CURRENT REPORT FOR ISSUERS SUBJECT TO THE
1934 ACT REPORTING REQUIREMENTS
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
For the Fiscal Year Ended December 31, 2012
PREMIER OIL FIELD SERVICES, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 1741 | 27-2262066 | ||
| (State or jurisdiction of incorporation or organization) | (Primary Industrial Classification Code No.) | I.R.S. Employer Identification No. |
270 Southern Drive, Royce City, Texas 75189-5704
(Address, including the ZIP code & telephone number, including area code of Registrant's principal executive office)
(972) 772-9493
(Registrant’s telephone number, including area code)
(Former address)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: Common Stock
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 Act of 1934 during the past 12 months and (2) has been subject to such filing requirement for the past 90 days Yes [X] No [ ].
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
| Large Accelerated Filer [ ]. | Accelerated Filer [ ]. | ||
| Non-Accelerated Filer [ ]. | Smaller Reporting Company [X] |
Indicate by a check mark whether the company is a shell company (as defined by Rule 12b-2 of the Exchange Act: Yes [ ] No [ X ].
Aggregate market value of the voting stock held by non-affiliates of the registrant as of December 31, 2012: $473,168.
Shares of common stock outstanding at March 31, 2013: 7,346,336
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PART I.
FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, which we refer to in this annual report as the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to in this annual report as the Exchange Act. Forward-looking statements are not statements of historical fact but rather reflect our current expectations, estimates and predictions about future results and events. These statements may use words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “project” and similar expressions as they relate to us or our management. When we make forward-looking statements, we are basing them on our management’s beliefs and assumptions, using information currently available to us. These forward-looking statements are subject to risks, uncertainties and assumptions, including but not limited to, risks, uncertainties and assumptions discussed in this annual report. Factors that can cause or contribute to these differences include those described under the headings “Risk Factors” and “Management Discussion and Analysis and Plan of Operation.”
If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. Any forward-looking statement you read in this annual report reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. All subsequent written and oral forward-looking statements attributable to us or individuals acting on our behalf are expressly qualified in their entirety by this paragraph. You should specifically consider the factors identified in this annual report which would cause actual results to differ before making an investment decision. We are under no duty to update any of the forward-looking statements after the date of this annual report or to conform these statements to actual results.
ITEM 1. DESCRIPTION OF BUSINESS
We were formed as a corporation on June 29, 2009 in Nevada in order to acquire 100% of the outstanding stock of Coil Motor Tubing Corporation, a Texas corporation. Coil Tubing Motor Corporation (“CTM”) is a wholly owned subsidiary of Premier Oil Field Services, Inc. (“Premier” or “the Company” or “we”) and was formed in June 2006 as a Texas Corporation. CTM serves the oil and gas industry with down-hole drilling motors. These motors are used in the gas well drilling process to drill out frac plugs and other debris in the wellbore.
CTM services independent drilling operations. Larger gas fields related to national and multinational corporations are generally well capitalized and typically contract with larger national drilling contractors. The smaller fields are representative of independent or privately owned fields and therefore these operations are more sensitive to declines in petroleum and gas prices. Consequently, production by the independent fields may be suspended or shut down in a market of lower prices.
CTM provides drilling systems and services. These services include drilling frac plugs, cement and other debris. We own the majority of our equipment and supplement any additional equipment needs through short term rental arrangements on an as needed basis.
We are a provider of motors to the hydraulic fracturing industry, a process that creates fractures extending from the well bore through the rock formation to enable natural gas or oil to move more easily through the rock pores to a production well. Our equipment is comprised of drilling motors which are used on-site in the field.
CTM provides well-head services through a complete line of high quality motors specifically designed for work-over and coil tubing drilling. The CTM work-over motors are designed for maximum performance and durability. CTM provides coil tubing motors for drilling in composite/cast iron frac plugs. Wells are completed with multiple-fractured zones and the zones are isolated with drill-able plugs. Coil Tubing is used to drill these plugs to allow for maximum production rate.
Industry Overview
Demand for our services depends on oil and natural gas industry activity and expenditure levels that are directly affected by trends in oil and natural gas prices. Demand for our services and products is particularly sensitive to the level of exploration, development, and production activity of, and the corresponding capital spending by, oil and natural gas companies, including national oil companies. Prices for oil and natural gas are subject to large fluctuations in response to relatively minor changes in the supply of and demand for oil and natural gas, market uncertainty, and a variety of other factors that are beyond our control.
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The current fluctuations in price for oil and natural gas have invigorated the market with increased exploration, development, and production activity, resulting in a corresponding increase in the demand for our natural gas well services and products.
We continue to believe in the strength of the long-term fundamentals of our business. After triple digit growth in 2011 we experienced double digit growth in 2012. The small to intermediate oil and gas fields continue to show strong activity and margins remain healthy.
In North America, the industry experienced an unprecedented decline in drilling activity and rig count during 2009. These declines, coupled with natural gas storage levels reaching record levels, resulted in severe margin contraction in 2009. Over the past few years we have seen a strong market in
Prices for oil and natural gas are subject to large fluctuations in response to relatively minor changes in the supply of and demand for oil and natural gas, market uncertainty, and a variety of other economic factors that are beyond our control. Any prolonged reduction in oil and natural gas prices will depress the immediate levels of exploration, development, and production activity. Perceptions of longer-term lower oil and natural gas prices by oil and natural gas companies can similarly reduce or defer major expenditures given the long-term nature of many large-scale development projects.
Resources
Resources essential to our business, including tools and shop supplies required to perform the services, are normally readily available. We are always seeking ways to ensure the availability of resources, as well as manage their costs.
Customers
We service small, independent gas fields.
Employees
We currently employ three employees, the President and two field workers.
