Colorado
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1381
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27-2888719
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||
(State or other jurisdiction
of incorporation)
|
(Primary Standard Classi-
fication Code Number)
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(IRS Employer
I.D. Number)
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Large accelerated filer | o | Accelerated filer | o |
Non-accelerated filer | o | Smaller reporting company | þ |
(Do not check if a smaller reporting company) |
Title of each Class of Securities to be Registered
|
Securities
to be
Registered
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Proposed
Maximum
Offering
Price Per
Share (1)
|
Proposed
Maximum
Aggregate
Offering
Price
|
Amount of
Registration
Fee
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||||||||||||
Common Stock (2) | 2,897,360 | $ | 0.93 | $ | 2,694,545 | |||||||||||
Class A Warrants (3) | 1,500,000 | $ | 0.25 | $ | 375,000 | |||||||||||
Common Stock (4) | 1,500,000 | $ | 0.93 | $ | 1,395,000 | |||||||||||
$ | 4,464,545 | $ | 519 |
(1)
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Offering price computed in accordance with Rule 457.
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(2)
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Shares of common stock issuable upon exercise of Series A, B, D and E warrants.
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(3)
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Class A Warrants to be issued to holders of the registrant’s Series C warrants.
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(4)
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Shares of common stock to be issued upon the exercise of Class A warrants.
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Page
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||||
PROSPECTUS SUMMARY
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4 | |||
RISK FACTORS
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8 | |||
MARKET FOR OUR COMMON STOCK
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11 | |||
COMPARATIVE SHARE DATA
|
12 | |||
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
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14 | |||
BUSINESS
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18 | |||
MANAGEMENT
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27 | |||
PRINCIPAL SHAREHOLDERS
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32 | |||
SELLING SHAREHOLDERS
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33 | |||
EXCHANGE OFFER
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37 | |||
DESCRIPTION OF SECURITIES
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38 | |||
LEGAL PROCEEDINGS
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43 | |||
INDEMNIFICATION
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43 | |||
GLOSSARY
|
43 | |||
AVAILABLE INFORMATION
|
45 | |||
FINANCIAL STATEMENTS
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46 |
●
|
a number of our warrant holders are offering to sell up to 2,897,360 shares of our common stock which they may acquire upon the exercise of our Series A, B, D and E warrants.
|
●
|
we are issuing 1,500,000 Class A warrants in exchange for our outstanding Series C warrants. We will issue 1,500,000 shares of our common stock upon the exercise of the Class A warrants.
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●
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focusing our operations in the hydrocarbon-rich region of east Texas;
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●
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drilling in areas which have a high proportion of oil relative to natural gas;
|
●
|
lessening risk by concentrating on established areas with proven production; and
|
●
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using new screening technology which prevents sand accumulation in the well bores and allows for the recovery of more oil from mature fields.
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●
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we had drilled and completed nine wells in the Batson Dome Field.
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●
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we were in the process of drilling or completing four wells, and
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●
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we were reworking one well.
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●
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340,000 shares of our common stock at a price of $1.20 per share at any time prior to October 31, 2014; and
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●
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170,000 shares of our common stock at a price of $4.00 per share at any time prior to October 31, 2014.
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●
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a number of our warrant holders are offering to sell up to 2,897,360 shares of our common stock which they may acquire upon the exercise of our Series A, B, D and E warrants. See the section of this prospectus entitled “Selling Shareholders” for more information.
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●
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we are offering 1,500,000 Class A warrants in exchange for our outstanding Series C warrants. We will issue 1,500,000 shares of our common stock upon the exercise of the Class A warrants. See the section of this prospectus captioned “Exchange Offer” for more information.
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●
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the sale prices of crude oil;
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●
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the amount of production from oil wells in which we have an interest;
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●
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lease operating expenses;
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●
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international conflict or acts of terrorism; and
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●
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general economic conditions.
