Nevada
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98-0170247
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(State or other jurisdiction of incorporation)
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(I.R.S. Employer Identification No.)
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430 Park Avenue, Suite 702, New York, NY
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10022
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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o
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Accelerated filer
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o
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Non-accelerated filer
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o
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Smaller reporting company
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x
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PART I - FINANCIAL INFORMATION
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Item 1.
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Financial Statements
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Consolidated Balance Sheets
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3 | |||
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Consolidated Statements of Operations
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4 | |||
Consolidated Statements of Comprehensive Loss
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5 | ||||
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Consolidated Statements of Stockholders’ Equity (Deficit)
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6 | |||
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Consolidated Statements of Cash Flows
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7 | |||
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Notes to Consolidated Financial Statements
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8 | |||
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Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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15 | |||
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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20 | |||
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Item 4.
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Controls and Procedures
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21 | |||
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PART II - OTHER INFORMATION
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Item 1.
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Legal Proceedings
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22 | |||
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Item 1A.
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Risk Factors
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22 | |||
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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22 | |||
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Item 6.
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Exhibits
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22 | |||
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Signatures
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23 |
March 31,
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December 31,
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2013 | 2012 | |||||||
(unaudited)
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ASSETS
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Current assets
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Cash and cash equivalents
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$ | 490,050 | $ | 513,595 | ||||
Accounts receivable
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- | 800 | ||||||
Prepaid expenses
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- | 7,562 | ||||||
Total current assets
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490,050 | 521,957 | ||||||
Oil and gas properties
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||||||||
Unproven properties
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- | 537,501 | ||||||
Accumulated depreciation, depletion, amortization and impairment
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- | (513,374 | ) | |||||
Oil and gas properties, net
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- | 24,127 | ||||||
Mineral properties
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519,750 | 519,750 | ||||||
Total assets
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$ | 1,009,800 | $ | 1,065,834 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities
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Accounts payable and accrued liabilities
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$ | 22,415 | $ | 30,905 | ||||
Accounts payable - related parties
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40,661 | 9,638 | ||||||
Total current liabilities
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63,076 | 40,543 | ||||||
Asset retirement obligation
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- | 57,532 | ||||||
Total liabilities
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63,076 | 98,075 | ||||||
STOCKHOLDERS' EQUITY
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Preferred stock: $0.0001 par value: Authorized: 10,000,000 shares,
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Issued and outstanding: nil
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- | - | ||||||
Common stock: $0.00001 par value: Authorized: 200,000,000 shares,
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Issued and outstanding: 63,075,122 shares (2012: 63,075,122)
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631 | 631 | ||||||
Additional paid-in capital
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5,462,236 | 5,462,236 | ||||||
Accumulated deficit
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(4,512,039 | ) | (4,491,004 | ) | ||||
Accumulated other comprehensive loss
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(4,104 | ) | (4,104 | ) | ||||
Total stockholders' equity
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946,724 | 967,759 | ||||||
Total liabilities and stockholders' equity
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$ | 1,009,800 | $ | 1,065,834 |
For the Three Months Ended
March 31,
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2013
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2012
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Revenue
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Oil and gas sales
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$ | - | $ | 6,053 | ||||
Expenses
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Lease operating expenses
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- | 5,025 | ||||||
Exploration costs
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- | 3,138 | ||||||
General and administrative expenses
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70,372 | 80,812 | ||||||
Impairment and depreciation
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- | 331 | ||||||
Total operating expenses
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70,372 | 89,306 | ||||||
Operating Loss
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(70,372 | ) | (83,253 | ) | ||||
Other income
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Gain on disposal of oil and gas properties
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49,337 | - | ||||||
Total other income
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49,337 | - | ||||||
Net loss
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$ | (21,035 | ) | $ | (83,253 | ) | ||
Earnings per share - basic and diluted
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Loss per common share
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$ | (0.00 | ) | $ | (0.00 | ) | ||
Weighted average shares outstanding
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63,075,122 | 63,075,122 |
For the Three Months Ended