Governmental Regulation and Environmental Matters
We are subject to numerous environmental, legal, and regulatory requirements related to our operations worldwide. In the United States, these laws and regulations include, among others:
| - | the Comprehensive Environmental Response, Compensation, and Liability Act; | |
| - | the Resource Conservation and Recovery Act; | |
| - | the Clean Air Act; | |
| - | the Federal Water Pollution Control Act; and | |
| - | the Toxic Substances Control Act. |
In addition to the federal laws and regulations, individual states where we do business often have numerous environmental, legal, and regulatory requirements by which we must abide.
Changes in environmental requirements may negatively impact demand for our services. For example, oil and natural gas exploration and production may decline as a result of environmental requirements (including land use policies responsive to environmental concerns). State, national, and international governments and agencies have been evaluating climate-related legislation and other regulatory initiatives that would restrict emissions of greenhouse gases in areas in which we conduct business. Because our business depends on the level of activity in the oil and natural gas industry, existing or future laws, regulations, treaties or international agreements related to greenhouse gases and climate change, including incentives to conserve energy or use alternative energy sources, could have a negative impact on our business if such laws, regulations, treaties, or international agreements reduce the worldwide demand for oil and natural gas. Likewise, such restrictions may result in additional compliance obligations with respect to the release, capture, and use of carbon dioxide that could have an adverse effect on our results of operations, liquidity, and financial condition.
We are a provider of motors to the hydraulic fracturing industry, a process that creates fractures extending from the well bore through the rock formation to enable natural gas or oil to move more easily through the rock pores to a production well. Bills pending in the United States House and Senate have asserted that chemicals used in the fracturing process could adversely affect drinking water supplies. The proposed legislation would require the reporting and public disclosure of chemicals used in the fracturing process. This legislation, if adopted, could establish an additional level of regulation at the federal level that could lead to operational delays and increased operating costs. During the first quarter of 2010, the United States Environmental Protection Agency announced it will begin a detailed scientific study of hydraulic fracturing and the alleged effect on surface and ground water. The adoption of any future federal or state laws or implementing regulations imposing reporting obligations on, or otherwise limiting, the hydraulic fracturing process could make it more difficult to complete natural gas and oil wells and could have an adverse impact on our future results of operations, liquidity, and financial condition.
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ITEM 2. DESCRIPTION OF PROPERTY
Our corporate facilities are located in a 10,000 square foot office and warehouse space in Royce City, Texas. We paid $1,250 per month on a month to month basis. This lease was terminated in May 2012 and the Company is operating virtually from a job site trailer.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in one legal proceeding. On June 15, 2010, the Company was served with a lawsuit from National Oilwell Varco LP (“VARCO”), a vendor of the Company, for $114,065, related to unpaid invoices from October 25, 2007 to September 30, 2008. During April, 2011 the Company agreed to a settlement that would require the Company to pay $122,304 over the next 24 months in equal installments of $5,096 month. The parties to the settlement also signed a judgment for $140,000 that will only be filed in the event of a default by the Company. As of August 9, 2012 the Company failed to make payments in May, June and July and technically is in default, therefore the Company accrued an additional $29,141 ($25,935 of principal and $3,206 of interest) to true-up the balance to the $140,000 original judgment, as agreed. In August 2012 the Company and VARCO agreed that the Company will resume payments by August 20, 2012 and will continue to make such payments by the 15th of each month thereafter as set forth in the original agreement. The final payment will now be due by September 15, 2013. In consideration for this agreement the Company agreed to pay VARCO an additional $1,500. VARCO retains the right to execute the original agreement should the Company breach this amendment. The balance owed at December 31, 2012 and December 31, 2011 was $35,672 and $81,536, respectively.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
As of December 31, 2012 the Common Stock is not trading.
Dividends
We have not paid cash dividends on any class of common equity since formation and we do not anticipate paying any dividends on our outstanding common stock in the foreseeable future.
Warrants
The Company has no warrants outstanding.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable for smaller reporting companies.
ITEM 7. MANAGEMENT DISCUSSIONS AND ANALYSIS OR PLAN OF OPERATION
SUMMARY OF 2011
EXECUTIVE OVERVIEW: After triple digit growth in 2011 of 149% we experienced double digit growth in 2012 with sales of $608,209. The small to intermediate oil and gas fields saw continue to show strong activity. Our margins decreased approximately 12% points to 64.8% due to increased costs. Even with the increased cost of goods sold we still experienced a net flow-through increase of 75% to operating income turning a loss in 2011 of $3,382 to operating income in 2012 of $113,550.
Material Changes in Results of Operations
Results for the Year Ended December 31, 2012
REVENUE:
Our revenue for the year ended December 31, 2012 was $608,209 versus $478,905 for the year ended December 31, 2011. The year-over-year increase in revenue of $129,304 is due to the continued strong activity in the small to medium size oil & gas fields where production volume remains strong. As long as gas fields are economically viable, the owners will keep them open which occurred in 2011. Revenue from a related party in 2011 was $85,001 or 18% of total revenue, compared to 2012 of $0 or 0%.
COST OF SALES:
Cost of Sales were $213,835 for the year ended December 31, 2012 versus $108,953 for the same period in 2011. Depreciation expense was $103,925 and $77,584 for the year ended December 31, 2012 and 2011, respectively. Backing out depreciation, net cost of sales were $109,910 and $31,341 for the year ended December 31, 2012 and 2011, respectively. The increase in net cost of sales as a percentage of revenue (18.1% in 2012 and 6.5% in 2011) is impacted by additional costs related to chemical additives to enhance the fracking process ($60,000).
GROSS PROFIT
Gross profit for the year ended 2012 was $394,374 or 64.8% versus $369,952 or 77.2% for the year ended December 31, 2011. Backing out depreciation of $103,925 and $77,584 for 2012 and 2011, respectively, gross profit would have been $498,299 (81.9%) compared to $447,536 (93.4%), respectively. The change year-over-year of negative 11.5 percentage points is due to the increase in cost of goods sold ($60,000). The volume increase favorable impacted margins $105,600 (revenue change of $129,304 at 81.9%).
