0001354488-15-001737.txt : 20150414 0001354488-15-001737.hdr.sgml : 20150414 20150414164119 ACCESSION NUMBER: 0001354488-15-001737 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20150228 FILED AS OF DATE: 20150414 DATE AS OF CHANGE: 20150414 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EFLO ENERGY, INC. CENTRAL INDEX KEY: 0001448806 STANDARD INDUSTRIAL CLASSIFICATION: OIL AND GAS FIELD EXPLORATION SERVICES [1382] IRS NUMBER: 263062721 STATE OF INCORPORATION: NV FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-54328 FILM NUMBER: 15769619 BUSINESS ADDRESS: STREET 1: 112 NORTH CURRY CITY: CARSON CITY STATE: NV ZIP: 89703 BUSINESS PHONE: 775-284-3708 MAIL ADDRESS: STREET 1: 112 NORTH CURRY CITY: CARSON CITY STATE: NV ZIP: 89703 FORMER COMPANY: FORMER CONFORMED NAME: EFL OVERSEAS, INC. DATE OF NAME CHANGE: 20081027 10-Q 1 eflo_10q.htm QUARTERLY REPORT eflo_10q.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended: February 28, 2015
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _______ to _______
 
Commission file number:  000-54328
 
EFLO ENERGY, INC.
(Exact name of registrant as specified in its charter)

Nevada
 
26-3062721
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)

333 N. Sam Houston Parkway East, Suite 600, Houston, Texas  77060
(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code:  (281) 260-1034

                                ­­­                      
 (Former name or former address if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ  No o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
 
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
þ
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Exchange Act). Yes o  No þ

As of April 14, 2015, the registrant had 32,204,299 outstanding shares of common stock.



 
 
 
 
 
FORWARD LOOKING STATEMENTS
 
The information contained in this Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties. Any statement which does not contain a historical fact may be deemed to be a forward-looking statement. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expect", "plan", "intend", "anticipate", "believe", "estimate", "predict", "potential" or "continue", the negative of such terms or other comparable terminology. In evaluating forward looking statements, you should consider various factors outlined in our latest Form 10-K filed with U.S. Securities Exchange Commission (“SEC”) on December 1, 2014 and, from time to time, in other reports we file with the SEC. These factors may cause our actual results to differ materially from any forward-looking statement. We disclaim any obligation to publicly update these statements, or disclose any difference between our actual results and those reflected in these statements.

 
1

 
 
PART 1 – FINANCIAL INFORMATION
 
ITEM 1.   FINANCIAL STATEMENTS
 
EFLO ENERGY, INC.
Condensed Consolidated Balance Sheets

(Unaudited - Expressed in US dollars)
 
   
February 28, 2015
$
   
August 31, 2014
$
 
             
ASSETS
 
             
CURRENT ASSETS
           
Cash
    158,905       650,599  
Accounts receivable; joint interest owners and other
    1,292,291       1,589,898  
Prepaids
    111,507       47,864  
Other
    15,922       30,182  
      1,578,625       2,318,543  
                 
OIL AND GAS PROPERTIES, full cost method, unproven
    50,534,546       50,305,989  
OTHER ASSETS – Goodwill
    1,194,365       1,194,365  
                 
TOTAL ASSETS
    53,307,536       53,818,897  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
                 
CURRENT LIABILITIES
               
Accounts payable and accrued liabilities
    2,866,371       4,250,625  
Convertible notes, net of $56,029 and $233,964 of unamortized discount at February 28, 2015 and August 31, 2014, respectively
    2,223,971       3,396,036  
Asset retirement obligation – current
    80,000       80,000  
      5,170,342       7,726,661  
                 
NONCURRENT LIABILITIES
               
Asset retirement obligations
    18,109,557       17,759,023  
Deferred income taxes
    3,297,434       3,297,434  
TOTAL LIABILITIES
    26,577,333       28,783,118  
                 
STOCKHOLDERS’ EQUITY
               
Capital Stock
               
Authorized:
               
10,000,000 preferred shares, par value $0.001 per share
               
150,000,000 common shares, par value $0.001 per share
               
Issued and outstanding:
               
32,204,299 common shares at February 28, 2015 (August 31, 2014 – 19,897,714 common shares)
    32,205       19,898  
Additional paid-in capital
    32,094,837       30,493,045  
Accumulated other comprehensive loss
    (141,033 )     (90,423 )
Accumulated deficit
    (5,255,806 )     (5,386,741 )
TOTAL STOCKHOLDERS’ EQUITY
    26,730,203       25,035,779  
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
    53,307,536       53,818,897  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
2

 
 
EFLO ENERGY, INC.
Condensed Consolidated Statements of Income (Loss)

(Unaudited - Expressed in US dollars)
 
   
Three months ended
February 28,
   
Six months ended
February 28,
 
   
2015
$
   
2014
$
   
2015
$
   
2014
$
 
                                 
                                 
EXPENSES
                               
Management and directors' fees
    102,884       218,676       244,725       432,568  
Stock-based compensation expense
    14,136       106,440       33,624       222,419  
Consulting fees
    58,536       86,737       128,345       244,535  
Professional fees
    93,989       112,752       230,599       245,905  
Financing fees
    -       -       -       176,400  
Office, travel and general
    70,285       145,474       134,211       237,353  
Accretion of asset retirement obligations
    175,307       172,374       350,534       343,042  
Total Expenses
    515,137       842,453       1,122,038       1,902,222  
                                 
OPERATING LOSS
    (515,137 )     (842,453 )     (1,122,038 )     (1,902,222 )
                                 
OTHER INCOME (EXPENSE)
                               
Interest expense and other financing costs
    (181,229 )     (101,794 )     (396,423 )     (136,920 )
Gain on settlement of accounts payable and accrued liabilities
    3,798       -       1,649,396       -  
NET INCOME (LOSS) before taxes
    (692,568 )     (944,247 )     130,935       (2,039,142 )
Provision for income tax
    -       -       -       -  
NET INCOME (LOSS)
    (692,568 )     (944,247 )     130,935       (2,039,142 )
Foreign currency translation
    (35,917 )     (39,185 )     (50,610 )     (33,084 )
COMPREHENSIVE INCOME (LOSS)
    (728,485 )     (983,432 )     80,325       (2,072,226 )
                                 
BASIC AND DILUTED INCOME (LOSS) PER SHARE
    (0.03 )     (0.05 )     0.01       (0.10 )
                                 
WEIGHTED AVERAGE SHARES OUTSTANDING
    26,926,956       19,539,191       23,398,431       19,513,604  

The accompanying notes are an integral part of these consolidated financial statements.
 
 
3

 

EFLO ENERGY, INC.
Condensed Consolidated Statements of Cash Flows
For the six months ended February 28, 2015 and 2014

(Unaudited - Expressed in US dollars)
 
   
2015
$
   
2014
$
 
                 
CASH FLOWS FROM OPERATING ACTIVITIES
               
Net income (loss)
    130,935       (2,039,142 )
Adjustments to reconcile net income (loss) to net cash used in operating activities:
               
Stock-based compensation and fee payments
    33,624       236,494  
Amortization of convertible note discount
    177,935       59,790  
Unrealized foreign exchange losses
    -       (33,084 )
Gain on settlement of accounts payable and accrued liabilities
    (1,649,396 )     -  
Accretion of asset retirement obligations
    350,534       343,042  
Changes in working capital items -
               
Accounts receivable
    272,302       (360,173 )
Prepaids and other
    (49,383 )     (38,871 )
Accounts payable and accrued liabilities
    554,667       550,710  
Net cash used in operating activities
    (178,782 )     (1,281,234 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Expenditures on oil and gas properties, net
    (312,912 )     (522,323 )
Net cash used in investing activities
    (312,912 )     (522,323 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
Proceeds from notes payable
    -       2,255,000  
Net cash provided by financing activities
    -       2,255,000  
                 
(DECREASE) INCREASE IN CASH
    (491,694 )     451,443  
                 
CASH, BEGINNING OF PERIOD
    650,599       476,522  
                 
CASH, END OF PERIOD
    158,905       927,965  
                 
SUPPLEMENTAL DISCLOSURE:
               
Cash paid for interest
    -       -  
Cash paid for income taxes
    -       -  
NON-CASH INVESTING ACTIVITIES:
               
Accrued expenditures on oil and gas properties
    930,321       102,000  
NON-CASH FINANCING ACTIVITIES: 
               
Common stock issued for settlement of accounts payable and accrued liabilities
    230,475       105,000  
Common stock issued as settlement of convertible notes
    1,350,000       -  
                 

The accompanying notes are an integral part of these consolidated financial statements.
 
 
4

 
 
EFLO ENERGY, INC.
Notes to the Condensed Consolidated Financial Statements
For the six months ended February 28, 2015

(Unaudited - Expressed in US dollars except where otherwise indicated)
 
1.
BASIS OF PRESENTATION
 
Unaudited Interim Condensed Consolidated Financial Statements
 
The unaudited interim condensed consolidated financial statements of EFLO Energy, Inc. (the “Company”), have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). They do not include all information and footnotes required by GAAP for complete financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the consolidated financial statements for the year ended August 31, 2014 included in the Company’s Annual Report on Form 10-K filed with the SEC. The unaudited interim condensed consolidated financial statements should be read in conjunction with those consolidated financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for fair presentation have been made. Operating results for the six months ended February 28, 2015 are not necessarily indicative of the results that may be expected for the year ending August 31, 2015.
 
Recent Accounting Pronouncements
 
In June 2014, the FASB issued Accounting Standards Update 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation (ASU 2014-10), which eliminates the concept of a development stage entity (DSE) from U.S. GAAP. This change rescinds certain financial reporting requirements that have historically applied to DSEs and is intended to result in cost-savings for affected entities.  ASU 2014-10 is effective for public entities for annual reporting periods beginning after December 15, 2014 and interim periods therein.
 
The Company adopted ASU 2014-10 on September 1, 2014 and has applied its guidance in the preparation of these unaudited interim condensed consolidated financial statements.  The application of ASU 2014-10 resulted in the removal of 1) inception-to-date information in the statements of operations and cash flows, 2) labels on the financial statements indicating the Company’s exploration stage status, 3) certain historic disclosures describing exploration stage activities in which the Company has been engaged. The Company does not believe, however, that the removal of this information has a material effect on its unaudited interim condensed consolidated financial statements or the related footnote disclosures thereto.
 
In August 2014, the FASB issued Accounting Standard Update No. 2014-15, Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern. The amendments require management to perform interim and annual assessments of an entity's ability to continue as a going concern and provides guidance on determining when and how to disclose going concern uncertainties in the financial statements. The standard applies to all entities and is effective for annual and interim reporting periods ending after December 15, 2016, with early adoption permitted. The Company is currently evaluating the impact that this new guidance will have on its financial statements.
 
2.
OIL AND GAS PROPERTIES
 
Oil and Gas Acquisition – Kotaneelee Gas Project (the “KGP”)
 
As a result of two working interest acquisitions, the Company generally owns a 53.65% working interest in the KGP, including a 100% working interest in one shut in gas well.
 
The KGP covers 30,188 gross acres in the Yukon Territory in Canada, and includes: a gas dehydration plant (capacity: 70 MMcf/d), one shut in gas well, one water disposal well (capacity: 6,000 bbl/d), and two suspended gas wells.  The KGP has a fully developed gas gathering, sales and delivery infrastructure, airstrip, roads, flarestack, storage tanks, barge dock and a 24 person permanent camp facility.  The KGP gas dehydration plant has a processing capacity of 70 MMcf/d, outlet gas compression of 1,200 psig and is tied-in through a 24-inch gas sales line to a gas processing plant in Fort Nelson, British Columbia.
 
 
5

 
 
EFLO ENERGY, INC.
Notes to the Condensed Consolidated Financial Statements
For the six months ended February 28, 2015

(Unaudited - Expressed in US dollars except where otherwise indicated)
 
On July 18, 2012, the Company completed an acquisition of Devon Canada’s (“Devon”) entire right and interest (generally a working interest of 22.989%, with a working interest of 69.337% in one shut in gas well) in the KGP. As consideration for Devon’s working interest in the KGP, (the “Devon Assets”), the Company paid approximately $23,298,000. The consideration was comprised of $290,000 in cash, 7,250,000 shares of the Company’s restricted common stock valued at $15,950,000, and the absorption of approximately $7,058,000 in asset retirement obligations.
 
On October 17, 2012, the Company completed a Share Purchase Agreement with Nahanni Energy Inc., 1700665 Alberta Ltd., Apex Energy (2000), Inc. and Canada Southern Petroleum #1 L.P. (jointly “Nahanni”) for the acquisition of its entire right and interest (generally a working interest of 30.664%) in the KGP (the “Nahanni Assets”) which, in addition to the 69.337% working interest acquired from Devon on July 18, 2012, provided the Company with a 100% interest in one shut in gas well in the KGP.
 
As consideration for the Nahanni Assets, the Company paid Nahanni approximately $13,761,000. The consideration was comprised of approximately $133,000 in cash ($398,550 offset by $265,950 paid in connection with the acquisition of the Devon Assets in settlement of certain Nahanni indebtedness), 1,614,767 shares of one of the Company’s subsidiaries, which are exchangeable for 1,614,767 shares of the Company’s restricted common stock valued at approximately $4,191,000, and the absorption of approximately $9,437,000 in asset retirement obligations. The number of shares issued by the Company’s subsidiary was calculated by dividing the fair value of the exchangeable shares by the volume weighted average trading price of the Company’s stock for the ten (10) trading days prior to closing the purchase agreement.  The fair value of the exchangeable shares has been recorded as additional paid in capital in the Company’s equity. The exchangeable shares enjoy no voting or revenue participation rights in the subsidiary.
 
The Company records assets acquired and liabilities assumed at their estimated acquisition date fair values, while transaction and integration costs associated with the acquisitions are expensed as incurred.  The Company uses relevant market assumptions to determine fair value and allocate purchase price, such as future commodity pricing for purchased hydrocarbons, market multiples for similar transactions and replacement value for certain equipment.  Many of the assumptions are unobservable. The Company’s preliminary assessment of the fair value of the Nahanni Assets resulted in a valuation of $25,526,554. As a result of incorporating this information into the purchase price allocation, a gain on bargain purchase of $11,766,787 was recognized in the accompanying consolidated statement of operations. The gain on bargain purchase was primarily attributable to the strategic nature of the divestiture by the motivated seller, coupled with a confluence of certain favorable economic trends in the industry and the geographic region in which the Nahanni Assets are located.
 
The Company allocated the consideration paid for the Nahanni Assets and Devon assets based upon its assessment of their fair value at the dates of purchase, as follows:
Fair Value of Assets Acquired  
Asset Description
 
Nahanni Assets
$
   
Devon Assets
$
   
Total
$
 
                   
Unproved leasehold costs
    14,548,787       13,827,001       28,375,788  
Plant and equipment
    8,594,362       6,484,001       15,078,363  
Gathering systems
    2,383,405       1,788,001       4,171,406  
Vehicles
    -       4,527       4,527  
Unproven Properties
    25,526,554       22,103,530       47,630,084  
Goodwill
    -       1,194,365       1,194,365  
Total Assets Acquired - KGP
    25,526,554       23,297,895       48,824,449  
 
 
6

 
 
EFLO ENERGY, INC.
Notes to the Condensed Consolidated Financial Statements
For the six months ended February 28, 2015

(Unaudited - Expressed in US dollars except where otherwise indicated)
 
Development costs incurred to obtain access and provide facilities for extracting, gathering, treating and storing oil and gas related to unproved oil and gas properties that are being evaluated for economic viability are capitalized to the full cost pool until proved reserves are established, or determination is made that the unproved properties are impaired.  During the six months ended February 28, 2015, the full cost pool was increased by $228,557 (2014 - $548,495) as a result of these costs.
 
3.
ASSET RETIREMENT OBLIGATIONS
 
In connection with its acquisition of the Nahanni Assets and the Devon Assets, the Company acquired $9,436,526 and $7,057,716 in asset retirement obligations, respectively, relating to its portion of the abandonment, reclamation and environmental liabilities associated with the KGP.
 
On March 31, 2011, the Company initiated oil and gas operations by entry into a Farmout and Participation Agreement which provided for its acquisition of a net working interest ranging from 21.25% to 42.5%, in a 2,629 acre oil and gas lease, insofar as that lease covers from the surface to the base of the San Miguel formation (the “San Miguel Lease”). The San Miguel Lease, which is located in Zavala County, Texas, is unproven and has no current production. The Company recorded $80,000 in asset retirement obligations related to the future plugging and abandonment of a test well on the San Miguel Lease. At May 31, 2014, the Company’s interest in the San Miguel lease was impaired and expensed to the extent of its carrying value, which included the full amount of the associated asset retirement obligation. The entire asset retirement obligation relating to the San Miguel Lease has been classified as a current liability.
 
The Company has no assets that are legally restricted for purposes of settling asset retirement obligations. As part of the Company’s acquisition of the Devon Assets, it provided Devon a corporate guarantee (the “Guarantee”) in the amount of CAD$10,000,000 ($9,225,000) and delivered a letter of credit in the amount of CAD$4,380,000 ($4,041,000) to Devon (the “Devon LOC”). The Company also delivered a letter of credit in the amount of CAD$625,000 ($577,000) to the government of the Yukon Territory (the “Yukon LOC”). The amounts of the Devon LOC and Yukon LOC reduce the amount of the Guarantee on a dollar-for-dollar basis. The Company is primarily responsible for payment of all asset retirement obligations. The Guarantee, Devon LOC and Yukon LOC are only available to Devon in the event the Company defaults upon its asset retirement obligations relating to the Devon Assets.
 
