Notes to Condensed Consolidated Financial
Statements (unaudited)
Three Months Ended March 31, 2014 and
2013
Note 1 – Organization and
Significant Accounting Policies
Organization
–
Paxton Energy, Inc. was organized under the laws of the State of Nevada on June 30, 2004. On January 27, 2012, Paxton
Energy, Inc. changed its name to Worthington Energy, Inc. (the “Company”). On October 12, 2012, the Company’s
stockholders approved a 1-for-10 reverse common stock split. In addition, on October 2, 2013 the Company effected a
1-for-50 reverse common stock split. All references in these consolidated financial statements and related notes to numbers of
shares of common stock, prices per share of common stock, and weighted average number of shares of common stock outstanding prior
to the reverse stock splits have been adjusted to reflect the reverse stock splits on a retroactive basis for all periods presented,
unless otherwise noted.
Nature of Operations
–
As further described in Note 2 to these consolidated financial statements, the Company commenced acquiring working interests
in oil and gas properties in June 2005. We are in the business of acquiring, exploring and developing oil and
gas-related assets. The Company is considered to be in the exploration stage due to the lack of significant revenues.
Condensed Interim Consolidated Financial
Statements
– The accompanying unaudited condensed consolidated financial statements of the Company have been prepared
in accordance with accounting principles generally accepted in the United States of America for interim financial information and
with the instructions to Form 10-Q. Accordingly, these condensed consolidated financial statements do not include all
of the information and disclosures required by generally accepted accounting principles for complete financial statements. In
the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all
adjustments (consisting of only normal recurring adjustments) necessary to fairly present the Company’s consolidated financial
position as of March 31, 2014, and its consolidated results of operations and cash flows for the three months ended March 31, 2014
and 2013, and for the period from June 30, 2004 (date of inception), through March 31, 2014. The results of operations
for the three months ended March 31, 2014, may not be indicative of the results that may be expected for the year ending December
31, 2014. The condensed consolidated financial statements included in this report on Form 10-Q should be read in conjunction with
the audited financial statements of Worthington Energy, Inc., and the notes thereto for the year ended December 31, 2013, included in
its annual report on Form 10-K filed with the SEC on April 17, 2013.
Going Concern
–
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going
concern. The Company has not had significant revenue and is still considered to be in the exploration stage. The Company
incurred losses of $178,357 for the three months ended March 31, 2014 and $3,322,257 for year ended December 31,
2013. The Company also used cash of $147,111 in its operating activities during the three months ended March 31, 2014 and
$228,024 during the year ended December 31, 2013, and a significant portion of the Company’s debt is in
default. At March 31, 2014, the Company has a working capital deficit of $14,993,362 and a stockholders’
deficiency of $9,308,700. These conditions raise substantial doubt about the Company’s ability to continue as a
going concern. The consolidated financial statements do not include any adjustments that might be necessary should the
Company be unable to continue as a going concern. Also, the Company’s independent registered public accounting
firm, in its report on the Company’s December 31, 2013 financial statements, has raised substantial doubt about the
Company’s ability to continue as a going concern.
The Company is
currently seeking debt and equity financing to fund potential acquisitions and other expenditures, although it does not have any
contracts or commitments for either at this time. The Company will have to raise additional funds to continue operations and, while
it has been successful in doing so in the past, there can be no assurance that it will be able to do so in the future. The Company’s
continuation as a going concern is dependent upon its ability to obtain necessary additional funds to continue operations and the
attainment of profitable operations. The Company hopes that working capital will become available via financing activities currently
contemplated with regards to its intended operating activities. There can be no assurance that such funds, if available, can be
obtained, or if obtained, on terms reasonable to the Company. The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern and do not include any adjustments that may result from the outcome
of this uncertainty.
On May
6, 2011, the Company completed the acquisition of certain oil and gas properties located in the Vermillion 179 tract in the
Gulf of Mexico, offshore from Louisiana. In December 2011, the seller of these oil and gas properties filed a lawsuit seeking
to rescind the asset sale transaction. Pursuant to a Release and Settlement Agreement dated February 12, 2014 the Company
agreed to convey its oil and gas properties for extinguishment of underlying obligations. The Company will account for the transaction
in 2014 upon final settlement as an exchange of the oil and gas asset for the debt and an extinguishment of the related
derivative liability (see Notes 2, 5, 6 and 11).
Principles of Consolidation
– The accompanying consolidated financial statements present the financial position, results of operations, and cash flows
of Worthington Energy, Inc. and of PaxAcq Inc., a wholly-owned subsidiary. Intercompany accounts and transactions
have been eliminated in consolidation.
Use of Estimates
–
In preparing these consolidated financial statements, management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the consolidated financial statements and the reported amount of
revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates and
assumptions included in the Company’s consolidated financial statements relate to the valuation of long-lived assets, accrued
other liabilities, and valuation assumptions related to share-based payments and derivative liability.
Oil and Gas Properties
– The Company follows the full cost method of accounting for oil and gas properties. Under this method,
all costs associated with acquisition, exploration, and development of oil and gas reserves, including directly related overhead
costs and related asset retirement costs, are capitalized. Costs capitalized include acquisition costs, geological
and geophysical expenditures, lease rentals on undeveloped properties, and costs of drilling and equipping productive and nonproductive
wells. Drilling costs include directly related overhead costs. Capitalized costs are categorized either
as being subject to amortization or not subject to amortization.
All capitalized costs of oil and gas properties,
including the estimated future costs to develop proved reserves, will be amortized, on the unit-of-production method using estimates
of proved reserves. At March 31, 2014 and December 31, 2013, there were no capitalized costs subject to amortization.
Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects
can be determined. If the results of an assessment indicate that the properties are impaired, the amount of the impairment
is charged to operations. The Company has not yet obtained a reserve report on its producing properties in Texas because
the properties are considered to be in the exploration stage, management has not completed an evaluation of the properties, and
the properties have had limited oil and gas exploration and production.
In addition, properties subject to amortization
will be subject to a “ceiling test,” which basically limits such costs to the aggregate of the “estimated present
value,” based on the projected future net revenues from proved reserves, discounted at 10% per annum to present value of
future net revenues from proved reserves, based on current economic and operating conditions, plus the lower of cost or fair market
value of unproved properties.
Sales of proved and unproved properties
are accounted for as adjustments of capitalized costs with no gain or loss recognized, unless such adjustments would significantly
alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized
in the results of operations. Abandonments of properties are accounted for as adjustments of capitalized costs with
no loss recognized.
Revenue Recognition
–
All revenues are derived from the sale of produced crude oil and natural gas. Revenue and related production taxes and
lease operating expenses are recorded in the month the product is delivered to the purchaser. Normally, payment for
the revenue, net of related taxes and lease operating expenses, is received from the operator of the well approximately 45 days
after the month of delivery.
Stock-Based
Compensation
– The Company recognizes compensation expense for stock-based awards to employees expected to vest
on a straight-line basis over the requisite service period of the award based on their grant date fair value. The
Company estimates the fair value of stock options using a Black-Scholes option pricing model which requires management to
make estimates for certain assumptions regarding risk-free interest rate, expected life of options, expected volatility of
stock and expected dividend yield of stock.
The Company accounts for equity
instruments issued in exchange for the receipt of goods or services from other than employees and non-employee directors in
accordance with Accounting Standards Codification (ASC) 505-50,
Equity-Based Payments to Non-Employees
. Costs
are measured at the estimated fair market value of the consideration received or the estimated fair value of the
equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for
consideration for other than employee services is determined on the earlier of a performance commitment or completion of
performance by the provider of goods or services. The fair value of the equity instrument is charged directly to
share-based compensation expense and credited to paid-in capital.
Basic and Diluted Loss per Common
Share
– Basic loss per common share amounts are computed by dividing net loss by the weighted-average number of shares
of common stock outstanding during each period. Diluted loss per share amounts are computed assuming the issuance of
common stock for potentially dilutive common stock equivalents. All outstanding stock options, warrants, stock awards, convertible
promissory notes, and other obligations to be satisfied with the issuance of common stock are currently antidilutive due to our
net loss and have been excluded from the diluted loss per share calculations. As such, options, warrants, and stock
awards to acquire 2,493,270 and 279,794 shares of common stock outstanding as of March 31, 2014 and 2013, respectively, and promissory
notes and debentures convertible into an aggregate of 5,653,502,228 and 28,096,258 shares of common stock at March 31, 2014 and
2013, respectively were excluded in the computation of diluted loss per share at March 31, 2014 and 2013 as their effect would
have been anti-dilutive.
Fair Values of
Financial Instruments
– The carrying amounts reported in the consolidated balance sheets for cash, accounts
payable, accrued liabilities, payable to Ironridge Global IV, Ltd., and payable to former officer approximate fair value because of the
immediate or, short-term maturity of these financial instruments. The carrying amounts reported for unsecured convertible
promissory notes payable, secured notes payable, and convertible debentures approximate fair value because the underlying
instruments are at interest rates which approximate current market rates. The fair value of derivative liabilities are
estimated based on a probability weighted average Black Scholes-Merton pricing model.
For assets and liabilities measured at
fair value, the Company uses the following hierarchy of inputs:
|
●
|
Level
one – Quoted market prices in active markets for identical assets or liabilities;
|
|
|
|
|
●
|
Level two
– Inputs other than level one inputs that are either directly or indirectly observable; and
|
|
|
|
|
●
|
Level three
– Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and
reflect those assumptions that a market participant would use.
|
Liabilities measured at fair value on a
recurring basis at March 31, 2014 are summarized as follows:
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability - conversion feature of debentures and related warrants
|
|
$
|
–
|
|
|
$
|
5,259,899
|
|
|
$
|
–
|
|
|
$
|
5,259,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability - embedded conversion feature and reset provisions of notes
|
|
$
|
–
|
|
|
$
|
2,279,190
|
|
|
$
|
–
|
|
|
$
|
2,279,190
|
|
Liabilities measured at fair value on a
recurring basis at December 31, 2013 are summarized as follows:
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability - conversion feature of debentures and related warrants
|
|
$
|
–
|
|
|
$
|
5,467,223
|
|
|
$
|
–
|
|
|
$
|
5,467,223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liability - embedded conversion feature and reset provisions of notes
|
|
$
|
–
|
|
|
$
|
2,441,192
|
|
|
$
|
–
|
|
|
$
|
2,441,192
|
|
Derivative Financial Instruments
– The Company
evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded
derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially
recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements
of operations. For stock-based derivative financial instruments, the Company uses a probability weighted average Black-Scholes-Merton
pricing model to value the derivative instruments. The classification of derivative instruments, including whether such instruments
should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument
liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative
instrument could be required within 12 months of the balance sheet date.
Recently Issued Accounting Statements
– In April 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-08, "
Presentation
of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360)
." ASU 2014-08 amends the requirements
for reporting discontinued operations and requires additional disclosures about discontinued operations. Under the new guidance,
only disposals representing a strategic shift in operations or that have a major effect on the Company's operations and financial
results should be presented as discontinued operations. This new accounting guidance is effective for annual periods beginning
after December 15, 2014. The Company is currently evaluating the impact of adopting ASU 2014-08 on the Company's results of operations
or financial condition.
On February 26, 2014, the FASB affirmed
changes in a November 2013 Exposure Draft,
Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting
Requirements
, and directed the staff to draft a final Accounting Standards Update for vote by the FASB. This is intended to
reduce the cost and complexity in financial reporting by eliminating inception-to-date information from the financial statements
of development stage entities.