OPERATING EXPENSES:
Operating expenses were $280,824 for the year ended December 31, 2012 versus $373,334 for the year ended December 31, 2011. The decrease in net expenses of $92,470 ($280,824 vs. $373,334) is due to decreases in a number of areas: Salaries $42,000 as the President paid himself a smaller salary, contract services $22,000, travel $11,000, insurance $10,000 and auto expenses $8,000. These decreases were partially offset by an increase in professional fees of $20,000. The above costs include depreciation expense of $1,006 and $1,732 for the year ended December 31, 2012 and 2011, respectively.
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NET INCOME (LOSS):
Net income for the year ended December 31, 2012 was $102,206 versus a net loss of $21,473 for the year ended December 31, 2011. The increased profit is related to the increased revenue volume in 2012 and other items discussed above.
LIQUIDITY AND CAPITAL RESOURCES: On July 14, 2010 the Company filed a Form S-1; general form for registration of securities under the Securities Act of 1933, and filed an amended Form S-1 on December 3, 2010, and it became effective on January 7, 2011. The Company, under this registration statement, is authorized to raise up to $600,000 by selling 800,000 shares of common stock at $.75 per share. The offering closed on June 15, 2011. On February 11, 2011 the Company broke escrow and as of June 30, 2011 we sold a total of 343,736 shares for $259,752 and closed the offering.
In addition to the preceding, the Company plans for liquidity needs on a short term and long term basis as follows:
Trends, events or uncertainties impact on liquidity:
The Company knows of no trends, additional events or uncertainties that would impact liquidity other than the volatility of the oil market and the previously disclosed lawsuit from National Oilwell Varco, LP.
Short Term Liquidity:
The Company has an accumulated deficit of $94,043 as of December 31, 2012. The Company has relied on external sources of financing to assist short-term working capital needs; through bank loans and shareholder advances. The monies raised under the Form S-1/A registration will meet the Company’s liquidity needs for the next year. Of the short-term liabilities (approximately $127,000), $35,700 relates to the VARCO lawsuit, leaving approximately $78,700 of short-term liabilities that require funding and have specific due dates over the next 12 months. We plan to accomplish this through cash flows from additional revenues, as we anticipate continued growth.
Long Term Liquidity:
The long term liquidity needs of the Company are projected to be met primarily through the cash flow provided by operations. Cash flow from Operating Activities is expected to become positive in 2012 due to revenue increases and efficiency improvements over the past two years. Long-term liabilities total approximately $153,400 at December 31, 2012 and we plan to fund these liabilities through cash flows from operations.
Capital Resources
As of December 31, 2012, the Company had notes payable of $142,704 for vehicles purchased. As of the date of this filing the Company had no additional commitments other than what is disclosed in the footnotes to the financial statements.
Trends, Events or Uncertainties
The Company, since its inception in 2006, has not experienced noticeable sales trends. Sales revenue follows the oil and gas market and when prices increase business usually remains strong. Historically, when oil and gas prices fall, sales revenue for the Company decreases.
Material Changes in Financial Condition
WORKING CAPITAL: Working Capital as of December 31, 2012 was $172,089. This is an increase of about $167,000 versus December 31, 2011 of ($7,194). The increase is mainly due to increased accounts receivable of $165, 000, a decrease in the VARCO note $46,000 partially off-set by a decrease in cash $55,000.
Critical Accounting Policies:
The Company’s critical accounting policies and estimates are depreciation expense and interest expense on loans. Please reference footnotes two and four.
SHAREHOLDERS’ EQUITY: Shareholders’ Equity increased by $102,206 due to the net income of in the year ended December 31, 2012.
UNUSUAL EVENTS: None.
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FUTURE FINANCIAL CONDITION: Fiscal year 2013 started slowly due to the cold inclement weather in North Texas but again we are planning a low double-digit revenue growth in 2013 as we continue to advertise and take market share. We spend time with our customers listening to their voice and make necessary changes to improve service and market accordingly.
Management Advisors
Yorkdale Capital, LLC advises and assists the President with many aspects related to the regulatory filings including assistance with the consolidation of financial statements for the quarterly reviews and year-end audit. Yorkdale Capital, LLC or its principals are shareholders. Yorkdale Capital was paid $11,250 and $9,000 for consulting and advisory services for the years ended December 31, 2012 and 2011, respectively.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for a smaller reporting company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements of the Company, together with the independent auditors' report thereon of The Hall Group, CPAs appear on pages F-1 through F-12 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2012. This evaluation was accomplished under the supervision and with the participation of our chief executive officer / principal executive officer, and chief financial officer / principal financial officer who concluded that our disclosure controls and procedures are not effective to ensure that all material information required to be filed in the annual report on Form 10-K has been made known to them.
Disclosure, controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by in our reports filed under the Securities Exchange Act of 1934, as amended (the "Act") is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Based upon an evaluation conducted for the period ended December 31, 2012, our Chief Executive and Chief Financial Officer as of December 31, 2012 and as of the date of this Report, has concluded that as of the end of the periods covered by this report, we have identified the following material weaknesses in our internal controls:
| · | Reliance upon independent financial reporting consultants for review of critical accounting areas and disclosures and material non-standard transaction. |
| · | Lack of sufficient accounting staff which results in a lack of segregation of duties necessary for a good system of internal control. |
In order to remedy our existing internal control deficiencies, as our finances allow, we will hire additional accounting staff.
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Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed 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 in the United States of America. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework at December 31, 2012. Based on its evaluation, our management concluded that, as of December 31, 2012, our internal control over financial reporting was not effective because of limited staff and a need for a full-time chief financial officer. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report is not subject to the attestation by the Company’s registered public accounting firm pursuant to the rules of the SEC that permit the Company to provide only management’s report in this annual report.
