[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
[ ] No [X]
Indicate by check mark if the registrant is not required to
file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
[ ] No [X]
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes
[X] No [ ]
Indicate by check mark 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 (232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
Yes [ ] No
[ ]
Indicate by check 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. [X]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a not-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.
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Act).
Yes [
] No [X]
The aggregate market value of the voting and non-voting common
equity held by non-affiliates as of April 11, 2014 was $3,929,529 based upon the
closing sales price of the Registrant’s Common Stock as reported on the
Over-the-Counter Bulletin Board of $0.04
At April 11, 2014 the Company had outstanding 102,238,238
shares of Common Stock, of $0.001 par value per share.
PART I
This Annual Report on Form
10-K contains forward-looking statements that have been made pursuant to the
provisions of Section 27A of the Securities Act of 1933, Section 21E of the
Securities Exchange Act of 1934, and the Private Securities Litigation Reform
Act of 1995 and concern matters that involve risks and uncertainties that could
cause actual results to differ materially from historical results or from those
projected in the forward-looking statements. Discussions containing
forward-looking statements may be found in the material set forth under
“Business,” “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and in other sections of this Form 10-K. Words such as
“may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,”
“estimate,” “predict,” “potential,” “continue” or similar words are intended to
identify forward-looking statements, although not all forward-looking statements
contain these words. Although we believe that our opinions and expectations
reflected in the forward-looking statements are reasonable as of the date of
this Report, we cannot guarantee future results, levels of activity, performance
or achievements, and our actual results may differ substantially from the views
and expectations set forth in this Annual Report on Form 10-K. We expressly
disclaim any intent or obligation to update any forward-looking statements after
the date hereof to conform such statements to actual results or to changes in
our opinions or expectations.
Readers should carefully
review and consider the various disclosures made by us in this Report, set forth
in detail in Part I, under the heading “Risk Factors,” as well as those
additional risks described in other documents we file from time to time with the
Securities and Exchange Commission, which attempt to advise interested parties
of the risks, uncertainties, and other factors that affect our business. We
undertake no obligation to publicly release the results of any revisions to any
forward-looking statements to reflect anticipated or unanticipated events or
circumstances occurring after the date of such statements.
Item 1. Business
General
These financial statements have been prepared in accordance
with generally accepted accounting principles applicable to a going concern,
which assumes that the Company will be able to meet its obligations and continue
its operations for its next fiscal year. Realization values may be substantially
different from carrying values as shown and these financial statements do not
give effect to adjustments that would be necessary to the carrying values and
classification of assets and liabilities should the Company be unable to
continue as a going concern. At December 31, 2013, the Company had not yet
achieved profitable operations, has accumulated losses of $14,355,874 since
inception and expects to incur further losses in the development of its
business, of which cast substantial doubt about the Company’s ability to
continue as a going concern.
The Company’s ability to continue as a going concern is
dependent upon future profitable operations and/or the necessary financing to
meet its obligations and repay its liabilities arising from normal business
operations when they come due.
Management has obtained additional funds by related party’s
advances and loans from third parties; however there is no assurance that this
additional funding is adequate and further funding may be necessary.
1
On March 16, 2011, the Company signed a Farm-Out Agreement for
oil and gas exploration in the Peco Area of Alberta. The Farm-Out Agreement
between FormCap Corp. and a private Alberta Corporation is comprised of a
Seismic Option, a Farm-Out and a Participation clause. The Agreement stipulated
a commencement date for the shooting of a 3D seismic program on the Farm-Out
Lands not later than June 1, 2011 and a Commencement Date of November 1, 2011
for spudding and continuous drilling of a Test Well. Due to conditions in the
oil and gas industry these dates were amended to October 1, 2011 for
commencement of seismic program and February 1, 2012 for the spudding of a Test
Well. The Agreement provides FormCap 60 days following completion of the seismic
program to elect to drill the Test Well. Upon completion of the Test Well
FormCap shall have earned a 40% working interest in the well subject to a 10%
Gross Overriding Royalty payable to the Farmor. The Farmor may elect to convert
the Gross Overiding Royalty to a 50% interest in FormCap’s working interest
(i.e.: a 20% working interest). During the second quarter of 2012 The Company
decided to discontinue activities on this project.
On November 19, 2013 the Company executed a Definitive
Agreement with: Kerr Energy Group and Keta Oil & Gas LLC (Kerr and Keta)
both incorporated in Wichita, Kansas. Pursuant to the terms of the Agreement the
Company paid Kerr and Keta a non-refundable deposit in the amount of $25,000
(the “Deposit”) to be applied to the purchase price of oil leases to be
purchased by Formcap, in Cowley County Kansas. The Company also agreed to issue
Kerr and Keta a total of 200,000 Rule 144 shares of common stock of FormCap.
In addition, the Company will pay Kerr and Keta two hundred dollars ($200.00) per acre for up to 2,400 acres of Leases, at total cost not to exceed $480,000 within 30 days of execution of the Agreement, subject to final due diligence by the
Company. The Company will own 100% of the Leases (80% net revenue to FormCap; 20% freehold royalty), and will be the operator. The Company will have the option to purchase additional leases in Cowley County from Kerr and Keta under an Area of Mutual
Interest, the terms of which are set forth in the Agreement. FormCap is required to drill one well in each of the first two years of the lease term to maintain its interest in the Leases.