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Quarter Ended | High | Low | ||||||
December 31, 2011 | $ | 1.05 | $ | 0.95 | ||||
March 31, 2012 | $ | 1.15 | $ | 0.95 | ||||
June 30, 2012 | $ | 1.05 | $ | 0.87 |
Shares outstanding as of August 31, 2012 | 12,741,512 |
Number
of Shares
|
Note
Reference
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||||
Shares issuable upon exercise of Class A warrants | 4,800,000 | (i) | |||
Shares issuable upon the conversion of 2010 notes | 325,000 | (ii) | |||
Shares issuable upon the exercise of Series A warrants | 1,700,000 | (ii) | |||
Shares issuable upon the exercise of Series B warrants | 510,000 | (ii) | |||
Shares issuable upon the exercise of Class A warrants which will be exchanged for Series C warrants | 1,500,000 | (iii) | |||
Shares issuable upon exercise Series D warrants | 150,000 | (iv) | |||
Shares issuable upon exercise of representative's warrants | 960,000 | (v) | |||
Shares issuable upon exercise of stock options | 850,000 | (vi) | |||
Shares issuable upon conversion of 2012 notes | 8,254,500 | (vii) | |||
Shares issuable upon exercise of Series E warrants | 537,360 | (vii) |
(i)
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In December 2011 we sold 4,800,000 Units in an initial public offering at a price of $1.00 per Unit. Each Unit consisted of one share of our common stock and one Class A Warrant. Each Class A warrant allows the holder to purchase one share of our common stock at a price of $1.50 per share at any time on or before November 29, 2016.
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(ii)
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In November and December 2010, we sold 34 units, at a price of $100,000 per unit, in a private offering. Each unit consisted of one promissory note in the principal amount of $100,000 and 50,000 Series A warrants. The notes are convertible into shares of our common stock at an initial conversion price of $1.00 per share. Each Series A warrant entitles the holder to purchase one share of our common stock at a price of $4.00 per share at any time on or before October 31, 2014. In June, July and September 2012 notes in the principal amount of $3,075,000 were surrendered in payment of the notes referred to in (vii) below. As a result, the outstanding principal balance of the notes sold in 2010 was $325,000 as of the date of this prospectus.
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In connection with this private offering, we paid the placement agent for the offering a commission of $288,000 plus a non-accountable expense allowance of $72,000. We also issued the placement agent Series B warrants. The Series B Warrants allow the placement agent to purchase up to:
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●
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340,000 shares of our common stock at a price of $1.20 per share at any time prior to October 31, 2014; and
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●
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170,000 shares of our common stock at a price of $4.00 per share at any time prior to October 31, 2014.
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(iii)
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In February and March 2011, we sold 1,500,000 units at a price of $1.00 per unit in a private offering. Each unit consisted of one share of our common stock and one Series C warrant. Each Series C warrant allows the holder to purchase one share of our common stock at a price of $1.50 per share at any time on or before November 29, 2016. By means of this prospectus, we are offering 1,500,000 Class A warrants in exchange for our outstanding Series C warrants. We will issue 1,500,000 shares of our common stock upon the exercise of the Class A warrants. See the section of this prospectus captioned “Exchange Offer” for more information.
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(iv)
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In connection with the private offering described in (iii) above, we paid the placement agent for the offering a commission of $150,000. We also issued the placement agent Series D warrants. The Series D warrants allow the placement agent to purchase up to 150,000 shares of our common stock at a price of $1.20 per share at any time prior to February 28, 2016.
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(v)
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We issued Paulson Investment Company, Inc., the representative of the underwriters of our initial public offering, a warrant to purchase 480,000 units. The units issuable upon the exercise of the warrants are identical to the units sold in our initial public offering. The warrants are exercisable at a price of $1.20 per unit and expire in December 2016.
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(vi)
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See "Management-Executive Compensation" for information concerning these options.
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(vii)
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In June, July and September 2012 we sold convertible secured promissory notes to a group of private investors. The notes bear interest at 15% per year, are payable quarterly, mature on June 30, 2015, and are convertible into shares of our common stock at a conversion price of $1.25 per share, subject to adjustment.
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Notes in the cumulative total principal amount of $5,179,500 were sold for cash and notes in the cumulative total principal amount of $3,075,000 were exchanged for notes that we sold in 2010.
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The placement agents for the offering received total cash commissions of $619,905 as well as Series E warrants which collectively entitle the holders to purchase up to 537,360 shares of our common stock. The Series E warrants may be exercised at any time on or before June 30, 2017 at a price of $1.55 per share.
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By means of this prospectus:
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●
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a number of our warrant holders are offering to sell up to 2,360,000 shares of our common stock which they may acquire upon the exercise of our Series A, B and D warrants.
