading tanker broker, where Mr. Mann’s role was as a trainee and junior shipbroker. Mr. Mann did not provide financing and accounting services to Capital Shipbrokers Ltd. From July 2005 to the present, Mr. Mann has been working as a consultant for SMV Engineering Ltd. Mr. Mann’s role includes accounting and financial services, specifically financial planning and project costing and financing with the commercial department for the development of new projects with a focus on engineering, commissioning and project management of Floating Production Storage & Offloading vessels and Floating Storage & re-gasification units. He was awarded an International Baccalaureate Certificate from King William’s College, Isle of Man in 2004.
Mr. Mann’s experience and skill with companies in the oil and gas industry and his experience with project development, management and finance background were the material considerations that led our Board of Directors to conclude that Mr. Mann should serve as one of our directors. Mr. Mann is not an officer or director of any other reporting company.
There are no orders, judgments, or decrees of any governmental agency or administrator, or of any court of competent jurisdiction, revoking or suspending for cause any license, permit or other authority to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining any of our officers or directors from engaging in or continuing any conduct, practice or employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security, or any aspect of the securities business or of theft or of any felony. Nor are any of the officers or directors of any corporation or entity affiliated with us so enjoined.
There are no family relationships among our directors or among our executive officers.
Section 16(a) Beneficial Ownership Reporting Compliance
. Section 16(a) of the Securities and Exchange Act of 1934, as amended, requires our directors, officers and persons owning more than 10% of our common stock to file reports of ownership and changes of ownership with the SEC. Based upon our review of the copies of such reports furnished to us, or representations from certain reporting persons that no other reports were required, we believe all applicable filing requirements were complied with during the fiscal year ended April 30, 2012.
Corporate Governance.
Nominating Committee.
Our entire Board of Directors participates in consideration of director nominees. The Board will consider candidates who have experience as a board member or senior officer of a company or who are generally recognized in a relevant field as a well-regarded practitioner, faculty member or senior government officer. The Board of Directors will also evaluate whether the candidates' skills and experience are complementary to the existing Board of Directors' skills and experience as well as the Board’s need for operational, management, financial, international, technological or other expertise. The Board of Directors will interview candidates that meet the criteria and then select nominees that the Board believes best suit our needs.
The Board of Directors will consider qualified candidates suggested by stockholders for director nominations. Stockholders can suggest qualified candidates for director nominations by writing to our Corporate Secretary, at 10575 Katy Freeway, Suite 300, Houston, Texas 77024. Submissions that are received that meet the criteria described above will be forwarded to the Board of Directors for further review and consideration. The Board of Directors will not evaluate candidates proposed by stockholders any differently than other candidates. There have been no material changes to the procedures by which our stockholders may recommend nominees to the Board of Directors.
Compensation Committee.
The Board of Directors has no compensation committee.
Audit Committee.
Presently, our Board of Directors acts as the audit committee. During the next six to twelve months, we hope to establish a formal audit committee, which will be responsible for: (1) selection and oversight of our independent accountant; (2) establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal controls and auditing matters; (3) establishing procedures for the confidential, anonymous submission by our employees of concerns regarding accounting and auditing matters; (4) engaging outside advisors; and, (5) funding for the independent auditor and any outside advisors engaged by the audit committee. We will adopt an audit committee charter when we establish the audit committee.
Audit Committee Financial Expert.
We do not have a board member who is an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K under the Securities Act. We do not have an audit committee financial expert because we believe the cost related to retaining a financial expert at this time is prohibitive. Further, because we have not commenced operations, at the present time, we believe the services of a financial expert are not warranted.
Code of Ethics.
We have adopted a corporate code of ethics. We believe our code of ethics is reasonably designed to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code.
Director Independence.
None of our directors are deemed independent. Our directors also hold positions as officers.
Item 11. Executive Compensation
Summary Compensation Table.
The table set forth below summarizes the annual and long-term compensation for services in all capacities to us payable to our principal executive officers during the years ended April 30, 2012 and 2011.