Other recent accounting pronouncements
issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities
and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future
consolidated financial statements.
Note 2 – Oil and Gas
Properties
On May 6, 2011, the Company completed its
acquisition of certain assets pursuant to an Asset Sale Agreement (the Montecito Agreement) with Montecito Offshore, L.L.C. (Montecito). The
assets consist of certain oil and gas leases located in the Vermillion 179 tract, which is in the shallow waters of the Gulf of
Mexico offshore from Louisiana. Pursuant to the terms of the Montecito Agreement, as amended, Montecito agreed to sell
the Company a 70% leasehold working interest, with a net revenue interest of 51.975%, of certain oil and gas leases owned by Montecito,
for $1,500,000 in cash, a subordinated promissory note in the amount of $500,000, and 30,000 shares of common stock. The
leasehold interest has been capitalized in the amount of $5,698,563, representing $2,000,000 in cash and promissory note, $3,675,000
for the common stock based on a closing price of $2.45 per share on the closing date, and $23,563 in acquisition costs. No
drilling or production has commenced as of March 31, 2014. Consequently, the oil and gas properties have not been subjected to
amortization of the full cost pool.
In December 2011, Montecito filed a
lawsuit in the Civil District Court for the Parish of Orleans of the State of Louisiana against the Company by filing a
Petition to Rescind Sale. In this action, Montecito is seeking to rescind the asset sale transaction, as described
in the previous paragraph. Pursuant to a Release and Settlement Agreement dated February 12, 2014 that has been signed and
notarized by all parties involved, the matter has been settled. The operative terms of the settlement were recited into the
record in open court on the day of trial. The result is that a judicially recognized compromise has been perfected under
Louisiana law, which has the effect of extinguishing the underlying obligations the compromise is premised on. The
Company’s obligations expected to be extinguished include a secured note payable in the amount of $500,000 to Montecito
Offshore, LLC (see Note 5) and convertible debentures of $2,453,032 (see Note 6). However, recording the conveyance of the
lease interest and cancelling mortgages and UCC-1’s by the debt holders has not occurred. The debt holders have delayed
in performing these obligations because they want to first undertake a degree of internal restructuring before accepting the
royalty interest they negotiated to receive as a part of the settlement. The debt holders have indicated that, after they
have formed an entity to receive the royalty interest, they will cancel the outstanding mortgages and UCC-1’s along
with recording the documents conveying the various interests in the public records. The Company will account for the
transaction in 2014 upon final settlement as an exchange of the oil and gas asset for the debt and an extinguishment of the
related derivative liability (see Note 11).
Note 3 – Payable to Ironridge
Global IV, Ltd.
In March 2012, Ironridge Global IV, Ltd.
(“Ironridge”) filed a complaint against the Company for the payment of $1,388,407 in outstanding accounts payable,
accrued compensation, accrued interest, and notes payable of the Company (the “Claim Amount”) that Ironridge had purchased
from various creditors of the Company. The lawsuit was filed in the Superior Court of the State of California for the
County of Los Angeles Central District, and the case was Ironridge Global IV, Ltd. v. Worthington Energy, Inc.,
Case No. BC
480184
. On March 22, 2012, the court approved an Order for Approval of Stipulation for Settlement of Claims (the
"Order").
The Order provided for the immediate issuance
by the Company of 20,300 shares of common stock (the “Initial Shares”) to Ironridge towards settlement of the Claim
Amount. The Order also provided for an adjustment in the total number of shares which may be issuable to Ironridge based
on a calculation period for the transaction, defined as that number of consecutive trading days following the date on which the
Initial Shares were issued (the “Issuance Date”) required for the aggregate trading volume of the common stock, as reported
by Bloomberg LP, to exceed $4.2 million (the "Calculation Period"). Pursuant to the Order, Ironridge would retain 200
shares of the Company's common stock as a fee, plus that number of shares (the “Final Amount”) with an aggregate value
equal to (a) the $1,358,135 plus reasonable attorney fees through the end of the Calculation Period, (b) divided by 70% of the
following: the volume weighted average price ("VWAP") of the Common Stock over the length of the Calculation Period,
as reported by Bloomberg, not to exceed the arithmetic average of the individual daily VWAPs of any five trading days during the
Calculation Period. The Company has calculated that the Calculation Period ended during the year ended December 31,
2012 and calculated that the Final Amount to be issued under the Order is 856,291 shares of common stock. Additionally,
during the year ended December 31, 2012 when the Final Amount was determined, the Company calculated the fair value of the original
liability to Ironridge Global IV, Ltd to be $1,981,312, that amount which when discounted to 70% of the VWAP and multiplied by
the Final Amount, would equal $1,358,135 plus reasonable attorney fees. In so doing, the Company recognized an expense
for the excess of the fair value of the resultant liability to Ironridge Global IV, Ltd. in excess of the original carrying amount
of the liabilities acquired by Ironridge and adjusted the liability to Ironridge Global IV, Ltd. for the fair value adjustment.
Since the issuance of the Initial Shares,
the Company issued an additional 194,200 shares of common stock during the year ended December 31, 2012 (for an aggregate value
of $531,689) which has been accounted for as the reduction of a proportionate amount of the calculated fair value of the original
liability to Ironridge. During the year ended December 31, 2013 the Company issued an additional 6,550,000 shares of common stock
to Ironridge with an aggregate value of $1,421,595. At that time, the Company believed it had a remaining obligation to Ironridge
of $68,028. However, on February 24, 2014, Ironridge claimed that the Company’s failure to comply with prior order
and stipulation has caused them harm and claimed that it was still owed $241,046. A judge awarded Ironridge a third order enforcing
a prior order for approval of stipulation for settlement claim by requiring the Company to reserve 1,095,950,732 shares of the
Company’s common stock until the balance of the claim is paid. On February 26, 2014, the Company issued to Ironridge 5,000,000
shares of common stock valued at $4,550 and at March 31, 2014, the balance due to Ironridge was $236,496.