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●
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we are issuing 1,500,000 Class A warrants in exchange for our outstanding Series C warrants. We will issue 1,500,000 shares of our common stock upon the exercise of the Class A warrants.
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Item
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Increase (I) or
Decrease (D)
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Reason
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Oil and Gas Sales
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(D) |
Decline in oil prices and decrease in production from certain wells due to temporary shutdown for workovers.
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Cost and Expenses
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(I) |
Operation of new wells; maintenance and repair of wells.
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Item
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Increase (I) or
Decrease (D)
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Reason
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Oil and Gas Sales
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(I)
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Completion of new wells
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Cost and Expenses
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(I) |
Operation of new wells and increased depletion of oil reserves as a result of increased production.
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●
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lease operating expenses;
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●
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general and administrative expenses; and
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●
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interest expense.
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●
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the sale prices of crude oil;
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●
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the amount of production from oil wells in which we have an interest;
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●
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lease operating expenses;
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●
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the availability of drilling rigs, drill pipe and other supplies and equipment required to drill and complete oil wells, and;
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●
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corporate overhead costs.
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Year Ended
September 30, 2011
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Inception Through
September 30, 2010
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|||||||
Cash provided (used) in operations
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$ | 477,266 | $ | (171,099 | ) | |||
Acquisition of oil properties and equipment
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(309,247 | ) | (40,000 | ) | ||||
Drilling and completion costs
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(3,087,047 | ) | (41,865 | ) | ||||
Debt issuance costs
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(400,051 | ) | -- | |||||
Pre-issuance equity offering costs
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(525,291 | ) | -- | |||||
Proceeds from issuance of common stock units
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1,340,155 | 409,900 | ||||||
Repayment of notes(1)
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(642,753 | ) | -- | |||||
Proceeds from sale of convertible notes
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3,400,000 | -- |
Nine months ended June 30,
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||||||||
2012
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2011
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|||||||
Cash from operating activities
|
$ | 138,177 | 250,871 | |||||
Purchase of oil properties and equipment
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(3,893 | ) | (310,446 | ) | ||||
Drilling and completion costs
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(4,080,031 | ) | (2,924,136 | ) | ||||
Debt issuance costs
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(478,214 | ) | (397,774 | ) | ||||
Equity offering costs
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(199,849 | ) | (280,219 | ) | ||||
Issuance of common stock and warrants
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4,224,000 | 1,340,155 | ||||||
Exercise of warrants
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-- | 45,289 | ||||||
Repayment of notes (1)
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-- | (642,753 | ) | |||||
Sale of convertible notes
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2,685,000 | 3,400,000 |
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(1)
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These notes were issued during 2010 in connection with the acquisition of leases in the Batson Dome field.
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●
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Trends, demands, commitments, events or uncertainties that will result in, or that are reasonably likely to result in, any material increase or decrease in our liquidity; or
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●
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Significant changes in our expected sources and uses of cash.
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Total
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2012
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2013
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2014
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Thereafter
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||||||||||||||||
2010 Convertible notes (1)
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$ | 325,000 | $ | 325,000 | -- | -- | -- | |||||||||||||
2012 Convertible notes (1) | $ | 8,254,500 | -- | -- | -- | $ | 8,254,500 | |||||||||||||
Office lease
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$ | 29,500 | $ | 29,500 | -- | -- | -- | |||||||||||||
Drilling commitment -
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||||||||||||||||||||
Exxon/Mobil farmout
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$ | 1,000,000 | $ | -- | $ | 1,000,000 | -- | -- |
(1)
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Gives effect to notes sold in September 2012.
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●
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focusing our operations in the hydrocarbon-rich region of east Texas;
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●
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drilling in areas which have a high proportion of oil relative to natural gas;
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●
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lessening risk by concentrating on established areas with proven production; and
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●
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using new screening technology which prevents sand accumulation in the well bores and allows for the recovery of more oil from mature fields.