The following table summarizes changes to the Company’s asset retirement obligations during the six months ended February 28, 2015 and the year ended August 31, 2014:
    $  
         
Balance, August 31, 2013
    17,146,750  
Liabilities incurred (acquired)
    -  
Accretion expense
    692,273  
Balance, August 31, 2014
    17,839,023  
Liabilities incurred (acquired)
    -  
Accretion expense
    350,534  
Total Balance, February 28, 2015
    18,189,557  
Total Balance, February 28, 2015 – Current
    80,000  
Total Balance, February 28, 2015 – Long Term
    18,109,557  
 
 
7

 
 
EFLO ENERGY, INC.
Notes to the Condensed Consolidated Financial Statements
For the six months ended February 28, 2015

(Unaudited - Expressed in US dollars except where otherwise indicated)
 
4.
CONVERTIBLE NOTES PAYABLE
 
The following table summarizes changes to the Company’s convertible notes payable during the six months ended February 28, 2015 and the year ended August 31, 2014:
 
   
2013 Convertible Notes
$
   
2014 Convertible Notes
$
 
             
Balance, August 31, 2013
    -       -  
Principal received
    2,255,000       1,400,000  
Transaction costs
    (533,803 )     -  
Amortization of transaction costs
    299,839       -  
Conversion into common stock
    (25,000 )     -  
Balance, August 31, 2014
    1,996,036       1,400,000  
Amortization of transaction costs
    177,935       -  
Settlement of principal and interest in common stock
    -       (1,350,000 )
Balance, February 28, 2015
    2,173,971       50,000  
 
2013 Convertible Note Offering
 
On October 30, 2013 the Company sold convertible notes having an aggregate principal amount of $2,255,000 (the “2013 Convertible Notes”), to 22 accredited investors, under the following general terms:
 
●  
the maturity date is April 30, 2015;
●  
the principal amount is convertible into shares of the Company’s common stock at a price of $1.00 per share;
●  
interest is at 15% per annum payable, at the Company’s election, in cash or shares of its common stock at a rate of $1.25 per share; and,
●  
the Company also issued stock purchase warrants in connection with the 2013 Convertible Note providing for the purchase of up to 1,127,500 shares of its common stock (1 full share for each $2.00 invested in the 2013 Convertible Notes”) at an exercise price of $1.25 per share for a period of three years (the "Stock Purchase Warrants”).

During the year ended August 31, 2014, the Company paid $176,400 in finders’ fees which were recognized as financing fees in the statement of loss.  The fair value of the Stock Purchase Warrants ($533,803) is being amortized to the statement of loss over the life of the 2013 Convertible Notes.

During the six months ended February 28, 2015, the Company recognized $167,250 (2014 - $75,773) in interest expense relating to the 2013 Convertible Notes and $177,935 (2014 - $61,147) as amortization of transaction costs.

On June 2, 2014, $25,000 in principal payable on the 2013 Convertible Notes was converted into 25,000 shares of the Company’s common stock at a conversion price of $1.00 per share.

2014 Convertible Note Offering

During June 2014, the Company sold convertible notes having an aggregate principal amount of $1,400,000 (the “2014 Convertible Notes”), to two accredited investors, and one non-accredited investor, under the following general terms:

●  
the maturity date is December 31, 2014.  On December 30, 2014, the maturity date was extended to January 31, 2015;
 
 
8

 
 
EFLO ENERGY, INC.
Notes to the Condensed Consolidated Financial Statements
For the six months ended February 28, 2015

(Unaudited - Expressed in US dollars except where otherwise indicated)
 
●  
at the option of the note holder, the principal amount is convertible into shares of the Company’s common stock at a price per share to be determined in connection with the Company’s planned offering of shares upon migration to a senior stock exchange, less a 10% discount (the “2014 Conversion Right”);
●  
a 6% financing fee on the principal sum of the 2014 Convertible Notes, is payable at the option of the note holder, in shares of the Company’s common stock (the number of which is to be calculated using the closing market price of the Company’s shares at the notes’ maturity date), or in cash of $84,000.
●  
the 2014 Convertible Notes are non-interest bearing so long as they are paid or converted prior to their maturity date. In the event of default, or if a 2014 Convertible Note is not paid, or converted on or within ten (10) days following its maturity date:
a)  
the note will bear interest at 10% per annum, payable monthly; and,
b)  
an additional 4% financing fee (the “Default Financing Fee”) on the then outstanding principal balance of the 2014 Convertible Note(s) shall become due and payable. The Company is obligated to pay the Default Financing Fee in common shares at a conversion price equal to the closing market price of the common shares on the date of an event of default, or at the maturity date, whichever is earliest.

Entities controlled, in part or in whole, by the Company’s Chairman and former President acquired $1,000,000 and $350,000 of 2014 Convertible Notes under these terms.

During the six months ended February 28, 2015, the Company recognized $46,817 (2014 - $nil) of financing expense relating to the 6% financing fee.

On January 12, 2015, the Company entered into a settlement agreement with two of the three 2014 Convertible Notes holders whereby $1,350,000 of principal and $81,000 of the 6% financing fee were settled by the issuance of 11,007,692 shares of the Company’s common stock calculated using a price of $0.13 per share.

During the six months ended February 28, 2015, the Company recognized $2,000 of Default Financing Fee and $417 of interest expense (2014 - $nil).

5.
CAPITAL STOCK AND STOCK-BASED COMPENSATION

 
a)
Issuance of Common Stock:

During the six months ended February 28, 2015, the Company completed the follow stock transactions:

i)  
During December 2014, in connection with cost cutting efforts, Holloman Corporation and Niconsult GmbH voluntarily terminated their service agreements with the Company (Note 6). The effective date of those terminations was June 1, 2014.  As a result, the Company adjusted fees totaling $22,500 related to the three months ended August 31, 2014, which had been paid using 23,991 shares of its restricted common stock, at a weighted average price of $0.938 per share. This adjustment resulted in the recognition of a gain on forgiveness of accounts payable of $22,500 during the six months ended February 28, 2015.

 
ii)
On January 12, 2015, the Company issued 11,007,692 shares of the Company’s common stock as settlement of $1,350,000 of 2014 Convertible Notes principal and $81,000 of 6% financing fee (Notes 4 and 7).

 
iii)
On January 12, 2015, the Company issued 1,322,884 shares of the Company’s common stock at the fair value of $171,975 as settlement of $1,798,871 of accounts payable and accrued liabilities and accordingly, the Company recorded a gain on settlement of accounts payable and accrued liabilities of $1,626,896 (Note 7).

 
b)
Convertible notes:

The Company has outstanding 2013 Convertible Notes and 2014 Convertible Notes (Note 4) which are convertible into shares of the Company’s common stock.
 
 
9

 
 
EFLO ENERGY, INC.
Notes to the Condensed Consolidated Financial Statements
For the six months ended February 28, 2015

(Unaudited - Expressed in US dollars except where otherwise indicated)
 
 
c)
Stock purchase warrants:

The Company has 1,127,500 Stock Purchase Warrants outstanding which are exercisable at $1.25 per share up to October 30, 2016.

 
d)
Options:

On August 27, 2012, the Company established a Non-Qualified Stock Option Plan and a Stock Bonus Plan (the “Plans”). The Non-Qualified Stock Option Plan (the “Option Plan”) authorizes the issuance of up to 2,000,000 shares of the Company’s common stock. The Stock Bonus Plan provides for the issuance of up to 350,000 common shares (“Bonus Shares”). Under the Plans, shares may only be issued to employees, directors, officers, consultants and advisors, provided qualifying services are rendered.
The Company’s stock options outstanding as at February 28, 2015 and August 31, 2014 and the changes for the periods then ended are as follows:

   
Number Outstanding
#
   
Weighted Average Exercise Price
$
 
             
Balance, August 31, 2013
    1,600,000       2.46  
Expired
    (600,000 )     2.23  
Balance, August 31, 2014
    1,000,000       2.60  
Expired
    (100,000 )     2.30  
Balance, February 28, 2015
    900,000       2.63  

Summary of stock options outstanding at February 28, 2015:

Security
 
Number Outstanding
#
   
Exercise Price
$
 
Expiry Date
               
Stock options
    100,000       2.50  
January 15, 2016
Stock options
    100,000       2.75  
January 15, 2017
Stock options
    100,000       3.00  
July 15, 2017
Stock options
    300,000       2.50  
August 27, 2017
Stock options
    300,000       2.65  
August 27, 2017

As of February 28, 2015, $13,174 of total unrecognized compensation cost remains under the Option Plan. All of this amount is expected to be recognized during the remainder of fiscal 2015.

During the six months ended February 28, 2015, the Company had stock-based compensation expense of $33,624 (2014 - $222,419).

6.
RELATED PARTY TRANSACTIONS

Effective January 20, 2011, a company controlled by the Company’s former Chief Executive Officer, its former Chief Financial Officer, and an unrelated consultant (the “Finders”) entered into an agreement with the Company providing for the payment of finder’s compensation ranging from 5% (on transaction values greater than $1,000,000) to 10% (on transactions valued up to $300,000) on transactions introduced to the Company by or through the Finders for a period of two years (the “Finder’s Fee Agreement”). Under the Finder’s Fee Agreement, compensation is divided between the Finders and the Finders may elect whether the finder’s compensation is payable in cash, or shares of the Company’s restricted common stock. The Finder’s Fee Agreement specifically recognizes that the KGP has been presented to the Company by the Finders. On January 12, 2015, two of the Finders settled the fees payable under the Finders’ Fee Agreement at no cost to the Company (see Note 7).
 
 
10

 
 
EFLO ENERGY, INC.
Notes to the Condensed Consolidated Financial Statements
For the six months ended February 28, 2015

(Unaudited - Expressed in US dollars except where otherwise indicated)
 
Effective September 1, 2013, the Company executed an administrative services agreement with Holloman Corporation. Under this agreement, fees of $5,000 per month are payable to Holloman Corporation covering; office and meeting space, supplies, utilities, office equipment, network access and other administrative facilities costs. These fees are payable quarterly in shares of the Company’s restricted common stock at the closing price of the stock on the last trading-day of the applicable monthly billing period. During December 2014, in connection with cost cutting efforts, Holloman Corporation voluntarily terminated its administrative services agreement with the Company. The effective date of that termination was June 1, 2014.

The chairman of the Company’s board of directors is also a director of Pacific World Energy Corporation (“Pacific World”).  Pacific World held $1,000,000 of 2014 Convertible Notes principal until settlement for shares of the Company’s common stock on January 12, 2015 (Note 4).

7.
GAIN ON SETTLEMENT OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

On January 12, 2015, the Company (together with its officers and directors), two of the 2014 Convertible Notes holders, and other interest parties entered into a settlement agreement (the “Settlement Agreement”).

Under the terms of the Settlement Agreement, two of the 2014 Convertible Notes holders agreed to accept payment of principal and 6% financing fees aggregating $1,431,000 into 11,007,692 shares of the Company’s common stock calculated using a price of $0.13 per share (Note 4).

The Settlement Agreement also provided for the following liability settlements which were settled with 1,322,884 shares of the Company’s common stock calculated using a price of $0.13 per share:

Description of liability
 
Accounts payable and accrued liabilities
$
   
Agreed settlement amount
$
   
Gain on settlement of accounts payable and accrued liabilities
$
   
Number of shares of the Company’s common stock
#
 
                         
Finders’ fees
    1,079,802       -       1,079,802       -  
Directors’ fees
    451,750       55,900       395,850       430,000  
Management fees
    233,891       116,075       117,816       892,884  
Consulting fees
    33,428       -       33,428       -  
      1,798,871       171,975       1,626,896       1,322,884  

8.
SUBSEQUENT EVENTS

On March 4, 2015, the Company entered into a Loan Agreement (the “Loan Agreement”) with Fundacion Inversiones Barroco (“FIB”), a Panamanian corporation, whereby the Company borrowed CAD$600,000 from FIB (the “Loan”).  The Loan bears interest at a rate of 10% per annum, is unsecured and due on or before February 1, 2016.  On April 7, 2015, the Company repaid the CAD$600,000 loan.

The Loan Agreement is a related party transaction as a director of the Company is related to FIB.
 
 
11

 
 
ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

EFLO Energy, Inc. (formerly, EFL Overseas, Inc.) was incorporated in Nevada on July 22, 2008. We are engaged in the acquisition, exploration and development of oil and gas properties in the United States and Canada. Under U.S. GAAP we have only one reportable operating segment which focuses upon our development of the Kotaneelee Gas Project (the “KGP”).

During March 2011, we initiated oil and gas operations by entry into the Eagleford Agreement which provided for our acquisition of a net working interest, ranging from 21.25% to 42.5%, in the San Miguel Lease.  The San Miguel Lease is located in Zavala County, Texas. Our investment in the San Miguel Lease has been fully impaired, and we have no current production or reserves relating to that investment.

During the period from July 18, 2012 through October 17, 2012, we acquired working interests totaling 53.65% (including a 100% working interest in one shut in gas well) in the KGP located in the Yukon Territory in Canada. We believe the KGP has significant conventional and shale gas potential and is supported by an environment of growing investment in gas processing and export in the Pacific Northwest. The KGP has no proven reserves.

We completed our acquisition of an initial working interest of 22.989% (including a 69.337% working interest in one shut in gas well) in the KGP on July 18, 2012, with an effective date of July 1, 2012. Since that date, we have been responsible for the operations of the KGP and have recognized our portion of its related net revenues (which are immaterial) and development costs as an increase to the unamortized cost pool related to our unproven interests while economic viability is being evaluated.

Prior to our initial working interest acquisition in the KGP, we had generated no revenues.

Management changes

Effective January 15, 2015, Keith Macdonald resigned as our Chief Executive Officer, Secretary and Director, and Al Conrad Kerr Jr. was appointed as our Chief Executive Officer and Director.  Effective January 15, 2015, Robert Wesolek resigned as our Chief Financial and Accounting Officer and Director and Matthew Anderson was appointed as our Chief Financial and Accounting Officer. Nico Civelli was also appointed as a member of our Board of Directors on January 15, 2015. These resignations and appointments were made in accordance with the Settlement Agreement (see Note 7 to the interim condensed consolidated financial statements included in this report). In an effort to reduce costs, decrease liabilities and support the Company’s future operations, Mr. Macdonald and Mr. Wesolek have agreed to settle fees payable to them in the aggregate amount of $1,393,500 for $121,825 to be paid using 937,115 shares of our common stock calculated at a price of $0.13 per share.

Mr. Al Conrad Kerr Jr. (Age 58) is a senior energy professional with over thirty (30) years of diversified experience in the natural gas, LNG, power generation, exploration and production industries in Africa, Asia, the Middle East and North America. His experience includes international business development, project execution and marketing as well as strategy planning. Since October 2014 Mr. Kerr has been the principal of Northern Ocean Star LLC, an energy-consulting firm focused on natural gas monetization. Mr. Kerr has served as the Vice President of Pacific LNG Operations Ltd. in Singapore, a natural gas exploration/development company, (2011 – 2014). Between June 2009 through January 2011, Mr. Kerr was a Principal of Caribbean LNG (Jamaica) Limited, a company working to develop natural gas distribution in Jamaica.  Previously, Mr. Kerr was a Managing Director – Head of Global LNG at Merrill Lynch Commodities Inc. (2007 – 2009).  Mr. Kerr previously worked for Mobil and ExxonMobil (1996 - 2007), Tenneco Gas Company (1994 – 1996), TransAlta Utility Corp. (1992 – 1994), Stewart and Stevenson Corporation (1986 – 1992) and Koomey Incorporated (1980 – 1985).  He has served on the Board on Blacksands Petroleum Inc. (BSPE) since December 2014. Mr. Kerr has a Bachelor’s Degree in Business Administration from the University of Texas. Mr. Kerr was previously an Officer in the U.S. Merchant Marines with a Captain’s License from the United States Coast Guard.
 
Mr. Nico Civelli (Age 37), is a Zurich-based independent financial advisor who has provided financial consultancy services through his wholly-owned company Niconsult GmbH since 2005. In this capacity, Mr. Civelli works closely with several leading European and North American private asset management companies and funds, which specialize in the natural resources sector. Mr. Civelli studied at the Universities of Zurich and St. Gallen in Switzerland and completed a Masters Degree in Applied Finance at the University of Southern Queensland in Australia. Mr. Civelli is currently Vice President of Finance and director of Terra Nova Energy Ltd. (since 2012), an oil and gas exploration company and Callinex Mines Inc. (since 2013), a mineral exploration, both listed on the TSXV. Since 2011, Mr. Civelli has also served as VP Finance of Pacific LNG (Singapore) and since 2014, as director and VP Finance & Strategy for Pacific Hunt Pte Ltd., a private oil and gas exploration company with concessions in Myanmar.
 
 
12

 
 
Mr. Matt Anderson (Age 32) holds a Bachelor of Commerce degree from McGill University and obtained his Chartered Accountant designation in 2008.  Mr. Anderson is a Senior Consultant with Malaspina Consultants Inc. a private company that provides accounting and administrative infrastructure to junior public companies. He serves or has served as CFO of I-Minerals Inc. (since July 2011) as well as several other junior public companies including Terra Nova Energy Ltd. (since October 2014), Wolfpack Gold Corp. (from October 2012 to September 2014), Search Minerals Inc. (since January 2010), Dynamic Oil & Gas Exploration Inc. (since January 2014), Tigris Uranium Corp. (from October 2012 to May 2013) and Explorator Resources Inc. (from October 2010 to May 2011).

Mr. Kerr and Mr. Civelli own directly and indirectly 100,000 and 37,199 shares of our common stock, respectively.