The Company will also have the option to participate in the drilling of up to six exploration or development wells on lands currently owned by Keta and Kerr under terms set out in the agreement.
On November 7, 2013 the Board of Directors approved the issuance of 200,000 Rule 144 shares
of common stock to Kerr and Keta.
Item 1A. Risk Factors
AN INVESTMENT IN THE COMPANY IS HIGHLY SPECULATIVE IN NATURE AND INVOLVES AN EXTREMELY HIGH DEGREE OF RISK.
There may be conflicts of interest between our management and our non-management stockholders.
Conflicts of interest create the risk that management may have an incentive to act adversely to the interests of other investors. A conflict of interest may arise between our management’s own pecuniary interests and may at some point
compromise its fiduciary duty to our stockholders. In addition, our officers and directors are currently involved with other blank check companies and conflicts in the pursuit of business combinations with such other blank check companies with which
they and other members of our management are, and may in the future be affiliated with, may arise. If we and the other blank check companies that our officers and directors are affiliated with desire to take advantage of the same opportunity, then
those officers and directors that are affiliated with both companies would abstain from voting upon the opportunity. In the event of identical officers and directors, the officers and directors will arbitrarily determine the company that will be
entitled to proceed with the proposed transaction.
As the Company has no recent operating history or revenue and there is a risk that we will be unable to continue as a going concern and consummate a business combination. We will, in all likelihood, sustain operating expenses without corresponding
revenues, at least until the consummation of a business combination. This may result in our incurring a net operating loss that will increase continuously until we can consummate a business combination with a profitable business opportunity. We
cannot assure you that we can identify a suitable business opportunity and consummate a business combination.
THERE IS COMPETITION FOR THOSE PRIVATE COMPANIES SUITABLE FOR A MERGER TRANSACTION OF THE TYPE CONTEMPLATED BY MANAGEMENT.
The Company is in a highly competitive market for a small number of business opportunities which could reduce the likelihood of consummating a successful business combination. We are and will continue to be an insignificant participant in the
business of seeking mergers with, joint ventures and acquisitions of small private and public entities. A large number of established and well-financed entities, including small public companies and venture capital firms, are active in mergers and
acquisitions of companies that may be desirable target candidates for us. Nearly all these entities have significantly greater financial resources, technical expertise and managerial capabilities than we do, consequently, we will be at a competitive
disadvantage in identifying possible business opportunities and successfully completing a business combination. These competitive factors may reduce the likelihood of our identifying and consummating a successful business combination.
FUTURE SUCCESS IS HIGHLY DEPENDENT ON THE ABILITY OF MANAGEMENT TO LOCATE AND ATTRACT A SUITABLE ACQUISITION.
The nature of our operations is highly speculative and there is a consequent risk of loss of your investment. The success of our plan of operation will depend to a great extent on the operations, financial condition and management of the identified
business opportunity. While management intends to seek business combination(s) with entities having established operating histories, we cannot assure you that we will be successful in locating candidates meeting that criterion. In the event we
complete a
business combination, the success of our operations may be dependent upon management of the successor firm or venture partner firm and numerous other factors beyond our control.
OUR BUSINESS WILL HAVE NO REVENUES UNLESS AND UNTIL WE MERGE WITH OR ACQUIRE AN OPERATING BUSINESS.
We are a development stage company and have had no revenues from operations. We may not realized any revenues unless and until we successfully merge with or acquire an operating business.
Item 1B. Unresolved Staff Comments
None
Item 2. Properties
None
Item 3. Legal Proceedings
None
See Subsequent Events
Item 4. Submission of Matters to a Vote of Security Holders
On October 1, 2012 the Company effected a reverse stock split in the ratio of 50 old shares for one new share. The consent resolution approving the Reverse Split was signed by 5 shareholders representing more than 50% of the issued and outstanding
Common Stock of the Company. As the consent resolution satisfied the requirements of the Nevada Revised Statutes the Company did not solicit the proxies or consent of the remaining shareholders.
PART II
Item 5. Market for Registrant’s Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities The Company’s
Common Stock is presently quoted on the National Association of Securities
Dealers’ Over-the-Counter Bulletin Board and on the “Pink Sheets” under the
symbol “FRMC”.
The table below reflects the high and low “bid” and “ask”
quotations for the Company’s Common Stock for each of the calendar years covered
by this report, as reported by the National Association of Securities Dealers
Over the Counter Bulletin Board National Quotation System. The prices reflect
inter-dealer prices, without retail mark-up, markdown or commission and do not
necessarily represent actual transactions.
|
2013
|
High
|
Low
|
|
1
st
Quarter
|
0.510
|
0.008
|
|
2
nd
Quarter
|
0.105
|
0.012
|
|
3
rd
Quarter
|
0.200
|
0.085
|
|
4
th
Quarter
|
1.920
|
0.200
|
|
|
|
|
|
2012
|
High
|
Low
|
|
1
st
Quarter
|
0.119
|
0.003
|
|
2
nd
Quarter
|
0.180
|
0.003
|
|
3
rd
Quarter
|
0.050
|
0.003
|
|
4
th
Quarter
|
0.499
|
0.004
|
As of December 31, 2013, there were 92,238,238 common shares
issued and approximately 98 shareholders on record. The Company believes that an
undefined number of shares of its common stock are held in either nominee name
or street name brokerage accounts. Consequently, the Company is unable to
determine the exact number of beneficial owners of its common stock.