Changes in Internal Controls over Financial Reporting
We have not yet made any changes in our internal controls over financial reporting that occurred during the period covered by this report on Form 10-K that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
| Name | Age | Position |
| Lewis Andrews | 61 | Director, President; Secretary and Treasurer |
Background of the Director and Executive Officer:
Lewis Andrews
Mr. Andrews, upon graduating from high school in 1976, began his career in the oilfields. He was employed by M&B Fishing and Rental Tool in Monahans, Texas from 1976 to 1984 serving in ever increasing positions of responsibility. In 1984 Mr. Andrews joined Andco Fishing Tools in Colorado, working throughout the Rocky Mountains, until 1992 when he left Andco and formed, with his brother, Boyd Fishing Tools in Brighton, Colorado. Mr. Andrews and his brother grew their business and after four years, sold it to a competitor.
In 1996 Mr. Andrews was recruited by Baker Oil Tools in Tyler, Texas as a troubleshooter due to his experience gained in the field. After six years, in 2002, Baker Oil Tools promoted Mr. Andrews to Fishing Manager, Australia, New Zealand and Papua, New Guinea, based in Perth, Australia. After spending four years growing the business in the Pan-Pacific region, Mr. Andrews returned to the USA and in 2006 founded Coil Tubing Motors Corporation. In 2009, Mr. Andrews formed Premier Oil Field Services, Inc., and is the President.
ITEM 11. EXECUTIVE COMPENSATION
Following is what our officers received in 2012 and 2011 as compensation.
| Name | Capacity Served | Aggregate Remuneration |
| Lewis Andrews | Director, President; Secretary and Treasurer |
2012: $ 52,500 2011: $120,400 |
As of the date of this filing, our sole officer is one of three employees.
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ITEM 12. SECURITY OWNERSHIP OF MANANGEMENT AND BENEFICIAL OWNERS
As of December 31, 2012 the following persons are known to the Company to own 5% or more of the Company's Voting Stock:
| Title / Relationship to Issuer | Name of Owner | Number of Shares Owned | Percent of Total |
| Director, President; Secretary and Treasurer | Lewis Andrews | 6,400,000 | 87.15% |
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTION
As of the date of this filing, the Company owes their Chief Executive Officer for amounts advanced in prior years to fund operating expenses. As of December 31, 2012, the Company had an amount payable to a shareholder for accounting and consulting services.
There are no other agreements or proposed transactions, whether direct or indirect, with anyone, but more particularly with any of the following:
| ● | a director or officer of the issuer; | |
| ● | any principal security holder; | |
| ● | any promoter of the issuer; | |
| ● | any relative or spouse, or relative of such spouse, of the above referenced persons. |
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
(1) AUDIT FEES
The aggregate fees billed for professional services rendered by our auditors, for the audit of the registrant's annual financial statements and review of the financial statements included in the registrant's Form 10-K or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements was $9,000 and $15,000 for the years ended December 31, 2012 and 2011, respectively.
(2) AUDIT-RELATED FEES
The aggregate fees billed for professional services rendered by our auditors, for the registrant’s quarterly financial statements and review of the unaudited financial statements included in the registrant’s Form 10-Q was $15,000 and $13,250 for the years ended December 31, 2012 and 2011, respectively.
(3) TAX FEES
NONE
(4) ALL OTHER FEES
NONE
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(5) AUDIT COMMITTEE POLICIES AND PROCEDURES
Audit Committee Financial Expert:
The Securities and Exchange Commission has adopted rules implementing Section 407 of the Sarbanes-Oxley Act of 2002 requiring public companies to disclose information about “audit committee financial experts.” As of the date of this Annual report, we do not have a standing Audit Committee. The functions of the Audit Committee are currently assumed by our Board of Directors. Additionally, we do not have a member of our Board of Directors that qualifies as an “audit committee financial expert.” For that reason, we do not have an audit committee financial expert.
Policies and Procedures:
The Board of Directors policies and procedures for hiring Independent Principal Accountants are summarized as follows:
| · | The Board ensures that the accountants are qualified by reviewing their valid license information as filed with the Texas State Board of Public Accountancy. |
| · | The Board ensures that the firm is registered with the PCAOB. |
| · | The Board ensures that the accountants are independent by reviewing Regulation S-X, section 210.2-01(b). |
(6) If greater than 50 percent, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.
Not applicable.
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ITEM 15. EXHIBITS, FINANICAL STATEMENTS AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report: Included in Part II, Item 7 of this report:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2012 and 2011
Consolidated Statements of Operations for the Years Ended December 31, 2012 and 2011
Consolidated Statement of Changes in Stockholders’ Equity for the Years Ended December 31, 2012 and 2011
Consolidated Statements of Cash Flows for the Years Ended December 31, 2012 and 2011
Notes to the Consolidated Financial Statements
(b) The Company filed one Form 8-K in 2011. On February 11, 2011 the Company filed Form 8-K announcing that its Registration Form S-1 filed with the U.S. Securities and Exchange Commission became effective on January 7, 2011. There were no 8-K’s filed in 2012.
(c) Exhibits
| No. | Description |
| 31.1 | Certification of the Company’s Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 31.2 | Certification of the Company’s Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 32.1 | Certification of the Company’s Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted to Section 906 of the Sarbanes-Oxley Act of 2002. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned hereunto duly authorized.
PREMIER OIL FIELD SERVICES, INC.
By: /s/ Lewis Andrews
Lewis Andrews
Director, President; Secretary and Treasurer
Dated: April 16, 2013
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PREMIER OIL FIELD SERVICES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2012
TABLE OF CONTENTS
| Report of Independent Registered Public Accounting Firm | F-2 |
| Consolidated Balance Sheets as of December 31, 2012 and 2011 | F-3 |
| Consolidated Statements of Operations for the Years Ended December 31, 2012 and 2011 | F-4 |
| Consolidated Statement of Changes in Stockholders’ Equity for the Years Ended December 31, 2012 and 2011 | F-5 |
| Consolidated Statements of Cash Flows for the Years Ended December 31, 2012 and 2011 | F-6 |
| Notes to the Consolidated Financial Statements | F-7 to F-12 |
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Management of
Premier Oil Field Services, Inc.