The Kotaneelee Gas Project (“KGP”) – Yukon Territory, Canada

Working Interest Acquisitions

The KGP covers 30,188 gross acres in the Yukon Territory in Canada, and includes a gas dehydration plant, one shut in gas well, one water disposal well (capacity: 6,000 bbl/d), and two suspended gas wells.  The KGP has a fully developed gas gathering, sales and delivery infrastructure, airstrip, roads, flarestack, storage tanks, barge dock and a 24 person permanent camp facility.  The KGP’s gas dehydration plant has a processing capacity of 70 MMcf/d, outlet gas compression of 1,200 psig and is tied-in to a 24-inch gas sales line to a gas processing plant in Fort Nelson, British Columbia.  The Fort Nelson plant is owned and operated by Spectra Energy and connected to the North American gas grid with a delivery capacity of approximately 1 Bcf/d.

The KGP is located in the Liard Basin, a Western Canadian sedimentary basin. The Liard Basin extends across the border between northeast British Columbia and the southeastern-most corner of the Yukon. It is located west of the Horn River Basin, between the Rocky Mountains to the south and the Mackenzie and Franklin Mountains to the north.

The Liard Basin in the Yukon Territory contains portions of three fields that are all on trend with each other: Beaver River Field, Kotaneelee Field and Pointed Mountain Field. The Kotaneelee field is currently the only field with in place infrastructure capable of production in the Yukon Territory. These three fields all produced from the Nahanni formation which is a naturally fractured Devonian carbonate section.  The Nahanni formation at the KGP has produced over 230 Bcf of gas out of three wells with two such wells having had calculated AOF's of 200 to 430 Mcf/d.  We believe that there are remaining volumes of gas in the Nahanni reservoir at the KGP and plan to exploit these resources are part of our business plan.

On July 18, 2012, the Company completed an acquisition of Devon Canada’s (“Devon”) entire right and interest (generally a working interest of 22.989%, with a working interest of 69.337% in one subsequently shut in gas well) in the KGP. As consideration for Devon’s working interest in the KGP, (the “Devon Assets”), the Company paid approximately $23,298,000. The consideration was comprised of $290,000 in cash, 7,250,000 shares of our restricted common stock valued at $15,950,000, and the absorption of approximately $7,058,000 in asset retirement obligations.
 
On October 17, 2012, we completed a Share Purchase Agreement (the “Purchase Agreement”) with Nahanni Energy Inc., 1700665 Alberta Ltd., Apex Energy (2000), Inc. and Canada Southern Petroleum #1 L.P. (jointly “Nahanni”) for the acquisition of its entire right and interest (generally a working interest of 30.664%) in the KGP (the “Nahanni Assets”).

As consideration for the Nahanni Assets, we paid Nahanni approximately $13,761,000. The consideration was comprised of approximately $133,000 in cash ($398,550 offset by $265,950 paid in connection with the acquisition of the Devon Assets in settlement of certain Nahanni indebtedness), 1,614,767 shares of one of our subsidiaries, which are exchangeable, under certain terms and circumstances, for 1,614,767 shares of our restricted common stock valued at approximately $4,191,000, and the absorption of approximately $9,437,000 in asset retirement obligations. The number of shares issued by our subsidiary was calculated by dividing the fair value of the exchangeable shares by the volume weighted average trading price of our stock for the ten (10) trading days prior to closing the Purchase Agreement.  Both the cash paid and stock issued for the Nahanni Assets are subject to certain holdbacks for asset related liabilities or breach of representations and warranties.
 
As a result of its purchase of the Nahanni Assets and Devon Assets, the Company now generally owns a 53.65% interest in the KGP, including a 100% interest in one gas well which has been shut in while economic viability is being evaluated.

After giving effect to these acquisitions, the current voting interest allocations in the KGP are described in the table below:
 
Voting Interest Holder
 
Working Interest
 
       
EFLO Energy, Inc. and affiliates
   
53.65
%
Apache Canada Ltd.
   
31.95
%
Imperial Oil Resources
   
10.4
%
Exxon Mobil Properties Canada
   
1.3
%
Talisman Energy Canada
   
2.7
%
 
 
13

 
 
During the tenure of Nahanni's prior ownership of the Nahanni Assets, Nahanni entered into an agreement with a third party in consideration of certain funding obligations of the third party (which were in part never performed by the  third party) which would enable the third party to earn potential net profits interests in a portion of the Nahanni Assets.  We are of the view that the foregoing agreement potentially resulted in a 20% net profit interest applicable to a maximum of 250 Mcf/d of production in certain of the Nahanni Assets payable to the third party.  In addition, the third party has previously alleged that the agreement between the third party and Nahanni resulted in a further 20% net profits interest, convertible into a working interest, in certain of the Nahanni Assets.  We have disputed this assertion on several bases, including that any potential arrangement between the third party and Nahanni, even if valid, (a) did not necessarily attach to the relevant properties and is personal between Nahanni and the third party; (b) pertains at most to Nahanni's former working interest in six potential wells included in the Nahanni Assets; and (c) even if valid, the third party is responsible for accrued and unpaid operating costs to date.  

The Company records assets acquired and liabilities assumed at their estimated acquisition date fair values, while transaction and integration costs associated with the acquisitions are expensed as incurred.  The Company uses relevant market assumptions to determine fair value and allocate purchase price, such as future commodity pricing for purchased hydrocarbons, market multiples for similar transactions and replacement value for certain equipment.  Many of the assumptions are unobservable. The Company’s preliminary assessment of the fair value of the Nahanni Assets and the Devon Assets resulted in a valuation of $25,526,554 and $22,103,530, respectively. As a result of the Company’s purchase price allocation, a gain on bargain purchase of $11,766,787 was recognized on the Nahanni Assets. The gain on bargain purchase was primarily attributable to the strategic nature of the divestiture by the motivated seller, coupled with a confluence of certain favorable economic trends in the industry and the geographic region in which the Nahanni Assets are located. The excess of the consideration paid over the estimated fair value of the Devon Assets was $1,194,365. This amount has been recognized as goodwill.

   
Fair Value of Assets Acquired (as restated)
 
Asset Description
 
Nahanni Assets
   
Devon Assets
   
Total
 
         
(Restated)
       
Unproved leasehold costs
 
$
14,548,787
   
$
13,827,001
   
$
28,375,788
 
Plant and equipment
   
8,594,362
     
6,484,001
     
15,078,363
 
Gathering systems
   
2,383,405
     
1,788,001
     
4,171,406
 
Vehicles
   
     
4,527
     
4,527
 
Unproven Properties
   
25,526,554
     
22,103,530
     
47,630,084
 
Goodwill
   
     
1,194,365
     
1,194,365
 
Total Assets Acquired - KGP
 
$
25,526,554
   
$
23,297,895
   
$
48,824,449
 

Future Development and Exploration

During the year ended August 31, 2014, we pursed a variety of geological, geophysical and engineering studies related to the KGP including, but not limited to seismic reprocessing and reinterpretation, mapping and subsurface modeling. Although certain of these studies are still underway, we believe the results in hand enhance our understanding of, and the overall value of, the KGP. Our long term exploration plan for the KGP involves the exploitation of both conventional and unconventional (shale) gas resources. Phase one of that plan includes the rework or recompletion of up to three wells. These efforts will focus on previously identified or tested conventional gas zones. During phase one, we intend to target lower cost development and exploration targets with the potential to create positive cash flows and long term sustainability for the KGP. During this period we also plan to determine whether 3D seismic is appropriate to enhance our understanding of field development. Early estimates indicate the cost of up to three wells may range from $8,000,000 to $10,000,000 on a gross basis.
 
Phases two and three of our exploration plan anticipate further development of conventional reservoirs and, with proper approvals, testing and development of shale resources.

Financial Condition and Results of Operations

KGP

Development costs incurred to obtain access and provide facilities for extracting, gathering, treating and storing oil and gas related to unproved oil and gas properties that are being evaluated for economic viability are added to the full cost pool until proved reserves are established, or determination is made that the unproved properties are impaired. During the six months ended February 28, 2015, the full cost pool was increased by $228,557 (2014 - $548,495) as a result of these costs.
 
 
14

 
 
The San Miguel Lease

During April and May 2011, we drilled and completed a test well, and earned our initial interest in the San Miguel Lease. The test well encountered oil and was completed as a producer. After completion, however, we determined that the oil was subject to significant viscosity changes related to temperature reductions from formation to recovery at surface. To date, oil viscosity has prohibited economic operation. Although we continue to investigate various methods to improve production from the Test Well, we cannot estimate what cost, if any, will be associated with future production efforts on the San Miguel Lease. During 2012 we determined that the book value of the San Miguel Lease was impaired to the extent of its carrying value. Accordingly, the carrying value of the San Miguel Lease was written off. We have made no additional expenditures on the San Miguel Lease since November 30, 2011.

We have no current plans to spend the funds necessary to earn an additional interest in the San Miguel Lease. In the event we are unable to substantially improve production, we intend to abandon the Test Well, or actively pursue the sale of our interest in the San Miguel Lease.
 
Other

Our operating loss for the three and six months ended February 28, 2015, decreased by approximately $327,316 or 39% (from $842,453 to $515,137) and $780,000 or 41% (from $1,902,222 to $1,122,038), respectively, when compared to the three and six months ended February 28, 2014. This net decrease resulted from lower costs in nearly all categories, including the following items of significance:
 
1.  
A current period decrease of approximately $115,792 or 53% (from $218,676 to $102,884) and $188,000 or 43% (from $432,568 to $244,725), respectively, in management and directors fees relating to a planned reduction in management personnel and a purposeful conservation in fee billings by the remaining members of the management group.  On January 12, 2015, the CEO and CFO resigned and a new CEO and a new CFO were appointed;

2.  
A current period decrease of approximately $92,304 or 87% (from $106,440 to $14,136) and $189,000 or 85% (from $222,419 to $33,624), respectively, in stock based compensation consisting entirely of lower expense generated in connection with the aging of grants under the terms of our 2012 Non-Qualified Stock Option Plan;
 
3.  
A current period decrease of approximately $28,201 or 33% (from $86,737 to $58,536) and $116,000 or 48% (from $244,535 to $128,345), respectively, in consulting fees relating to a planned reduction in consulting personnel, the forgiveness of fees by certain consultants and a purposeful conservation in fee billings by the remaining members of our consulting group;
 
4.  
A current period decrease of $176,800 in costs incurred in connection with the 2013 Convertible Note offering during October 2013, which were not repeated during the current period; and
 
5.  
A current period decrease of $75,189 or 52% (from $145,474 to $70,285) and $103,000 or 43% (from $237,353 to $134,211), respectively, in office, travel and general expense relating to a planned reduction in travel expense, and a forbearance from charging certain administrative fees by Holloman corporation.
 
During the six month periods ended February 28, 2015 and 2014 we recognized interest expense of $396,423 and $136,920, respectively incurred in connection with the 2013 Convertible Note and 2014 Convertible Note Offerings.
 
During the six month period ended February 28, 2015, we recognized $1,649,396 in gains related to the forgiveness of accounts payable, consisting of $22,500 related to forgiveness of consulting and administrative fees previously incurred, and $1,626,896 relating to the Settlement Agreement. See Note 7 to the financial statements included with this report.
 
From September 2012 through May 2014, we used fuel gas from the Spectra pipeline system to maintain operations at the KGP. This fuel gas was to be re-delivered into the Spectra pipeline once production at the KGP was re-established. In March 2014, we agreed to purchase monthly fuel gas from Spectra on an as-used basis (approximately 10,075 gigajoules “GJs” per month). We also agreed to repay Spectra in cash, or in kind, prior to December 31, 2014, for our previous consumption of fuel gas (approximately 174,000 GJs at an estimated net cost to us of approximately $262,000). We are currently renegotiating the repayment due date of this obligation with Spectra.
 
We have initiated cost saving measures, including the termination of directors fees effective September 1, 2013, and we further reduced administrative costs during the six month period ended February 28, 2015.

Liquidity and Capital Resources
 
During the six month period ended February 28, 2015, we have expended net cash of $178,782 to fund our operating activities, and have invested net cash of $312,912 in our oil and gas assets. As of February 28, 2015, we have negative working capital of approximately $3,592,000. During January 2015, we completed a settlement agreement in which certain of our accrued liabilities were settled at a gain to us (see below).
 
 
15

 
 
Our operations and investments to date have been funded through the issuance of capital stock and debt. We plan to generate profits by drilling productive gas wells or improving the production of existing wells. We will, however, need to raise additional funds through the sale of our securities, from loans from third parties or by joint venturing operations with third parties which will pay a portion of the costs required to explore for oil and gas in the area covered by our leases. Any wells which we may drill may not produce oil or gas in commercial quantities. We plan to report losses from our operations until such time, if ever, that we begin to generate significant revenue from oil and gas sales.

On October 30, 2013 we sold convertible notes having an aggregate principal amount of $2,255,000 (the “2013 Convertible Notes”), to 22 accredited investors, under the following general terms (the "2013 Convertible Note Offering"):
 
●  
the maturity date of is April 30, 2015;
●  
the principal amount is convertible into shares of our common stock at a price of $1.00 per share;
●  
interest is at 15% per annum payable, at our election, in cash or shares of our common stock at a rate of $1.25 per share; and
●  
we also issued stock purchase warrants in connection with the 2013 Convertible Note Offering providing for the purchase of up to 1,127,500 shares of our common stock (1 full share for each $2.00 invested in the 2013 Convertible Notes”) at an exercise price of $1.25 per share for a period of three years (the "Stock Purchase Warrants”).
 
On June 2, 2014, $25,000 in principal payable on the 2013 Convertible Notes was converted to 25,000 shares of our common stock at a conversion price of $1.00 per share. In total, we reserved 3,357,500 shares of our common stock (comprised of 2,230,000 shares issuable on conversion of the residual principal of the 2013 Convertible Notes and 1,127,500 shares issuable on exercise of the Warrants) or such greater number of shares as may be issuable upon election of interest repayment in common stock under the terms of the 2013 Convertible Notes.
 
We paid $176,400 in finders' fees with respect to the 2013 Convertible Note Offering.  Entities controlled by our former Chief Executive Officer and President acquired $50,000 and $150,000 of 2013 Convertible Notes and were issued 25,000 and 75,000 Warrants, respectively, in the 2013 Convertible Note Offering under these terms.
 
During June 2014, the Company sold convertible notes having an aggregate principal amount of $1,400,000 (the “2014 Convertible Notes”), to two accredited investors, and one non-accredited investor, under the following general terms (the “2014 Convertible Note Offering”):
 
●  
the maturity date, as extended, is January 31, 2015 (see below);
●  
at the option of the note holder, the principal amount is convertible into shares of the Company’s common stock at a price per share to be determined in connection with the Company’s planned offering of shares upon migration to a senior stock exchange, less a 10% discount (the “2014 Conversion Right”);
●  
a 6% financing fee on the principal sum of the 2014 Convertible Notes, is payable at the option of the note holder, in shares of the Company’s common stock (the number of which is to be calculated using the closing market price of the Company’s shares at the notes’ maturity date), or in cash of $84,000.
●  
the 2014 Convertible Notes are non-interest bearing so long as they are paid or converted prior to their maturity date. In the event of default, or if a 2014 Convertible Note is not paid, or converted on or within ten (10) days following its maturity date:
 
a.  
the  note will bear interest at 10% per annum, payable monthly; and
 
b.  
an additional 4% financing fee (the Default Financing Fee) on the then outstanding principal balance of the 2014 Convertible Note(s) shall become due and payable. We are obligated to pay the Default Financing Fee in shares of our common at a conversion price equal to the closing market price of our common shares on the date of an event of default, or at the maturity date, whichever is earliest.
 
Entities controlled in part or in whole, by our Chairman and former President acquired $1,000,000 and $350,000 of the 2014 Convertible Notes under these terms.

On December 30, 2014, the 2014 Convertible Note Holders agreed to extend the maturity date of the 2014 Convertible Notes to January 31, 2015
 
The 2013 Convertible Notes and 2014 Convertible Notes enhanced our capital resources and supported on-going operations including the acquisition of scientific and engineering data relating to our oil and gas assets.
 
Effective January 20, 2011, a company controlled by our former Chief Executive Officer, our former Chief Financial Officer, and an unrelated consultant (the “Finders”) entered into an agreement with us providing for the payment of finders’ compensation ranging from 5% (on transaction values greater than $1,000,000) to 10% (on transactions valued up to $300,000) on transactions introduced to us by or through the Finders for a period of two years (the “Finders’ Fee Agreement”). Under the Finders’ Fee Agreement, compensation is divided among the Finders and the Finders may elect whether the finders’ compensation is payable in cash, or shares of our restricted common stock. The Finders’ Fee Agreement specifically recognizes that the KGP has been presented to us by the Finders. As of August 31, 2014, finders’ compensation of $1,619,621 had been accrued under the Finders’ Fee Agreement. On January 12, 2015, the Finders settled the fees payable under the Finders’ Fee Agreement at a significant discount to its original terms (see below).
 
 
16

 
 
Effective January 12, 2015, we (together with our officers and directors), two of the 2014 Convertible Note holders, and other interested parties entered into a settlement agreement (the “Settlement Agreement”). The Settlement Agreement was undertaken in an effort to reduce costs, decrease liabilities and support our future operations. Under the terms of the Settlement Agreement, two of the 2014 Convertible Note holders agreed to accept payment of principal and interest aggregating $1,431,000 ($1,350,000 principal / $81,000 interest) due under the 2014 Convertible Note holders in 11,007,692 shares of the our common stock calculated using a price of $0.13 per share. As a result, Pacific World Energy Corporation became our largest shareholder. In that connection, our current Chief Executive and Chief Financial Officers agreed to resign as officers and members of our board of directors effective January 15, 2015, in favor of candidates nominated by Pacific World.
 
