-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D+qelHO8aoHvhdwoO0c2osakra73D2QB8XnSAKHGfuM5raKSTgP7iDQECV3rp9wd 7bsdM9w7kRawsQl9/ozsbg== 0001165527-09-000407.txt : 20090615 0001165527-09-000407.hdr.sgml : 20090615 20090615122426 ACCESSION NUMBER: 0001165527-09-000407 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20090430 FILED AS OF DATE: 20090615 DATE AS OF CHANGE: 20090615 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Baron Energy Inc. CENTRAL INDEX KEY: 0001410012 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 260582528 FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-146627 FILM NUMBER: 09891383 BUSINESS ADDRESS: STREET 1: 3753 HOWARD HUGHES PARKWAY STREET 2: SUITE 135 CITY: LAS VEGAS STATE: NV ZIP: 89169 BUSINESS PHONE: 702-993-7424 MAIL ADDRESS: STREET 1: 3753 HOWARD HUGHES PARKWAY STREET 2: SUITE 135 CITY: LAS VEGAS STATE: NV ZIP: 89169 FORMER COMPANY: FORMER CONFORMED NAME: Nevwest Explorations Corp. DATE OF NAME CHANGE: 20070816 10-Q 1 g3211.txt QTRLY REPORT FOR THE QTR ENDED 4-30-09 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED APRIL 30, 2009 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________to _______________ Commission file number 333-146627 BARON ENERGY INC. (Exact name of registrant as specified in its charter) NEVADA (State or other jurisdiction of incorporation or organization) 26-0582528 IRS Identification Number 3753 Howard Hughes Parkway Suite 135 Las Vegas, NV 89169 (Address of principal executive offices, including zip code) 702-993-7424 (Telephone number, including area code) Indicate by check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the last 90 days. YES [X] NO [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer, "accelerated filer," "non-accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES [X] NO [ ] State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 44,400,000 shares as of June 12, 2009. BARON ENERGY INC. INDEX Item 1. Financial Statements (Unaudited) 3 Balance Sheets 3 Statements of Expenses 4 Statements of Cash Flows 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk 14 Item 4. Controls and Procedures 14 Part II Other Information Item 1. Legal Proceedings 15 Item 1A. Risk Factors 15 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 15 Item 3. Defaults Upon Senior Securities 15 Item 4. Submission of Matters to a Vote of Security Holders 15 Item 5. Other Information 15 Item 6. Exhibits 15 Signatures 16 2 ITEM 1. FINANCIAL STATEMENTS BARON ENERGY INC. (An Exploration Stage Company) Balance Sheets (Unaudited)
As of As of April 30, July 31, 2009 2008 ----------- ----------- ASSETS CURRENT ASSETS Cash $ 54,625 $ 49,754 Other receivables 2,952 -- Oil inventory 9,389 -- Deposits -- 4,750 ----------- ----------- TOTAL CURRENT ASSETS 66,966 54,504 OIL AND GAS PROPERTIES (FULL COST METHOD) 1,372,937 -- GOODWILL 3,569,918 -- ----------- ----------- TOTAL ASSETS $ 5,009,821 $ 54,504 =========== =========== LIABILITIES & STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses $ 6,092 $ -- ----------- ----------- TOTAL CURRENT LIABILITIES 6,092 -- LONG-TERM LIABILITIES Asset retirement obligations 4,764 -- ----------- ----------- TOTAL LONG-TERM LIABILITIES 4,764 -- STOCKHOLDERS' EQUITY Common stock, $0.001 par value, 150,000,000 shares authorized; 44,400,000 and 24,000,000 shares issued and outstanding as of April 30, 2009 and July 31, 2008 44,400 24,000 Additional paid-in capital 5,130,600 51,000 Deficit accumulated during exploration stage (176,035) (20,496) ----------- ----------- TOTAL STOCKHOLDERS' EQUITY 4,998,965 54,504 ----------- ----------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 5,009,821 $ 54,504 =========== ===========
See notes to the financial statements. 3 BARON ENERGY INC. (An Exploration Stage Company) Statements of Expenses (Unaudited)