Rockwall, Texas
We have audited the accompanying consolidated balance sheets of Premier Oil Field Services, Inc. as of December 31, 2012 and 2011, and the related consolidated statements of operations, cash flows and stockholders’ equity for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
We were not engaged to examine management’s assertion about the effectiveness of Premier Oil Field Services, Inc.’s internal control over financial reporting as of December 31, 2012 and 2011 and, accordingly, we do not express an opinion thereon.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Premier Oil Field Services, Inc. as of December 31, 2012 and 2011, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 6 to the financial statements, the Company has suffered significant losses and will require additional capital to develop its business until the Company either (1) achieves a level of revenues adequate to generate sufficient cash flows from operations; or (2) obtains additional financing necessary to support its working capital requirements. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 6. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ The Hall Group, CPAs
The Hall Group, CPAs
Dallas, Texas
April 12, 2013
| F-2 |
PREMIER OIL FIELD SERVICES, INC.
Consolidated Balance Sheets
December 31, 2012 and 2011
| 2012 | 2011 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and Cash Equivalents | $ | 57,741 | $ | 112,895 | ||||
| Accounts Receivable (net of allowance of $0 and $0) | 226,814 | 63,972 | ||||||
| Other Assets | 1,950 | 0 | ||||||
| Total Current Assets | 286,505 | 176,867 | ||||||
| Fixed Assets (net of accumulated depreciation of $345,121 and $250,864) | 172,460 | 160,006 | ||||||
| Other Assets | 0 | 5,188 | ||||||
| TOTAL ASSETS | $ | 458,965 | $ | 342,061 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts Payable | $ | 49,616 | $ | 59,219 | ||||
| Accrued Expenses | 0 | 23,284 | ||||||
| Bank Overdraft | 0 | 0 | ||||||
| Current Portion of Settlement Payable (Note 7) | 35,672 | 61,152 | ||||||
| Current Portion of Notes Payable | 29,128 | 20,022 | ||||||
| Total Current Liabilities | 114,416 | 163,677 | ||||||
| Long Term Liabilities | ||||||||
| Loan From Shareholder | 39,608 | 3,334 | ||||||
| Long Term Accounts Payable | 200 | 200 | ||||||
| Long Term Portion of Settlement Payable | 0 | 20,384 | ||||||
| Notes Payable, Less Current Portion | 113,576 | 65,507 | ||||||
| Total Long Term Liabilities | 153,384 | 89,425 | ||||||
| Total Liabilities | 267,800 | 253,102 | ||||||
| Stockholders' Equity | ||||||||
| Preferred Stock, $.001 par value, 20,000,000 shares authorized, | 0 | 0 | ||||||
| Common Stock, $.001 par value, 50,000,000 shares authorized, 7,346,336 issued and outstanding, respectively | 7,346 | 7,346 | ||||||
| Additional Paid-In Capital | 277,862 | 277,862 | ||||||
| Retained Earnings (Deficit) | (94,043 | ) | (196,249 | ) | ||||
| Total Stockholders' Equity | 191,165 | 88,959 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 458,965 | $ | 342,061 | ||||
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements.
| F-3 |
PREMIER OIL FIELD SERVICES, INC.
Consolidated Statements of Operations
For the Years Ended December 31, 2012 and 2011
| 2012 | 2011 | |||||||
| REVENUES | ||||||||
| Third Party Revenues | $ | 608,209 | $ | 393,904 | ||||
| Related Party Revenues | 0 | 85,001 | ||||||
| TOTAL REVENUE | 608,209 | 478,905 | ||||||
| COST OF SALES (inclusive of depreciation of $102,919 and $77,584) | 213,835 | 108,953 | ||||||
| GROSS PROFIT | 394,374 | 369,952 | ||||||
| OPERATING EXPENSES | ||||||||
| General and Administrative | 280,824 | 373,334 | ||||||
| TOTAL OPERATING EXPENSES | 280,824 | 373,334 | ||||||
| NET OPERATING INCOME (LOSS) | 113,550 | (3,382 | ) | |||||
| OTHER INCOME (EXPENSE) | ||||||||
| Loss on Sale of Assets | 0 | (9,448 | ) | |||||
| Interest Expense (net) | (11,344 | ) | (8,643 | ) | ||||
| TOTAL OTHER (EXPENSE) | (11,344 | ) | (18,091 | ) | ||||
| NET INCOME (LOSS) BEFORE INCOME TAXES | 102,206 | (21,473 | ) | |||||
| Provision for Income Taxes (Expense) Benefit | 0 | 0 | ||||||
| NET INCOME (LOSS) | $ | 102,206 | $ | (21,473 | ) | |||
| EARNINGS PER SHARE, basic and diluted | ||||||||
| Weighted Average of Outstanding Shares | 7,346,336 | 7,279,629 | ||||||
| Income (Loss) per Share | $ | 0.01 | $ | (0.00 | ) | |||
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements.
| F-4 |
PREMIER OIL FIELD SERVICES, INC.