The Settlement Agreement also provides for the following liability settlements, the aggregate amount of which were settled with 1,322,884 shares of our common stock calculated using a price of $0.13 per share:
 
Description of liability
 
Accounts payable and accrued liabilities
$
   
Agreed settlement amount
$
   
Gain on settlement of accounts payable and accrued liabilities
$
   
Number of shares of the Company’s common stock
#
 
                         
Finders’ fees
    1,079,802       -       1,079,802       -  
Directors’ fees
    451,750       55,900       395,850       430,000  
Management fees
    233,891       116,075       117,816       892,884  
Consulting fees
    33,428       -       33,428       -  
      1,798,871       171,975       1,626,896       1,322,884  

On March 4, 2015, the Company entered into a Loan Agreement (the “Loan Agreement”) with Fundacion Inversiones Barroco (“FIB”), a Panamanian corporation, whereby the Company borrowed CAD$600,000 from FIB (the “Loan”).  The Loan bears interest at a rate of 10% per annum, is unsecured and due on or before February 1, 2016.  On April 7, 2015, the Company repaid the CAD$600,000 loan.

The Loan Agreement is a related party transaction as a director of the Company is related to FIB.

Other than residual Finders’ Fee payable to an unrelated consultant, and obligations associated with the operation, acquisition and exploration of our oil and gas leases disclosed elsewhere in this report, our material future contractual obligations as of February 28, 2015 consisted of the 2013 Convertible Notes and 2014 Convertible Notes having an aggregate principal amount of $2,280,000.
 
We anticipate that our acquisition of the KGP will generate significant capital requirements.  During the twelve month period ending April 30, 2016, early estimates indicate that investment in the KGP, including operating costs, the acquisition of additional working interests, and phase one exploration costs may range from $8,000,000 to $10,000,000. We are attempting to raise the capital needed to implement our business plan.

We believe our plan of operations, exclusive of costs associated with the KGP or other acquired assets, will require from $500,000 to $750,000 in financing over the twelve-month period ending April 30, 2016, to cover general, administrative, and other costs.
 
In June 2014, we filed a Canadian Prospectus and a US Form S-1 Registration Statement to facilitate our planned migration and initial public offering of common stock on the TSX Venture Exchange (Canada). As a result of poor and deteriorating conditions in Canadian capital markets, however, we withdrew our offering documents effective November 25, 2014. We currently plan to undertake further cost reduction strategies and a combination of farm-out strategies and working interest acquisitions to facilitate our KPG exploration plans.
 
If we are unable to raise the financing we need, our business plan may fail and our stockholders could lose their investment. There can be no assurance that we will be successful in raising the capital we require, or that if the capital is offered, it will be subject to terms we consider acceptable. Investors should be aware that even if we are able to raise the funds we require, there can be no assurance that we will succeed in our acquisition, exploration or production plans and we may never be profitable.
 
 
17

 
 
The oil and gas industry is cyclical in nature and tends to reflect general economic conditions. The pattern of historic fluctuations in gas prices has resulted in additional uncertainty in capital markets. Our access to capital, as well as that of our partners and contractors, has been limited due to tightened credit markets. These limitations may inhibit the size, and timing of exploration ventures.
 
As of April 14, 2015, we did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, result of operations, liquidity or capital resources.

Critical Accounting Policies and Estimates
 
Measurement Uncertainty
 
The preparation of consolidated financial statements in conformity with US GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. We regularly evaluate estimates and assumptions. We base our estimates and assumptions on current facts, historical experience and various other factors we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. The most significant estimates with regard to our consolidated financial statements relate to the collectability of accounts receivable, the carrying values of oil and gas properties, asset retirement obligations, the valuation of goodwill, determination of fair values of stock-based transactions, deferred income tax rates, and environmental risks and exposures.
 
Allowance for Doubtful Accounts
 
We routinely assess the recoverability of all material receivables to determine their collectability. All of our receivables are from joint venture partners. We are exposed to a concentration of credit risk with respect to our accounts receivable. We believe our financial partners are financially strong and the risk of loss is minimal. We accrue a reserve on a receivable when, based on our judgment, it is probable that a receivable will not be collected and the amount of any reserve may be reasonably estimated. As of February 28, 2015 and August 31, 2014, we had no amount recorded as an allowance for doubtful accounts.
 
Oil and Gas Properties

We utilize the full cost method to account for our investment in oil and gas properties. Accordingly, all costs associated with acquisition, exploration and development of oil and gas reserves, including such costs as leasehold acquisition costs relating to unproved properties, geological expenditures, tangible and intangible development costs including direct internal costs are capitalized to the full cost pool. When we commence production from established proven oil and gas reserves, capitalized costs, including estimated future costs to develop the reserves and estimated abandonment costs, net of salvage, will be depleted on the units-of-production method using estimates of proved reserves. We do not amortize costs of unproved properties until the proved reserves associated with the projects can be determined or until impairment occurs.   We periodically assess potential impairment of our unproven properties by applying factors based on historical asset experience, average holding periods for unproven properties and other data such as remaining lease term, and geological and geophysical information. If an assessment of such properties indicates that properties are impaired, we added the amount of impairment to the capitalized cost base to be amortized.

We calculate Depreciation, Depletion and Amortization (DD&A) of proved oil and gas properties, using the Units of Production (UOP) method. The UOP calculation, in simplest terms, matches the percentage of estimated proved reserves produced each quarter with the costs of those reserves. The result is to recognize expense at the same pace that the reservoirs are actually depleting. The amortization base in the UOP calculation includes the sum of proved property costs net of accumulated DD&A, estimated future development costs (future costs to access and develop reserves) and asset retirement costs which are not already included in oil and gas properties, less related salvage value.
 
The capitalized costs included in the full cost pool are subject to a "ceiling test" (based on the average of the first-day-of-the-month prices during the preceding twelve-month period pursuant to the SEC's "Modernization of Oil and Gas Reporting" rule), which limits such costs to the aggregate of the (i) estimated present value, using a ten percent discount rate, of the future net revenues from proved reserves, based on current economic and operating conditions, (ii) the lower of cost or estimated fair value of unproven properties included in the costs being amortized, (iii) the cost of properties not being amortized, less (iv) income tax effects related to differences between the book and tax basis of the cost of properties not being amortized and the cost or estimated fair value of unproved properties included in the costs being amortized. If net capitalized costs exceed this limit, the excess is charged to expense in the current period. At February 28, 2015, and August 31, 2014 all of our oil and gas interests were unproven.
 
 
18

 
 
We account for sales of proved and unproved properties as adjustments of capitalized costs and recognize no gain or loss, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case we recognize the gain or loss in the statements of operations.
 
Oil and Gas Acquisitions
 
We account for all property acquisitions that include working interests in proved leaseholds, both operated and non-operated, that would generate more than an immaterial balance of goodwill as business combinations. We do not apply acquisition accounting to the purchase of oil and gas properties entirely comprised of unproved leaseholds. In large part, however, our acquisitions of the KGP targeted its infrastructure which is capable of being conducted and managed as a business in our hands. The KGP’s principal business activities included the production of natural gas, with access to a proven customer base. In accordance with this guidance, we have recognized the fair value of all the assets acquired and liabilities assumed in connection with our KGP working interest acquisitions from Devon and Nahanni effective July 18, 2012 and October 17, 2012, respectively
 
On an ongoing basis, we conduct assessments of net assets acquired to determine if acquisition accounting is appropriate.  When we determine a "business" has been acquired under the requirements of ASC Topic 805, we record assets acquired and liabilities assumed at their estimated acquisition date fair values, while transaction and integration costs associated with the acquisitions are expensed as incurred.  We use relevant market assumptions to determine fair value and allocate purchase price, such as future commodity pricing for purchased hydrocarbons, market multiples for similar transactions and replacement value for certain equipment.  Many of the assumptions are unobservable.

 Asset Retirement Obligations
 
We record asset retirement obligations based on guidance set forth in ASC Topic 410, as a liability in the period in which we incur an obligation associated with the retirement of tangible long-lived assets that result from the acquisition, construction, development and/or normal use of the assets. The estimated balance of the asset retirement obligation is based on the current cost escalated at an inflation rate and discounted at a credit adjusted risk-free rate. This liability is capitalized as part of the cost of the related asset and amortized over its useful life.

Fair Value Measurements
 
Our valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of these techniques requires significant judgment and is primarily dependent upon the characteristics of the asset or liability, the principal (or most advantageous) market in which participants would transact for the asset or liability and the quality and availability of inputs. Inputs to valuation techniques are classified as either observable or unobservable within the following hierarchy:
 
●  
Level 1 — quoted prices in active markets for identical assets or liabilities.
●  
Level 2 — inputs other than quoted prices that are observable for an asset or liability. These include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).
●  
Level 3 — unobservable inputs that reflect our own expectations about the assumptions that market participants would use in measuring the fair value of an asset or liability.
  
We consider all highly liquid instruments with an original maturity of three months or less at the time of issuance to be cash equivalents.  Cash and cash equivalents totaled $158,905 and $650,599 at February 28, 2015 and August 31, 2014, respectively. We are exposed to a concentration of credit risk with respect to our cash deposits. We place cash deposits with highly rated financial institutions in the United States and Canada. At times, cash balances held in financial institutions may be in excess of insured limits. We believe the financial institutions are financially strong and the risk of loss is minimal. We have not experienced any losses with respect to the related risks and do not believe our exposure to such risks is more than normal.

The estimated fair values for financial instruments are determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. The estimated fair value of cash, other receivables, accounts payable, accrued liabilities and demand notes payable approximates their carrying value due to their short-term nature.
 
Revenue Recognition

We recognize natural gas revenue under the sales method of accounting for our interests in producing wells as natural gas is produced and sold from those wells. We recognize revenue upon transfer of ownership of the product to the customer which occurs when (i) the product is physically received by the customer, (ii) an invoice is generated which evidences an arrangement between the customer and us, (iii) a fixed sales price has been included in such invoice and (iv) collection from such customer is reasonably assured. Gas sales are reported net of applicable production taxes.
 
 
19

 
 
We generated no revenue during the six month periods ended February 28, 2015 and 2014.
  
Stock-Based Compensation
 
We record compensation expense in the financial statements for stock-based payments using the fair value method. The fair value of stock options granted to directors and employees is determined using the Black-Scholes option valuation model at the time of grant. Fair value for common shares issued for goods or services rendered by non-employees are measured based on the fair value of the goods and services received. Stock-based compensation is expensed as earned with a corresponding increase to share capital.
 
 Foreign Currency Gains and Losses
 
Our functional and reporting currency is the United States dollar. The functional currency of our Canadian subsidiaries is the Canadian dollar. Financial statements of our Canadian subsidiaries are translated to United States dollars using period-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues and expenses. Translation gains (losses) are recorded in accumulated other comprehensive income as a component of stockholders’ equity. Transaction gains and losses are included in the determination of income. Foreign currency transactions are primarily undertaken in Canadian dollars. As of February 28, 2015, we have not entered into derivative instruments to offset the impact of foreign currency fluctuations.
 
Income Taxes
 
We follow the asset and liability method of accounting for future income taxes. Under this method, future income tax assets and liabilities are recorded based on temporary differences between the carrying amount of balance sheet items and their corresponding tax bases. In addition, the future benefits of income tax assets, including unused tax losses, are recognized, subject to a valuation allowance, to the extent that it is more likely than not that such future benefits will ultimately be realized. Future income tax assets and liabilities are measured using enacted tax rates and laws expected to apply when the tax liabilities or assets are to be either settled or realized.
 
Earnings per share

We present both basic and diluted earnings (loss) per share (EPS) on the face of the consolidated statements of operations. Basic EPS is computed by dividing net earnings (loss) available to common shareholders by the weighted average number of shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including convertible debt, and stock options and warrants using the treasury stock method. Diluted EPS excludes all dilutive potential shares unless their effect is anti-dilutive. 
 
See Note 1 to the Financial Statements included as part of this report for a discussion of recent accounting pronouncements.
 
ITEM 4.   CONTROLS AND PROCEDURES

An evaluation was carried out under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report on Form 10-Q. Disclosure controls and procedures are procedures designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this Form 10-Q, is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and is communicated to our management, including our Principal Executive Officer and Principal Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our management concluded that, as February 28, 2015, our disclosure controls and procedures were effective.
 
Change in Internal Control over Financial Reporting
 
Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.
 
There were no changes in our internal control over financial reporting that occurred during the fiscal quarter covered by this report that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 
20

 
 
PART II - OTHER INFORMATION
 
ITEM 2.   UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS.

See Note 5 to the financial statements included with this report.

We relied upon the exemption provided by Section 4(2) of the Securities Act of 1933 in connection with the issuance of the shares described in Note 5. The certificates representing the shares of common stock bear a restricted legend providing that they cannot be sold unless pursuant to an effective registration statement or an exemption from registration.  We did not pay any underwriting discounts or sales commissions in connection with the issuance of these shares.
   
 
 

 
21

 
 
ITEM 6.   EXHIBITS

(b)
Exhibits

3.1.1
Articles of Incorporation(1)
3.1.2
Amendment to Articles of Incorporation(2)
3.2
Bylaws(3)
4.0
Form of Convertible Note – October 30, 2013(5)
4.1 
Form of Convertible Note – June 12, 2014(6)
10.1
Agreement of Purchase and Sale between Devon Canada and EFL Overseas, Inc.(4)
10.2
Share Purchase Agreement between Nahanni Energy et.al and EFL Overseas, Inc. (4)
10.3
Kotaneelee Closing Agreement between Devon Canada and EFL Overseas, Inc. (4)
10.4
Settlement Agreement effective January 5, 2015(7)
14.1
Code of Ethics for Principal Executive and Senior Financial Officers(4)
21.1
As of February 28, 2015, we had four consolidated subsidiaries;
 
EFLO Energy Yukon Ltd., a Canadian Corporation (100% owned)
 
1693730 Alberta Ltd, a Canadian Corporation (voting stock 100% owned)
 
1693731 Alberta Ltd, a Canadian Corporation (100% owned)
 
1700665 Alberta Ltd, a Canadian Corporation (100% owned by 1693730 Alberta Ltd)
Rule 13a-14(a) Certifications
Rule 13a-14(a) Certifications
Section 1350 Certifications
99.1
EFL Overseas Inc. – Audit Committee Charter(4)
   
101.INS
- XBRL Instance Document
101.SCH
- XBRL Taxonomy Extension Schema Document
101.CAL
- XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
- XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
- XBRL Taxonomy Extension Label Linkbase Document
101.PRE
- XBRL Taxonomy Extension Presentation Linkbase Document
(1)
Incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1 filed on November 12, 2008.
(2)
Incorporated by reference to Exhibit 3.1 to the Company’s Form 8-K report dated April 28, 2010.
(3)
Incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K report dated April 28, 2010.
(4)
Incorporated by reference to the Company’s Form10-K report for the year ended August 31, 2012, filed November 29, 2012.
(5)
Incorporated by reference to the Company’s Form 10-Q report for the quarter ended November 30, 2013, filed January 14, 2014.
(6)
Incorporated by reference to the Company’s Registration Statement on Form S-1filed June 16, 2014.
(7)
Incorporated by reference to the Company’s Form 10-Q report for the quarter ended November 30, 2014, filed January 14, 2015.
 
 
22

 
 
SIGNATURES
 
Pursuant to the requirements of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
EFLO ENERGY, INC.
 
       
Dated:  April 14, 2015
BY:
/s/ Al Conrad Kerr Jr.
 
   
Al Conrad Kerr Jr.,
 
   
Principal Executive Officer
 
       
       
 
BY:
/s/ Matthew Anderson
 
   
Matthew Anderson,
 
   
Principal Financial and Accounting Officer
 
 
23


EX-31.1 2 eflo_ex311.htm CERTIFICATION eflo_ex311.htm
EXHIBIT 31.1

CERTIFICATION

I, Al Conrad Kerr Jr., certify that:

1.  
I have reviewed this quarterly report on Form 10-Q of EFLO 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 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 Rule 13a-15(f) and 15(d)-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 within 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 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;

(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 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 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):

(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: April 14, 2015

 
/s/ Al Conrad Kerr Jr.
Al Conrad Kerr Jr.
Principal Executive Officer

EX-31.2 3 eflo_ex312.htm CERTIFICATION eflo_ex321.htm
EXHIBIT 31.2

CERTIFICATION

I, Matthew Anderson, certify that:

1.  
I have reviewed this quarterly report on Form 10-Q of EFLO 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 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 Rule 13a-15(f) and 15(d)-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 within 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 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;

(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 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 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):

(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: April 14, 2015

 
/s/ Matthew Anderson
Matthew Anderson
Principal Financial Officer

EX-32 4 eflo_ex32.htm CERTIFICATION eflo_ex32.htm
EXHIBIT 32
 
In connection with the quarterly report of EFLO Energy, Inc. (the “Company”) on Form 10-Q for the period ended February 28, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Al Conrad Kerr Jr., Principal Executive Officer and Matthew Anderson, Principal Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 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 results of operations of the Company.