March 31,
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2013
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2012
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Net loss
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$ | (21,035 | ) | $ | (83,253 | ) | ||
Other comprehensive loss
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Foreign currency translation adjustments
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- | (769 | ) | |||||
Total comprehensive loss
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$ | (21,035 | ) | $ | (84,022 | ) |
Accumulated
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other
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Total
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Common Stock
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Additional
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Accumulated
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comprehensive
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stockholders'
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Shares
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Amount
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paid-in capital
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(deficit)
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(loss)
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equity
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Balance, December 31, 2011
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63,075,122 | $ | 631 | $ | 5,462,236 | $ | (4,247,045 | ) | $ | (4,104 | ) | $ | 1,211,718 | |||||||||||
Net loss, December 31, 2012
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- | - | - | (243,959 | ) | - | (243,959 | ) | ||||||||||||||||
Balance, December 31, 2012
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63,075,122 | 631 | 5,462,236 | (4,491,004 | ) | (4,104 | ) | 967,759 | ||||||||||||||||
Net loss, March 31, 2013
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- | - | - | (21,035 | ) | - | (21,035 | ) | ||||||||||||||||
Balance, March 31, 2013
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63,075,122 | $ | 631 | $ | 5,462,236 | $ | (4,512,039 | ) | $ | (4,104 | ) | $ | 946,724 |
For the Three Months Ended
March 31,
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2013
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2012
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Cash flows from operating activities:
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Net loss
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$ | (21,035 | ) | $ | (83,253 | ) | ||
Adjustments to reconcile net loss to
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net cash flows from operating activities:
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Impairment and depreciation
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- | 331 | ||||||
Accretion of asset retirement obligation
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- | 729 | ||||||
Gain on disposal of oil and gas properties
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(49,337 | ) | - | |||||
Changes in operating assets and liabilities:
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Decrease (increase) in receivables
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800 | 6,752 | ||||||
Decrease (increase) in prepaid expenses
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7,562 | (10,200 | ) | |||||
(Decrease) increase in accounts payable
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and accrued liabilities including related party payables
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35,465 | (40,056 | ) | |||||
Net cash flows from operating activities
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(26,545 | ) | (125,697 | ) | ||||
Cash flows from investing activities:
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Proceeds from disposal of oil and gas properties
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3,000 | - | ||||||
Net cash flows from investing activities
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3,000 | - | ||||||
Effect of exchange rate changes on cash and cash equivalents
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- | (769 | ) | |||||
Decrease in cash and cash equivalents
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(23,545 | ) | (126,466 | ) | ||||
Cash and cash equivalents, beginning of period
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513,595 | 787,771 | ||||||
Cash and cash equivalents, end of period
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$ | 490,050 | $ | 661,305 | ||||
Supplemental disclosure of cash flow information:
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Interest paid in cash
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$ | - | $ | - | ||||
Income tax paid in cash
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$ | - | $ | - |
·
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Revenue and expense items are translated at the average exchange rate for the period in which they are incurred.
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·
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Non-monetary assets and liabilities at the rate of exchange in effect on the dates the assets were acquired or the liabilities were incurred.
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·
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Monetary assets and liabilities at the exchange rate at the balance sheet date.
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March 31
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December 31
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2013
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2012
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Change ($)
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Unproven Properties
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$ | - | $ | 537,501 | $ | (537,501 | ) | |||||
Depreciation and impairment
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- | (513,374 | ) | 513,374 | ||||||||
Oil and gas properties, net
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$ | - | $ | 24,127 | $ | (24,127 | ) |
March 31,
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December 31,
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2013
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2013
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Asset retirement obligations, beginning of period
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$ | 57,532 | $ | 55,316 | ||||
Accretion expense
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- | 2,216 | ||||||
Liability settled upon sale of properties
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(57,532 | ) | - | |||||
Asset retirement obligations, end of period
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- | 57,532 | ||||||
Less: current portion
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- | - | ||||||
Long-term asset retirement obligations, end of period
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$ | - | $ | 57,532 |
a)
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On June 8, 2011, pursuant to an asset purchase agreement, the Company paid CAD $500,000 in cash for the acquisition of EMC Metals Corp.’s 100% leasehold interest in two mining leases known as the Fostung tungsten property. The Fostung tungsten property consists of two contiguous claim blocks of 30 claims totaling 485 hectors. The nine claims covered by Mining Lease 108592 (“Lease One”) expire on October 31, 2031. The twenty one claims covered by Mining Lease 108847 (“Lease Two”) have been extended by the Ministry of Northern Development, Mines and Forestry (“MNDMF”) through March 31, 2032. The Fostung property is located in Foster Township, Sudbury Mining Division, Ontario, Canada. It is approximately 8 kilometers southeast of the town of Espanola and 70 kilometers west-southwest of the town of Sudbury. An excellent all-weather gravel road extends from Espanola, crossing the property and providing access to the west bay of Lake Panache.