SUMMARY COMPENSATION TABLE
|
Name and Principal Position
|
Year Ended
|
Salary
$
|
Bonus
$
|
Stock Awards
$
|
Option Awards
$
|
Non-Equity
Incentive Plan
Compensation
$
|
Nonqualified
Deferred
Compensation
Earnings
$
|
All Other Compensation
$
|
Total
$
|
Allan Millmaker,
President, CEO
|
2012
|
$110,000
|
$5,000
|
0
|
0
|
0
|
0
|
0
|
$115,000
|
|
2011
|
$111,000
|
0
|
0
|
0
|
0
|
0
|
0
|
$111,000
|
|
|
|
|
|
|
|
|
|
|
Donald Sebastian, CFO
|
2012
|
$69,000
|
$3,000
|
$25,750
|
0
|
0
|
0
|
0
|
$97,750
|
|
2011
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|
|
|
|
|
|
|
|
|
|
Philip Mann,
CFO, Secretary*
|
2012
|
$72,000
|
0
|
0
|
0
|
0
|
0
|
0
|
$72,000
|
|
2011
|
$67,500
|
0
|
0
|
0
|
0
|
0
|
0
|
$67,500
|
* On May 1, 2011, Philip Mann resigned his position as our Chief Financial Officer, and Don Sebastian was appointed as our Chief Financial Officer.
Employment Contracts and Termination of Employment.
On November 19, 2009, we entered into an executive employment agreement with Allan Millmaker (“Millmaker Agreement”). Under the terms of the Millmaker Agreement, Mr. Millmaker has agreed to serve as our President and Chief Executive Officer for a period of three years. The Millmaker Agreement provides for an initial base salary of $6,000 per month. The base salary amount shall increase by $1,000 after the last day of each of our fiscal quarters during the first fiscal year of the Millmaker Agreement. Mr. Millmaker is also eligible to participate in benefit and incentive programs we may offer.
On November 19, 2009, we entered into an executive employment agreement with Philip Mann (“Mann Agreement”). Under the terms of the Mann Agreement, Mr. Mann has agreed to serve as our Chief Financial Officer and Secretary for a period of three years. The Mann Agreement provides for an initial base salary of $4,000 per month. The base salary amount shall increase by $500 after the last day of each of our fiscal quarters during the first fiscal year of the Mann Agreement. Mr. Mann is also eligible to participate in benefit and incentive programs we may offer.
Any compensation received by our officers, directors, and management personnel will be determined from time to time by our Board of Directors.
Outstanding Equity Awards.
As of April 30, 2012, the following named executive officers had the following unexercised options, stock that has not vested, and equity incentive plan awards:
Option Awards
|
Stock Awards
|
Name
|
Number of Securities Underlying Unexercised Options
# Exercisable
|
# Un-exercisable
|
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Options
|
Option Exercise Price
|
Option Expiration Date
|
Number of Shares or Units of Stock Not Vested
|
Market Value of Shares or Units Not Vested
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights Not Vested
|
Value of Unearned Shares, Units or Other Rights Not Vested
|
Allan Millmaker, President, CEO
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
Donald Sebastian, CFO
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
Philip Mann, Former CFO, Secretary*
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
* On May 1, 2011, Philip Mann resigned his position as our Chief Financial Officer, and Don Sebastian was appointed as our Chief Financial Officer.
Stock Options/SAR Grants
. On December 21, 2011, our Board of Directors approved the Alamo Energy Corp. 2011 Stock Option Plan (the “Plan”). No grants of stock options were made pursuant to the Plan during the fiscal year ended April 30, 2012.
Long-Term Incentive Plans
.
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers.
We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers.
Director Compensation.
Our directors received the following compensation for their service as directors during the fiscal year ended April 30, 2012:
Name
|
Fees Earned or Paid in Cash
$
|
Stock Awards
$
|
Option Awards
$
|
Non-Equity Incentive Plan Compensation
$
|
Non-Qualified Deferred Compensation Earnings
$
|
All Other Compensation
$
|
Total
$
|
Allan Millmaker
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
Philip Mann
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth certain information regarding the beneficial ownership of our common stock as of August 13, 2012, by each person or entity known by us to be the beneficial owner of more than 5% of the outstanding shares of common stock, each of our directors and named executive officers, and all of our directors and executive officers as a group.