Note 4 – Unsecured Convertible Promissory Notes
Payable
A summary of unsecured convertible promissory
notes at March 31, 2014 and December 31, 2013 is as follows:
|
|
March 31, 2014
|
|
|
December 31, 2013
|
|
|
|
Unpaid
|
|
|
Unamortized
|
|
|
Carrying
|
|
|
Unpaid
|
|
|
Unamortized
|
|
|
Carrying
|
|
|
|
Principal
|
|
|
Discount
|
|
|
Value
|
|
|
Principal
|
|
|
Discount
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asher Enterprises, Inc.
|
|
$
|
183,170
|
|
|
$
|
56,511
|
|
|
$
|
126,659
|
|
|
$
|
111,900
|
|
|
$
|
7,473
|
|
|
$
|
104,427
|
|
GEL Properties, LLC
|
|
|
149,000
|
|
|
|
2,534
|
|
|
|
146,466
|
|
|
|
149,000
|
|
|
|
13,486
|
|
|
|
135,514
|
|
Prolific Group, LLC
|
|
|
79,900
|
|
|
|
–
|
|
|
|
79,900
|
|
|
|
79,900
|
|
|
|
11,849
|
|
|
|
68,051
|
|
Haverstock Master Fund, LTD and Common Stock, LLC
|
|
|
328,976
|
|
|
|
–
|
|
|
|
328,976
|
|
|
|
289,906
|
|
|
|
–
|
|
|
|
289,906
|
|
Redwood Management LLC
|
|
|
205,229
|
|
|
|
45,833
|
|
|
|
159,396
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
AGS Capital Group
|
|
|
25,000
|
|
|
|
19,792
|
|
|
|
5,208
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Charles Volk (related party)
|
|
|
125,000
|
|
|
|
22,346
|
|
|
|
102,654
|
|
|
|
125,000
|
|
|
|
53,596
|
|
|
|
71,404
|
|
Various Other Individuals and Entities
|
|
|
108,257
|
|
|
|
4,932
|
|
|
|
103,325
|
|
|
|
285,000
|
|
|
|
24,338
|
|
|
|
260,662
|
|
|
|
$
|
1,204,531
|
|
|
$
|
151,947
|
|
|
$
|
1,052,584
|
|
|
$
|
1,040,705
|
|
|
$
|
110,742
|
|
|
$
|
929,964
|
|
The unsecured convertible promissory notes
payable are generally due within one year from the date of issuance bear interest at rates ranging from 8% to 12% and are convertible
into shares of our common stock at discounts ranging from 30% to 70%. Most of our unsecured convertible promissory notes payable
are in default at March 31, 2014. Additionally, the notes have generally contained a reset provision that provides that if the
Company issues or sells any shares of common stock for consideration per share less than the conversion price of the notes, that
the conversion price will be reduced to the amount of consideration per share of the stock issuance.
During the three months ended March 31,
2014, the Company received proceeds of $149,000 pursuant to unsecured convertible promissory notes to various entities. The convertible
promissory notes bear interest from 8% to 12% per annum, are convertible into shares of our common stock at discounts ranging from
49% to 70%, contain reset provisions, and are due from three months to 9 months after the issuance date. Under authoritative guidance
of the FASB, due to the variable conversion prices and reset provisions, the Company accounted for the conversion features of these
notes as instruments which do not have fixed settlement provisions and are deemed to be derivative instruments (see Note 7). The
Company determined the aggregate fair value of the derivative liabilities related to these notes was $334,056, of which $149,000
was recorded as note discount (up to the face amount of the notes) to be amortized over the term of the related notes, and the
balance of $185,056 is recorded as current period interest expense.
During the three months ended March 31,
2014, the Company increased existing notes by $100,415 to reflect an increase in the principal amount of certain notes due to an
event of default occurring. This was recorded in amortization of discount on convertible notes.
During the three months ended March 31,
2014 and 2013, the Company recognized interest expense from the amortization of discounts in the amount of $107,794 and $329,635,
respectively.
The change in unsecured convertible promissory notes payable from December 31, 2013 to March 31, 2014
is as follows:
Balance at December 31, 2013
|
|
$
|
929,964
|
|
Issuance of new notes
|
|
|
149,000
|
|
Penalties on existing notes
|
|
|
100,415
|
|
Converted into common stock
|
|
|
(85,589
|
)
|
Discount on new notes
|
|
|
(149,000
|
)
|
Amortization of discounts
|
|
|
107,794
|
|
Balance at March 31, 2014
|
|
$
|
1,052,584
|
|
Note 5 – Secured Notes
Payable
A summary of secured notes payable at March
31, 2014 and December 31, 2013:
|
|
March 31, 2014
|
|
|
December 31, 2013
|
|
|
|
Unpaid
|
|
|
Unamortized
|
|
|
Carrying
|
|
|
Unpaid
|
|
|
Unamortized
|
|
|
Carrying
|
|
|
|
Principal
|
|
|
Discount
|
|
|
Value
|
|
|
Principal
|
|
|
Discount
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Montecito Offshore, LLC
|
|
$
|
500,000
|
|
|
$
|
–
|
|
|
$
|
500,000
|
|
|
$
|
500,000
|
|
|
$
|
–
|
|
|
$
|
500,000
|
|
Bridge Loan Settlement Note
|
|
|
40,000
|
|
|
|
–
|
|
|
|
40,000
|
|
|
|
40,000
|
|
|
|
–
|
|
|
|
40,000
|
|
What Happened LLC
|
|
|
21,575
|
|
|
|
–
|
|
|
|
21,575
|
|
|
|
21,575
|
|
|
|
–
|
|
|
|
21,575
|
|
La Jolla Cove Investors, Inc.