Date: April 14, 2015

 
/s/ Al Conrad Kerr Jr.
Al Conrad Kerr Jr.
Principal Executive Officer

Date: April 14, 2015

 
/s/ Matthew Anderson
Matthew Anderson
Principal Financial Officer


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GAIN ON SETTLEMENT OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES - GAIN ON SETTLEMENT OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details) link:presentationLink link:calculationLink link:definitionLink EX-101.CAL 7 eflo-20150228_cal.xml EX-101.DEF 8 eflo-20150228_def.xml EX-101.LAB 9 eflo-20150228_lab.xml Proven Properties Oil and Gas Delivery Commitments and Contracts [Axis] Unproven Properties Unproven Common Stock Statement, Equity Components [Axis] Additional Paid-In Capital Option 1 Open Option Contracts Written Type [Axis] Option 2 Option 3 Option 4 Fair Value of Asset Acquired Business Acquisition [Axis] Nahanni Assets Devon Assets Canadian ExtinguishmentOfDebt [Axis] United States Stock Option A Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range [Axis] Stock Option B Stock Option C Stock Option D Chief Operating Officer Total Accumulated Other Comprehensive Loss Deficit Accumulated During Exploration Stage Chief Executive Officer under the terms of a management consulting agreement Related Party [Axis] Previously Reported Scenario [Axis] Adjustments As Restated 2013 Convertible Notes Debt Instrument [Axis] 2014 Convertible Notes Option group 1 Award Date [Axis] Option group 2 Option group 3 Option group 4 Option group 5 Finders’ fees Directors’ fees Management fees Consulting fees Option 1 Entity Registrant Name Entity Central Index Key Document Type Document Period End Date Amendment Flag Current Fiscal Year End Date Is Entity a Well-known Seasoned Issuer? Is Entity a Voluntary Filer? Is Entity's Reporting Status Current? Entity Filer Category Entity Public Float Entity Common Stock, Shares Outstanding Document Fiscal Period Focus Document Fiscal Year Focus Statement of Financial Position [Abstract] ASSETS Cash Accounts receivable; joint interest owners and other Prepaids Other Total current assets OIL AND GAS PROPERTIES, full cost method, unproven OTHER ASSETS-Goodwill Total assets LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and accrued liabilities Convertible notes, net of $56,029 and $233,964 of unamortized discount at February 28, 2015 and August 31, 2014, respectively Asset retirement obligation-current Total current liabilities NONCURRECT LIABILITIES Asset retirement obligations Deferred income taxes Total liabilities STOCKHOLDERS' EQUITY Capital Stock Authorized: 10,000,000 preferred shares, par value $0.001 per share 150,000,000 common shares, par value $0.001 per share Issued and outstanding: 32,204,299 common shares at February 28, 2015 (August 31, 2014 – 19,897,714 common shares) Additional paid-in capital Accumulated other comprehensive loss Accumulated deficit Total stockholders' equity Total liabilities and stockholders' equity Unamortized Discount Stockholders Equity Preferred Stock Shares Par value Preferred Stock Shares Authorized Preferred Stock Shares Issued Preferred Stock Shares Outstanding Common Stock Shares Par value Common Stock Shares Authorized Common Stock Shares Issued Common Stock Shares Outstanding Condensed Consolidated Statements Of Income Loss EXPENSES Management and director's fees Stock-based compensation expense Consulting fees Professional fees Financing fees Office, travel and general Accretion of asset retirement obligations Total Expenses OPERATING LOSS OTHER INCOME (EXPENSE) Interest expense and other financing costs Gain on settlement of accounts payable and accrued liabilities NET INCOME (LOSS) before taxes Provision for income tax NET INCOME (LOSS) Foreign currency translation COMPREHENSIVE INCOME (LOSS) BASIC AND DILUTED INCOME (LOSS) PER SHARE WEIGHTED AVERAGE SHARES OUTSTANDING Statement of Cash Flows [Abstract] CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) Adjustments to reconcile net income (loss) to net cash used in operating activities: Stock-based compensation and fee payments Amortization of convertible note discount Unrealized foreign exchange losses Gain on settlement of accounts payable and accrued liabilities Changes in working capital items- Accounts receivable Prepaids and other Accounts payable and accrued liabilities Net cash used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Expenditures on oil and gas properties, net Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from notes payable Net cash provided by financing activities (DECREASE) INCREASE IN CASH CASH, BEGINNING OF PERIOD CASH, END OF PERIOD SUPPLEMENTAL DISCLOSURE Cash paid for interest Cash paid for income taxes Forgiveness of debt NON-CASH INVESTING ACTIVITIES: Accrued expenditures on oil and gas properties Asset retirment obligation incrurred Asset retirement obligation acquired in Devon acquisition Asset retirement obligation acquired in Nahanni acquisition NON-CASH FINANCING ACTIVITIES Common stock issued for settlement of accounts payable and accrued liabilities Common stock issued as settlement of convertible notes Common stock issued as repayment of note payable Common stock issued for services Common stock issued for Devon assets Exchangeable shares granted for Nahanni assets Accounting Policies [Abstract] 1. BASIS OF PRESENTATION Extractive Industries [Abstract] 2. OIL AND GAS PROPERTIES Notes to Financial Statements 3. ASSET RETIRMENT OBLIGATIONS 4. CONVERTIBLE NOTES PAYABLE Disclosure of Compensation Related Costs, Share-based Payments [Abstract] 5. CAPITAL STOCK AND STOCK BASED COMPENSATION Related Party Transactions [Abstract] 6. RELATED PARTY TRANSACTIONS 7. GAIN ON SETTLEMENT OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Subsequent Events [Abstract] 8. SUBSEQUENT EVENTS Oil And Gas Properties Tables Schedule of Oil and Gas Acquisition BalanceEnding1 Schedule of Asset Retirement Obligation Convertible Notes Payable Tables Schedule convertible notes payable Capital Stock And Stock-based Compensation Tables Option activity GAIN ON SETTLEMENT OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Statement [Table] Statement [Line Items] Unproven Properties Unproved Leasehold costs Plant and equipment Gathering systems Vehicles Subtotal Goodwill Total Assets Acquired - KGP BalanceBeginning Asset Retirement Obligations Asset Retirement Obligation, Beginning Liabilities incurred (acquired) Accretion expense Liabilities (settled) Changes in asset retirement obligations Asset Retirement Obligation, Ending Total Balance, February 28, 2015 - Current Total Balance, February 28, 2015 - Long Term Beginning balance Principal received Transaction costs Amortization of transaction costs Conversion into common stock Settlement of principal and interest in common stock Ending balance Capital Stock And Stock-based Compensation Details Options outstanding, beginning Expired Options outstanding, ending Weighted Average Exercise Price, beginning Weighted Average Exercise Price, expired Weighted Average Exercise Price, ending Expiry date Accounts payable and accrued liabilities Agreed settlement amount Gain on settlement of accounts payable and accrued liabilities Number of shares of the Company’s common stock Accrued expenditures on oil and gas properties Asset retirement obligation acquired in Devon acquisition AssetRetirementObligations BalanceBeginning Changes in working capital items- Common stock issued for services Consulting fees Fair Value of Asset Acquired GainOnForgivenessOfAccountsPayable Gathering systems Leasehold costs Option 2 Option 3 Schedule of Oil and Gas Acquisition Stock-based compensation expense Total Total Assets Acquired - KGP Total Balance, August&amp;#160;31, 2012 &amp;#8211; Long Term Unproven Leasehold Costs Unproven Unproven properties Unproven Properties Proven Properties Schedule of Oil and Gas Acquisition Stock-based compensation expense Subtotal Total Assets Acquired - KGP Unproven Unproven Properties Vehicles DocumentAndEntityInformationAbstract Assets, Current Assets Liabilities, Current Liabilities Stockholders' Equity Attributable to Parent Liabilities and Equity Consulting Operating Income (Loss) Interest Expense Income (Loss) from Continuing Operations before Income Taxes, Extraordinary Items, Noncontrolling Interest Income Tax Expense (Benefit) Other Comprehensive Income (Loss), Tax GainOnSettlementOfAccountsPayableAndAccruedLiabilities Increase (Decrease) in Accounts Receivable Increase (Decrease) in Prepaid Expense Increase (Decrease) in Accounts Payable and Accrued Liabilities Net Cash Provided by (Used in) Operating Activities Payments to Acquire Oil and Gas Property Net Cash Provided by (Used in) Investing Activities Net Cash Provided by (Used in) Financing Activities UnprovedProperties Asset Retirement Obligation Convertible Debt Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price Accounts Payable and Accrued Liabilities EX-101.PRE 10 eflo-20150228_pre.xml EXCEL 11 Financial_Report.xlsx IDEA: XBRL DOCUMENT begin 644 Financial_Report.xlsx M4$L#!!0`!@`(````(0#J;;DZQ@$``%<1```3``@"6T-O;G1E;G1?5'EP97-= M+GAM;""B!`(HH``"```````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M``````````````````````````````````````#,F-]*PS`4QN\%WZ'D5M8L M];^L\V+JI0KJ`\3D;"U+DY!DNKV]IYT.D;DQ''AN&MHDY_LUE(]^9W`];TSV M!B'6SI9,Y'V6@55.UW92LI?GN]X%RV*25DOC+)1L`9%=#P\/!L\+#S'#W3:6 MK$K)7W$>506-C+GS8'%F[$(C$]Z&"?=23>4$>-'OGW'E;`*;>JFMP8:#&QC+ MF4G9[1P?+TD"F,BRT7)AJU4RZ;VIE4Q(RM^L_J'2^U3(<6>W)E:UCT>(P?A: MA7;F=X'/?0]X-*'6D#W*D.YE@QA\;OB["]-7YZ;YYB)K*-UX7"O03LT:/($\ M^@!2QPH@-2;OQKR1M?WBWJ#?+8Z\&\2>0=KWZPKOR%$0X3@FPG%"A..4",<9 M$8YS(AP71#@NB7"(/A40*HXJJ%BJH.*I@HJI"BJN*JC8JJ#BJX**L0HJSEI0 M<=:"BK,65)RUH.*LQ7\Y:\+8"+R[_OWKZ,ILR2TQ+0S$/?]K+(MN4ZYD`/V4 M`@;LO0-\K[V%0TFC1A4FS3T?PJKN)GV,OX_!^8B-@`"[`WPE_79WSV,A"*F& M5=9?EYE7BMA$V%WP1VB'MDVA0:_1YEU;9/@!``#__P,`4$L#!!0`!@`(```` M(0"U53`C]0```$P"```+``@"7W)E;',O+G)E;',@H@0"**```@`````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M```````````````````````````````````````````````````````````` M````````````C)+/3L,P#,;O2+Q#Y/OJ;D@(H:6[3$B[(50>P"3N'[6-HR1` M]_:$`X)*8]O1]N?//UO>[N9I5!\<8B].P[HH0;$S8GO7:GBMGU8/H&(B9VD4 MQQJ.'&%7W=YL7WBDE)MBU_NHLHN+&KJ4_"-B-!U/%`OQ['*ED3!1RF%HT9,9 MJ&74"T\U<%J"`=[!ZH^^CSYLK$SO+=N5# M9@NIS]NHFD++28,5\YS3$$X4UD^&'!Q0]47P```/__`P!02P,$%``&``@````A`(96 M?W*L`0``#!```!H`"`%X;"]?S%X-6>#7,S*Y6J\UG MVR3ORKK:Z(S!*&6)TKDI:EUF['7W=+=@B?-2%[(Q6F7LJ!S;K&]O5L^JD3[\ MY*JZ\Y=7JE6NI'IE`X[>V-;ZY>C3Y6ZNT_^4(_F'LP55*^9!4VE+YC,60 MXZ>=Q2@@9OQW,#`F1@-C%`XU.8"R(V9#LN/\L0EFBT)]KS$ZJ,5!M1$P)!G1 MI3T?,70VK@",FSDQFCD&!@0Q&A`H'&IR`&5'3(=DQX=6K'K7G);\]$7]0JT0 M+M"@C2463L]*#)UK"6:87T2X)$GO))%B<*@;#>H;:J50H8"<&I0;,:'VS03S MS:!M)E;0WT4UQ<``-1I`X0CJ64+@P\2@@UXNF_RADK7NM8HA5"/JO@=XWUL2 MEQ,L,7:HBQNM;6IJ4&:`FAI`N1'DLPTZW(A!IT]72:N*%V_#`_[R\709_G$Q MOWK#K[\```#__P,`4$L#!!0`!@`(````(0"L5[(&PO M=V]R:V)O;VLN>&ULE)9=;YLP%(;O)^T_(.Y7OM+T0TTJ$MP.C4(6DU2]LFAP M&JL$(G"6]M_O0!9V@!9M-P%C_/@][WF!W-R^;1/E%\\+D:4CU3C3586GJRP6 MZ MBQ5WLM5^RU-YA.0\B23(+S9B5ZCCF[5(^/)8D1+M=GZT!=UOB:HD42%)+"2/ M1^HY#+,#;US(][O)7B0P>V7IEJJ-ZR)GN1+S=;1/9`CEG>C@ESDPS6%Y9VG% M4O!#\7=1.53>'D4:9X?R5K#VO1Y9(.!033V*6&Y@7M?U^MIW+EXV\G01\!KB M5P["/M512:OR3HXPZ!0CJ13RG;GIT7V100M+UUVHS%"5_%K`2>[&1BD<4Z:! 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4. CONVERTIBLE NOTES PAYABLE
6 Months Ended
Feb. 28, 2015
Notes to Financial Statements  
4. CONVERTIBLE NOTES PAYABLE

 

The following table summarizes changes to the Company’s convertible notes payable during the six months ended February 28, 2015 and the year ended August 31, 2014:

 

   

2013 Convertible Notes

$

   

2014 Convertible Notes

$

 
             
Balance, August 31, 2013     -       -  
Principal received     2,255,000       1,400,000  
Transaction costs     (533,803 )     -  
Amortization of transaction costs     299,839       -  
Conversion into common stock     (25,000 )     -  
Balance, August 31, 2014     1,996,036       1,400,000  
Amortization of transaction costs     177,935       -  
Settlement of principal and interest in common stock     -       (1,350,000 )
Balance, February 28, 2015     2,173,971       50,000  

 

2013 Convertible Note Offering

 

On October 30, 2013 the Company sold convertible notes having an aggregate principal amount of $2,255,000 (the “2013 Convertible Notes”), to 22 accredited investors, under the following general terms:

 

●   the maturity date is April 30, 2015;
●   the principal amount is convertible into shares of the Company’s common stock at a price of $1.00 per share;

 

●   interest is at 15% per annum payable, at the Company’s election, in cash or shares of its common stock at a rate of $1.25 per share; and,
●   the Company also issued stock purchase warrants in connection with the 2013 Convertible Note providing for the purchase of up to 1,127,500 shares of its common stock (1 full share for each $2.00 invested in the 2013 Convertible Notes”) at an exercise price of $1.25 per share for a period of three years (the "Stock Purchase Warrants”).

 

During the year ended August 31, 2014, the Company paid $176,400 in finders’ fees which were recognized as financing fees in the statement of loss.  The fair value of the Stock Purchase Warrants ($533,803) is being amortized to the statement of loss over the life of the 2013 Convertible Notes.

 

During the six months ended February 28, 2015, the Company recognized $167,250 (2014 - $75,773) in interest expense relating to the 2013 Convertible Notes and $177,935 (2014 - $61,147) as amortization of transaction costs.

 

On June 2, 2014, $25,000 in principal payable on the 2013 Convertible Notes was converted into 25,000 shares of the Company’s common stock at a conversion price of $1.00 per share.

 

2014 Convertible Note Offering

 

During June 2014, the Company sold convertible notes having an aggregate principal amount of $1,400,000 (the “2014 Convertible Notes”), to two accredited investors, and one non-accredited investor, under the following general terms:

 

●   the maturity date is December 31, 2014.  On December 30, 2014, the maturity date was extended to January 31, 2015;
 ●   at the option of the note holder, the principal amount is convertible into shares of the Company’s common stock at a price per share to be determined in connection with the Company’s planned offering of shares upon migration to a senior stock exchange, less a 10% discount (the “2014 Conversion Right”);
●   a 6% financing fee on the principal sum of the 2014 Convertible Notes, is payable at the option of the note holder, in shares of the Company’s common stock (the number of which is to be calculated using the closing market price of the Company’s shares at the notes’ maturity date), or in cash of $84,000.

 

●   the 2014 Convertible Notes are non-interest bearing so long as they are paid or converted prior to their maturity date. In the event of default, or if a 2014 Convertible Note is not paid, or converted on or within ten (10) days following its maturity date:
a)   the note will bear interest at 10% per annum, payable monthly; and,
     

 

b)   an additional 4% financing fee (the “Default Financing Fee”) on the then outstanding principal balance of the 2014 Convertible Note(s) shall become due and payable. The Company is obligated to pay the Default Financing Fee in common shares at a conversion price equal to the closing market price of the common shares on the date of an event of default, or at the maturity date, whichever is earliest.

 

Entities controlled, in part or in whole, by the Company’s Chairman and former President acquired $1,000,000 and $350,000 of 2014 Convertible Notes under these terms.

 

During the six months ended February 28, 2015, the Company recognized $46,817 (2014 - $nil) of financing expense relating to the 6% financing fee.

 

On January 12, 2015, the Company entered into a settlement agreement with two of the three 2014 Convertible Notes holders whereby $1,350,000 of principal and $81,000 of the 6% financing fee were settled by the issuance of 11,007,692 shares of the Company’s common stock calculated using a price of $0.13 per share.

 

During the six months ended February 28, 2015, the Company recognized $2,000 of Default Financing Fee and $417 of interest expense (2014 - $nil).

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3. ASSET RETIRMENT OBLIGATIONS
6 Months Ended
Feb. 28, 2015
Notes to Financial Statements  
3. ASSET RETIRMENT OBLIGATIONS

In connection with its acquisition of the Nahanni Assets and the Devon Assets, the Company acquired $9,436,526 and $7,057,716 in asset retirement obligations, respectively, relating to its portion of the abandonment, reclamation and environmental liabilities associated with the KGP.