The number of shares beneficially owned by each 5% holder, director or executive officer is determined by the rules of the SEC, and the information does not necessarily indicate beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares over which the person or entity has sole or shared voting power or investment power and also any shares that the person or entity can acquire within 60 days of August 13, 2012 through the exercise of any stock option or other right. For purposes of computing the percentage of outstanding shares of common stock held by each person or entity, any shares that the person or entity has the right to acquire within 60 days after August 13, 2012 are deemed to be outstanding with respect to such person or entity but are not deemed to be outstanding for the purpose of computing the percentage of ownership of any other person or entity. Unless otherwise indicated, each person or entity has sole investment and voting power (or shares such power with his or her spouse) over the shares set forth in the following table. The inclusion in the table below of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of those shares. As of August 13, 2012, and after giving effect to the issuances described above, there were 79,104,638 shares of common stock issued and outstanding.
Title Of Class
|
Name and Address
of Beneficial Owner
|
Amount and
Nature Of Beneficial Owner
|
Percentage of Class (1)
|
Common Stock
|
Alamo Oil Limited (2)
5 Spinnaker Close
Hedon Hull, United Kingdom HU12 8RE101
|
10,500,000 Shares
Beneficial Owner
|
13.27
%
|
Common Stock
|
Anson Investments Master Fund LP (3)
5950 Berkshire Lane, Suite 510
Dallas, Texas 75225
|
7,857,339 Shares
Beneficial Owner
|
9.93%
|
Common Stock
|
Capital Ventures International (4)
c/o Heights Capital Management Inc.
101 California Street, Suite 3250
San Francisco, California 94111
|
5,342,990 Shares
Beneficial Owner
|
6.75%
|
Common Stock
|
Philip Mann
10575 Katy Freeway, Suite 300
Houston, Texas 77024
|
2,244,950
Shares
Secretary and Director
|
2.84
%
|
Common Stock
|
Allan Millmaker
10575 Katy Freeway, Suite 300
Houston, Texas 77024
|
7,000,020 Shares
Chief Executive Officer, President and Director
|
8.85%
|
Common Stock
|
Range Kentucky Holdings, LLC (5)
504 Fremont
Thermopolis, WY 82443-2913
|
6,889,353 Shares
Beneficial Owner
|
8.71
%
|
Common Stock
|
Donald Sebastian
10575 Katy Freeway, Suite 300
Houston, Texas 77024
|
114,059 Shares (6)
Chief Financial Officer
|
*
|
Common Stock
|
All Executive Officers and Directors as a Group
|
9,359,029 Shares
|
11.83
%
|
* Denotes less than 1%.
(1) Percentage of beneficial ownership of our common stock is based on 79,104,638 shares of common stock outstanding as of the date of the table.
(2) Michael Stott holds voting and dispositive power over the shares held by Alamo Oil Limited.
(3)
Adam Spears is the portfolio manager of Anson Investments Master Fund LP and has voting and dispositive power over the shares beneficially owned by Anson Investments Master Fund LP.
(4)
Heights Capital Management, Inc. is the investment manager to Capital Ventures International and has voting and dispositive power over the shares beneficially owned by Capital Ventures International. The number of Shares was calculated based on the Schedule 13G filed by Capital Ventures International on August 9, 2012.
(5)
Range Exploration Partners LLC is the sole manager of Range Kentucky Holdings LLC. Range Exploration Partners LLC is managed by Messrs. Frode Aschim, William Byrd and Petter Hagland. Each of Messrs. Aschim, Byrd and Hagland hold shared voting and dispositive power over the shares held by Range Exploration Partners LLC. Each of Messrs. Aschim, Byrd and Hagland disclaims beneficial ownership of the shares held of record by Range Exploration Partners LLC to the extent of his respective pecuniary interest therein.
(6) Includes 14,059 shares, which are held by Tahoe Energy, LLC, of which Donald Sebastian is the managing member. Mr. Sebastian holds voting and dispositive power over the shares held by Tahoe Energy, LLC.
Changes in Control.