|
|
|
83,440
|
|
|
|
6,003
|
|
|
|
77,437
|
|
|
|
83,940
|
|
|
|
25,003
|
|
|
|
58,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
645,015
|
|
|
$
|
6,003
|
|
|
$
|
639,012
|
|
|
$
|
645,515
|
|
|
$
|
25,003
|
|
|
$
|
620,512
|
|
The secured notes payable are generally
secured with oil and gas properties, bear interest at rates ranging from 4.75% to 9% and some are convertible into shares of our
common stock at discount of 93%. Our secured notes payable are in default at March 31, 2014. The Montecito Offshore LLC note is
secured by a second lien mortgage, subordinated to the convertible debentures discussed below. See discussion below about
the Release and Settlement Agreement dated February 12, 2014. Certain notes contained a reset provision that provides that if the
Company issues or sells any shares of common stock for consideration per share less than the conversion price of the notes, that
the conversion price will be reduced to the amount of consideration per share of the stock issuance.
A roll forward of the secured notes payable
from December 31, 2013 to March 31, 2014 is as follows:
Balance at December 31, 2013
|
|
$
|
620,512
|
|
Converted into common stock
|
|
|
(500
|
)
|
Amortization of discounts
|
|
|
19,000
|
|
Balance at March 31, 2014
|
|
$
|
639,012
|
|
Montecito Offshore, L.L.C. (Vermillion
179)
As further described in Note 2, on
May 6, 2011, the Company acquired a leasehold interest in oil and gas properties from Montecito Offshore, L.L.C.
(Montecito). Pursuant to the terms of the agreement, as amended, the Company issued a subordinated promissory note in
the amount of $500,000 as partial consideration for the purchase. The note is secured by a second lien mortgage,
subordinated to the convertible debentures issued in May 2011, as further described in Note 7 to these consolidated financial
statements. The note bears interest at 9% per annum. The note and unpaid interest were originally due ninety
days after the date of the promissory note, but the due date was extended to August 15, 2011. The note came due on August 15,
2011 and has not been paid. The Company’s failure to repay the note when due constitutes an event of default
under the note. Upon the occurrence of an event of default, the note holder has the right to exercise its rights under
the security agreement associated with the note. These rights include, among other things, the right to foreclose
on the collateral if necessary. The Company is exploring alternatives for a partial sale, a farm-in, or the
refinancing of the Vermillion 179 tract in order to pay off this note, with accrued interest.
In December 2011, Montecito filed a
lawsuit in the Civil District Court for the Parish of Orleans of the State of Louisiana against the Company by filing a
Petition to Rescind Sale. In this action, Montecito is seeking to rescind the asset sale transaction, as described in
the previous paragraph. The Company has entered into settlement discussions and has reached a preliminary settlement, but
final documents remain to be signed as of the date of this Report.
Note 6 – Convertible Debentures and Related
Warrants (In Default)
In May 2011 the Company sold units to certain
investors for aggregate cash proceeds of $2,550,000 at a price of $30,000 per unit. Each unit consisted of a secured convertible
debenture in the principal amount of $30,000 and a warrant to purchase 400 shares of the Company’s common stock. The
convertible debentures were issued in three tranches, matured one year after issuance on May 5, 2012, May 13, 2012, and May 19,
2012, and originally accrued interest at 9% per annum. The debentures were convertible at the holder’s option
at any time into common stock at a conversion price originally set at $150.00 per share. The debentures will automatically
be redeemed with a 30% premium upon a Change of Control or Listing Event (each as defined in the convertible debenture). Interest
on the debentures is payable quarterly in arrears in cash. The Company is in default under the convertible debentures
because it has not made the interest payments that were due beginning July 1, 2011 and has not repaid the principal which matured
on May 19, 2012. As such, the Company is in default on all unpaid principal and total accrued interest of $1,233,496
as of March 31, 2014. The default interest rate is 18% per annum. Interest on the convertible debentures
has been accrued at 18% in the accompanying consolidated financial statements commencing on July 1, 2011, the date when the Company
first defaulted on an interest payment. To date, such default has not been either cured by the Company or waived by
the holders of the convertible debentures. Upon the occurrence of an event of default, the debenture holders have the
right to exercise their rights under the Mineral Mortgage associated with the debentures. These rights include, among
other things, the right to foreclose on the collateral if necessary. The Company is currently working to resolve the
default on these debentures. Pursuant to a Release and Settlement Agreement dated February 12, 2014 that has been signed
and notarized by all parties involved, the matter has been settled. The operative terms of the settlement were recited into the
record in open court on the day of trial. The result is that a judicially recognized compromise has been perfected under Louisiana
law, which has the effect of extinguishing the underlying obligations the compromise is premised on. The Company’s obligations
expected to be extinguished include a secured note payable in the amount of $500,000 to Montecito Offshore, LLC (see Note 5) and
the convertible debentures. However, recording the conveyance of the lease interest and cancelling mortgages and UCC-1’s
by the debt holders has not occurred. The debt holders have delayed in performing these obligations because they want to first
undertake a degree of internal restructuring before accepting the royalty interest they negotiated to receive as a part of the
settlement. The debt holders have indicated that, after they have formed an entity to receive the royalty interest, they will cancel
the outstanding mortgages and UCC-1’s along with recording the documents conveying the various interests in the public records
(See Notes 2 and 11).