 

On March 31, 2011, the Company initiated oil and gas operations by entry into a Farmout and Participation Agreement which provided for its acquisition of a net working interest ranging from 21.25% to 42.5%, in a 2,629 acre oil and gas lease, insofar as that lease covers from the surface to the base of the San Miguel formation (the “San Miguel Lease”). The San Miguel Lease, which is located in Zavala County, Texas, is unproven and has no current production. The Company recorded $80,000 in asset retirement obligations related to the future plugging and abandonment of a test well on the San Miguel Lease. At May 31, 2014, the Company’s interest in the San Miguel lease was impaired and expensed to the extent of its carrying value, which included the full amount of the associated asset retirement obligation. The entire asset retirement obligation relating to the San Miguel Lease has been classified as a current liability.

 

The Company has no assets that are legally restricted for purposes of settling asset retirement obligations. As part of the Company’s acquisition of the Devon Assets, it provided Devon a corporate guarantee (the “Guarantee”) in the amount of CAD$10,000,000 ($9,225,000) and delivered a letter of credit in the amount of CAD$4,380,000 ($4,041,000) to Devon (the “Devon LOC”). The Company also delivered a letter of credit in the amount of CAD$625,000 ($577,000) to the government of the Yukon Territory (the “Yukon LOC”). The amounts of the Devon LOC and Yukon LOC reduce the amount of the Guarantee on a dollar-for-dollar basis. The Company is primarily responsible for payment of all asset retirement obligations. The Guarantee, Devon LOC and Yukon LOC are only available to Devon in the event the Company defaults upon its asset retirement obligations relating to the Devon Assets.

 

The following table summarizes changes to the Company’s asset retirement obligations during the six months ended February 28, 2015 and the year ended August 31, 2014:

    $  
         
Balance, August 31, 2013     17,146,750  
Liabilities incurred (acquired)     -  
Accretion expense     692,273  
Balance, August 31, 2014     17,839,023  
Liabilities incurred (acquired)     -  
Accretion expense     350,534  
Total Balance, February 28, 2015     18,189,557  
Total Balance, February 28, 2015 – Current     80,000  
Total Balance, February 28, 2015 – Long Term     18,109,557  

 

 

XML 16 R2.htm IDEA: XBRL DOCUMENT v2.4.1.9
CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $)
Feb. 28, 2015
Aug. 31, 2014
ASSETS    
Cash $ 158,905us-gaap_CashAndCashEquivalentsAtCarryingValue $ 650,599us-gaap_CashAndCashEquivalentsAtCarryingValue
Accounts receivable; joint interest owners and other 1,292,291EFLO_JointInterestOwnersAndOther 1,589,898EFLO_JointInterestOwnersAndOther
Prepaids 111,507us-gaap_PrepaidExpenseCurrent 47,864us-gaap_PrepaidExpenseCurrent
Other 15,922us-gaap_OtherAssets 30,182us-gaap_OtherAssets
Total current assets 1,578,625us-gaap_AssetsCurrent 2,318,543us-gaap_AssetsCurrent
OIL AND GAS PROPERTIES, full cost method, unproven 50,534,546EFLO_OilAndGasPropertiesFullCostMethodUnproven 50,305,989EFLO_OilAndGasPropertiesFullCostMethodUnproven
OTHER ASSETS-Goodwill 1,194,365us-gaap_OtherAssetsNoncurrent 1,194,365us-gaap_OtherAssetsNoncurrent
Total assets 53,307,536us-gaap_Assets 53,818,897us-gaap_Assets
CURRENT LIABILITIES    
Accounts payable and accrued liabilities 2,866,371us-gaap_AccountsPayableAndAccruedLiabilitiesCurrent 4,250,625us-gaap_AccountsPayableAndAccruedLiabilitiesCurrent
Convertible notes, net of $56,029 and $233,964 of unamortized discount at February 28, 2015 and August 31, 2014, respectively 2,223,971us-gaap_ConvertibleNotesPayableCurrent 3,396,036us-gaap_ConvertibleNotesPayableCurrent
Asset retirement obligation-current 80,000us-gaap_AssetRetirementObligationCurrent 80,000us-gaap_AssetRetirementObligationCurrent
Total current liabilities 5,170,342us-gaap_LiabilitiesCurrent 7,726,661us-gaap_LiabilitiesCurrent
NONCURRECT LIABILITIES    
Asset retirement obligations 18,109,557us-gaap_AssetRetirementObligationsNoncurrent 17,759,023us-gaap_AssetRetirementObligationsNoncurrent
Deferred income taxes 3,297,434us-gaap_DeferredIncomeTaxesAndOtherLiabilitiesNoncurrent 3,297,434us-gaap_DeferredIncomeTaxesAndOtherLiabilitiesNoncurrent
Total liabilities 26,577,333us-gaap_Liabilities 28,783,118us-gaap_Liabilities
STOCKHOLDERS' EQUITY    
Capital Stock Authorized: 10,000,000 preferred shares, par value $0.001 per share 150,000,000 common shares, par value $0.001 per share Issued and outstanding: 32,204,299 common shares at February 28, 2015 (August 31, 2014 – 19,897,714 common shares) 32,205us-gaap_CommonStockValue 19,898us-gaap_CommonStockValue
Additional paid-in capital 32,094,837us-gaap_AdditionalPaidInCapital 30,493,045us-gaap_AdditionalPaidInCapital
Accumulated other comprehensive loss (141,033)us-gaap_AccumulatedOtherComprehensiveIncomeLossNetOfTax (90,423)us-gaap_AccumulatedOtherComprehensiveIncomeLossNetOfTax
Accumulated deficit (5,255,806)us-gaap_RetainedEarningsAccumulatedDeficit (5,386,741)us-gaap_RetainedEarningsAccumulatedDeficit
Total stockholders' equity 26,730,203us-gaap_StockholdersEquity 25,035,779us-gaap_StockholdersEquity
Total liabilities and stockholders' equity $ 53,307,536us-gaap_LiabilitiesAndStockholdersEquity $ 53,818,897us-gaap_LiabilitiesAndStockholdersEquity
XML 17 R6.htm IDEA: XBRL DOCUMENT v2.4.1.9
1. BASIS OF PRESENTATION
6 Months Ended
Feb. 28, 2015
Accounting Policies [Abstract]  
1. BASIS OF PRESENTATION

Unaudited Interim Condensed Consolidated Financial Statements

 

The unaudited interim condensed consolidated financial statements of EFLO Energy, Inc. (the “Company”), have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). They do not include all information and footnotes required by GAAP for complete financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the consolidated financial statements for the year ended August 31, 2014 included in the Company’s Annual Report on Form 10-K filed with the SEC. The unaudited interim condensed consolidated financial statements should be read in conjunction with those consolidated financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for fair presentation have been made. Operating results for the six months ended February 28, 2015 are not necessarily indicative of the results that may be expected for the year ending August 31, 2015.

 

Recent Accounting Pronouncements

 

In June 2014, the FASB issued Accounting Standards Update 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation (ASU 2014-10), which eliminates the concept of a development stage entity (DSE) from U.S. GAAP. This change rescinds certain financial reporting requirements that have historically applied to DSEs and is intended to result in cost-savings for affected entities.  ASU 2014-10 is effective for public entities for annual reporting periods beginning after December 15, 2014 and interim periods therein.

 

The Company adopted ASU 2014-10 on September 1, 2014 and has applied its guidance in the preparation of these unaudited interim condensed consolidated financial statements.  The application of ASU 2014-10 resulted in the removal of 1) inception-to-date information in the statements of operations and cash flows, 2) labels on the financial statements indicating the Company’s exploration stage status, 3) certain historic disclosures describing exploration stage activities in which the Company has been engaged. The Company does not believe, however, that the removal of this information has a material effect on its unaudited interim condensed consolidated financial statements or the related footnote disclosures thereto.

 

In August 2014, the FASB issued Accounting Standard Update No. 2014-15, Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern. The amendments require management to perform interim and annual assessments of an entity's ability to continue as a going concern and provides guidance on determining when and how to disclose going concern uncertainties in the financial statements. The standard applies to all entities and is effective for annual and interim reporting periods ending after December 15, 2016, with early adoption permitted. The Company is currently evaluating the impact that this new guidance will have on its financial statements.

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5. CAPITAL STOCK AND STOCK-BASED COMPENSATION (Details) (USD $)
6 Months Ended 12 Months Ended
Feb. 28, 2015
Aug. 31, 2014
Capital Stock And Stock-based Compensation Details    
Options outstanding, beginning 1,000,000us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingNumber 1,600,000us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingNumber
Expired (100,000)us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsExpirationsInPeriod (600,000)us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsExpirationsInPeriod
Options outstanding, ending 900,000us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingNumber 1,000,000us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingNumber
Weighted Average Exercise Price, beginning $ 2.60us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingWeightedAverageExercisePrice $ 2.46us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingWeightedAverageExercisePrice
Weighted Average Exercise Price, expired $ 2.30us-gaap_ShareBasedCompensationArrangementsByShareBasedPaymentAwardOptionsExpirationsInPeriodWeightedAverageExercisePrice $ 2.23us-gaap_ShareBasedCompensationArrangementsByShareBasedPaymentAwardOptionsExpirationsInPeriodWeightedAverageExercisePrice
Weighted Average Exercise Price, ending $ 2.63us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingWeightedAverageExercisePrice $ 2.60us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingWeightedAverageExercisePrice
XML 19 R24.htm IDEA: XBRL DOCUMENT v2.4.1.9
7. GAIN ON SETTLEMENT OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES - GAIN ON SETTLEMENT OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details) (USD $)
6 Months Ended
Feb. 28, 2015
Feb. 28, 2014
Accounts payable and accrued liabilities $ 1,798,871us-gaap_AccountsPayableAndAccruedLiabilitiesCurrentAndNoncurrent  
Agreed settlement amount 171,975EFLO_AgreedSettlementAmount  
Gain on settlement of accounts payable and accrued liabilities 1,649,396EFLO_GainOnSettlementOfAccountsPayableAndAccruedLiabilities 0EFLO_GainOnSettlementOfAccountsPayableAndAccruedLiabilities
Number of shares of the Company’s common stock 1,322,884EFLO_NumberOfSharesOfCompanysCommonStockIssuedInSettlement  
Finders’ fees    
Accounts payable and accrued liabilities 1,079,802us-gaap_AccountsPayableAndAccruedLiabilitiesCurrentAndNoncurrent
/ us-gaap_DebtInstrumentAxis
= EFLO_FindersFeesMember
 
Agreed settlement amount 0EFLO_AgreedSettlementAmount
/ us-gaap_DebtInstrumentAxis
= EFLO_FindersFeesMember
 
Gain on settlement of accounts payable and accrued liabilities 1,079,802EFLO_GainOnSettlementOfAccountsPayableAndAccruedLiabilities
/ us-gaap_DebtInstrumentAxis
= EFLO_FindersFeesMember
 
Number of shares of the Company’s common stock 0EFLO_NumberOfSharesOfCompanysCommonStockIssuedInSettlement
/ us-gaap_DebtInstrumentAxis
= EFLO_FindersFeesMember
 
Directors’ fees    
Accounts payable and accrued liabilities 451,750us-gaap_AccountsPayableAndAccruedLiabilitiesCurrentAndNoncurrent
/ us-gaap_DebtInstrumentAxis
= EFLO_DirectorsFeesMember
 
Agreed settlement amount 55,900EFLO_AgreedSettlementAmount
/ us-gaap_DebtInstrumentAxis
= EFLO_DirectorsFeesMember
 
Gain on settlement of accounts payable and accrued liabilities 395,850EFLO_GainOnSettlementOfAccountsPayableAndAccruedLiabilities
/ us-gaap_DebtInstrumentAxis
= EFLO_DirectorsFeesMember
 
Number of shares of the Company’s common stock 430,000EFLO_NumberOfSharesOfCompanysCommonStockIssuedInSettlement
/ us-gaap_DebtInstrumentAxis
= EFLO_DirectorsFeesMember
 
Management fees    
Accounts payable and accrued liabilities 233,891us-gaap_AccountsPayableAndAccruedLiabilitiesCurrentAndNoncurrent
/ us-gaap_DebtInstrumentAxis
= EFLO_ManagementFeesMember
 
Agreed settlement amount 116,075EFLO_AgreedSettlementAmount
/ us-gaap_DebtInstrumentAxis
= EFLO_ManagementFeesMember
 
Gain on settlement of accounts payable and accrued liabilities 117,816EFLO_GainOnSettlementOfAccountsPayableAndAccruedLiabilities
/ us-gaap_DebtInstrumentAxis
= EFLO_ManagementFeesMember
 
Number of shares of the Company’s common stock 892,884EFLO_NumberOfSharesOfCompanysCommonStockIssuedInSettlement
/ us-gaap_DebtInstrumentAxis
= EFLO_ManagementFeesMember
 
Consulting fees    
Accounts payable and accrued liabilities 33,428us-gaap_AccountsPayableAndAccruedLiabilitiesCurrentAndNoncurrent
/ us-gaap_DebtInstrumentAxis
= EFLO_ConsultingFeesMember
 
Agreed settlement amount 0EFLO_AgreedSettlementAmount
/ us-gaap_DebtInstrumentAxis
= EFLO_ConsultingFeesMember
 
Gain on settlement of accounts payable and accrued liabilities $ 33,428EFLO_GainOnSettlementOfAccountsPayableAndAccruedLiabilities
/ us-gaap_DebtInstrumentAxis
= EFLO_ConsultingFeesMember
 
Number of shares of the Company’s common stock 0EFLO_NumberOfSharesOfCompanysCommonStockIssuedInSettlement
/ us-gaap_DebtInstrumentAxis
= EFLO_ConsultingFeesMember
 
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2. OIL AND GAS PROPERTIES
6 Months Ended
Feb. 28, 2015
Extractive Industries [Abstract]  
2. OIL AND GAS PROPERTIES

Oil and Gas Acquisition – Kotaneelee Gas Project (the “KGP”)

 

As a result of two working interest acquisitions, the Company generally owns a 53.65% working interest in the KGP, including a 100% working interest in one shut in gas well.

 

The KGP covers 30,188 gross acres in the Yukon Territory in Canada, and includes: a gas dehydration plant (capacity: 70 MMcf/d), one shut in gas well, one water disposal well (capacity: 6,000 bbl/d), and two suspended gas wells.  The KGP has a fully developed gas gathering, sales and delivery infrastructure, airstrip, roads, flarestack, storage tanks, barge dock and a 24 person permanent camp facility.  The KGP gas dehydration plant has a processing capacity of 70 MMcf/d, outlet gas compression of 1,200 psig and is tied-in through a 24-inch gas sales line to a gas processing plant in Fort Nelson, British Columbia.

 

On July 18, 2012, the Company completed an acquisition of Devon Canada’s (“Devon”) entire right and interest (generally a working interest of 22.989%, with a working interest of 69.337% in one shut in gas well) in the KGP. As consideration for Devon’s working interest in the KGP, (the “Devon Assets”), the Company paid approximately $23,298,000. The consideration was comprised of $290,000 in cash, 7,250,000 shares of the Company’s restricted common stock valued at $15,950,000, and the absorption of approximately $7,058,000 in asset retirement obligations.

 

On October 17, 2012, the Company completed a Share Purchase Agreement with Nahanni Energy Inc., 1700665 Alberta Ltd., Apex Energy (2000), Inc. and Canada Southern Petroleum #1 L.P. (jointly “Nahanni”) for the acquisition of its entire right and interest (generally a working interest of 30.664%) in the KGP (the “Nahanni Assets”) which, in addition to the 69.337% working interest acquired from Devon on July 18, 2012, provided the Company with a 100% interest in one shut in gas well in the KGP.

 

As consideration for the Nahanni Assets, the Company paid Nahanni approximately $13,761,000. The consideration was comprised of approximately $133,000 in cash ($398,550 offset by $265,950 paid in connection with the acquisition of the Devon Assets in settlement of certain Nahanni indebtedness), 1,614,767 shares of one of the Company’s subsidiaries, which are exchangeable for 1,614,767 shares of the Company’s restricted common stock valued at approximately $4,191,000, and the absorption of approximately $9,437,000 in asset retirement obligations. The number of shares issued by the Company’s subsidiary was calculated by dividing the fair value of the exchangeable shares by the volume weighted average trading price of the Company’s stock for the ten (10) trading days prior to closing the purchase agreement.  The fair value of the exchangeable shares has been recorded as additional paid in capital in the Company’s equity. The exchangeable shares enjoy no voting or revenue participation rights in the subsidiary.

 

The Company records assets acquired and liabilities assumed at their estimated acquisition date fair values, while transaction and integration costs associated with the acquisitions are expensed as incurred.  The Company uses relevant market assumptions to determine fair value and allocate purchase price, such as future commodity pricing for purchased hydrocarbons, market multiples for similar transactions and replacement value for certain equipment.  Many of the assumptions are unobservable. The Company’s preliminary assessment of the fair value of the Nahanni Assets resulted in a valuation of $25,526,554. As a result of incorporating this information into the purchase price allocation, a gain on bargain purchase of $11,766,787 was recognized in the accompanying consolidated statement of operations. The gain on bargain purchase was primarily attributable to the strategic nature of the divestiture by the motivated seller, coupled with a confluence of certain favorable economic trends in the industry and the geographic region in which the Nahanni Assets are located.