The Company has not paid cash dividends on its common stock.
The Company anticipates that for the foreseeable future any earnings will be
retained for use in its business, and no cash dividends will be paid on the
common stock. Declaration of common stock dividends will remain within the
discretion of the Company’s Board of Directors and will depend upon the
Company’s growth, profitability, financial condition and other relevant factors.
The Transfer Agent for the Company's Common Stock is Presidents
Stock Transfer, located at 215 - 515 West Hastings Street, Vancouver, B.C.
V6B-6H5 Canada.
Section 15(g) of the Securities Exchange Act of 1934:
The Company’s shares are covered by Section 15(g) of the
Securities Exchange Act of 1934, as amended that imposes additional sales
practice requirements on broker/dealers who sell such securities to persons
other than established customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals with net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouses). For transactions covered by this Section 15(g), the
broker/dealer must make a special suitability determination for the purchase and
have received the purchaser's written agreement to the transaction prior to the
sale. Consequently, Section 15(g) may affect the ability of broker/dealers to
sell the Company’s securities and also may affect your ability to sell your
shares in the secondary market.
Section 15(g) also imposes additional sales practice
requirements on broker/dealers who sell penny securities. These rules require a
one page summary of certain essential items. The items include the risk of
investing in penny stocks in both public offerings and secondary marketing; terms important to an
understanding of the function of the penny stock market, such as "bid" and
"offer" quotes, a dealers "spread" and broker/dealer compensation; the
broker/dealer compensation, the broker/dealers duties to its customers,
including the disclosures required by any other penny stock disclosure rules;
the customers rights and remedies in causes of fraud in penny stock
transactions; and, the NASD's toll free telephone number and the central number
of the North American Administrators Association, for information on the
disciplinary history of broker/dealers and their associated persons.
RECENT SALES OF RESTRICTED SECURITIES
The Company did not issue any additional shares during the year
ended December 31, 2012.
On May 16, 2013, 50,000,000 common shares were issued under a
debt settlement agreement with a related Party.
On May 20, 2013, 39,999,998 common shares were issued under a
debt settlement agreement with a related Party.
On November 7, 2013, 200,000 common shares were issued in
connection with the acquisition of exploration property leases.
Item 6. Selected Financial Data.
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations.
The following discussion of our financial condition and results
of operations should be read in conjunction with the financial statements and
notes thereto and the other financial information included elsewhere in this
report. Certain statements contained in this report, including, without
limitation, statements containing the words “believes,” “anticipates,” “expects”
and words of similar import, constitute “forward looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks and uncertainties.
Our actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including our ability
to create, sustain, manage or forecast our growth; our ability to attract and
retain key personnel; changes in our business strategy or development plans;
competition; business disruptions; adverse publicity; and international,
national and local general economic and market conditions. Our audited financial
statements are stated in United States Dollars and are prepared in accordance
with United States Generally Accepted Accounting Principles.
Overview
The Company does not currently engage in any business
activities that provide cash flow. The Company is currently in the development
stage.
On November 19, 2013 the Company executed a Definitive Agreement with: Kerr Energy Group and Keta Oil & Gas LLC (Kerr and Keta) both incorporated in Wichita, Kansas. Pursuant to the terms of the Agreement the Company paid Kerr and Keta a
non-refundable deposit in the amount of $25,000 (the “Deposit”) to be applied to the purchase price of oil leases to be purchased by Formcap, in Cowley County, Kansas. The Company also agreed to issue Kerr and Keta a total of 200,000
Rule 144 shares of FormCap.
Going Concern
We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and
classification of liabilities that might be necessary should we be unable to continue in operation.
We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.
Results of Operations for the Fiscal Years Ended December 31, 2013 and 2012
The audited operating results and cash flows are presented for the years ended December 31, 2013 and 2012 and for the period since inception to December 31, 2013.
We did not earn any revenues for the years ended December 31, 2013 and 2012.
Net Loss: For the year ended December 31, 2013 we had a net loss of $2,386,213 as compared with a net loss of $109,440 for the year ended December 31, 2012.
Operating Expenses. For the year ended December 31, 2013, we had total operating expenses of $112,203 as compared to $109,397 for the year ended December 31, 2012. The reduction is due to a decrease of $50,145 in consulting services and
an increase in General and administrative expenses of $52,951.
Consulting Fees. For the year ended December 31, 2012, we had consulting fees of $14,022 as compared to $64,167 for the previous year. The decrease was attributable to the reduced use of consulting services as compared with the previous
year.
General and administrative expenses: For the year ended December 31, 2013 we had general and administrative expenses of $98,181, an increase of $52,951 as compared with $45,230 for the year ended December 31, 2012.
Filing, Transfer agents’ expenses increased by $2,694 from $6,037 during the year ended December 31, 2012 to $8,731 during the year ended December 31, 2013 as a result of corporate activity.
Investor and public relations expenses increased by $56,328 from $2,413 for the year ended December 31, 2012 to $58,741 for the year ended December 31, 2013 as the Company engaged a specialist to develop a corporate branding strategy and
a new website.