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Productive Wells
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Developed Acreage
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Undeveloped Acreage(1)
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||||||||||||||||||||||
State
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Gross
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Net
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Gross
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Net
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Gross
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Net
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||||||||||||||||||
Texas
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9 | 8.1 | 25 | 22.5 | 205 | 185 |
State
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Held by Production
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Not Held by Production
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||||||
Texas
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230 | -- |
Oil
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Gas
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|||||||
(Bbls) | (Mcf) | |||||||
Proved Developed:
|
||||||||
Producing
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90,572 | -- | ||||||
Non-Producing
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73,391 | -- | ||||||
Proved Undeveloped
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371,847 | -- |
Future cash inflows
|
$ | 50,622,329 | ||
Deductions (including estimated taxes)
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(22,823,917 | ) | ||
Future net cash flow
|
$ | 27,798,412 | ||
Discounted future net cash flow
|
$ | 22,690,495 |
●
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acquire a working interest in one or more prospects from others and participate with the other working interest owners in drilling and if warranted, completing oil wells on a prospect;
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●
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purchase producing oil properties; or
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●
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enter into farmin agreements with third parties. A farmin agreement will obligate us to pay the cost of drilling, and if warranted completing a well, in return for a majority of the working and net revenue interest in the well.
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Name
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Age
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Position
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||
Warren M. Dillard
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69 |
President, Chief Executive, Financial and Accounting Officer and a Director
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||
R. Gerald Bailey
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70 |
Chairman of the Board and a Director
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||
Michael L. Fraim
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49 |
Vice President, Technology
|
||
Delton C. Drum
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54 |
Vice President, Field Operations
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||
Steven M. Powers
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69 |
Vice President of Business Development, Secretary and a Director
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||
Rick A. Wilber
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63 |
Director
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||
John P. Barton
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67 |
Director
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Restricted | Other | ||||||||||||||||||||||||
Stock
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Option
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Annual
|
|||||||||||||||||||||||
Fiscal
|
Salary
|
Bonus
|
Awards
|
Awards | Compensation |
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|||||||||||||||||||
Name and Principal Position
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Year
|
(1) | (2) | (3) | (4) | (5) |
Total
|
||||||||||||||||||
Warren Dillard
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2011
|
$ | 135,000 | — | — | — | — | $ | 135,000 | ||||||||||||||||
President, Principal Executive,
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2010
|
$ | 22,500 | $ | 22,500 | ||||||||||||||||||||
Financial and Accounting Officer
|
|||||||||||||||||||||||||
R. Gerald Bailey
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2011
|
$ | 105,000 | — | — | — | — | $ | 105,000 | ||||||||||||||||
Chairman of the Board
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2010
|
$ | 9,000 | $ | 9,000 | ||||||||||||||||||||
Michael Fraim
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2011
|
$ | 10,000 | — | — | — | — | $ | 10,000 | ||||||||||||||||
Vice President Technology
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2010
|
— | — |
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(1) The dollar value of base salary (cash and non-cash) earned.
|
|
(2) The dollar value of bonus (cash and non-cash) earned.
|
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(3) The value of the shares of restricted stock issued as compensation for services computed in accordance with ASC 718 on the date of grant.
|
|
(4) The value of all stock options computed in accordance with ASC 718 on the date of grant.
|
|
(5) All other compensation received that could not be properly reported in any other column of the table.
|
Name | Projected
Compensation
|
Percent of Time to be
Devoted to our Business
|
||||||
Warren Dillard
|
$ | 190,000 | 100 | % | ||||
R. Gerald Bailey
|
$ | 120,000 | 25 | % | ||||
Steven Powers
|
$ | 115,000 | 40 | % | ||||
Rick A. Wilber
|
$ | 30,000 | 10 | % | ||||
John Barton
|
$ | 54,000 | 30 | % |
Shares Issuable
|
||||||||||||||||
Grant
|
Upon Exercise
|
Exercise
|
Expiration
|
|||||||||||||
Name
|
Date
|
of Options (1)
|
Price
|
Date
|
||||||||||||
Warren M. Dillard
|
1-10-11 | 200,000 | $ | 1.00 | 1-10-14 | |||||||||||
R. Gerald Bailey
|
1-10-11 | 200,000 | $ | 1.00 | 1-10-14 | |||||||||||
Steven M. Powers
|
1-10-11 | 100,000 | $ | 1.00 | 1-10-14 | |||||||||||
Rick A. Wilber
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1-10-11 | 150,000 | $ | 1.00 | 1-10-14 | |||||||||||
John P. Barton
|
1-10-11 | 100,000 | $ | 1.00 | 1-10-14 | |||||||||||
Ben Barton
|
1-10-11 | 100,000 | $ | 1.00 | 1-10-14 |
(1)
|
Any options which have not been exercised will automatically terminate upon the option holder’s death, 90 days after the date the option holder voluntarily resigns as an officer, director or employee or in the event the option holder is terminated for cause. For purposes of these options, cause is defined as (i) the failure by the option holder to substantially perform his duties and obligations owed to us (other than any failure resulting from incapacity due to physical or mental illness); (ii) engaging in misconduct or a breach of fiduciary duty which is, or potentially is,materially injurious to us; (iii) commission of a felony; or (iv) the commission of a crime which is, or potentially is, materially injurious to us.