The debentures contain price ratchet anti-dilution
protection. In addition, the conversion price shall be adjusted if the conversion price of securities in a subsequent offering
by the Company is adjusted pursuant to a make good provision. The shares of common stock issuable upon conversion of the debentures
are entitled to piggyback registration rights. The Company has determined that this anti-dilution reset provision caused the conversion
feature to be bifurcated from the debentures, treated as a derivative liability, and accounted for as a valuation discount at its
fair value. Upon issuance, the Company recorded a corresponding discount to the convertible debentures.
The carrying amount of the convertible debentures is $2,453,032
at March 31, 2014 and December 31, 2013.
Pursuant to the debentures and warrants,
no holder may convert or exercise such holder’s debenture or warrant if such conversion or exercise would result in the holder
beneficially owning in excess of 4.99% of our then issued and outstanding common stock. A holder may, however, increase or decrease
this limitation (but in no event exceed 9.99% of the number of shares of common stock issued and outstanding) by providing the
Company with 61 days’ notice that such holder wishes to increase or decrease this limitation.
Note 7 – Derivative
Liabilities
Under the authoritative guidance of the
FASB on determining whether an instrument (or embedded feature) is indexed to an entity’s own stock, instruments which do
not have fixed settlement provisions are deemed to be derivative instruments. All of the notes described in Notes 4, 5 and 6 that
contain a reset provision or have a conversion price that is a percentage of the market price contain embedded conversion features
which are considered derivative liabilities to be re-measured at the end of every reporting period with the change in value reported
in the statement of operations. The conversion feature of the Company’s Debentures (described in Note 6), and the related
warrants, do not have fixed settlement provisions because their conversion and exercise prices, respectively, may be lowered if
the Company issues securities at lower prices in the future. The Company was required to include the reset provisions in order
to protect the holders of the Debentures from the potential dilution associated with future financings. In accordance with the
FASB authoritative guidance, the conversion feature of the Debentures was separated from the host contract (i.e., the Debentures)
and recognized as a derivative instrument.
As of March 31, 2014 and December 31, 2013, the derivative liabilities
were valued using a probability weighted average Black Scholes-Merton pricing model with the following assumptions:
|
|
March 31,
|
|
|
At Date of
|
|
December 31,
|
|
|
|
2014
|
|
|
Issuance
|
|
2013
|
|
Conversion feature:
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free interest rate
|
|
|
0.13%
|
|
|
|
0.11% - 0.13%
|
|
|
0.13%
|
|
Expected Volatility
|
|
|
431%
|
|
|
|
421% - 441%
|
|
|
425%
|
|
Expected life (in years)
|
|
|
.06 to .7
|
|
|
|
.5 to .8
|
|
|
.04 to .62
|
|
Expected dividend yield
|
|
|
0%
|
|
|
|
0%
|
|
|
0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants:
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free interest rate
|
|
|
0.15%
|
|
|
|
N/A
|
|
|
0.13%
|
|
Expected Volatility
|
|
|
431%
|
|
|
|
N/A
|
|
|
425%
|
|
Expected life (in years)
|
|
|
1.3 to 2.93
|
|
|
|
N/A
|
|
|
1.6 to 3.6
|
|
Expected dividend yield
|
|
|
0%
|
|
|
|
N/A
|
|
|
0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
Conversion feature
|
|
$
|
7,535,507
|
|
|
$
|
334,056
|
|
$
|
7,896,892
|
|
Warrants
|
|
|
3,582
|
|
|
|
–
|
|
|
11,523
|
|
|
|
$
|
7,539,089
|
|
|
$
|
334,056
|
|
$
|
7,908,415
|
|
The risk-free interest rate was based
on rates established by the Federal Reserve Bank. The Company uses the historical volatility of its common stock to estimate the
future volatility for its common stock. The expected life of the convertible debentures and notes was determined by the maturity
date of the notes. The expected life of the warrants was determined by their expiration dates. The expected dividend yield was
based on the fact that the Company has not paid dividends to its common stockholders in the past and does not expect to pay dividends
to its common stockholders in the future.
At March 31, 2014 and December 31, 2013,
the fair value of the aggregate derivative liability of the conversion features and warrants was $7,539,089 and $7,908,415, respectively.
For the three months ended March 31, 2014 and 2013 the Company recorded a change in fair value of the derivative liability of $703,382
and $163,969, respectively. During the three months ended March 31, 2014, we recognized additional derivative liabilities of $334,056,
related to the issuances of convertible promissory notes payable as described under Note 4.
Note 8 – Preferred and Common
Stock
Issuance of Common Stock for Cash
During the three months ended March 31,
2014, the Company sold 3,637 shares of common stock at the price of $1.37 per share for total proceeds of $5,000.
Issuance of Common Stock for Debt
During the three months ended March 31,
2014, the Company issued:
|
·
|
130,761,577 shares of its common stock
to the holders of certain unsecured convertible promissory notes payable in exchange for $85,589 of notes payable and $2,500 in
accrued interest and fees,
|
|
·
|
3,666,666 shares of its common stock to
La Jolla Cover Investors, Inc. in exchange for $500 of notes payable (see below), and
|
|
·
|
5,000,000 shares of its common stock to
Ironridge Global IV, Ltd. in exchange for $4,550 of debt.
|
Equity Investment Agreement
Pursuant to the Equity Investment Agreement,
La Jolla Cove Investors, Inc., has the right from time to time during the term of the agreement to purchase up to $2,000,000 of
the Company’s Common Stock in accordance with the terms of the agreement. Beginning October 27, 2012 and for each
month thereafter, La Jolla shall purchase from the Company at least $100,000 of common stock, at a price per share equal to 125%
of the VWAP on the Closing Date, provided, however, that La Jolla shall not be required to purchase common stock if (i) the VWAP
for the five consecutive trading days prior to the payment date is equal to or less than $10.00 per share or (ii) an event of default
has occurred under the SPA, the Convertible Debenture or the Equity Investment Agreement. Pursuant to the Equity Investment Agreement,
La Jolla has the right to purchase, at any time and in any amount, at La Jolla’s option, common stock from the Company at
a price per share equal to 125% of the VWAP on the Closing Date.