July 24, 2007 Three Months Ended Nine Months Ended (inception) April 30, April 30, through --------------------------- ---------------------------- April 30, 2009 2008 2009 2008 2009 ----------- ----------- ----------- ----------- ----------- Professional Fees $ 30,182 $ 1,400 $ 69,403 $ 4,900 $ 75,703 General and Administrative Expenses 22,505 1,713 76,309 4,780 82,755 Accretion Expense 110 -- 327 -- 327 ----------- ----------- ----------- ----------- ----------- Loss from Continuing Operations (52,797) (3,113) (146,039) (9,680) (158,785) Discontinued Operations Loss from discontinued operations -- -- (9,500) (7,750) (17,250) ----------- ----------- ----------- ----------- ----------- Net Loss $ (52,797) $ (3,113) $ (155,539) $ (17,430) $ (176,035) =========== =========== =========== =========== =========== Basic and diluted net loss per share: Net loss per share $ (0.00) $ (0.00) $ (0.01) $ (0.00) Continuing operations loss per share $ (0.00) $ (0.00) $ (0.01) $ (0.00) Discontinued operations loss per share $ (0.00) $ (0.00) $ (0.00) $ (0.00) Weighted average number of common shares outstanding - basic and diluted 30,853,933 14,200,000 27,333,333 12,963,504 ----------- ----------- ----------- -----------
See notes to the financial statements. 4 BARON ENERGY INC. (An Exploration Stage Company) Statements of Cash Flows (Unaudited)
July 24, 2007 Nine Months Ended (inception) April 30, through ---------------------------- April 30, 2009 2008 2009 ----------- ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (155,539) $ (17,430) $ (176,035) Adjustments to reconcile net loss to net cash used in operating activities: Accretion expense 327 -- 327 Changes in operating assets and liabilities: Decrease (increase) in other receivables 97,017 -- 97,017 Increase (decrease) in accounts payable and accrued expenses (28,184) 810 (28,184) Decrease (increase) in deposits 4,750 (4,750) -- ----------- ----------- ----------- NET CASH USED IN OPERATING ACTIVITIES (81,629) (21,370) (106,875) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of oil and gas properties (513,500) -- (513,500) ----------- ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (513,500) -- (513,500) CASH FLOWS FROM FINANCING ACTIVITIES Issuance of common stock 600,000 60,000 675,000 ----------- ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 600,000 60,000 675,000 ----------- ----------- ----------- NET INCREASE IN CASH 4,871 38,630 54,625 CASH AT BEGINNING OF PERIOD 49,754 15,000 -- ----------- ----------- ----------- CASH AT END OF PERIOD $ 54,625 $ 53,630 $ 54,625 =========== =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during year for: Interest $ -- $ -- $ -- Income taxes $ -- $ -- $ -- NON-CASH TRANSACTIONS Asset retirement obligations $ 4,437 $ -- $ 4,437 Stock issued for business acquisition $ 4,500,000 $ -- $ 4,500,000
See notes to the financial statements. 5 NOTE 1. BASIS OF PRESENTATION The accompanying unaudited interim consolidated financial statements of Baron Energy Inc. ("Baron") have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in Baron's annual report filed with the SEC on Form 10-K for the year ended July 31, 2008. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year 2008 as reported in the Form 10-K have been omitted. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board (FASB) has issued Statement No. 165, SUBSEQUENT EVENTS. Statement 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, Statement 165 provides: * The period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; * The circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and * The disclosures that an entity should make about events or transactions that occurred after the balance sheet date. Statement 165 is effective for interim or annual financial periods ending after June 15, 2009, and shall be applied prospectively. The Company does not believe that SFAS 165 will have an impact on operating results, financial position or cash flows. On June 3, 2009, FASB approved the FASB Accounting Standards Codification (Codification) as the single source of authoritative nongovernmental U.S. generally accepted accounting principles (GAAP). The Codification will be launched on July 1, 2009 and will be effective for interim and annual periods ending after September 15, 2009. Preparers must begin use of the Codification for periods that begin on or about July 1, 2009. After the Codification launch on July 1, 2009 only one level of authoritative GAAP will exist, other than guidance issued by the Securities and Exchange Commission (SEC). All other accounting literature excluded from the Codification will be considered non-authoritative. On December 4, 2007, the FASB issued FASB Statement No. 141 (Revised 2007), BUSINESS COMBINATIONS. Statement 141R changed the accounting for business combinations. Under Statement 141R, an acquiring entity is required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. Statement 141R changes the accounting treatment for certain specific