Our
management is not aware of any arrangements which may result in “changes in control” as that term is defined by the provisions of Item 403(c) of Regulation S-K. Our Articles of Incorporation and our Bylaws do not contain any other provisions which were included to delay, defer, discourage or prevent a change in control.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Related party transactions.
Except as disclosed below, there have been no other related party transactions, or any other transactions or relationships required to be disclosed pursuant to Item 404 of Regulation S-K.
Our executive offices are located at 10575 Katy Freeway, Suite 300, Houston, Texas 77024, where we occupy approximately 690 square feet of office.
We sublease our offices from Allan Millmaker, our Chief Executive Officer, President and a director, and in exchange for $1,000 per month on a month to month basis.
We also maintain an office in London, United Kingdom, where we occupy approximately 130 square feet of office space, which we sublease from Philip Mann, our Secretary and a director, in exchange for £1,500 per month on a month to month basis.
Our subsidiary, KYTX Pipeline LLC,
subleases an office from a stockholder (Range),
a warehouse building and a yard facility in Gray County
, Kentucky
with a value of $1,500 per month that is contributed by one of the Company’s employees.
Director Independence.
We do not have any independent directors. The determination of independence of directors has been made using the definition of “independent director” contained under Rule 4200(a)(15) of the Rules of National Association of Securities Dealers.
There have been no other related party transactions, or any other transactions or relationships required to be disclosed pursuant to Item 404 of Regulation S-K.
Item 14. Principal Accountant Fees and Services.
Audit Fees.
The aggregate fees billed in each of the fiscal years ended April 30, 2012 and 2011 for professional services rendered by the principal accountant for the audit of our annual financial statements and quarterly review of the financial statements included in our Form 10-K or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were $43,300 and $32,650, respectively.
Audit-Related Fees.
For each of the fiscal years ended April 30, 2012 and 2011, there were no fees billed for services reasonably related to the performance of the audit or review of the financial statements outside of those fees disclosed above under “Audit Fees.”
Tax Fees.
For each of the fiscal years ended April 30, 2012 and 2011, our accountants rendered services for tax compliance, tax advice, and tax planning work for which we paid $3,000 and $0, respectively.
All Other Fees.
None.
Pre-Approval Policies and Procedures.
Prior to engaging our accountants to perform a particular service, our Board of Directors obtains an estimate for the service to be performed. All of the services described above were approved by the Board of Directors in accordance with its procedures.
PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a)
|
Financial Statements.
|
Included in Item 8
(b)
|
Exhibits required by Item 601.
|
Exhibit No.
|
Description
|
|
|
2.1
|
Asset Purchase and Sale Agreement by and among Green Irons Holdings Corp. and Alamo Oil Limited, dated November 18, 2009, Incorporated by reference to our Current Report on Form 8-K filed on November 24, 2009
|
2.2
|
Agreement and Plan of Merger between Green Irons Holdings Corp. and Alamo Energy Corp., dated November 18, 2009, Incorporated by reference to our Current Report on Form 8-K filed on November 24, 2009
|
3.1
|
Articles of Incorporation, incorporated by reference to Exhibit 3.1 of Green Irons’ Registration Statement on Form SB-2 filed on June 22, 2006
|
3.2
|
Bylaws of the Company, incorporated by reference to Exhibit 3.2 of Green Irons’ Registration Statement on Form SB-2 filed on June 22, 2006
|
3.3
|
Articles of Merger between Green Irons Holdings Corp. and Alamo Energy Corp., incorporated by reference to our Current Report on Form 8-K filed on November 24, 2009
|
4.1
|
Form of Registration Rights Agreement, incorporated by reference to our Current Report on Form 8-K filed on November 24, 2009
|
10.1
|
Employment Agreement with Allan Millmaker, dated as of November 19, 2009, incorporated by reference to our Current Report on Form 8-K filed on November 24, 2009
|
10.2
|
Employment Agreement with Philip Mann, dated as of November 19, 2009, incorporated by reference to our Current Report on Form 8-K filed on November 24, 2009
|
10.3
|
Stock Vesting Agreement with Allan Millmaker, dated as of November 19, 2009, incorporated by reference to our Current Report on Form 8-K filed on November 24, 2009
|
10.4
|
Stock Vesting Agreement with Philip Mann, dated as of November 19, 2009, incorporated by reference to our Current Report on Form 8-K filed on November 24, 2009
|
10.5
|
Lock-Up Agreement with Allan Millmaker, dated as of November 19, 2009, incorporated by reference to our Current Report on Form 8-K filed on November 24, 2009
|
10.6
|