A production bonus in the amount of CAD $500,000 is payable to Breakwater Resources Ltd. by the Company within thirty business days following the commencement of commercial production from the property. A 1% net smelter return royalty on the property is also payable to Breakwater Resources Ltd. by the Company. No capitalized costs have been amortized as of March 31, 2013. The Company did not incur any impairment of these capitalized costs through March 31, 2013.
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b)
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The Fostung property also consists of four unpatented mining claims, located in Foster Township in the Sudbury Mining Division, Ontario, Canada, comprised of 26 claim units, were recorded in the name of Fostung Resources Ltd. on June 7, 2011. Two of the four mining claim blocks consisting of two contiguous claims are located to the north east of the structural trend in the two contiguous claim blocks of 30 claims referred to in (a) above. Two of the four mining claim blocks consisting of two contiguous claims are located to the south west of the structural trend in the two contiguous claim blocks of 30 claims referred to in (a) above. Each of the four claims has an expiration date of June 7, 2013. The aggregate amount of work required to renew the four claims is CAD $10,400.
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(a)
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On June 8, 2011, pursuant to an asset purchase agreement, the Company paid CAD $500,000 in cash for the acquisition of EMC Metals Corp’s. 100% leasehold interest in two mining leases known as the Fostung tungsten property. The Fostung tungsten property consists of two contiguous claim blocks of 30 claims totaling 485 hectors. The nine claims covered by Mining Lease 108592 (“Lease One”) expire on October 31, 2031. The twenty one claims covered by Mining Lease 108847 (“Lease Two”) have been extended by the Ministry of Northern Development, Mines and Forestry (“MNDMF”) through March 31, 2032. The Fostung property is located in Foster Township, Sudbury Mining Division, Ontario, Canada. It is approximately 8 kilometers southeast of the town of Espanola and 70 kilometers west-southwest of the town of Sudbury. An excellent all-weather gravel road extends from Espanola, crossing the property and providing access to the west bay of Lake Panache.
A production bonus in the amount of CAD $500,000 is payable to Breakwater Resources Ltd. by us within thirty business days following the commencement of commercial production from the property. A 1% Net Smelter Return royalty on the property is also payable to Breakwater Resources Ltd. by us. No capitalized costs have been amortized as of March 31, 2013. We did not incur any impairment of these capitalized costs through March 31, 2013.
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(b)
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The Fostung property also consists of four unpatented mining claims, located in Foster Township in the Sudbury Mining Division, Ontario, Canada, comprised of 26 claim units, were recorded in the name of Fostung Resources Ltd. on June 7, 2011. Two of the four mining claim blocks consisting of two contiguous claims are located to the north east of the structural trend in the two contiguous claim blocks of 30 claims referred to in (a) above. Two of the four mining claim blocks consisting of two contiguous claims are located to the south west of the structural trend in the two contiguous claim blocks of 30 claims referred to in (a) above. Each of the four claims has an expiration date of June 7, 2013. The aggregate amount of work required to renew the four claims is CAD $10,400.
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·
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Authorized share capital of 200,000,000 (December 31, 2012, – 200,000,000) common shares with par value of $0.00001 each.
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·
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Authorized share capital of 10,000,000 (December 31, 2012 – 10,000,000) preferred shares with par value of $0.0001 each.
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·
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63,075,122 common shares were issued and outstanding (December 31, 2012, – 63,075,122).
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Exhibit No.
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Description of Exhibit
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3.1
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Articles of incorporation (exhibit 3.1). S-8 filing dated October 3, 2003.
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3.2
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Bylaws (exhibit 3.2). S-8 filing dated October 3, 2003.