 

The Company allocated the consideration paid for the Nahanni Assets and Devon assets based upon its assessment of their fair value at the dates of purchase, as follows:

Fair Value of Assets Acquired  
Asset Description  

Nahanni Assets

$

   

Devon Assets

$

   

Total

$

 
                   
Unproved leasehold costs     14,548,787       13,827,001       28,375,788  
Plant and equipment     8,594,362       6,484,001       15,078,363  
Gathering systems     2,383,405       1,788,001       4,171,406  
Vehicles     -       4,527       4,527  
Unproven Properties     25,526,554       22,103,530       47,630,084  
Goodwill     -       1,194,365       1,194,365  
Total Assets Acquired - KGP     25,526,554       23,297,895       48,824,449  

 

 

Development costs incurred to obtain access and provide facilities for extracting, gathering, treating and storing oil and gas related to unproved oil and gas properties that are being evaluated for economic viability are capitalized to the full cost pool until proved reserves are established, or determination is made that the unproved properties are impaired.  During the six months ended February 28, 2015, the full cost pool was increased by $228,557 (2014 - $548,495) as a result of these costs.

XML 22 R3.htm IDEA: XBRL DOCUMENT v2.4.1.9
CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
Feb. 28, 2015
Aug. 31, 2014
Statement of Financial Position [Abstract]    
Unamortized Discount $ 56,029us-gaap_DebtInstrumentUnamortizedDiscount $ 233,964us-gaap_DebtInstrumentUnamortizedDiscount
Stockholders Equity    
Preferred Stock Shares Par value $ 0.001us-gaap_PreferredStockParOrStatedValuePerShare $ 0.001us-gaap_PreferredStockParOrStatedValuePerShare
Preferred Stock Shares Authorized 10,000,000us-gaap_PreferredStockSharesAuthorized 10,000,000us-gaap_PreferredStockSharesAuthorized
Common Stock Shares Par value $ 0.001us-gaap_CommonStockParOrStatedValuePerShare $ 0.001us-gaap_CommonStockParOrStatedValuePerShare
Common Stock Shares Authorized 150,000,000us-gaap_CommonStockSharesAuthorized 150,000,000us-gaap_CommonStockSharesAuthorized
Common Stock Shares Issued 32,204,299us-gaap_CommonStockSharesIssued 19,897,714us-gaap_CommonStockSharesIssued
Common Stock Shares Outstanding 32,204,299us-gaap_CommonStockSharesOutstanding 19,897,714us-gaap_CommonStockSharesOutstanding
XML 23 R17.htm IDEA: XBRL DOCUMENT v2.4.1.9
5. CAPITAL STOCK AND STOCK-BASED COMPENSATION (Tables)
6 Months Ended
Feb. 28, 2015
Capital Stock And Stock-based Compensation Tables  
Option activity

The Company’s stock options outstanding as at February 28, 2015 and August 31, 2014 and the changes for the periods then ended are as follows:

 

   

Number Outstanding

#

   

Weighted Average Exercise Price

$

 
             
Balance, August 31, 2013     1,600,000       2.46  
Expired     (600,000 )     2.23  
Balance, August 31, 2014     1,000,000       2.60  
Expired     (100,000 )     2.30  
Balance, February 28, 2015     900,000       2.63  

 

Summary of stock options outstanding at February 28, 2015:

 

Security  

Number Outstanding

#

   

Exercise Price

$

  Expiry Date
               
Stock options     100,000       2.50   January 15, 2016
Stock options     100,000       2.75   January 15, 2017
Stock options     100,000       3.00   July 15, 2017
Stock options     300,000       2.50   August 27, 2017
Stock options     300,000       2.65   August 27, 2017

 

XML 24 R1.htm IDEA: XBRL DOCUMENT v2.4.1.9
Document and Entity Information
6 Months Ended
Feb. 28, 2015
Apr. 14, 2015
DocumentAndEntityInformationAbstract    
Entity Registrant Name EFLO ENERGY, INC.  
Entity Central Index Key 0001448806  
Document Type 10-Q  
Document Period End Date Feb. 28, 2015  
Amendment Flag false  
Current Fiscal Year End Date --08-31  
Is Entity a Well-known Seasoned Issuer? No  
Is Entity a Voluntary Filer? No  
Is Entity's Reporting Status Current? Yes  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   32,204,299dei_EntityCommonStockSharesOutstanding
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2015  
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7. GAIN ON SETTLEMENT OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Tables)
6 Months Ended
Feb. 28, 2015
Notes to Financial Statements  
GAIN ON SETTLEMENT OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Description of liability  

Accounts payable and accrued liabilities

$

   

Agreed settlement amount

$

   

Gain on settlement of accounts payable and accrued liabilities

$

   

Number of shares of the Company’s common stock

#

 
                         
Finders’ fees     1,079,802       -       1,079,802       -  
Directors’ fees     451,750       55,900       395,850       430,000  
Management fees     233,891       116,075       117,816       892,884  
Consulting fees     33,428       -       33,428       -  
      1,798,871       171,975       1,626,896       1,322,884  
XML 26 R4.htm IDEA: XBRL DOCUMENT v2.4.1.9
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Unaudited) (USD $)
3 Months Ended 6 Months Ended
Feb. 28, 2015
Feb. 28, 2014
Feb. 28, 2015
Feb. 28, 2014
EXPENSES        
Management and director's fees $ 102,884EFLO_ManagementFees $ 218,676EFLO_ManagementFees $ 244,725EFLO_ManagementFees $ 432,568EFLO_ManagementFees
Stock-based compensation expense 14,136EFLO_StockbasedCompensationExpense 106,440EFLO_StockbasedCompensationExpense 33,624EFLO_StockbasedCompensationExpense 222,419EFLO_StockbasedCompensationExpense
Consulting fees 58,536EFLO_Consulting 86,737EFLO_Consulting 128,345EFLO_Consulting 244,535EFLO_Consulting
Professional fees 93,989us-gaap_ProfessionalFees 112,752us-gaap_ProfessionalFees 230,599us-gaap_ProfessionalFees 245,905us-gaap_ProfessionalFees
Financing fees 0EFLO_FinancingFees 0EFLO_FinancingFees 0EFLO_FinancingFees 176,400EFLO_FinancingFees
Office, travel and general 70,285us-gaap_GeneralAndAdministrativeExpense 145,474us-gaap_GeneralAndAdministrativeExpense 134,211us-gaap_GeneralAndAdministrativeExpense 237,353us-gaap_GeneralAndAdministrativeExpense
Accretion of asset retirement obligations 175,307us-gaap_AssetRetirementObligationAccretionExpense 172,374us-gaap_AssetRetirementObligationAccretionExpense 350,534us-gaap_AssetRetirementObligationAccretionExpense 343,042us-gaap_AssetRetirementObligationAccretionExpense
Total Expenses 515,137us-gaap_CostsAndExpenses 842,453us-gaap_CostsAndExpenses 1,122,038us-gaap_CostsAndExpenses 1,902,222us-gaap_CostsAndExpenses
OPERATING LOSS (515,137)us-gaap_OperatingIncomeLoss (842,453)us-gaap_OperatingIncomeLoss (1,122,038)us-gaap_OperatingIncomeLoss (1,902,222)us-gaap_OperatingIncomeLoss
OTHER INCOME (EXPENSE)        
Interest expense and other financing costs (181,229)us-gaap_InterestExpense (101,794)us-gaap_InterestExpense (396,423)us-gaap_InterestExpense (136,920)us-gaap_InterestExpense
Gain on settlement of accounts payable and accrued liabilities 3,798us-gaap_GainsLossesOnExtinguishmentOfDebt 0us-gaap_GainsLossesOnExtinguishmentOfDebt 1,649,396us-gaap_GainsLossesOnExtinguishmentOfDebt 0us-gaap_GainsLossesOnExtinguishmentOfDebt
NET INCOME (LOSS) before taxes (692,568)us-gaap_IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest (944,247)us-gaap_IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest 130,935us-gaap_IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest (2,039,142)us-gaap_IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest
Provision for income tax 0us-gaap_IncomeTaxExpenseBenefit 0us-gaap_IncomeTaxExpenseBenefit 0us-gaap_IncomeTaxExpenseBenefit 0us-gaap_IncomeTaxExpenseBenefit
NET INCOME (LOSS) (692,568)us-gaap_NetIncomeLoss (944,247)us-gaap_NetIncomeLoss 130,935us-gaap_NetIncomeLoss (2,039,142)us-gaap_NetIncomeLoss
Foreign currency translation (35,917)us-gaap_ForeignCurrencyTransactionGainLossBeforeTax (39,185)us-gaap_ForeignCurrencyTransactionGainLossBeforeTax (50,610)us-gaap_ForeignCurrencyTransactionGainLossBeforeTax (33,084)us-gaap_ForeignCurrencyTransactionGainLossBeforeTax
COMPREHENSIVE INCOME (LOSS) $ (728,485)us-gaap_OtherComprehensiveIncomeLossTax $ (983,432)us-gaap_OtherComprehensiveIncomeLossTax $ 80,325us-gaap_OtherComprehensiveIncomeLossTax $ (2,072,226)us-gaap_OtherComprehensiveIncomeLossTax
BASIC AND DILUTED INCOME (LOSS) PER SHARE $ (0.03)us-gaap_EarningsPerShareBasicAndDiluted $ (0.05)us-gaap_EarningsPerShareBasicAndDiluted $ 0.01us-gaap_EarningsPerShareBasicAndDiluted $ (0.10)us-gaap_EarningsPerShareBasicAndDiluted
WEIGHTED AVERAGE SHARES OUTSTANDING 26,926,956us-gaap_WeightedAverageNumberOfShareOutstandingBasicAndDiluted 19,539,191us-gaap_WeightedAverageNumberOfShareOutstandingBasicAndDiluted 23,398,431us-gaap_WeightedAverageNumberOfShareOutstandingBasicAndDiluted 19,513,604us-gaap_WeightedAverageNumberOfShareOutstandingBasicAndDiluted
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7. GAIN ON SETTLEMENT OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
6 Months Ended
Feb. 28, 2015
Notes to Financial Statements  
7. GAIN ON SETTLEMENT OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

On January 12, 2015, the Company (together with its officers and directors), two of the 2014 Convertible Notes holders, and other interest parties entered into a settlement agreement (the “Settlement Agreement”).

 

Under the terms of the Settlement Agreement, two of the 2014 Convertible Notes holders agreed to accept payment of principal and 6% financing fees aggregating $1,431,000 into 11,007,692 shares of the Company’s common stock calculated using a price of $0.13 per share (Note 4).

 

The Settlement Agreement also provided for the following liability settlements which were settled with 1,322,884 shares of the Company’s common stock calculated using a price of $0.13 per share:

 

Description of liability  

Accounts payable and accrued liabilities

$

   

Agreed settlement amount

$

   

Gain on settlement of accounts payable and accrued liabilities

$

   

Number of shares of the Company’s common stock

#

 
                         
Finders’ fees     1,079,802       -       1,079,802       -  
Directors’ fees     451,750       55,900       395,850       430,000  
Management fees     233,891       116,075       117,816       892,884  
Consulting fees     33,428       -       33,428       -  
      1,798,871       171,975       1,626,896       1,322,884  

 

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6. RELATED PARTY TRANSACTIONS
6 Months Ended
Feb. 28, 2015
Related Party Transactions [Abstract]  
6. RELATED PARTY TRANSACTIONS

Effective January 20, 2011, a company controlled by the Company’s former Chief Executive Officer, its former Chief Financial Officer, and an unrelated consultant (the “Finders”) entered into an agreement with the Company providing for the payment of finder’s compensation ranging from 5% (on transaction values greater than $1,000,000) to 10% (on transactions valued up to $300,000) on transactions introduced to the Company by or through the Finders for a period of two years (the “Finder’s Fee Agreement”). Under the Finder’s Fee Agreement, compensation is divided between the Finders and the Finders may elect whether the finder’s compensation is payable in cash, or shares of the Company’s restricted common stock. The Finder’s Fee Agreement specifically recognizes that the KGP has been presented to the Company by the Finders. On January 12, 2015, two of the Finders settled the fees payable under the Finders’ Fee Agreement at no cost to the Company (see Note 7).

  

Effective September 1, 2013, the Company executed an administrative services agreement with Holloman Corporation. Under this agreement, fees of $5,000 per month are payable to Holloman Corporation covering; office and meeting space, supplies, utilities, office equipment, network access and other administrative facilities costs. These fees are payable quarterly in shares of the Company’s restricted common stock at the closing price of the stock on the last trading-day of the applicable monthly billing period. During December 2014, in connection with cost cutting efforts, Holloman Corporation voluntarily terminated its administrative services agreement with the Company. The effective date of that termination was June 1, 2014.

 

The chairman of the Company’s board of directors is also a director of Pacific World Energy Corporation (“Pacific World”).  Pacific World held $1,000,000 of 2014 Convertible Notes principal until settlement for shares of the Company’s common stock on January 12, 2015 (Note 4).

XML 29 R23.htm IDEA: XBRL DOCUMENT v2.4.1.9
5. CAPITAL STOCK AND STOCK-BASED COMPENSATION (Details 1) (USD $)
6 Months Ended
Feb. 28, 2015
Aug. 31, 2014
Aug. 31, 2013
Options outstanding, ending 900,000us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingNumber 1,000,000us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingNumber 1,600,000us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingNumber
Weighted Average Exercise Price, ending $ 2.63us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingWeightedAverageExercisePrice $ 2.60us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingWeightedAverageExercisePrice $ 2.46us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingWeightedAverageExercisePrice
Option group 1      
Options outstanding, ending 100,000us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingNumber
/ us-gaap_AwardDateAxis
= EFLO_OptionGroup1Member
   
Weighted Average Exercise Price, ending $ 2.5us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingWeightedAverageExercisePrice
/ us-gaap_AwardDateAxis
= EFLO_OptionGroup1Member
   
Expiry date Jan. 15, 2016    
Option group 2      
Options outstanding, ending 100,000us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingNumber
/ us-gaap_AwardDateAxis
= EFLO_OptionGroup2Member
   
Weighted Average Exercise Price, ending $ 2.75us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingWeightedAverageExercisePrice
/ us-gaap_AwardDateAxis
= EFLO_OptionGroup2Member
   
Expiry date Jan. 15, 2017    
Option group 3      
Options outstanding, ending 100,000us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingNumber
/ us-gaap_AwardDateAxis
= EFLO_OptionGroup3Member
   
Weighted Average Exercise Price, ending $ 3us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingWeightedAverageExercisePrice
/ us-gaap_AwardDateAxis
= EFLO_OptionGroup3Member
   
Expiry date Jul. 15, 2017    
Option group 4      
Options outstanding, ending 300,000us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingNumber
/ us-gaap_AwardDateAxis
= EFLO_OptionGroup4Member
   
Weighted Average Exercise Price, ending $ 2.5us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingWeightedAverageExercisePrice
/ us-gaap_AwardDateAxis
= EFLO_OptionGroup4Member
   
Expiry date Aug. 17, 2017    
Option group 5      
Options outstanding, ending 300,000us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingNumber
/ us-gaap_AwardDateAxis
= EFLO_OptionGroup5Member
   
Weighted Average Exercise Price, ending $ 2.65us-gaap_ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsOutstandingWeightedAverageExercisePrice
/ us-gaap_AwardDateAxis
= EFLO_OptionGroup5Member
   
Expiry date Aug. 17, 2017    
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M```5`!@```````$```"D@:Q#``!E9FQO+3(P,34P,C(X7V-A;"YX;6Q55`4` M`WI[+55U>`L``00E#@``!#D!``!02P$"'@,4````"``OA8Y&,]>EI1\+```; M?@``%0`8```````!````I(&%3P``969L;RTR,#$U,#(R.%]D968N>&UL550% M``-Z>RU5=7@+``$$)0X```0Y`0``4$L!`AX#%`````@`+X6.1KGUBK7;+0`` M`&T"`!4`&````````0```*2!\UH``&5F;&\M,C`Q-3`R,CA?;&%B+GAM;%54 M!0`#>GLM575X"P`!!"4.```$.0$``%!+`0(>`Q0````(`"^%CD;C"7CHJAD` M`/6"`0`5`!@```````$```"D@1V)``!E9FQO+3(P,34P,C(X7W!R92YX;6Q5 M5`4``WI[+55U>`L``00E#@``!#D!``!02P$"'@,4````"``OA8Y&H6DPK2,, M``!J>```$0`8```````!````I($6HP``969L;RTR,#$U,#(R."YX`L``00E#@``!#D!``!02P4&``````8`!@`:`@``A*\````` ` end XML 31 R19.htm IDEA: XBRL DOCUMENT v2.4.1.9
2. OIL AND GAS PROPERTIES (Details) (USD $)
Feb. 28, 2015
Unproven Properties  
Unproved Leasehold costs $ 28,375,788EFLO_UnprovedLeaseholdCost
Plant and equipment 15,078,363EFLO_PlantAndEquipment
Gathering systems 4,171,406EFLO_GatheringSystems
Vehicles 4,527EFLO_Vehicles
Subtotal 47,630,084EFLO_Subtotal
Goodwill 1,194,365us-gaap_Goodwill
Total Assets Acquired - KGP 48,824,449EFLO_TotalAssetsAcquiredKgp
Nahanni Assets  
Unproven Properties  
Unproved Leasehold costs 14,548,787EFLO_UnprovedLeaseholdCost
/ us-gaap_BusinessAcquisitionAxis
= EFLO_NahanniAssetsMember
Plant and equipment 8,594,362EFLO_PlantAndEquipment
/ us-gaap_BusinessAcquisitionAxis
= EFLO_NahanniAssetsMember
Gathering systems 2,383,405EFLO_GatheringSystems
/ us-gaap_BusinessAcquisitionAxis
= EFLO_NahanniAssetsMember
Vehicles 0EFLO_Vehicles
/ us-gaap_BusinessAcquisitionAxis
= EFLO_NahanniAssetsMember
Subtotal 25,526,554EFLO_Subtotal
/ us-gaap_BusinessAcquisitionAxis
= EFLO_NahanniAssetsMember
Goodwill 0us-gaap_Goodwill
/ us-gaap_BusinessAcquisitionAxis
= EFLO_NahanniAssetsMember
Total Assets Acquired - KGP 25,526,554EFLO_TotalAssetsAcquiredKgp
/ us-gaap_BusinessAcquisitionAxis
= EFLO_NahanniAssetsMember
Devon Assets  
Unproven Properties  
Unproved Leasehold costs 13,827,001EFLO_UnprovedLeaseholdCost
/ us-gaap_BusinessAcquisitionAxis
= EFLO_DevonAssetsMember
Plant and equipment 6,484,001EFLO_PlantAndEquipment
/ us-gaap_BusinessAcquisitionAxis
= EFLO_DevonAssetsMember
Gathering systems 1,788,001EFLO_GatheringSystems
/ us-gaap_BusinessAcquisitionAxis
= EFLO_DevonAssetsMember
Vehicles 4,527EFLO_Vehicles
/ us-gaap_BusinessAcquisitionAxis
= EFLO_DevonAssetsMember
Subtotal 22,103,530EFLO_Subtotal
/ us-gaap_BusinessAcquisitionAxis
= EFLO_DevonAssetsMember
Goodwill 1,194,365us-gaap_Goodwill
/ us-gaap_BusinessAcquisitionAxis
= EFLO_DevonAssetsMember
Total Assets Acquired - KGP $ 23,297,895EFLO_TotalAssetsAcquiredKgp
/ us-gaap_BusinessAcquisitionAxis
= EFLO_DevonAssetsMember
XML 32 R15.htm IDEA: XBRL DOCUMENT v2.4.1.9
3. ASSET RETIREMENT OBLIGATIONS (Tables)
6 Months Ended
Feb. 28, 2015
BalanceEnding1  
Schedule of Asset Retirement Obligation
    $  
         