Consolidated Statement of Changes in Stockholders’ Equity
For the Years Ended December 31, 2012 and 2011
| Common Stock | Paid-In | Retained Earnings | ||||||||||||||||||
| Shares | Amount | Capital | (Deficit) | Totals | ||||||||||||||||
| Stockholders' Equity (Deficit) at January 1, 2011 | 7,000,000 | $ | 7,000 | $ | 18,456 | $ | (174,776 | ) | $ | (149,320 | ) | |||||||||
| Stock issued for Cash | 346,336 | 346 | 259,406 | 259,752 | ||||||||||||||||
| Net (Loss) | (21,473 | ) | (21,473 | ) | ||||||||||||||||
| Stockholders' Equity (Deficit) at December 31, 2011 | 7,346,336 | $ | 7,346 | $ | 277,862 | $ | (196,249 | ) | $ | 88,959 | ||||||||||
| Net Income | 102,206 | 102,206 | ||||||||||||||||||
| Stockholders' Equity (Deficit) at December 31, 2012 | 7,346,336 | $ | 7,346 | $ | 277,862 | $ | (94,043 | ) | $ | 191,165 | ||||||||||
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements.
| F-5 |
PREMIER OIL FIELD SERVICES, INC.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2012 and 2011
| 2012 | 2011 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net Income (Loss) | $ | 102,206 | $ | (21,473 | ) | |||
| Adjustments to reconcile net income to net cash | ||||||||
| provided by operating activities: | ||||||||
| Depreciation & Amortization | 103,925 | 79,316 | ||||||
| Loss on Sale of Fixed Assets | 0 | 9,448 | ||||||
| Changes in Assets and Liabilities: | ||||||||
| (Increase) in Accounts Receivable | (164,792 | ) | (51,157 | ) | ||||
| (Increase) in Other Assets | 5,188 | (1,147 | ) | |||||
| (Decrease) in Accounts Payable | (51,385 | ) | (125,605 | ) | ||||
| (Decrease) in Accrued Expenses | (27,366 | ) | (25,388 | ) | ||||
| Net Cash Used in Operating Activities | (32,224 | ) | (136,006 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Proceeds From Sale of Fixed Assets | 119,239 | 42,000 | ||||||
| Purchase of Fixed Assets | (235,618 | ) | (81,899 | ) | ||||
| Net Cash Used in Investing Activities | (116,379 | ) | (39,899 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from Notes Payable | 202,905 | 96,489 | ||||||
| Payments on Notes | (145,730 | ) | (70,775 | ) | ||||
| Proceeds from Sale of Stock for Cash | 0 | 259,752 | ||||||
| Proceeds from Advances – Related Party | 36,274 | 44,890 | ||||||
| Payments on Advances from Shareholder | 0 | (41,556 | ) | |||||
| Net Cash Provided by Financing Activities | 93,449 | 288,800 | ||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (55,154 | ) | 112,895 | |||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR | 112,895 | 0 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF YEAR | $ | 57,741 | $ | 112,895 | ||||
| SUPPLEMENTAL DISCLOSURES | ||||||||
| Cash Paid During the Year for Interest Expense | $ | 11,405 | $ | 8,673 | ||||
| Loss on Sale of Assets | $ | — | $ | 9,448 | ||||
The Accompanying Notes are an Integral Part of these Consolidated Financial Statements.
| F-6 |
PREMIER OIL FIELD SERVICES, INC.
Notes to the Consolidated Financial Statements
December 31, 2012 and 2011
NOTE 1 – NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Activities, History and Organization:
Premier Oil Field Services, Inc. (The “Company” or "Premier") serves the oil and gas industry with down-hole drilling motors. These motors are used in the oil and gas well drilling process to drill out frac plugs and other debris in the well bore. The Company is located in Rockwall County, Texas and was incorporated on June 29, 2009 under the laws of the State of Nevada.
Premier Oil Field Services, Inc., is the parent company of Coil Tubing Motors Corporation, (“CTM”), a company incorporated under the laws of the State of Texas. CTM was established in June 2006.
Premier is a private holding company established under the laws of Nevada on June 29, 2009, was formed in order to acquire 100% of the outstanding membership interests of CTM. On June 30, 2009, Premier issued 7,000,000 shares of common stock in exchange for a 100% equity interest in CTM. As a result of the share exchange, CTM became the wholly owned subsidiary of Premier. As a result, the members of CTM owned a majority of the voting stock of Premier. The transaction was accounted for as a reverse merger whereby CTM was considered to be the accounting acquirer as its members retained control of Premier after the exchange, although Premier is the legal parent company. The share exchange was treated as a recapitalization of Premier. As such, CTM, (and its historical financial statements) is the continuing entity for financial reporting purposes. The financial statements have been prepared as if Premier had always been the reporting company and then on the share exchange date, had changed its name and reorganized its capital stock. The share exchange transaction was effected to change the state of incorporation to allow the opportunity for a reduction of franchise taxes under the new Texas franchise tax calculations and to facilitate the initial public offering. At the time of the exchange transaction, Premier had no assets or liabilities and CTM had assets of approximately $409,000 with equity of approximately $81,800.
The capital structure of Premier is presented as a consolidated entity as if the transaction had been effected in 2006 to consistently reflect the number of shares outstanding. However, the capital structure as presented is different that the capital structure that appears in the historical statements of CTM, in earlier periods due to the recapitalization accounting.
The Company operates on a calendar year-end. Due to the nature of their operations, the Company operates in only one business segment.
Basis of Accounting and Consolidation:
The Company prepares its financial statements on the accrual basis of accounting. It has one wholly owned subsidiary, Coil Tubing Motors, Corporation, which is consolidated. All intercompany balances and transactions are eliminated.
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and applicable Securities and Exchange Commission (“SEC”) regulations.
Significant Accounting Policies:
The Company’s management selects accounting principles generally accepted in the United States of America and adopts methods for their application. The application of accounting principles requires the estimating, matching and timing of revenue and expense.
The financial statements and notes are representations of the Company’s management which is responsible for their integrity and objectivity. Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company's system of internal accounting control is designed to assure, among other items, that 1) recorded transactions are valid; 2) valid transactions are recorded; and 3) transactions are recorded in the proper period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the Company for the respective periods being presented.
| F-7 |
Cash and Cash Equivalents:
All highly liquid investments with original maturities of three months or less are included in cash and cash equivalents. All deposits are maintained in FDIC insured depository accounts in local financial institutions and balances are insured up to $250,000.
Fair Value of Financial Instruments:
In accordance with the reporting requirements of ASC 820, the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this statement and includes this additional information in the notes to the financial statements when the fair value is different than the carrying value of those financial instruments.