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10.1
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Assignment Agreement between Janus Resources, Inc. and Leexus Oil LLC dated as of February 18, 2013.*
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10.2
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Assignment Agreement between Janus Resources, Inc. and Millennium Petro-Physics, Inc. dated as of February 19, 2013.*
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31.1
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Certification of Principal Executive Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
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31.2
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Certification of Principal Financial Officer Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
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32.1
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Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
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101.INS
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XBRL Instance Document
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101.SCH
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XBRL Taxonomy Extension - Schema Document
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101.CAL
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XBRL Taxonomy Extension - Calculation Linkbase Document
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101.DEF
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XBRL Taxonomy Extension - Definition Linkbase Document
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101.LAB
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XBRL Taxonomy Extension - Label Linkbase Document
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101.PRE
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XBRL Taxonomy Extension - Presentation Linkbase Document
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Janus Resources, Inc. | |||
(Registrant) | |||
Date: May 15, 2013
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By:
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/s/ Joseph Sierchio | |
Name: Joseph Sierchio | |||
Title: Acting Interim President and Chief Executive Officer | |||
(Principal Executive Officer) | |||
Date: May 15, 2013 |
By:
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/s/ Janet Bien | |
Name: Janet Bien | |||
Title: Chief Financial Officer | |||
(Principal Financial Officer) |
1.
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I have reviewed this quarterly report on Form 10-Q of Janus Resources, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) ) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: May 15, 2013
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By:
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/s/ Joseph Sierchio | |
Name: |
Joseph Sierchio
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Title: | Acting Interim President and Chief Executive Officer
(Principal Executive Officer)
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1.
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I have reviewed this quarterly report on Form 10-Q of Janus Resources, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) ) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: May 15, 2013
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By:
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/s/ Janet Bien | |
Name: | Janet Bien | ||
Title: | Chief Financial Officer | ||
(Principal Financial Officer) |
JANUS RESOURCES, INC.
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|||
Date: May 15, 2013
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By:
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/s/ Joseph Sierchio
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Name: |
Joseph Sierchio
|
||
Title: |
Acting Interim President and Chief Executive Officer
(Principal Executive Officer)
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Date: May 15, 2013
|
By:
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/s/ Janet Bien
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|
Name: |
Janet Bien
|
||
Title: | Chief Financial Officer
(Principal Financial Officer)
|
Significant Accounting Policies
|
3 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Mar. 31, 2013
|
|||||||
Significant Accounting Policies | |||||||
Note 2. Significant Accounting Policies | Basis of Presentation and Principles of Accounting
The interim consolidated financial statements included herein have been prepared by the Company, without audit, in accordance with the rules and regulations of the Securities and Exchange Commission (SEC) pursuant to Part 210 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP) have been condensed or omitted pursuant to such SEC rules and regulations, although the Company believes that the disclosures included are adequate to make the information presented not misleading.
In managements opinion, the unaudited consolidated financial statements contained herein reflect all adjustments, consisting solely of normal recurring items, which are necessary for the fair presentation of our financial position, results of operations, and cash flows on a basis consistent with that of our prior audited consolidated financial statements. The Company has evaluated information about subsequent events that became available to them through the date the financial statements were issued. This information relates to events, transactions or changes in circumstances that would require us to adjust the amounts reported in the financial statements or to disclose information about those events, transactions or changes in circumstances. However, the results of operations for interim periods may not be indicative of results to be expected for the full fiscal year. Therefore, these financial statements should be read in conjunction with the Companys audited consolidated financial statements including the notes thereto for the year ended December 31, 2012, which may be found under the Companys profile on EDGAR.
The accounting policies followed by the Company are set out in Note 2 to the audited consolidated financial statements for the year ended December 31, 2012 and have been consistently followed in the preparation of these consolidated interim financial statements.
Principles of Consolidation
These interim consolidated financial statements have been prepared in accordance with US GAAP and include the accounts of the Company and its wholly-owned subsidiaries, Fostung Resources, Limited (Fostung) and Entheos Energy, Inc. (Entheos). Collectively, they are referred to herein as the Company. All significant intercompany transactions and balances have been eliminated. Fostung was formed on incorporated on May 10, 2011, in Ontario Canada. Entheos was incorporated under the laws of the State of Nevada on October 5, 2000.