During the three months ended March 31,
2014, the Company received notices of purchase from La Jolla under the Equity Investment Agreement totaling $500, pursuant
to which the Company issued 3,666,666 shares of common stock at a weighted average price of $0.0001 per share.
Note 9 – Stock Options and
Warrants
Stock Options and Compensation-Based
Warrants
On September 29, 2010, the stockholders
of the Company approved the adoption of the 2010 Stock Option Plan. The Plan provides for the granting of incentive
and nonqualified stock options to employees and consultants of the Company. Generally, options granted under the plan
may not have a term in excess of ten years. Upon adoption, the Plan reserved 40,000 shares of the Company’s common
stock for issuance there under.
Generally accepted accounting principles
for stock options and compensation-based warrants require the recognition of the cost of services received in exchange for an award
of equity instruments in the financial statements, is measured based on the grant date fair value of the award, and requires the
compensation expense to be recognized over the period during which an employee or other service provider is required to provide
service in exchange for the award (the vesting period). No income tax benefit has been recognized for share-based compensation
arrangements and no compensation cost has been capitalized in the accompanying consolidated balance sheet.
A summary of stock option and compensation-based
warrant activity for the three months ended March 31, 2014 is presented below:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Shares
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
Under
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Option or
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Warrant
|
|
|
Price
|
|
|
Life (in years)
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2013
|
|
|
92,300
|
|
|
$
|
33.52
|
|
|
|
2.9
|
|
|
$
|
–
|
|
Granted or issued
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired or forfeited
|
|
|
(8,400
|
)
|
|
|
121.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and Exercisable at March 31, 2014
|
|
|
83,900
|
|
|
$
|
24.72
|
|
|
|
2.9
|
|
|
$
|
–
|
|
Other Stock Warrants
A summary of other stock warrant activity
for the three-month period ended March 31, 2014 is presented below:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
Shares
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Under
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Warrant
|
|
|
Price
|
|
|
Life (in years)
|
|
|
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2013
|
|
|
2,409,370
|
|
|
$
|
0.38
|
|
|
|
2.4
|
|
|
$
|
–
|
|
Granted or issued
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired or forfeited
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2014
|
|
|
2,409,370
|
|
|
$
|
0.38
|
|
|
|
2.2
|
|
|
$
|
–
|
|
Note 10 – Related Party Transactions
Payable to Related Parties
Warren Rothouse was appointed to be a director
of the Company in October 2012. Mr. Rothouse is Senior Partner of Surety Financial Group, LLC (Surety). Surety
has provided investor relations services to the Company in recent years. On November 7, 2012, the Company entered into
a new agreement with Surety to provide investor relations services for the fifteen month period commencing December 1, 2012 and
continuing through February 28, 2014. The agreement provided for monthly payments of $6,500 for Surety’s services. In
addition, Surety was issued 10,000 shares of restricted common stock of the Company’s common stock and warrants to purchase
15,000 shares of the Company’s common stock. The exercise price of the warrants is $5.00 per share and the warrants
are exercisable on a cashless basis. The term of the warrants is three years. On February 27, 2013, the Company
amended the November 7, 2012 agreement. Under the amended agreement, Surety will provide investor relations services
for the fifteen month period commencing March 1, 2013 and continuing through May 31, 2014 and Surety will receive monthly payments
of $10,000 for its services. Compensation to Surety under the agreements was $30,000 for the three months ended March 31, 2014.
The balance due to Surety at March 31, 2014 and December 31, 2013 was $110,300 and $113,300, respectively, included on the Company’s
accounts payable balance.
Effective January 31, 2013, David
Pinkman was appointed to the Board of Directors of the Company. On February 1, 2013, the Company entered into a
consulting agreement with Mr. Pinkman. The term of the agreement is for twelve months and provides for monthly
compensation of $8,330. As additional compensation, the Company issued 20,000 shares of restricted common stock to Mr.
Pinkman and issued him a warrant to acquire 20,000 shares of the Company’s common stock at $2.50 per
share. Compensation earned by Mr. Pinkman under the consulting agreement was $17,121 for the year ended December 31,
2013 and March 31, 2014, of which approximately $7,000 remained outstanding and included on the Company’s Accounts
payable balance at December 31, 2013 and March 31, 2014.
Note 11 – Subsequent
Events
On April 24, 2014, the Company entered
into a Settlement Agreement and Stipulation, whereby an investor acquired $74,514 of past due liabilities of the Company and the
Company allowed this investor to convert the acquired liabilities into shares of the Company’s common stock at a conversion
price equal to 50% of the market price.
Subsequent to March 31, 2014 the Company
issued shares of common stock as follows:
|
·
|
742,692,659 to investors upon the conversion
of notes payable and accrued interest;
|
|
·
|
2,909 to an investor for cash;
|
|
·
|
46,000,000 to Ironridge Global IV, Ltd
for settlement of accrued liabilities; and
|
|
·
|
70,000,000 for payment of acquisitions
(see below).
|
On April 17, 2014, the Company completed
the acquisition of the oil and gas assets of American Dynamic Resources, Inc. (ADR) and the Heavy Oil Technology and Intellectual
Property. The assets of ADR consist of multiple leases in Montgomery, Labette and Wilson Counties in Kansas. The combined leases
contain 140 oil wells and 17 gas wells within 3,527 acres. The purchase price for these oil and gas leases was $50,000 plus 35,000,000
shares of the Company’s common stock valued at $63,000. We also acquired ADR's patents on Intellectual Properties covering
3 areas of Enhanced Oil Recovery: Air Lift, Thermal Enhancement and Reservoir Management. The purchase price for the patents was
$75,000 plus 35,000,000 shares of the Company’s common stock valued at $63,000.