Lock-Up Agreement with Philip Mann, dated as of November 19, 2009, incorporated by reference to our Current Report on Form 8-K filed on November 24, 2009
|
10.7
|
Stock Repurchase and Debt Forgiveness Agreement, by and between the Company and Sandy McDougall, dated as of November 18, 2009, incorporated by reference to our Current Report on Form 8-K filed on November 24, 2009
|
10.8
|
Form of Note and Warrant Purchase Agreement , incorporated by reference to our Current Report on Form 8-K filed on November 24, 2009
|
10.9
|
Form of Convertible Promissory Note, incorporated by reference to our Current Report on Form 8-K filed on November 24, 2009
|
10.10
|
Form of Warrant Agreement , incorporated by reference to our Current Report on Form 8-K filed on November 24, 2009
|
10.11
|
Form of Security Agreement, incorporated by reference to our Current Report on Form 8-K filed on November 24, 2009
|
10.12
|
Letter Agreement with Aimwell Energy Limited, dated as of January 11, 2010, incorporated by reference to our Current Report on Form 8-K filed on January 14, 2010
|
10.13
|
Form of Amended and Restated Security Agreement, incorporated by reference to our Current Report on Form 8-K filed on February 9, 2010
|
10.14
|
Operating Agreement with Boardman Energy Partners LLC., incorporated by reference to our Current Report on Form 8-K filed on March 10, 2010
|
10.15
|
Addendum to Operating Agreement with Boardman Energy Partners LLC., incorporated by reference to our Current Report on Form 8-K filed on March 10, 2010
|
10.16
|
Subscription and Customer Agreement with Third Coast Energy & Development LLC, incorporated by reference to our Current Report on Form 8-K filed on March 10, 2010
|
10.17
|
Participation Agreement with WEJCO Inc. incorporated by reference to our Current Report on Form 8-K filed on April 21, 2010
|
10.18
|
Participation Agreement with Allied Energy, Inc. incorporated by reference to our Current Report on Form 8-K filed on May 20, 2010
|
10.19
|
Participation Agreement with Allied Energy, Inc. incorporated by reference to our Current Report on Form 8-K filed on August 5, 2010
|
10.20
|
Subscription Agreement with Berry Resources, Inc. incorporated by reference to our Current Report on Form 8-K filed on September 9, 2010
|
10.21
|
Advisory Agreement with Richard Edmonson incorporated by reference to our Current Report on Form 8-K filed on October 18, 2010
|
10.22
|
Amendment Agreement with Allied Energy, Inc. incorporated by reference to our Current Report on Form 8-K filed on October 20, 2010
|
10.23
|
Advisory Agreement with Terry Davis incorporated by reference to our Current Report on Form 8-K filed on March 30, 2011
|
10.24
|
Membership Interest Purchase and Sale Agreement with Range Kentucky Holdings, LLC incorporated by reference to our Current Report on Form 8-K filed on April 13, 2011
|
10.25
|
Lock-Up Agreement, by and between the Registrant and Range Kentucky Holdings, LLC incorporated by reference to our Current Report on Form 8-K filed on April 13, 2011
|
10.26
|
Development Agreement, by and between the Registrant and Range Kentucky Holdings, LLC incorporated by reference to our Current Report on Form 8-K filed on April 13, 2011
|
10.27
|
Accounting Services Agreement, by and between the Registrant and Range Kentucky Holdings, LLC incorporated by reference to our Current Report on Form 8-K filed on April 13, 2011
|
10.28
|
Additional Shares Agreement, by and between the Registrant and Range Kentucky Holdings, LLC incorporated by reference to our Current Report on Form 8-K filed on April 13, 2011
|
10.29
|
Form of Note and Warrant Purchase Agreement, incorporated by reference to our Current Report on Form 8-K filed on April 13, 2011
|
10.30
|
Form of Registration Rights Agreement, incorporated by reference to our Current Report on Form 8-K filed on April 13, 2011
|
10.31
|
Form of Second Amended and Restated Security Agreement, incorporated by reference to our Current Report on Form 8-K filed on April 13, 2011
|
10.32
|
Form of Senior Secured Convertible Promissory Note, incorporated by reference to our Current Report on Form 8-K filed on April 13, 2011
|
10.33
|
Form of Warrants, incorporated by reference to our Current Report on Form 8-K filed on April 13, 2011
|
10.34
|
Advisory Agreement with Richard Henderson incorporated by reference to our Current Report on Form 8-K filed on April 21, 2011
|
10.35
|
Employment Agreement with Donald Sebastian incorporated by reference to our Current Report on Form 8-K filed on May 4, 2011
|
10.36
|
Form of Securities Purchase Agreement, incorporated by reference to our Current Report on Form 8-K filed on August 1, 2011
|
10.37
|
Form of Original Issue Discount Convertible Debenture, incorporated by reference to our Current Report on Form 8-K filed on August 1, 2011
|
10.38
|
Form of Series A Warrant, incorporated by reference to our Report on Form 8-K filed on August 1, 2011
|
10.39
|
Form of Series B Warrant, incorporated by reference to our Report on Form 8-K filed on August 1, 2011
|
10.40
|
Form of Series C Warrant, incorporated by reference to our Report on Form 8-K filed on August 1, 2011
|
10.41
|