Applicable Accounting Guidance
Any reference in these notes to applicable accounting guidance is meant to refer to the authoritative non-governmental United States GAAP as found in the Financial Accounting Standards Boards (FASB) Accounting Standards Codification (ASC).
Accounting Estimates
The preparation of consolidated financial statements in conformity 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 the reported amounts of revenues and expenses during the reporting period. Significant areas requiring the use of management estimates include the determination of impairment of mineral properties, valuation allowances for future income tax assets, fair value of non-cash stock-based compensation, common stock warrants and reclamation and environmental obligations. Actual results, as determined by future events, may differ from these estimates. Managements judgments and estimates in these areas are based on information available from both internal and external sources, including engineers, geologists, consultants and historical experience in similar matters.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company did not have any cash equivalents at March 31, 2013 and December 31, 2012.
Mineral Properties
The Company has concluded that mineral rights meet the definition of tangible assets. Accordingly, the Company accounts for its mineral properties on a cost basis whereby all direct costs, net of pre-production revenue, relative to the acquisition of the properties are capitalized. All sales and option proceeds received are first credited against the costs of the related property, with any excess credited to earnings. Once commercial production has commenced, the net costs of the applicable property will be charged to operations using the unit-of-production method based on estimated proven and probable recoverable reserves. The net costs related to abandoned properties are charged to operations.
Costs of exploring, carrying and retaining unproven properties are charged to operations as incurred until such time that proven reserves are discovered. From that time forward, the Company will capitalize all costs to the extent that future cash flow from mineral reserves equals or exceeds the costs deferred. The deferred costs will be amortized over the recoverable reserves when a property reaches commercial production. As at March 31, 2013 and December 31, 2012, the Company did not have proven reserves. Exploration activities conducted jointly with others are reflected at the Company's proportionate interest in such activities.
Full Cost Method of Accounting for Oil and Gas Properties
The Company has elected to utilize the full cost method of accounting for its oil and gas activities. In accordance with the full cost method of accounting, 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.
All capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are amortized on the unit-of-production method using estimates of proved reserves once proved reserves are determined to exist. The Company did not establish proved reserves for oil and gas properties during the periods presented and as such did not record amortization.
Oil and gas properties without estimated proved reserves are assessed for impairment at each reporting date. As a result of managements impairment analysis, the Company recorded an impairment loss of $nil and $331 during the three month periods ended March 31, 2013 and 2012, respectively.
Sales of oil and gas 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 income. On February 18, 2013 and February 19, 2013 the Company sold its interests in all of its oil and gas properties. During the three month period ended March 31, 2013, a gain of $49,337 was recognized in income as there are no longer any oil and gas capitalized costs.
Asset Retirement Obligation
The Company records the fair value of the liability for closure and removal costs associated with the legal obligations upon retirement or removal of any tangible long-lived assets by recording the fair value of the liability during the period in which it was incurred. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The increase in carrying value of a property associated with the capitalization of an asset retirement obligation is included in oil and gas properties in the balance sheets. The Companys asset retirement obligation consists of costs related to the plugging of wells, removal of facilities and equipment and site restoration on its oil and gas properties. The asset retirement liability is allocated to operating expense using a systematic and rational method. Asset retirement obligations amounted to $nil and $57,532 at March 31, 2013 and December 31, 2012, respectively. See Note 3. Oil and Gas Properties for further discussion.
Impairment of Long-Lived Assets
The Company reviews and evaluates its long-lived assets for impairment at each balance sheet date and documents such impairment testing. The tests include an evaluation of the assets and events or changes in circumstances that would indicate that the related carrying amounts may not be recoverable.
Oil and gas properties are subject to a ceiling test which basically limits capitalized costs to the sum of the estimated future net revenues from proved reserves, discounted at 10% per annum to present value, based on current economic and operating conditions, adjusted for related income tax effects.
Mineral properties in the exploration stage are monitored for impairment based on factors such as the Companys continued right to explore the area, exploration reports, assays, technical reports, drill results and the Companys continued plans to fund exploration programs on the property, whether sufficient work has been performed to indicate that the carrying amount of the mineral property cost carried forward as an asset will not be fully recovered, even though a viable mine has been discovered.