Audit and accounting expenses for the year ended December 31, 2013 amounted to
$26,167, a decrease of $415 as compared with $26,582 incurred during the year
ended December 31, 2012. The increase in expenditure in this category resulted
from a correction to the accruals for this category of professional services.
The Company did not incur legal expenses for the year ended December 31, 2013.
Legal expenses for the year ended December 31, 2012 was $3,273. The decrease
resulted from reduced corporate activity during the year ended December 31, 2013
as compared with the year ended December 31, 2012.
Losses on foreign exchange transactions amounted to $1,580 in the year ended
December 31, 2013, as compared with a loss of $146 in the year ended December
31, 2012. These losses arose as a result of fluctuations in the exchange rates
between the US Dollar and foreign currencies.
Loss on impairment of assets: We did not incur a Loss on impairment of assets
during the years ended December 31, 2013 and 2012, respectively
Financing expenses: We did not incur Financing expenses during the years ended
December 31, 2013 and 2012, respectively
Interest Expense. The Company incurred insignificant interest expense charges
during the years ended December 31, 2013 and 2012, respectively.
Loss on settlement of debt: During the year ended December 31, 2013 we incurred
a loss of $2,274,000 on the settlement of debts owed to related parties.
Liquidity and Capital Resources: During the year ended December 31, 2013 our
operating activities consumed cash in the amount of $78,126, an increase of
$66,253 as compared to cash consumed by operations of $11,873 during the year
ended December 31, 2012. During the year ended December 31, 2013 we invested
$6,802 in the purchase of oil and gas leases and advanced $9,266 to an unrelated
Canadian company (year ended December 31, 2012 - $Nil). During the year ended
December 31, 2013, we obtained financing in the amount of $85,790 in the form of
convertible notes as compared with $6,417 and $5,000 in proceeds from related
party payables and proceeds from notes payable, respectively, during the year
ended December 31, 2012.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
The Company does not hold any derivatives or investments that are subject to market risk. The carrying values of any financial instruments, approximate fair value as of those dates because of relatively short-term maturity of these instruments which
eliminates any potential market risk associated with such instruments.
Item 8. Financial Statements and Supplementary Data
See Item 15
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable
Item 9A (T). Controls and Procedures.
As supervised by our board of directors and our principal executive and principal financial officers, management has established a system of disclosure controls and procedures and has evaluated the effectiveness of that system. The system and its
evaluation are reported on in the below Management's Annual Report on Internal Control over Financial Reporting. Our principal executive and financial officer has concluded that our disclosure controls and procedures (as defined in the 1934
Securities Exchange Act Rule 13a-15(e)) as of December 31, 2013, are not effective, based on the evaluation of these controls and procedures required by paragraph (b) of Rule 13a-15.
Management's Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Securities Exchange Act of 1934 (the "Exchange Act"). Internal control over financial
reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
Management assessed the effectiveness of internal control over financial reporting as of December 31, 2013. We carried out this assessment using the criteria of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal
Control—Integrated Framework. This annual 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 Securities and Exchange Commission that permits us to provide only management's report in this annual report. Management concluded in this assessment that as of December 31, 2013,
our internal control over financial reporting is not effective.
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of our 2013 fiscal year that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
None.
FORMCAP CORP.
(A Development Stage Company)
Statements of Cash Flows for the years ended December 31, 2013
and 2012 and for the period since April 10, 1991 (Inception) to December 31,
2012 (CONTINUED)
|
|
|
|
|
|
|
|
|
From Inception on
|
|
|
|
|
For the Year Ended
|
|
|
April 10, 1991 to
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of capital assets
|
|
-
|
|
|
-
|
|
|
(104,880
|
)
|
|
Acquisition deposits
|
|
-
|
|
|
-
|
|
|
(431,000
|
)
|
|
Extinguishment of oil and gas leases
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Purchase of oil and gas
lease
|
|
(6,802
|
)
|
|
-
|
|
|
(256,802
|
)
|
|
Capitalized software expenditures
|
|
-
|
|
|
-
|
|
|
(135,181
|
)
|
|
Principal payments on
notes receivable
|
|
-
|
|
|
-
|
|
|
44,117
|
|
|
Notes
receivable advances
|
|
-
|
|
|
-
|
|
|
(701,152
|
)
|
|
Convertible promissory
note receivable
|
|
(9,266
|
)
|
|
|
|
|
(9,266
|
)
|
|
Proceeds
from sale of notes receivable
|
|
-
|
|
|
-
|
|
|
350,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Investing Activities
|
|
(16,068
|
)
|
|
-
|
|
|
(1,244,164
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
Proceeds from related
party payables
|
|
15,000
|
|
|
6,417
|
|
|
2,065,177
|
|
|
Repayments of related party payables
|
|
-
|
|
|
-
|
|
|
(637,012
|
)
|
|
Proceeds from notes
payable
|
|
|
|
|
5,000
|
|
|
931,919
|
|
|
Repayment
of notes payable
|
|
|
|
|
-
|
|
|
-
|
|
|
Proceeds from the sale of
preferred stock
|
|
-
|
|
|
-
|
|
|
3,000
|
|
|
Proceeds
from the sale of common stock and stock options
|
|
-
|
|
|
-
|
|
|
3,608,242
|
|
|
Process from Convertible notes payable
|
|
70,790
|
|
|
-
|
|
|
70,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Provided by Financing Activities
|
|
235,663
|
|
|
11,417
|
|
|
6,042,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH
|
|
862
|
|
|
(456
|
)
|
|
910
|
|
|
CASH AT BEGINNING OF PERIOD
|
|
48
|
|
|
504
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AT END OF PERIOD
|
$
|
910
|
|
$
|
48
|
|
$
|
910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OFCASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH PAID FOR:
|
|
|
|
|
|
|
|
|
|
|
Interest
|
$
|
10
|
|
$
|
43
|
|
$
|
12,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON CASH FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for
rounding shares
|
$
|
|
|
$
|
22
|
|
$
|
22
|
|
|
Common
stock issued for prepaid expenses
|
$
|
-
|
|
$
|
-
|
|
$
|
280,000
|
|
|
Common
stock issued for purchase of oil and gas leases
|
$
|
20,000
|
|
$
|
-
|
|
$
|
20,000
|
|
|
Conversion
of related party payables to common stock
|
$
|
425,000
|
|
$
|
-
|
|
$
|
3,984,999
|
|
|
Extinguishment of related party notes payable and
Accounts Payable
|
$
|
2,699,000
|
|
$
|
|
|
$
|
2,699,000
|
|
|
Notes Payable Issued for Oil and Gas
Lease
|
$
|
75,000
|
|
$
|
|
|
$
|
75,000
|
|
The accompanying notes are an integral part of these financial
statements
FORMCAP CORP.