Form of Registration Rights Agreement, incorporated by reference to our Current Report on Form 8-K filed on August 1, 2011
|
10.42
|
Placement Agent Agreement with Rodman & Renshaw, LLC, incorporated by reference to our Current Report on Form 8-K filed on August 1, 2011
|
10.43
|
Purchase Agreement with United American Petroleum Corp., incorporated by reference to our Current Report on Form 8-K filed on November 8, 2011
|
10.44
|
Form of Farmout Agreement with Northdown Energy Limited, incorporated by reference to our Current Report on Form 8-K filed on November 16, 2011
|
10.45
|
Form of Novation and Amendment of Participation Agreement with Northdown Energy Limited and Aimwell Energy Limited, incorporated by reference to our Current Report on Form 8-K filed on November 16, 2011
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10.46
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Form of Joint Operating Agreement with Northdown Energy Limited and Aimwell Energy Limited, incorporated by reference to our Current Report on Form 8-K filed on November 16, 2011
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10.47
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Amendment to Additional Shares Agreement with Range Kentucky Holdings LLC, incorporated by reference to our Quarterly Report on Form 10-Q filed on December 15, 2011
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10.48
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2011 Stock Option Plan, incorporated by reference to our Current Report on Form 8-K filed on December 21, 2011
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10.49
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Second Amendment to Additional Shares Agreement with Range Kentucky Holdings LLC, incorporated by reference to our Current Report on Form 8-K filed on April 13, 2012
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14.1
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Code of Ethics, incorporated by reference to our Annual Report on Form 10-KSB filed on August 14, 2007
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101.INS
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XBRL Instance Document
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101.SCH
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XBRL Taxonomy Schema
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101.CAL
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XBRL Taxonomy Calculation Linkbase
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101.DEF
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XBRL Taxonomy Definition Linkbase
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101.LAB
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XBRL Taxonomy Label Linkbase
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101.PRE
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XBRL Taxonomy Presentation Linkbase
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* Filed herewith.
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.
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Alamo Energy Corp.
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a Nevada corporation
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August 14, 2012
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By:
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/s/ Allan Millmaker
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Allan Millmaker
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Its:
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Chief Executive Officer, President, and a director
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(Principal Executive Officer)
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By:
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/s/ Donald Sebastian
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Donald Sebastian
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Its:
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Chief Financial Officer
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(Principal Financial and Accounting Officer)
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In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By:
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/s/ Allan Millmaker
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August 14, 2012
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Allan Millmaker
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Its:
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CEO, President, and a director
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(Principal Executive Officer)
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By:
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/s/ Philip Mann
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August 14, 2012
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Philip Mann
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Its:
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Secretary and Director
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66