On April 18, 2014, the
Company purchased certain assets from Sunwest Group, LLC. The assets consisting of 18 leases in Montgomery, Labette and Wilson
Counties in Kansas. The purchase price was $325,000. As additional consideration for its purchase of the assets the Company assumed
the obligations and responsibilities with respect to the abandonment obligations up to the amount of $250,000.
On May 6, 2011, the Company acquired
certain assets from Montecito (see Notes 2, 6, and 7). The assets consist of certain oil and gas leases located in the
Vermillion 179 tract, which is in the shallow waters of the Gulf of Mexico offshore from Louisiana. Pursuant to the terms of
the Montecito Agreement, as amended, Montecito agreed to sell the Company a 70% leasehold working interest, with a net
revenue interest of 51.975%, of certain oil and gas leases owned by Montecito, for $1,500,000 in cash, a subordinated
promissory note in the amount of $500,000, and 30,000 shares of common stock. The leasehold interest has been capitalized in
the amount of $5,698,563, representing $2,000,000 in cash and promissory note, $3,675,000 for the common stock based on a
closing price of $2.45 per share on the closing date, and $23,563 in acquisition costs. No drilling or production has
commenced as of December 31, 2013. Consequently, the oil and gas properties have not been subjected to amortization of the
full cost pool. In December 2011, Montecito filed a lawsuit in the Civil District Court for the Parish of Orleans of the
State of Louisiana against the Company by filing a Petition to Rescind Sale. In this action, Montecito is seeking to rescind
the asset sale transaction, as described above. Pursuant to a Release and Settlement Agreement dated February 12, 2014 that
has been signed and notarized by all parties involved, the matter has been settled and the operative terms of the settlement
were recited into the record in open court on the day of trial. The result is that a judicially recognized compromise has
been perfected under Louisiana law, which has the effect of extinguishing the underlying obligations the compromise is
premised on. The Company’s obligations extinguished include a secured notes payable in the amount of $500,000 (see Note
5) and convertible debentures of approximately $2,450,000 (see Note 6). However, recording the conveyance of the lease
interest and cancelling mortgages and UCC-1’s by the debt holders has not occurred. The debt holders
have delayed in performing these obligations because they want to first undertake a degree of internal restructuring before
accepting the royalty interest they negotiated to receive as a part of the settlement. The debt holders have indicated that,
after they have formed an entity to receive the royalty interest, they will cancel the outstanding mortgages and
UCC-1’s along with recording the documents conveying the various interests into the public records. The Company
believes the conveyances will occur and that the matter has been settled. Below is an unaudited pro forma balance sheet that
shows the pro forma impact of this settlement on the Company’s March 31, 2014 balance sheet:
|
|
As filed
|
|
|
Adjustments
|
|
|
Proforma
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
7,055
|
|
|
$
|
|
|
|
$
|
7,055
|
|
Total Current Assets
|
|
|
7,055
|
|
|
|
0
|
|
|
|
7,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and Equipment, net of accumulated depreciation
|
|
|
8,777
|
|
|
|
|
|
|
|
8,777
|
|
Oil and gas properties
|
|
|
5,698,563
|
|
|
|
(5,698,563
|
)
|
|
|
0
|
|
Other assets
|
|
|
14,610
|
|
|
|
|
|
|
|
14,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
5,729,005
|
|
|
$
|
(5,698,563
|
)
|
|
$
|
30,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
989,286
|
|
|
$
|
|
|
|
$
|
989,286
|
|
Accrued interest
|
|
|
1,479,730
|
|
|
|
(1,233,496
|
)
|
|
|
246,234
|
|
Accrued liabilities
|
|
|
496,188
|
|
|
|
|
|
|
|
496,188
|
|
Payable to Ironridge Global IV, Ltd.
|
|
|
236,496
|
|
|
|
|
|
|
|
236,496
|
|
Payable to former officer
|
|
|
115,000
|
|
|
|
|
|
|
|
115,000
|
|
Unsecured convertible promissory notes payable, net of discount, in default
|
|
|
1,052,584
|
|
|
|
|
|
|
|
1,052,584
|
|
Secured notes payable, net of discount, in default
|
|
|
639,012
|
|
|
|
(500,000
|
)
|
|
|
139,012
|
|
Convertible debentures in default
|
|
|
2,453,032
|
|
|
|
(2,453,032
|
)
|
|
|
0
|
|
Derivative liabilities
|
|
|
7,539,089
|
|
|
|
(5,259,769
|
)
|
|
|
2,279,320
|
|
Total Current Liabilities
|
|
|
15,000,417
|
|
|
|
(9,446,297
|
)
|
|
|
5,554,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term asset retirement obligation
|
|
|
37,288
|
|
|
|
(37,288
|
)
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
15,037,705
|
|
|
|
(9,483,585
|
)
|
|
|
5,554,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Deficiency:
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A convertible preferred stock
|
|
|
1,000
|
|
|
|
|
|
|
|
1,000
|
|
Common stock
|
|
|
186,907
|
|
|
|
|
|
|
|
186,907
|
|
Additional paid-in capital
|
|
|
26,394,378
|
|
|
|
|
|
|
|
26,394,378
|
|
Deficit accumulated during the exploration stage
|
|
|
(35,890,985
|
)
|
|
|
3,785,022
|
|
|
|
(32,105,963
|
)
|
Total Stockholders' Deficiency
|
|
|
(9,308,700
|
)
|
|
|
3,785,022
|
|
|
|
(5,523,678
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Deficiency
|
|
$
|
5,729,005
|
|
|
$
|
(5,698,563
|
)
|
|
$
|
30,442
|
|