|
Name and Address of Beneficial Owner
|
Number of Shares
BeneficiallyOwned
|
Percentage
of Class
|
||||||
Warren M. Dillard(2)
|
1,165,000 | (2)(3) | 8.3 | % | ||||
1330 Post Oak Blvd., Suite 1600
|
||||||||
Houston, Texas 77056
|
||||||||
R. Gerald Bailey
|
500,000 | (3) | 3.6 | % | ||||
1330 Post Oak Blvd., Suite 1600
|
||||||||
Houston, Texas 77056
|
||||||||
Michael L. Fraim
|
30,000 | * | ||||||
9266 N. Ventura Ave.
|
||||||||
Ventura, CA 93001
|
||||||||
Delton C. Drum
|
40,000 | * | ||||||
2626 Royal Trail Dr.
|
||||||||
Kingwood, TX 77339
|
||||||||
Steven M. Powers (2)
|
1,065,000 | (2)(4) | 7.6 | % | ||||
1999 Avenue of the Stars, Ste. 1100
|
||||||||
Los Angeles, CA 90067
|
||||||||
Rick A. Wilber
|
650,000 | (5) | 4.6 | % | ||||
10360 Kestrel Street
|
||||||||
Plantation, FL 33324
|
||||||||
John P. Barton (2)
|
575,000 | (2)(4)(6) | 4.21 | % | ||||
1200 17th Street, Suite 570
|
||||||||
Denver, CO 80202
|
||||||||
All officers and directors as a group (7 persons)
|
4,025,000 | (7) | 29.4 | % |
|
(1) Assumes none of our outstanding notes is converted and none of our outstanding warrants is exercised.
|
|
(2) Shares are beneficially held through trusts or other entities under the control of this beneficial owner.
|
|
(3) Includes 200,000 shares issuable upon exercise of an option that is currently exercisable.
|
|
(4) Includes 100,000 shares issuable upon exercise of an option that is currently exercisable.
|
|
(5) Includes 150,000 shares issuable upon exercise of an option that is currently exercisable.
|
|
(6)Includes 100,000 shares owned by Mr. Barton's wife.
|
|
(7) Includes 750,000 shares issuable upon exercise of options that are currently exercisable.