Balance, August 31, 2013     17,146,750  
Liabilities incurred (acquired)     -  
Accretion expense     692,273  
Balance, August 31, 2014     17,839,023  
Liabilities incurred (acquired)     -  
Accretion expense     350,534  
Total Balance, February 28, 2015     18,189,557  
Total Balance, February 28, 2015 – Current     80,000  
Total Balance, February 28, 2015 – Long Term     18,109,557  
XML 33 R13.htm IDEA: XBRL DOCUMENT v2.4.1.9
8. SUBSEQUENT EVENTS
6 Months Ended
Feb. 28, 2015
Subsequent Events [Abstract]  
8. SUBSEQUENT EVENTS

On March 4, 2015, the Company entered into a Loan Agreement (the “Loan Agreement”) with Fundacion Inversiones Barroco (“FIB”), a Panamanian corporation, whereby the Company borrowed CAD$600,000 from FIB (the “Loan”).  The Loan bears interest at a rate of 10% per annum, is unsecured and due on or before February 1, 2016.  On April 7, 2015, the Company repaid the CAD$600,000 loan.

 

The Loan Agreement is a related party transaction as a director of the Company is related to FIB.

 

XML 34 R14.htm IDEA: XBRL DOCUMENT v2.4.1.9
2. OIL AND GAS PROPERTIES (Tables)
6 Months Ended
Feb. 28, 2015
Oil And Gas Properties Tables  
Schedule of Oil and Gas Acquisition
Fair Value of Assets Acquired  
Asset Description  

Nahanni Assets

$

   

Devon Assets

$

   

Total

$

 
                   
Unproved leasehold costs     14,548,787       13,827,001       28,375,788  
Plant and equipment     8,594,362       6,484,001       15,078,363  
Gathering systems     2,383,405       1,788,001       4,171,406  
Vehicles     -       4,527       4,527  
Unproven Properties     25,526,554       22,103,530       47,630,084  
Goodwill     -       1,194,365       1,194,365  
Total Assets Acquired - KGP     25,526,554       23,297,895       48,824,449  
XML 35 R16.htm IDEA: XBRL DOCUMENT v2.4.1.9
4. CONVERTIBLE NOTES PAYABLE (Tables)
6 Months Ended
Feb. 28, 2015
Convertible Notes Payable Tables  
Schedule convertible notes payable
   

2013 Convertible Notes

$

   

2014 Convertible Notes

$

 
             
Balance, August 31, 2013     -       -  
Principal received     2,255,000       1,400,000  
Transaction costs     (533,803 )     -  
Amortization of transaction costs     299,839       -  
Conversion into common stock     (25,000 )     -  
Balance, August 31, 2014     1,996,036       1,400,000  
Amortization of transaction costs     177,935       -  
Settlement of principal and interest in common stock     -       (1,350,000 )
Balance, February 28, 2015     2,173,971       50,000  
XML 36 R21.htm IDEA: XBRL DOCUMENT v2.4.1.9
4. CONVERTIBLE NOTES PAYABLE (Details) (USD $)
6 Months Ended 12 Months Ended
Feb. 28, 2015
Aug. 31, 2014
2013 Convertible Notes    
Beginning balance $ 1,996,036us-gaap_ConvertibleDebt
/ us-gaap_DebtInstrumentAxis
= EFLO_NotesConvertible1Member
$ 0us-gaap_ConvertibleDebt
/ us-gaap_DebtInstrumentAxis
= EFLO_NotesConvertible1Member
Principal received   2,255,000EFLO_PrincipalReceivedDuringPeriodConvertibleDebt
/ us-gaap_DebtInstrumentAxis
= EFLO_NotesConvertible1Member
Transaction costs   (533,803)EFLO_TransactionCostsChargedDuringPeriodConvertibleDebt
/ us-gaap_DebtInstrumentAxis
= EFLO_NotesConvertible1Member
Amortization of transaction costs 177,935EFLO_AmortizationOfTransactionCostsDuringPeriodConvertibleDebt
/ us-gaap_DebtInstrumentAxis
= EFLO_NotesConvertible1Member
299,839EFLO_AmortizationOfTransactionCostsDuringPeriodConvertibleDebt
/ us-gaap_DebtInstrumentAxis
= EFLO_NotesConvertible1Member
Conversion into common stock   (25,000)EFLO_ConversionIntoCommonStockDuringPeriodConvertibleDebt
/ us-gaap_DebtInstrumentAxis
= EFLO_NotesConvertible1Member
Ending balance 2,173,971us-gaap_ConvertibleDebt
/ us-gaap_DebtInstrumentAxis
= EFLO_NotesConvertible1Member
1,996,036us-gaap_ConvertibleDebt
/ us-gaap_DebtInstrumentAxis
= EFLO_NotesConvertible1Member
2014 Convertible Notes    
Beginning balance 1,400,000us-gaap_ConvertibleDebt
/ us-gaap_DebtInstrumentAxis
= EFLO_NotesConvertible2Member
0us-gaap_ConvertibleDebt
/ us-gaap_DebtInstrumentAxis
= EFLO_NotesConvertible2Member
Principal received   1,400,000EFLO_PrincipalReceivedDuringPeriodConvertibleDebt
/ us-gaap_DebtInstrumentAxis
= EFLO_NotesConvertible2Member
Transaction costs   0EFLO_TransactionCostsChargedDuringPeriodConvertibleDebt
/ us-gaap_DebtInstrumentAxis
= EFLO_NotesConvertible2Member
Amortization of transaction costs 0EFLO_AmortizationOfTransactionCostsDuringPeriodConvertibleDebt
/ us-gaap_DebtInstrumentAxis
= EFLO_NotesConvertible2Member
0EFLO_AmortizationOfTransactionCostsDuringPeriodConvertibleDebt
/ us-gaap_DebtInstrumentAxis
= EFLO_NotesConvertible2Member
Conversion into common stock   0EFLO_ConversionIntoCommonStockDuringPeriodConvertibleDebt
/ us-gaap_DebtInstrumentAxis
= EFLO_NotesConvertible2Member
Settlement of principal and interest in common stock (1,350,000)EFLO_SettlementOfPrincipalAndInterestInCommonStockDuringPeriodConvertibleDebt
/ us-gaap_DebtInstrumentAxis
= EFLO_NotesConvertible2Member
 
Ending balance $ 50,000us-gaap_ConvertibleDebt
/ us-gaap_DebtInstrumentAxis
= EFLO_NotesConvertible2Member
$ 1,400,000us-gaap_ConvertibleDebt
/ us-gaap_DebtInstrumentAxis
= EFLO_NotesConvertible2Member
XML 37 R5.htm IDEA: XBRL DOCUMENT v2.4.1.9
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
6 Months Ended
Feb. 28, 2015
Feb. 28, 2014
CASH FLOWS FROM OPERATING ACTIVITIES    
Net income (loss) $ 130,935us-gaap_NetIncomeLoss $ (2,039,142)us-gaap_NetIncomeLoss
Adjustments to reconcile net income (loss) to net cash used in operating activities:    
Stock-based compensation and fee payments 33,624us-gaap_ShareBasedCompensation 236,494us-gaap_ShareBasedCompensation
Amortization of convertible note discount 177,935EFLO_AmortizationOfConvertibleNoteDiscount 59,790EFLO_AmortizationOfConvertibleNoteDiscount
Unrealized foreign exchange losses 0EFLO_UnrealizedForeignExchangeLosses (33,084)EFLO_UnrealizedForeignExchangeLosses
Gain on settlement of accounts payable and accrued liabilities (1,649,396)EFLO_GainOnSettlementOfAccountsPayableAndAccruedLiabilities 0EFLO_GainOnSettlementOfAccountsPayableAndAccruedLiabilities
Accretion of asset retirement obligations 350,534us-gaap_AssetRetirementObligationAccretionExpense 343,042us-gaap_AssetRetirementObligationAccretionExpense
Changes in working capital items-    
Accounts receivable 272,302us-gaap_IncreaseDecreaseInAccountsReceivable (360,173)us-gaap_IncreaseDecreaseInAccountsReceivable
Prepaids and other (49,383)us-gaap_IncreaseDecreaseInPrepaidExpense (38,871)us-gaap_IncreaseDecreaseInPrepaidExpense
Accounts payable and accrued liabilities 554,667us-gaap_IncreaseDecreaseInAccountsPayableAndAccruedLiabilities 550,710us-gaap_IncreaseDecreaseInAccountsPayableAndAccruedLiabilities
Net cash used in operating activities (178,782)us-gaap_NetCashProvidedByUsedInOperatingActivities (1,281,234)us-gaap_NetCashProvidedByUsedInOperatingActivities
CASH FLOWS FROM INVESTING ACTIVITIES    
Expenditures on oil and gas properties, net (312,912)us-gaap_PaymentsToAcquireOilAndGasProperty (522,323)us-gaap_PaymentsToAcquireOilAndGasProperty
Net cash used in investing activities (312,912)us-gaap_NetCashProvidedByUsedInInvestingActivities (522,323)us-gaap_NetCashProvidedByUsedInInvestingActivities
CASH FLOWS FROM FINANCING ACTIVITIES    
Proceeds from notes payable 0us-gaap_ProceedsFromNotesPayable 2,255,000us-gaap_ProceedsFromNotesPayable
Net cash provided by financing activities 0us-gaap_NetCashProvidedByUsedInFinancingActivities 2,255,000us-gaap_NetCashProvidedByUsedInFinancingActivities
(DECREASE) INCREASE IN CASH (491,694)us-gaap_CashAndCashEquivalentsPeriodIncreaseDecrease 451,443us-gaap_CashAndCashEquivalentsPeriodIncreaseDecrease
CASH, BEGINNING OF PERIOD 650,599us-gaap_CashAndCashEquivalentsAtCarryingValue 476,522us-gaap_CashAndCashEquivalentsAtCarryingValue
CASH, END OF PERIOD 158,905us-gaap_CashAndCashEquivalentsAtCarryingValue 927,965us-gaap_CashAndCashEquivalentsAtCarryingValue
SUPPLEMENTAL DISCLOSURE    
Cash paid for interest 0us-gaap_InterestPaid 0us-gaap_InterestPaid
Cash paid for income taxes 0us-gaap_IncomeTaxesPaid 0us-gaap_IncomeTaxesPaid
NON-CASH INVESTING ACTIVITIES:    
Accrued expenditures on oil and gas properties 930,321EFLO_AccruedExpendituresOnOilAndGasProperties 102,000EFLO_AccruedExpendituresOnOilAndGasProperties
NON-CASH FINANCING ACTIVITIES    
Common stock issued for settlement of accounts payable and accrued liabilities 230,475EFLO_CommonStockIssuedForSettlementOfAccountsPayableAndAccruedLiabilities 105,000EFLO_CommonStockIssuedForSettlementOfAccountsPayableAndAccruedLiabilities
Common stock issued as settlement of convertible notes $ 1,350,000EFLO_CommonStockIssuedAsSettlementOfConvertibleNotes $ 0EFLO_CommonStockIssuedAsSettlementOfConvertibleNotes
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5. CAPITAL STOCK AND STOCK BASED COMPENSATION
6 Months Ended
Feb. 28, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
5. CAPITAL STOCK AND STOCK BASED COMPENSATION
  a) Issuance of Common Stock:

 

During the six months ended February 28, 2015, the Company completed the follow stock transactions:

 

i)   During December 2014, in connection with cost cutting efforts, Holloman Corporation and Niconsult GmbH voluntarily terminated their service agreements with the Company (Note 6). The effective date of those terminations was June 1, 2014.  As a result, the Company adjusted fees totaling $22,500 related to the three months ended August 31, 2014, which had been paid using 23,991 shares of its restricted common stock, at a weighted average price of $0.938 per share. This adjustment resulted in the recognition of a gain on forgiveness of accounts payable of $22,500 during the six months ended February 28, 2015.

 

  ii) On January 12, 2015, the Company issued 11,007,692 shares of the Company’s common stock as settlement of $1,350,000 of 2014 Convertible Notes principal and $81,000 of 6% financing fee (Notes 4 and 7).

 

  iii) On January 12, 2015, the Company issued 1,322,884 shares of the Company’s common stock at the fair value of $171,975 as settlement of $1,798,871 of accounts payable and accrued liabilities and accordingly, the Company recorded a gain on settlement of accounts payable and accrued liabilities of $1,626,896 (Note 7).

 

  b) Convertible notes:

 

The Company has outstanding 2013 Convertible Notes and 2014 Convertible Notes (Note 4) which are convertible into shares of the Company’s common stock.

  

  c) Stock purchase warrants:

 

The Company has 1,127,500 Stock Purchase Warrants outstanding which are exercisable at $1.25 per share up to October 30, 2016.

 

  d) Options:

 

On August 27, 2012, the Company established a Non-Qualified Stock Option Plan and a Stock Bonus Plan (the “Plans”). The Non-Qualified Stock Option Plan (the “Option Plan”) authorizes the issuance of up to 2,000,000 shares of the Company’s common stock. The Stock Bonus Plan provides for the issuance of up to 350,000 common shares (“Bonus Shares”). Under the Plans, shares may only be issued to employees, directors, officers, consultants and advisors, provided qualifying services are rendered.

The Company’s stock options outstanding as at February 28, 2015 and August 31, 2014 and the changes for the periods then ended are as follows:

 

   

Number Outstanding

#

   

Weighted Average Exercise Price

$

 
             
Balance, August 31, 2013     1,600,000       2.46  
Expired     (600,000 )     2.23  
Balance, August 31, 2014     1,000,000       2.60  
Expired     (100,000 )     2.30  
Balance, February 28, 2015     900,000       2.63  

 

Summary of stock options outstanding at February 28, 2015:

 

Security  

Number Outstanding

#

   

Exercise Price

$

  Expiry Date
               
Stock options     100,000       2.50   January 15, 2016
Stock options     100,000       2.75   January 15, 2017
Stock options     100,000       3.00   July 15, 2017
Stock options     300,000       2.50   August 27, 2017
Stock options     300,000       2.65   August 27, 2017

 

As of February 28, 2015, $13,174 of total unrecognized compensation cost remains under the Option Plan. All of this amount is expected to be recognized during the remainder of fiscal 2015.

 

During the six months ended February 28, 2015, the Company had stock-based compensation expense of $33,624 (2014 - $222,419).

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3. ASSET RETIREMENT OBLIGATIONS (Details) (USD $)
6 Months Ended 12 Months Ended
Feb. 28, 2015
Aug. 31, 2014
Asset Retirement Obligations    
Asset Retirement Obligation, Beginning $ 17,839,023us-gaap_AssetRetirementObligation $ 17,146,750us-gaap_AssetRetirementObligation
Liabilities incurred (acquired) 0EFLO_LiabilitiesIncurredAcquired 0EFLO_LiabilitiesIncurredAcquired
Accretion expense 350,534EFLO_AccretionExpense1 692,273EFLO_AccretionExpense1
Asset Retirement Obligation, Ending 18,189,557us-gaap_AssetRetirementObligation 17,839,023us-gaap_AssetRetirementObligation
Total Balance, February 28, 2015 - Current 80,000us-gaap_AssetRetirementObligationCurrent 80,000us-gaap_AssetRetirementObligationCurrent
Total Balance, February 28, 2015 - Long Term $ 18,109,557us-gaap_AssetRetirementObligationsNoncurrent $ 17,759,023us-gaap_AssetRetirementObligationsNoncurrent