The tests for long-lived assets in the exploration, development or producing stage that would have a value beyond proven and probable reserves would be monitored for impairment based on factors such as current market value of the mineral property and results of exploration, future asset utilization, business climate, mineral prices and future undiscounted cash flows expected to result from the use of the related assets. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated future net undiscounted cash flows expected to be generated by the asset, including evaluating its reserves beyond proven and probable amounts.
The Companys policy is to record an impairment loss in the period when it is determined that the carrying amount of the asset may not be recoverable either due to impairment or by abandonment of the property. The impairment loss is calculated as the amount by which the carrying amount of the asset exceeds its fair value. While the Company incurred losses from operations, these losses have not been in excess of planned expenditures on the specific mineral properties in order to ultimately realize their value.
Oil and Gas Revenue Recognition
The Company recognizes oil and gas revenues when oil and gas production is sold to a purchaser at a fixed or determinable price, when delivery has occurred and title has transferred, and if collectability of the revenue is probable. Delivery occurs and title is transferred when production has been delivered to a purchasers pipeline or truck. As a result of the numerous requirements necessary to gather information from purchasers or various measurement locations, calculate volumes produced, perform field and wellhead allocations, distribute and disburse funds to various working interest partners and royalty owners, the collection of revenues from oil and gas production may take up to 45 days following the month of production. Therefore, the Company may make accruals for revenues and accounts receivable based on estimates of its share of production. Since the settlement process may take 30 to 60 days following the month of actual production, its financial results may include estimates of production and revenues for the related time period. The Company will record any differences between the actual amounts ultimately received and the original estimates in the period they become finalized.
Income Taxes
The Company recognizes income taxes on an accrual basis based on tax position taken or expected to be taken in our tax returns. A tax position is defined as a position in a previously filed tax return or a position expected to be taken in a future tax filing that is reflected in measuring current or deferred income tax assets and liabilities. Tax positions are recognized only when it is more likely than not (i.e., likelihood of greater than 50%), based on technical merits, that the position would be sustained upon examination by taxing authorities. Tax positions that meet the more likely than not threshold are measured using a probability-weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement. Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more than likely not be realized. Should they occur, our policy is to classify interest and penalties related to tax positions as interest expense. Since our inception, no such interest or penalties have been incurred.
Earnings (Loss) Per Share
The Company presents both basic and diluted earnings per share (EPS) amounts. Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding during the period presented. Diluted EPS amounts are based upon the weighted average number of common and common equivalent shares outstanding during the period presented. There were no dilutive shares outstanding for the three month period ended March 31, 2013 and 2012.
Foreign Currency Translation
Transactions and account balances originally stated in currencies other than the U.S dollar have been translated into U.S. dollars as follows:
Exchange gains and losses are recorded in operations in the period in which they occur, except for exchange gains and losses related to translation of monetary assets and liabilities associated with mineral properties, which are deferred and included in mineral properties.
Comprehensive income
Comprehensive loss is comprised of net loss and foreign currency translation adjustments for the periods presented.
Related Party Transactions
A related party is generally defined as (i) any person who holds 10% or more of the Companys securities and their immediate families, (ii) the Companys management, (iii) someone who directly or indirectly controls, is controlled by or is under common control with the Company, or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. See Note 6. Related Party Transactions for further discussion.
Concentration of Risk
Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, and accounts receivable. The Company occasionally has cash deposits in excess of federally insured limits. The Company has not experienced any losses related to these balances, and management believes its credit risk to be minimal. Accounts receivable are with the operators of the oil wells in which the Company participates. Given the close working relationship between the operators and the Company, management believes its credit risk is minimal.
Fair Values of Financial Instruments
The Company measures certain financial assets and liabilities at fair value based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in on orderly transaction between market participants. The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to the short-term nature of maturity of the instruments.
Recently Issued Accounting Standards Updates
Accounting Standards Update 2012-02: Intangibles - Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment
In July 2012, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2012-02, Intangibles - Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment, allowing entities to make a qualitative evaluation about the likelihood of impairment of an indefinite-lived intangible asset to determine whether the quantitative test is required, as opposed to required annual quantitative impairment testing. The update is effective for interim and annual impairment tests performed for fiscal years beginning after September 15, 2012. The adoption of this guidance did not affect the Company's financial condition, results of operations, or cash flows. |
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