The carrying amounts of cash, cash equivalents, accounts receivable, accounts payable and notes payable approximate their fair values due to the short-term maturities of these instruments. The carrying amount of the Company’s marketable securities and capital leases approximate fair value due to the stated interest rates approximating market rates.
Accounts Receivable:
Accounts receivable are carried at their face amount, less an allowance for doubtful accounts. On a periodic basis, the Company evaluates accounts receivable and establishes the allowance for doubtful accounts based on a combination of specific customer circumstances and credit conditions, based on a history of write offs and collections. The Company’s policy is generally not to charge interest on trade receivables after the invoice becomes past due. A receivable is considered past due if payments have not been received within agreed upon invoice terms. The Company provides an allowance for all receivables that are greater than 90 days old. There were no allowances for doubtful accounts at December 31, 2012 and 2011. Write offs are recorded at a time when a customer receivable is deemed uncollectible.
Revenue Recognition:
The Company recognizes revenue in accordance with ASC 605-10. Revenue will be recognized only when all of the following criteria have been met:
| ● | Persuasive evidence of an arrangement exists; |
| ● | Ownership and all risks of loss have been transferred to buyer, which is generally upon shipment or at the time the service is provided; |
| ● | The price is fixed and determinable; and |
| ● | Collectability is reasonably assured. |
All services are billed when rendered and payment is due upon receipt of invoice.
Advertising:
The Company did not incur any advertising expenses in 2012 or 2011.
Cost of Sales:
Cost of sales consists primarily of shop supplies and field related expenses.
Income Taxes:
The Company has adopted ASC 740-10 which requires the use of the liability method in the computation of income tax expense and the current and deferred income taxes payable.
Earnings per Share:
Earnings per share (basic) is calculated by dividing the net income (loss) by the weighted average number of common shares outstanding for the period covered. As the Company has no potentially dilutive securities, fully diluted earnings per share is equal to earnings per share (basic).
| F-8 |
Use of Estimates:
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Employee Benefit Plans:
The Company has no employee benefit plans.
NOTE 2 – FIXED ASSETS
Fixed assets at December 31, 2012 and 2011 are as follows:
| 2012 | 2011 | |||||||
| Office Equipment | $ | 9,748 | $ | 9,748 | ||||
| Trucks & Trailers | 125,492 | 81,899 | ||||||
| Machinery & Equipment | 382,341 | 319,223 | ||||||
| Less: Accumulated Depreciation | (345,121 | ) | (250,864 | ) | ||||
| Total Fixed Assets | $ | 172,460 | $ | 160,006 | ||||
Depreciation expense for the years ended December 31, 2012 and 2011 was $103,925 and $79,316, respectively.
During 2012, the Company acquired $106,711 of vehicles and trailers and disposed of $0 of fixed assets.
NOTE 3 – EQUITY
On June 30, 2009, Premier issued 7,000,000 shares of common stock in exchange for a 100% equity interest in CTM. As a result of the share exchange, CTM became the wholly owned subsidiary of Premier. As a result, the members of CTM owned a majority of the voting stock of Premier. The transaction was accounted for as a reverse merger whereby CTM was considered to be the accounting acquirer as its members retained control of Premier after the exchange, although Premier is the legal parent company. The share exchange was treated as a recapitalization of Premier. As such, CTM, (and its historical financial statements) is the continuing entity for financial reporting purposes. The financial statements have been prepared as if Premier had always been the reporting company and then on the share exchange date, had changed its name and reorganized its capital stock.
The Company is authorized to issue 20,000,000 preferred shares at a par value of $0.001 per share. These shares have full voting rights. At December 31, 2012 and December 31, 2011, there were zero shares issued and outstanding.
The Company is authorized to issue 50,000,000 common shares at a par value of $0.001 per share. These shares have full voting rights. At December 31, 2012 and December 31, 2011, there were 7,346,336 and 7,346,336 shares issued and outstanding, respectively.
On July 14, 2010 the Company filed a Form S-1; general form for registration of securities under the Securities Act of 1933, and filed an amended Form S-1 on December 3, 2010, and it became effective on January 7, 2011. The Company, under this registration statement, is authorized to raise up to $600,000 by selling 800,000 shares of common stock at $.75 per share. The offering closed on June 15, 2011. On February 11, 2011 the Company broke escrow as we had raised $61,750. As of June 30, 2011 the Company sold a total of 346,336 shares for $259,752 and closed the offering.
NOTE 4 – COMMITMENTS AND CONTINGENCIES
The Company leases office and warehouse space in Royce City, Texas. The facility is approximately 10,000 square feet and is $1,250 per month on a month-to-month basis. This lease was terminated in May and the Company is operating virtual from a job site trailer.
| F-9 |
At December 31, 2012, the Company had the following outstanding notes payable:
NOTE 5 – INCOME TAXES
The Company follows Statement of Financial Accounting Standards ASC 740. Deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carryforwards (“NOL”). No net provision for refundable Federal income tax has been made in the accompanying statement of loss because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carryforward has been recognized, as it is deemed more likely than not to be realized.
The Company had a net income for the year ended December 31, 2012 of $102,206 and a net loss of $21,473 for the year ended December 31, 2011.
Deferred tax assets at December 31, 2012 and 2011 consisted of the following:
| 2012 | 2011 | |||||||
| Prior year deferred tax asset | $ | 59,300 | $ | 53,930 | ||||
| Utilization of NOL | (25,552 | ) | — | |||||
| Tax benefit for the year | — | 5,370 | ||||||
| Total deferred tax asset | 33,748 | 59,300 | ||||||
| Less: Valuation Allowance | (33,748 | ) | (59,300 | ) | ||||
| Net Deferred Tax Asset | $ | 0 | $ | 0 | ||||
The net deferred tax asset generated by the loss carryforward has been fully reserved. The cumulative net operating loss carry-forward was $94,043 at December 31, 2012, and will expire in 2031.