(A Development Stage Company)
Notes
to the Financial Statements December 31, 2013 and 2012
NOTE 1: ORGANIZATION AND DESCRIPTION OF BUSINESS
FormCap Corp. (the “Company” or “FormCap”) was incorporated in
the State of Florida on April 10, 1991, under the name of Aarden-Bryn
Enterprises, Inc. The Company became a foreign registrant in the State of Nevada
on December 24, 1998, and became qualified to transact business in the State of
Nevada.
Since its incorporation, the Company has changed its name
several times. On August 27, 1998 the Company changed its name to Corbett’s Cool
Clear WTAA, Inc., on September 24, 1999 to WTAA International, Inc., on December
6, 2001 to Gravitas International, Inc., and finally to its current name,
FormCap Corp. on October 12, 2007.
On September 18, 2007, the Company merged the Florida
jurisdiction and the Nevada jurisdiction into one Nevada jurisdiction.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These financial statements
have been prepared in accordance with generally accepted accounting principles
in the United States of America and are stated in US dollars. Because a precise
determination of many assets and liabilities is dependent upon future events,
the preparation of financial statements for a period necessarily involves the
use of estimates which have been made using careful judgment. Actual results may
differ from these estimates.
Reclassification of Financial Statement Accounts
Certain amounts in the December 31, 2012 as well as the inception column of
the financial statements have been reclassified to conform to the presentation
in the December 31, 2013 financial statements.
Use of Estimates
The preparation of financial
statements in accordance with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reportable amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Development Stage Company
The Company is considered
to be in the development stage as defined in Accounting Standards Codification
(ASC) 915 “Development Stage Entities.” The Company is devoting substantially
all of its efforts to development of business plans.
Basic Earnings (Loss) Per Share
Basic earnings
(loss) per share is calculated by dividing the Company’s net loss applicable to
common shareholders by the weighted average number of common shares during the
period. Diluted earnings per share is calculated by dividing the Company’s net
income available to common shareholders by the diluted weighted average number
of shares outstanding during the year. The diluted weighted average number of
shares outstanding is the basic weighted number of shares adjusted for any
potentially dilutive debt or equity. There were no dilutive or potentially
dilutive instruments outstanding as of December 31, 2013 and 2012.
Stock Issued in Exchange for Services
The valuation
of common stock issued in exchange for services is valued at an estimated fair
market value as determined by the most readily determinable value of either the
stock or services exchanged. Values of the stock are based upon other sales and
issuances of the Company’s common stock within the same general time period.
Cash and Cash Equivalents
Cash equivalents are
comprised of certain highly liquid investments with original maturities of three
months or less when purchased. The Company maintains its cash in bank deposit
accounts which at times may exceed federally insured limits of $250,000. The
Company has not experienced any losses related to this concentration of risk.
Deposits did not exceed insured limits during the years ended December 31, 2013
and 2012.
1
FORMCAP CORP.
(A Development Stage Company)
Notes
to the Financial Statements December 31, 2013 and 2012
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Financial Instruments
For accounts receivable,
accounts payable, accrued liabilities, current portion of long-term debt and
long-term debt, the carrying amounts of these financial instruments approximates
their fair value. Unless otherwise noted, it is management’s opinion that the
Company is not exposed to significant interest, currency or credit risks arising
from these financial instruments.
Foreign Currency Translation
The Company translates
foreign currency transactions and balances to its reporting currency, United
States Dollars, in accordance with ASC 830 “Foreign Currency Matters”. Monetary
assets and liabilities are translated into the functional currency at the
exchange rate in effect at the end of the year. Non-monetary assets and
liabilities are translated at the exchange rate prevailing when the assets were
acquired or the liabilities assumed. Revenue and expenses are translated at the
rate approximating the rate of exchange on the transaction date. All exchange
gains and losses are included in the determination of net income (loss) for the
year.