items, including: * Acquisition costs are generally expensed as incurred; * Noncontrolling interests (formerly known as "minority interests" -- see Statement 160 discussion below) are valued at fair value at the acquisition date; * Acquired contingent liabilities are recorded at fair value at the acquisition date and subsequently measured at either the higher of such amount or the amount determined under existing guidance for non-acquired contingencies; * In-process research and development are recorded at fair value as an indefinite-lived intangible asset at the acquisition date; * Restructuring costs associated with a business combination are generally expensed subsequent to the acquisition date; and * Changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date generally affect income tax expense. 6 Statement 141R also includes a substantial number of new disclosure requirements. Statement 141 applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company adopted Statement 141R as of January 1, 2009. On December 31, 2008, the SEC published the final rules and interpretations updating its oil and gas reporting requirements. Many of the revisions are updates to definitions in the existing oil and gas rules to make them consistent with the petroleum resource management system, which is a widely accepted standard for the management of petroleum resources that was developed by several industry organizations. Key revisions include changes to the pricing used to estimate reserves utilizing a 12-month average price rather than a single day spot price which eliminates the ability to utilize subsequent prices to the end of a reporting period when the full cost ceiling was exceeded and subsequent pricing exceeds pricing at the end of a reporting period, the ability to include nontraditional resources in reserves, the use of new technology for determining reserves, and permitting disclosure of probable and possible reserves. The SEC will require companies to comply with the amended disclosure requirements for registration statements filed after January 1, 2010, and for annual reports on Form 10-K for fiscal years ending on or after December 15, 2009. Early adoption is not permitted. We are currently assessing the impact that the adoption will have on our disclosures, operating results, financial position and cash flows. NOTE 2. GOING CONCERN As shown in the accompanying financial statements, we incurred a net loss of $52,797 for the three months ended April 30, 2009 and had an accumulated deficit of $176,035 as of April 30, 2009. These conditions raise substantial doubt as to our ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. Our financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. We are in the process of establishing a sufficient ongoing source of revenues to cover its operating costs. The ability of the Company to continue as a going concern is dependent on our ability to fulfill the business plan. NOTE 3. ORGANIZATION AND BUSINESS OPERATIONS Baron Energy Inc. was incorporated as Nevwest Explorations Corp. in the State of Nevada on July 24, 2007 to engage in the acquisition, exploration and development of natural resource properties. Effective September 2, 2008, we changed our name from Nevwest Explorations Corp. to Baron Energy Inc. We are an exploration stage company with no revenues and limited operating history. The principal executive offices are located at 3753 Howard Hughes Parkway, Suite 135, Las Vegas, NV 89169. NOTE 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES OIL AND GAS PROPERTIES, FULL COST METHOD During October, 2008, we acquired the oil, gas, and mineral leasehold working interests in Baylor County, Texas from Lucas Energy Inc. in exchange for $213,500. In addition, we assumed all liabilities and obligations with regard to the acquired property including the obligation to deliver 225 barrels of oil to a third party. In the preliminary purchase price allocation, the entire purchase price was allocated to unevaluated properties. During November 2008, another $200,000 was spent on a feasibility study. On April 6, 2009, we acquired leases in South Texas through a stock purchase of TMG Partners, LLC (see Note 6); the preliminary purchase price allocation for those leases was $855,000. We paid an additional $100,000 towards the lease agreement on April 9, 2009. Oil and gas properties include $4,437 of capitalized costs