The difference in the income tax benefit not shown in the consolidated statements of operations and the amount that would result if the U.S. Federal statutory rate of 25% were applied to pre-tax loss for 2012 and 2011 is attributable to the valuation allowance.
The realization of deferred tax benefit is contingent upon future earnings and is fully reserved at December 31, 2012 and 2011.
| F-10 |
NOTE 6 – LEGAL PROCEEDINGS
The Company is involved in one legal proceeding. On June 15, 2010, the Company was served with a lawsuit from National Oilwell Varco LP (“VARCO”), a vendor of the Company, for $114,065, related to unpaid invoices from October 25, 2007 to September 30, 2008 During April, 2011 the Company agreed to a settlement that would require the Company to pay $122,304 over the next 24 months in equal installments of $5,096 month. The parties to the settlement also signed a judgment for $140,000 that will only be filed in the event of a default by the Company. As of August 9, 2012 the Company failed to make payments in May, June and July and technically was in default, therefore the Company accrued an additional $29,141 ($25,935 of principal and $3,206 of interest) to true-up the balance to the $140,000 original judgment, as agreed. In August 2012 the Company and VARCO agreed that the Company will resume payments by August 20, 2012 and will continue to make such payments by the 15th of each month thereafter as set forth in the original agreement. The final payment will now be due by September 15, 2013. In consideration for this agreement the Company agreed to pay VARCO an additional $1,500. VARCO retains the right to execute the original agreement should the Company breach this amendment. The balance owed at December 31, 2012 and December 31, 2011 was $35,672 and $81,536, respectively.
NOTE 7 – FINANCIAL CONDITION AND GOING CONCERN
The Company has a retained deficit through December 31, 2012 totaling $94,043 and had working capital of approximately $158,000. Because of this retained deficit, the Company most likely will require additional working capital to develop its business operations.
The Company has experienced no loan defaults, labor stoppages, legal proceedings or any other operating interruption in 2012. Therefore, these items will not factor into whether the business continues as a going concern, and accordingly, management has not made any plans to dispose of assets or factor receivables to assist in generating working capital.
The Company intends to raise additional working capital either through private placements, and/or bank financing, or additional loans from Management if there is need for liquidity. Management may also consider reducing administrative costs. There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placement, public offerings and/or bank financing necessary to support the Company’s working capital requirements. To the extent that funds generated from private placements, public offerings and/or bank financing are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital is not generated from operations, financing is not available, or the Management cannot loan sufficient funds, the Company may not be able to continue its operations.
Management believes that the efforts it has made to promote its operation will continue for the foreseeable future. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 8 – REVENUE CONCENTRATION
The Company provides drilling services to the oil and gas industry and has two significant customers from which 97.4% of revenues are derived during the year ended December 31, 2012.
| Customers | 2012 Revenue | % | 2011 Revenue | % |
| A – Related Party | $0 | 0.0% | $85,001 | 17.7% |
| B | 567,487 | 93.3 | 295,491 | 61.7 |
| Others | 40,722 | 6.7 | 93,413 | 20.6 |
| TOTAL | $608,209 | 100.0% | $478,905 | 100.0% |
Approximately 0.0% of the Company’s revenue for the year ended December 31, 2012 was generated from services performed for an entity controlled by the Company’s chief executive officer.
Approximately 17.7% of the Company’s revenue for the year ended December 31, 2011 was generated from services performed for an entity controlled by the Company’s chief executive officer.
| F-11 |
NOTE 9 – RECENT ACCOUNTING PRONOUNCEMENTS
In 2012, the FASB issued the following guidance:
In June 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-05, “Comprehensive Income – Presentation of Comprehensive Income.” ASU No. 2011-05 eliminated the option to present the components of other comprehensive income as part of the statement of stockholders’ equity. It requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In December, 2011, the FASB issued ASU 2011-12, “Comprehensive Income – Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05” to defer the effective date of the specific requirement to present items that are reclassified out of accumulated other comprehensive income to net income alongside their respective components of net income and other comprehensive income. All other provisions of this update, which are to be applied retrospectively, are effective for fiscal years, and interim periods within those years, beginning December 15, 2011, The Company is currently evaluating the impact that the adoption will have on their consolidated financial statements.
In December 2011, the FASB issued ASU No. 2011-11, “Balance Sheet – Disclosures about Offsetting Assets and Liabilities.” ASU 2011-11 requires entities to disclose information about offsetting and related arrangements of financial instruments and derivative instruments and will be applied retrospectively for all comparative periods presented. ASU 2011-11 is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The Company is currently evaluating the impact that the adoption will have on their consolidated financial statements.
NOTE 10 – SUBSEQUENT EVENTS
In conjunction with the preparation of these financial statements, an evaluation of subsequent events was performed. No reportable subsequent events were noted.
| F-12 |
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change to the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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a)
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all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change to the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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a)
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all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Lewis Andrews
President and Chief Executive officer
Dated: April 16, 2013
/s/ Lewis Andrews
President, Secretary, Treasurer and Chief Accounting Officer
Dated: April 16, 2013
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NOTE 8 REVENUE CONCENTRATION - NOTE 8 Customer Sales, Percent (Details) (USD $)
|
9 Months Ended | 12 Months Ended |
|---|---|---|
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Sep. 30, 2011
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Dec. 31, 2012
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| Notes to Financial Statements | ||
| Customer A Related Party | $ 18 | $ 0 |
| Customer B | 62 | 93 |
| Others | 20 | 7 |
| TOTAL | $ 100 | $ 100 |
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NOTE 2 FIXED ASSETS
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2012
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| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FIXED ASSETS |
Fixed assets at December 31, 2012 and 2011 are as follows:
Depreciation expense for the years ended December 31, 2012 and 2011 was $103,925 and $79,316, respectively.
During 2012, the Company acquired $106,711 of vehicles and trailers and disposed of $0 of fixed assets.
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