Income Taxes
The Company applies ASC 740, which
requires the asset and liability method of accounting for income taxes. The
asset and liability method requires that the current or deferred tax
consequences of all events recognized in the financial statements are measured
by applying the provisions of enacted tax laws to determine the amount of taxes
payable or refundable currently or in future years. Deferred tax assets are
reviewed for recoverability and the Company records a valuation allowance to
reduce its deferred tax assets when it is more likely than not that all or some
portion of the deferred tax assets will not be recovered.
The Company adopted ASC 740, at the beginning of fiscal year
2008. This interpretation requires recognition and measurement of uncertain tax
positions using a “more-likely-than-not” approach, requiring the recognition and
measurement of uncertain tax positions. The adoption of ASC 740 had no material
impact on the Company’s financial statements.
Recent Accounting Pronouncements
Except for rules
and interpretive releases of the SEC under authority of federal securities laws
and a limited number of grandfathered standards, the FASB Accounting Standards
Codification™ (“ASC”) is the sole source of authoritative GAAP literature
recognized by the FASB and applicable to the Company. Management has reviewed
the aforementioned rules and releases and believes any effect will not have a
material impact on the Company's present or future consolidated financial
statements.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles in the United States of America applicable to a
going concern which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company has not yet
established an ongoing source of revenues sufficient to cover its operating
costs and allow it to continue as a going concern. The ability of the Company to
continue as a going concern is dependent on the Company obtaining adequate
capital to fund operating losses until it becomes profitable. If the Company is
unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the Company will need,
among other things, additional capital resources. Management's plan is to obtain
such resources for the Company by obtaining capital from management and
significant shareholders sufficient to meet its minimal operating expenses and
seeking equity and/or debt financing. However management cannot provide any
assurances that the Company will be successful in accomplishing any of its
plans.
The ability of the Company to continue as a going concern is
dependent upon its ability to successfully accomplish the plans described in the
preceding paragraph and eventually secure other sources of financing and attain
profitable operations. The accompanying financial statements do not include any
adjustments that might be necessary if the Company is unable to continue as a
going concern.
2
FORMCAP CORP.
(A Development Stage Company)
Notes
to the Financial Statements December 31, 2013 and 2012
NOTE 4 – PROMISSORY NOTE RECEIVABLE
On June 3, 2013 the Company advanced the sum of $11,194
($11,500 Canadian Dollars) to an unrelated Canadian company. The loan is secured
by a promissory note and is due on December 31, 2014. On November 30, 2013 the
Borrower repaid $1,928, leaving a balance owing of $9,266 as of December 31,
2013.
The promissory note is non-interest bearing until maturity and
bears interest at 3% per annum thereafter. The Promissory note will become due
and payable if the company receives financing totalling $5,000,000 in aggregate
prior to the maturity date. The promissory note is convertible into common
shares of the company either in whole or in part at the option of the Company.
NOTE 5 – EXPLORATION PROPERTY LEASE
On November 19, 2013 the Company executed a Definitive
Agreement with Kerr Energy Group and Keta Oil & Gas LLC (Kerr and Keta) both
incorporated in Wichita, Kansas.
Pursuant to the terms of the Agreement the Company paid Kerr
and Keta a non-refundable deposit in the amount of $75,000 (the “Deposit”) to be
applied to the purchase price of oil leases to be purchased by the Company, in
Cowley County Kansas and agreed to issue Kerr and Keta a total of 200,000 Rule
144 shares of common stock of FormCap.
In addition, the Company will pay Kerr and Keta two hundred
dollars ($200.00) per acre for up to 2,400 acres of Leases, at total cost not to
exceed $480,000 within 30 days of execution of the Agreement, subject to final
due diligence by the Company. The Company will own 100% of the Leases (80% net
revenue to FormCap; 20% freehold royalty), and will be the operator. The Company
will have the option to purchase additional leases in Cowley County from Kerr
and Keta under an Area of Mutual Interest, the terms of which are set forth in
the Agreement. FormCap is required to drill one well in each of the first two
years of the lease term to maintain its interest in the Leases. As at December
31, 2013 the Company has capitalized $101,802 toward the acquisition of the
Leases.
NOTE 6 – CONVERTIBLE PROMISSORY NOTES PAYABLE
During April and May, 2013 the Company issued convertible
promissory notes in the amounts of $15,000 to two unrelated third parties. The
notes mature on December 31, 2014
On June 3, 2013, the Company issued promissory notes in the
amounts of $20,000 Canadian Dollars in favour an unrelated third
party. The notes mature on December 31, 2015
On July 30, 2013 the Company issued a promissory
note in the amount $5,000 Dollars in favour an unrelated third party. The note
matures on December 31, 2015
On August 9, 2013 the Company issued a promissory
note in the amount of $3,000 in favour an unrelated third
party. The note matures on December 31, 2015
On September 30, 2013 the Company issued a promissory note in
the amount of $25,000 to an unrelated third party. The note matures on December
31, 2015
On November 8, 2013 the Company issued a promissory note in the
amount of $7,500 to a related third party. The note matures on December 31,
2015
On November 6, 2013 the Company issued a promissory note in the
amount of $3,000 to a unrelated third party. The note matures on December 31,
2015
On November 19, 2013 the Company issued a promissory note in
the amount of $7,500 to a unrelated third party. The note matures on December 31,
2015
3
FORMCAP CORP.