associated with our asset retirement obligation. We use the full cost method of accounting for oil and gas producing activities. Under this method of accounting, all costs, including internal costs directly related to acquisition, exploration and development activities are capitalized as oil and gas property costs. Properties not subject to amortization consist of acquisition, exploration and development costs which are evaluated on a 7 property-by-property basis. Amortization of these unevaluated property costs begins when the properties are evaluated or their values become impaired. Baron assesses the realizability of unevaluated properties, if any, on at least an annual basis or when there has been an indication that impairment in value may have occurred. Impairment of unevaluated properties is assessed based on management's intention with regard to future exploration and development of individually significant properties and the ability of Baron to obtain funds to finance such exploration and development. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is added to the capitalized costs to be amortized. Costs of oil and gas properties are amortized using the units of production method. There was no production in the three or nine months ended April 30, 2009, therefore no amortization was recorded. Under full cost accounting rules for each cost center, capitalized costs of proved properties, less accumulated amortization and related deferred income taxes, shall not exceed an amount (the "cost ceiling") equal to the sum of (a) the present value of future net cash flows from estimated production of proved oil and gas reserves, based on current economic and operating conditions, discounted at 10 percent, plus (b) the cost of properties not being amortized, plus (c) the lower of cost or estimated fair value of any unproved properties included in the costs being amortized, less (d) any income tax effects related to differences between the book and tax basis of the properties involved. If capitalized costs exceed this limit, the excess is charged as an impairment expense. There was no impairment expense in the three or nine months ended April 30, 2009. ASSET RETIREMENT OBLIGATIONS The fair value of an asset retirement obligation is recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The present value of the estimated asset retirement costs is capitalized as part of the carrying amount of the long-lived asset. For Baron, asset retirement obligations relate to the abandonment of oil and gas producing facilities. The amounts recognized are based upon numerous estimates and assumptions, including future retirement costs, future recoverable quantities of oil and gas, future inflation rates and the credit-adjusted risk-free interest rate. The following is a description of the changes to the Company's asset retirement obligations: 2009 -------- Asset retirement obligations at July 31, 2008 $ -- Additions 4,437 Accretion expense 327 -------- Asset retirement obligations at April 30, 2009 $ 4,764 ======== EARNINGS (LOSS) PER SHARE Basic and diluted earnings (loss) per share calculations are presented in accordance with Financial Accounting Standards Statement 128 and are calculated on the basis of the weighted average number of common shares outstanding during the year. Common stock equivalents are excluded from the calculation when a loss is incurred as their effect would be anti-dilutive. The basic earnings (loss) per share of common stock is based on the weighted average number of shares issued and outstanding at the date of the financial statements. Baron had no options or warrants outstanding at April 30, 2009. RECLASSIFICATIONS Certain amounts in prior periods have been reclassified to conform to current period presentation. 8 NOTE 5. DISCONTINUED OPERATIONS On July 31, 2008, Baron's management made the decision to discontinue its prior business plan to invest in minerals and move its direction towards the investment and exploration of oil and gas. There were no assets associated with these operations, no remaining liabilities as of April 30, 2009, and there was no gain or loss associated with the discontinuation of the minerals operations. Prior period amounts applicable to the mineral operations were reclassified and included under "Loss from discontinued operations." The following table presents the loss for the interim periods shown and from Inception.
July 24, 2007 Three Months Ended Nine Months Ended (inception) April 30, April 30, through --------------------- ---------------------- April 30, 2009 2008 2009 2008 2009 -------- -------- -------- -------- -------- Costs and expenses $ -- $ -- $ (9,500) $ (7,750) $(17,250) -------- -------- -------- -------- -------- Loss from discontinued operations $ -- $ -- $ (9,500) $ (7,750) $(17,250) ======== ======== ======== ======== ========
Discontinued operations have not been segregated in the statement of cash flows. Therefore, amounts for certain captions will not agree with respective data in the statement of operations. NOTE 6. ACQUISITIONS On April 6, 2009, Baron acquired 100% of the issued and outstanding membership interests of TMG Partners, LLC, a Nevada limited liability company ("TMG") in exchange for 18,000,000 restricted shares of common stock of the Company. The initial accounting for the business combination has not been completed because the determination of the acquisition date fair value of the assets acquired. The fair value of the acquired identifiable assets of $4,500,000 is provisional pending receipt of the final valuations for the assets acquired. The fair value of the 18,000,000 restricted shares issued as consideration paid for TMG ($4,500,000) was determined on the basis of the price of the Company's common shares received from private placements during the nine months ended April 30, 2009. The following table summarizes the consideration paid for TMG and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date: Consideration: Cash $ -- Equity instruments (18,000,000 common shares of the Company) 4,500,000 Contingent consideration arrangement -- ---------- Fair value of total consideration transferred 4,500,000 Fair value of the Company's equity interest in TMG held before the business combination -- ---------- $4,500,000 ========== 9 Recognized amounts of identifiable assets acquired and liabilities assumed: Other receivables $ 99,969 Oil inventory 9,389 Oil and gas properties 855,000 Goodwill 3,569,918 Less: Liabilities (34,276) ---------- Total $4,500,000 ========== Estimated acquisition-related costs (included in selling, general, and administrative expenses in the Company's statement of expenses for the nine months ended April 30, 2009) $ 9,750 ========== The following table presents the unaudited pro forma condensed combined statement of expenses as if TMG Partners, LLC had been acquired at the beginning of each period presented. The pro forma results do not purport to represent what the Company's results of operations or financial position would have been if such transactions had occurred on the date indicated.
Pro Forma Pro Forma Three Months Ended Nine Months Ended April 30, April 30, ----------------------------- ---------------------------- 2009 2008 2009 2008 ----------- ----------- ----------- ----------- Professional Fees $ 53,033 $ 1,400 $ 253,714 $ 4,900 Write-down of oil inventory -- -- 20,182 General & Administrative Expenses 22,505 1,713 81,734 4,780 Accretion Expense 110 -- 327 -- ----------- ----------- ----------- ----------- Loss from Continuing Operations (75,648) (3,113) (355,957) (9,680) Discontinued Operations Loss from discontinued operations -- -- (9,500) (7,750) ----------- ----------- ----------- ----------- Net Loss $ (75,648) $ (3,113) $ (365,457) $ (17,430) =========== =========== =========== =========== Basic and diluted net loss per share Net loss per share $ (0.00) $ (0.00) $ (0.01) $ (0.00) Continuing operations loss per share $ (0.00) $ (0.00) $ (0.01) $ (0.00) Discontinued operations loss per share $ (0.00) $ (0.00) $ (0.00) $ (0.00) Weighted average number of common shares outstanding - basic and diluted 44,202,247 32,933,333 43,816,850 30,963,504 ----------- ----------- ----------- -----------
10 NOTE 7. COMMON STOCK All references in the financial statements to the number of common shares and related per share amounts reflect the effect of both the September 2008 and February 2009 stock splits. Effective September 2, 2008, we affected a two (2) for one (1) forward stock split of our issued and outstanding common stock. As a result, our authorized capital was not increased and remained at 75,000,000 shares of common stock with a par value of $0.001 and our issued and outstanding shares increased from 6,000,000 shares of common stock to 12,000,000 shares of common stock. On November 5, 2008, we filed with the State of Nevada the paperwork required for a two (2) for one (1) forward stock split of our authorized, issued and outstanding common stock; however, this stock split was not effective until February 24, 2009. As a result, our authorized capital was increased from 75,000,000 to 150,000,000 shares of common stock with a par value of $0.001 and our issued and outstanding shares increased from 13,100,000 shares of common stock to 26,200,000 shares of common stock. For purposes of calculating earnings per share, the stock split was retroactively applied to prior periods. On August 29, 2008, we sold 1,400,000 shares of common stock for $350,000. On October 16, 2008, we sold 600,000 shares of common stock for $150,000. On January 29, 2009, we sold 200,000 shares of common stock for $50,000. On April 6, 2009, we issued 18,000,000 shares of common stock for 100% membership interest in TMG Partners, LLC valued at $4,500,000 (see Note 6). On April 29, 2009, we sold 200,000 shares of common stock for $50,000. NOTE 8. COMMITMENTS & CONTINGENCIES Upon the acquisition of TMG Partners, LLC (See Note 6), the Company assumed an agreement to acquire certain leases. Under the terms of the agreement, the Company is committed to fund approximately $1,300,000 for leases. As of April 30, 2009, the Company had paid $955,000 of the total $1,300,000 commitment and is obligated to pay the remaining upon request. The Company may from time to time be involved with various litigation and claims that arise in the normal course of business. As of April 30, 2009, no such matters were outstanding. 