(A Development Stage Company)
Notes
to the Financial Statements December 31, 2013 and 2012
On December 16, 2013, an unrelated third party paid $50,000 to
Kerr and Keta in connection with the acquisition of the Cowley leases. On that
date the Company issued a promissory note in the amount of $50,000 to the
unrelated third party. The note matures on December 31, 2015
On December 24, 2013 the Company issued a promissory note in
the amount of $24,800 to an unrelated third party. The note matures on December
31, 2015
The promissory notes are non-interest bearing until maturity
and bear interest at 3% per annum thereafter. The Promissory notes will become
due and payable if the Company receives financing totalling $5,000,000 in
aggregate prior to the maturity date. The promissory notes are convertible into
common shares of the Company on terms to be determined by the Company, either in
whole or in part at the option of the Holders.
NOTE 7 – RELATED PARTY PAYABLES
The Company from time to time has borrowed funds from or has
received services from several related parties for operating purposes.
During 2012 the Company borrowed cash in the amount of $6,417
and had expenses paid on behalf of the Company by related parties in the amount
of $32,339.
As of December 31, 2013 the Company owed related parties
$126,500. These amounts bear no interest, are not
collateralized, and are due on demand.
4
FORMCAP CORP.
(A Development Stage Company)
Notes
to the Financial Statements December 31, 2013 and 2012
NOTE 8 – NOTES PAYABLE
During 2012 the Company borrowed cash from various third
parties in the amount of $5,000. These parties also paid expenses on behalf of
the Company in the amount of $3,569.
The balance owed to these parties as of December 31, 2013 was
$78,653 (December 31, 2012 - $78,653). These amounts bear no interest, are not
collateralized, and are due on demand.
NOTE 9 – COMMON STOCK
The Company had 50,000,000 shares of preferred stock authorized
with no shares outstanding as of December 31, 2013 and 2012. The Company also
had 200,000,000 shares of Common Stock authorized with 98,238,236 and 2,038,240
shares issued and outstanding as of December 31, 2013 and 2012 respectively.
On November 23, 2011 500,000 common shares were issued under a
debt settlement agreement with a related Party.
On December 1, 2011, 200,000 common shares were issued under
the terms of an Oil & Gas Farm-In, Operating and Consulting Agreement with a
consultant.
On December 1, 2011, 200,000 common shares were issued to the
same consultant under a debt settlement agreement as payment in full for
previous debt incurred under a Consulting Agreement.
On December 1, 2011, 200,000 common shares were issued to the
President of the Company as payment for services rendered in the performance of
his duties.
On October 1, 2012, the Company effected a 1 for 50 reverse
stock split. All references in these financial statements to number of common
shares issued and outstanding, price per share and weighted average number of
common shares have been adjusted to reflect the stock split on a retroactive
basis, unless otherwise noted. The Company’s authorized preferred stock and
authorized common stock remain unchanged.
Prior to the reverse stock split, the Company had 100,788,607
common shares issued and outstanding. Immediately after the reverse split the
Company had 2,038,240 common shares issued and outstanding, including 22,467
common shares issued to various shareholders as a result of rounding. The
rounding shares were not issued for compensation and have no net effect on
owner’s equity.
During the year ended December 31, 2013, the Company issued
89,999,998 Common shares in settlement of debts owed by the Company (see Note
10).
On November 7, 2013 the Company issued 200,000 shares to Kerr
and Keta in connection with the acquisition of the Cowley Leases (see Note 5)
NOTE 10 – DEBT SETTLEMENT
On May 16, 2013 the Company settled debts owed to related
parties in the amount of $50,000 by the issuance of 50,000,000 Common Shares.
The Company recorded a loss of $1,362,587 on this transaction.
On May 20, 2013 the Company settled debts owed to related
parties in the amount of $375,000 by the issuance of 39,999,998 Common Shares.
The Company recorded a loss of $911,413 on this transaction.
5
FORMCAP CORP.
(A Development Stage Company)
Notes
to the Financial Statements December 31, 2013 and 2012
NOTE 11 – INCOME TAXES
Income Taxes
The Company accounts for income taxes in accordance with
Accounting Standards Codification Topic 740, Income Taxes ("Topic 740"), which
requires the recognition of deferred tax liabilities and assets at currently
enacted tax rates for the expected future tax consequences of events that have
been included in the financial statements or tax returns. A valuation allowance
is recognized to reduce the net deferred tax asset to an amount that is more
likely than not to be realized.
Topic 740 provides guidance on the accounting for uncertainty
in income taxes recognized in a company's financial statements. Topic 740
requires a company to determine whether it is more likely than not that a tax
position will be sustained upon examination based upon the technical merits of
the position. If the more likely-than-not threshold is met, a company must
measure the tax position to determine the amount to recognize in the financial
statements.