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD LOOKING STATEMENTS This quarterly report contains forward-looking statements that involve risk and uncertainties. We use words such as "anticipate", "believe", "plan", "expect", "future", "intend", and similar expressions to identify such forward-looking statements. Investors should be aware that all forward-looking statements contained within this filing are good faith estimates of management as of the date of this filing. Our actual results could differ materially from those anticipated in these forward-looking statements. GENERAL INFORMATION You should read the following summary together with the financial statements and related notes that appear elsewhere in this report. In this report, unless the context otherwise denotes, references to "we", "us", "our", "Company", "Baron" and "Baron Energy" are to Baron Energy Inc. (formerly Nevwest Explorations Corp.). Baron Energy Inc. was incorporated as Nevwest Explorations Corp. in the State of Nevada on July 24, 2007 to engage in the acquisition, exploration and development of natural resource properties. Effective September 2, 2008 we changed our name from Nevwest Explorations Corp. to Baron Energy Inc.. We are an exploration stage company with no revenues and limited operating history. The principal executive offices are located at 3753 Howard Hughes Parkway, Las Vegas, NV 89169. The telephone and fax number is (702) 993-7424. We completed a form SB-2 Registration Statement under the Securities Act of 1933 with the U.S. Securities and Exchange Commission registering 12,000,000 shares at a price of $0.02 per share. The offering was completed on April 8, 2008 for total proceeds to the company of $60,000. On July 9, 2008 our common stock shares were approved for trading on the Over-the-Counter Bulletin Board under the symbol "NVWT". On September 2, 2008 the symbol was changed to "BRON". On July 31, 2008, we discontinued our business plan to invest in minerals and move its direction towards the investment and exploration of oil and gas. On August 29, 2008, we sold 1,400,000 shares of common stock for $350,000 Effective September 2, 2008, we affected a two (2) for one (1) forward stock split of our issued and outstanding common stock. As a result, our authorized capital was not increased and remained at 75,000,000 shares of common stock with a par value of $0.001 and our issued and outstanding shares increased from 12,000,000 shares of common stock to 24,000,000 shares of common stock. During October, 2008, we acquired the oil, gas, and mineral leasehold working interests in Baylor County, Texas from Lucas Energy Inc. in exchange for two hundred thirteen thousand five hundred dollars $213,500. In addition, we assumed all liabilities and obligations with regard to the acquired property including the obligation to deliver 225 barrels of oil to a third party. On October 16, 2008, we sold 600,000 shares of common stock for $150,000. On November 3, 2008, Baron entered into an agreement with a third party to perform the evaluation, economic analysis, geologic study, seismic study, AFE design and prospect, and overall feasibility of the South Texas YUGA prospect for a fee of ($200,000). On January 29, 2009, we sold 200,000 shares of common stock for $50,000. April 6, 2009 - Issued 18,000,000 shares of common stock for 100% membership interest in TMG Partners, LLC valued at $4,500,000 (see Note 6 to the financial statements). 12 On April 29, 2009, we sold 200,000 shares of common stock for $50,000. We have a total of 150,000,000 authorized common shares with a par value of $0.001 per share and 44,400,000 common shares issued and outstanding as of April 30, 2009. RESULTS OF OPERATIONS THREE MONTHS ENDED APRIL 30, 2009 AND 2008 We had no revenues during the three months ended April 30, 2009 and 2008. For the three month ended April 30, 2009 and 2008, our professional fees were $30,182 and $1,400, respectively. The increase is due to our increased requirement for accounting and legal assistance related to our progressed business stage. For the three months ended April 30, 2009 and 2008, our general and administrative expenses were $22,505 and $1,713, respectively. The increase is primarily due to consulting fees. For the three months ended April 30, 2009 and 2008, our net losses were $52,797 and $3,113, respectively. The increase is due to our increased business activity. NINE MONTHS ENDED APRIL 30, 2009 AND 2008 We had no revenues during the nine months ended April 30, 2009 and 2008. For the nine months ended April 30, 2009 and 2008, our professional fees were $69,403 and $4,900, respectively. The increase is due to our increased requirement for accounting and legal assistance related to our progressed business stage. For the nine months ended April 30, 2009 and 2008, our general and administrative expenses were $76,309 and $4,780, respectively. The increase is primarily due to consulting fees. For the nine months ended April 30, 2009 and 2008, our net losses were $155,539 and $17,430, respectively. The increase is due to our increased business activity. LIQUIDITY AND CAPITAL RESOURCES As of April 30, 2009, we had cash of $54,625 and working capital of $60,874. This compares to cash of $49,754 and working capital of $54,504 at July 31, 2008. As of April 30, 2009, we had a deficit accumulated during the development stage of $176,035. Baron will need to generate revenues to achieve profitability. To the extent that increases in its operating expenses precede or are not subsequently followed by commensurate revenues, or that Baron is unable to adjust operating expense levels accordingly, the Company's business, results of operations and financial condition would be materially and adversely affected. There can be no assurances that the Company can achieve or sustain profitability or that the Company's operating losses will not increase in the future. If we experience a shortage of funds prior to generating revenues from operations we may utilize funds from our director, who has informally agreed to advance funds to allow us to pay for operating costs, however he has no formal commitment, arrangement or legal obligation to advance or loan funds to us. Cash used in operating activities for the nine months ended April 30, 2009 and 2008 were $81,629 and $21,370, respectively. The increase is due to our increased business activity. 13 Cash used in investing activities for the nine months ended April 30, 2009 and 2008 were $513,500 and $0, respectively. The increase is due to our acquisition of oil and gas properties. Cash provided by financing activities for the nine months ended April 30, 2009 and 2008 were $600,000and $60,000, respectively. The increase is due to our private placements. CRITICAL ACCOUNTING POLICIES We have significant obligations to remove tangible equipment and facilities associated with our oil and gas wells and our gathering systems, and to restore land at the end of oil and gas production operations. Our removal and restoration obligations are associated with plugging and abandoning wells and our gathering systems. Estimating the future restoration and removal costs is difficult and requires us to make estimates and judgments because most of the removal obligations are many years in the future and contracts and regulations often have vague descriptions of what constitutes removal. Asset removal technologies and costs are constantly changing, as are regulatory, political, environmental, safety and public relations considerations. Inherent in the present value calculations are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlements and changes in the legal, regulatory, environmental and political environments. Under the full cost method, we are subject to quarterly calculations of a ceiling or limitation on the amount of our oil and natural gas properties that can be capitalized on our balance sheet. If the net capitalized costs of our oil and natural gas properties exceed the cost center ceiling, we are subject to a ceiling test write down to the extent of such excess. If required, it would reduce earnings and impact stockholders' equity in the period of occurrence and result in lower amortization expense in future periods. The discounted present value of our proved reserves is a major component of the ceiling calculation and represents the component that requires the most subjective judgments. However, the associated prices of oil and natural gas reserves that are included in the discounted present value of the reserves do not require judgment. The ceiling calculation dictates that prices and costs in effect as of the last day of the quarter are held constant. However, we may not be subject to a write down if prices increase subsequent to the end of a quarter in which a write down might otherwise be required. If oil and natural gas prices decline, even if for only a short period of time, or if we have downward revisions to our estimated proved reserves, it is possible that write downs of our oil and natural gas properties could occur in the future. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the risk of loss arising from adverse changes in market rates and prices. We are exposed to risks related to increases in the prices of fuel and raw materials consumed in exploration, development and production. We do not engage in commodity price hedging activities. ITEM 4. CONTROLS AND PROCEDURES Under the supervision and with the participation of our management, including our principal executive officer and the principal financial officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded as of the evaluation date that our disclosure controls and procedures were not effective such that the material information required to be included in our Securities and Exchange Commission reports is accumulated and communicated to our management, including our principal executive and financial officer, recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, particularly during the period when this report was being prepared. There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter ended April 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 14 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Our management is not aware of any significant litigation, pending or threatened, that would have a significant adverse effect on our financial position or results of operations. ITEM 1A. RISK FACTORS There have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the year ended July 31, 2008, as filed with the SEC on October 8, 2008. The risk factors disclosed in our Annual Report on Form 10-K for the fiscal year ended July 31, 2008, in addition to the other information set forth in this quarterly report, could materially affect our business, financial condition or results of operations. Additional risks and uncertainties not currently known to us or that we deem to be immaterial could also materially adversely affect our business, financial condition or results of operations. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS August 29, 2008 - Sold 1,400,000 shares of common stock for $350,000. October 16, 2008 - Sold 600,000 shares of common stock for $150,000. January 29, 2009 - Sold 200,000 shares of common stock for $50,000. April 6, 2009 - Issued 18,000,000 shares of common stock for 100% membership interest in TMG Partners, LLC valued at $4,500,000 (See Note 6 to the financial statements). April 29, 2009 - Sold 200,000 shares of common stock for $50,000. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS The following exhibits are included with this quarterly filing. Those marked with an asterisk and required to be filed hereunder, are incorporated by reference and can be found in their entirety in our Form SB-2 Registration Statement, filed under SEC File Number 333-146627, at the SEC website at www.sec.gov: Exhibit No. Description ----------- ----------- 3.1 Articles of Incorporation* 3.2 Bylaws* 31.1 Sec. 302 Certification of Principal Executive Officer 31.2 Sec. 302 Certification of Principal Financial Officer 32.1 Sec. 906 Certification of Principal Executive Officer 32.2 Sec. 906 Certification of Principal Financial Officer 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. June 12, 2009 Baron Energy Inc. /s/ Michael Maguire -------------------------------------------------- By: Michael Maguire (Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, President, Secretary, Treasurer & Director) /s/ Lou Schiliro -------------------------------------------------- By: Lou Schiliro (Director) In accordance with the requirements of the Securities Act of 1933, this quarterly report was signed by the following person in the capacities and date stated. /s/ Michael Maguire June 12, 2009 - -------------------------------------------------- ------------- Michael Maguire, President & Director Date (Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer) 16 EX-31.1 2 ex31-1.txt CEO SECTION 302 CERTIFICATION Exhibit 31.1 CERTIFICATION I, Michael Maguire, certify that: 1. I have reviewed this report on Form 10-Q of Baron Energy Inc. 2. 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; 3. 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; 4. 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: a) 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 in those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my 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; c) 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 d) 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 5. 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 registrant's board of directors (or persons performing the equivalent functions): a) 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 b) 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. Date: June 12, 2009 /s/ Michael Maguire - ------------------------------------- Michael Maguire President and Chief Executive Officer EX-31.2 3 ex31-2.txt CFO SECTION 302 CERTIFICATION Exhibit 31.2 CERTIFICATION I, Michael Maguire, certify that: 1. I have reviewed this report on Form 10-Q of Baron Energy Inc. 2. 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; 3. 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; 4. 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: a) 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 in those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my 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; c) 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 d) 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 5. 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 registrant's board of directors (or persons performing the equivalent functions): a) 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 b) 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. Date: June 12, 2009 /s/ Michael Maguire - -------------------------------- Michael Maguire Chief Financial Officer EX-32.1 4 ex32-1.txt CEO SECTION 906 CERTIFICATION Exhibit 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Baron Energy Inc. (the "Company") on Form 10-Q for the period ending April 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael Maguire, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. IN WITNESS WHEREOF, the undersigned has executed this certification as of the 12th day of June, 2009. /s/ Michael Maguire - ------------------------------ Chief Executive Officer EX-32.2 5 ex32-2.txt CFO SECTION 906 CERTIFICATION Exhibit 32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Baron Energy Inc. (the "Company") on Form 10-Q for the period ending April 30, 2009 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael Maguire, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. IN WITNESS WHEREOF, the undersigned has executed this certification as of the 12th day of June, 2009. /s/ Michael Maguire - --------------------------------- Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----