Net deferred tax assets consist of the following components as
of December 31, 2013 and 2012:
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
Deferred tax assets:
|
|
2013
|
|
|
2012
|
|
|
|
Net operating loss carryover
|
$
|
(7,856,769
|
)
|
$
|
(7,744,556
|
)
|
|
|
Common stock and warrants
issued for services
|
|
563,712
|
|
|
563,712
|
)
|
|
|
Common stock issued for settlement of debt
|
|
45,900
|
|
|
45,900
|
|
|
|
Loss on extinguishment of
debt
|
|
2,621,982
|
|
|
1,848,822
|
|
|
|
Impairment of assets
|
|
423,710
|
|
|
423,710
|
|
|
|
Amortization of beneficial
conversion feature
|
|
258,373
|
|
|
258,373
|
|
|
|
Valuation allowance
|
|
2,671,301
|
|
|
2,633,149
|
|
|
|
Income tax expense per books
|
$
|
-
|
|
$
|
-
|
|
The income tax provision differs from the amount of income tax
determined by applying the estimated U.S. federal and state income tax rates of
39% to pretax income from continuing operations for the year ended December 31,
2012 and 2011 due to the following:
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
|
Income tax expense at
statutory rate
|
$
|
(38,152
|
)
|
$
|
(37,210
|
)
|
|
|
Common stock and warrants issued for services
|
|
|
|
|
-
|
|
|
|
Loss on extinguishment of
debt
|
|
|
|
|
-
|
|
|
|
Impairment of assets
|
|
|
|
|
-
|
|
|
|
Amortization of beneficial
conversion feature
|
|
|
|
|
-
|
|
|
|
(Gain) Loss on extinguishment of debt
|
|
|
|
|
-
|
|
|
|
Valuation allowance
|
|
38,152
|
|
|
37,210
|
|
|
|
Income tax expense per books
|
$
|
-
|
|
$
|
-
|
|
As at December 31, 2013, the Company had net operating loss
carry forwards of approximately $6,622,735 through 2032. No tax benefit has been
reported in the December 31, 2013 financial statements as the potential tax
benefit is offset by a valuation allowance of the same amount.
Due to the change in ownership provisions of the Tax Reform Act
of 1986, net operating loss carry forwards for Federal income tax reporting
purposes are subject to annual limitations. Should a change in ownership occur,
net operating loss carry forwards may be limited as to use in future years.
6
FORMCAP CORP.
(A Development Stage Company)
Notes
to the Financial Statements December 31, 2013 and 2012
NOTE 12 – SUBSEQUENT EVENTS
In accordance with ASC 855-10 Company management reviewed all
material events through the date of this report
Payments in connection with the acquisition of oil and gas leases
On January 2, 2014, an unrelated third party paid Kerr and Keta a further
$25,000 in connection with the acquisition of the Cowley leases. On that date
the Company issued a promissory note in the amount of $25,000 to the unrelated
third party.
On January 23, 2014, an unrelated third party paid Kerr and Keta a further
$50,000 in connection with the acquisition of the Cowley leases. On that date
the Company issued a promissory note in the amount of $50,000 to the unrelated
third party. The promissory notes are non-interest bearing until maturity on
December 31, 2015 and bear interest at 3% per annum thereafter. The Promissory
notes will become due and payable if the Company receives financing totalling
$5,000,000 in aggregate prior to the maturity date. The promissory notes are
convertible into common shares of the Company on terms to be determined by the
Company, either in whole or in part at the option of the Holder.
On March 11, 2014 an unrelated third party paid Kerr and Keta a further $305,000
in connection with the acquisition of the Cowley leases. This payment was made
pursuant to a material definitive agreement entered into between the Company and
the unrelated third party (see below)
Entry into a Material Definitive Agreement.
Ironridge Global IV, Ltd. ("Ironridge") purchased from various creditors of the
Company, bona fide claims held by those creditors against the Company in the
aggregate amount of $671,938.90 (the "Claim Amount"). Subsequently, the Company
offered to settle those claims in exchange for the issuance of unrestricted and
fully tradable shares of the Company's common stock. Ironridge accepted the
Company's settlement offer, subject to a hearing on the fairness of the
settlement terms. On February 21, 2014, the Company, Ironridge and the CEO of
the Company entered into a Stipulation Order for the settlement on the terms
agreed on by Ironridge and the Company. On February 21, 2014, a California
Superior Court for the County of Los Angeles (the "State Court") held a hearing
on the fairness of the Company's settlement offer to Ironridge. Pursuant to the
court order issued by the State Court on February 21, 2014, the shares of the
Company's common stock will be deemed issued in settlement of the claims
(subject to certain adjustments based on the future trading value of the stock)
when delivered to Ironridge. On February 24, 2014 the Company's transfer agent
delivered to Ironridge 10,000,000 shares of the Company's common stock. The
shares issued to Ironridge are freely tradable and exempt from registration
under the Securities Act of 1933 and the California Corporations Code. The
number of shares to be issued to Ironridge is subject to adjustment based
trading price of the Company's stock such that the value of the shares is
sufficient to cover the Claim Amount, a 10% agent fee amount and Ironridge's
reasonable legal fees and expenses ( the "Final Amount"). Under the Stipulation
Order, Ironridge may not be the beneficial owner of more than 9.99% of the
Company's outstanding shares of common stock until the Final Amount is paid.
Further Ironridge has agreed not to exercise any voting rights of the shares
issued to it nor influence or cause any change in control of the Company.
7
(b)
Exhibits
SIGNATURES
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.
Dated: April 15, 2014
FORMCAP CORP.
By:
/s/ Graham
Douglas
Graham
Douglas
President,
Secretary, Treasurer & Director.
Formcap (CE) (USOTC:FRMC)
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