|
Shares Issuable
|
Share
|
|||||||||||||||
Upon Exercise
|
Shares to
|
Ownership
|
||||||||||||||
Shares
|
of Series A
|
Be Sold In
|
After
|
|||||||||||||
Name of Selling Shareholder
|
Owned
|
Warrants
|
This Offering
|
Offering
|
||||||||||||
Peter J. and Kathryn R. Armatas
|
-- | 25,000 | 25,000 | -- | ||||||||||||
Craig Bardman
|
-- | 25,000 | 25,000 | -- | ||||||||||||
Michael S. Barish
|
-- | 50,000 | 50,000 | -- | ||||||||||||
Susan C. Barton
|
-- | 5,000 | 5,000 | -- | ||||||||||||
Margaret Bathgate
|
-- | 25,000 | 25,000 | -- | ||||||||||||
Gary W. and Theresa Boening
|
-- | 50,000 | 50,000 | -- | ||||||||||||
Burcham Family Revocable Trust
|
-- | 50,000 | 50,000 | -- | ||||||||||||
Butera Family Trust
|
-- | 100,000 | 100,000 | -- | ||||||||||||
The Burns Partnership LLC
|
-- | 100,000 | 100,000 | -- | ||||||||||||
Robert A. Cowfer
|
-- | 25,000 | 25,000 | -- | ||||||||||||
Michael E. Donnelly
|
-- | 6,250 | 6,250 | -- | ||||||||||||
Duncan Family Trust 1997
|
-- | 75,000 | 75,000 | -- | ||||||||||||
William Max and Kathleen A. Duncan
|
-- | 100,000 | 100,000 | -- | ||||||||||||
Richard R. and Ann Marie Ferro
|
-- | 25,000 | 25,000 | -- | ||||||||||||
Roland W. and Cynthia L. Gentner
|
-- | 25,000 | 25,000 | -- | ||||||||||||
Zenas N. Gurley, IRA
|
-- | 25,000 | 25,000 | -- | ||||||||||||
Bill and Diana Hochstett
|
-- | 12,500 | 12,500 | -- | ||||||||||||
William and Cheryl Hughes Family Trust
|
-- | 50,000 | 50,000 | -- | ||||||||||||
Douglas H. Kelsall, IRA
|
-- | 12,500 | 12,500 | -- | ||||||||||||
Robin Kert Trust
|
-- | 12,500 | 12,500 | -- | ||||||||||||
Jeffrey T. and Carrie Klenda
|
-- | 50,000 | 50,000 | -- | ||||||||||||
Jon B. Kruljac
|
-- | 12,500 | 12,500 | -- | ||||||||||||
Richard Martin
|
-- | 25,000 | 25,000 | -- | ||||||||||||
Robert F. McCullough Jr.
|
-- | 25,000 | 25,000 | -- | ||||||||||||
Wilbert L. Miles
|
-- | 7,500 | 7,500 | -- | ||||||||||||
William D. Moreland
|
-- | 150,000 | 150,000 | -- | ||||||||||||
Mundon Anticline Investment LLC
|
-- | 25,000 | 25,000 | -- | ||||||||||||
Bernard and Sandra Orsi
|
-- | 25,000 | 25,000 | -- | ||||||||||||
Rack Properties, LLP
|
-- | 25,000 | 25,000 | -- | ||||||||||||
Pedro and Patricia Rivera
|
-- | 25,000 | 25,000 | -- | ||||||||||||
Mark J. Russo
|
-- | 12,500 | 12,500 | -- | ||||||||||||
Earl W. Sauder Irrevocable Trust
|
-- | 50,000 | 50,000 | -- | ||||||||||||
Earl W. Sauder, LLC
|
-- | 100,000 | 100,000 | -- | ||||||||||||
Sauder Family LLC
|
-- | 50,000 | 50,000 | -- | ||||||||||||
H. Leigh Severance
|
-- | 50,000 | 50,000 | -- | ||||||||||||
David C. Shatzer
|
-- | 75,000 | 75,000 | -- | ||||||||||||
Roy G. Shuman
|
-- | 50,000 | 50,000 | -- | ||||||||||||
Alva Terry Staples
|
-- | 12,500 | 12,500 | -- | ||||||||||||
Sunset Hill Investments Retirement Plan
|
-- | 50,000 | 50,000 | -- | ||||||||||||
Dwight E. Vandervort
|
-- | 50,000 | 50,000 | -- | ||||||||||||
Gregory J. Wasinger
|
-- | 12,500 | 12,500 | -- | ||||||||||||
Michael D. Williams
|
-- | 12,500 | 12,500 | -- | ||||||||||||
Thomas D. Wolf
|
-- | 6,250 | 6,250 | -- | ||||||||||||
-- | 1,700,000 | 1,700,000 | -- |
Shares Issuable
|
Shares Issuable
|
Share | ||||||||||||||||||
Upon Exercise
|
Upon Exercise
|
Shares to
|
Ownership
|
|||||||||||||||||
Shares
|
of Series B
|
of Series D
|
Be Sold In
|
After
|
||||||||||||||||
Name of Selling Shareholder
|
Owned
|
Warrants (1)
|
Warrants (1)
|
This Offering
|
Offering
|
|||||||||||||||
Vicki D.E. Barone
|
- | 38,887 | 11,535 | 50,422 | - | |||||||||||||||
Steven M. Bathgate
|
- | 37,893 | 8,115 | 46,011 | - | |||||||||||||||
Gail Cohen
|
- | 750 | 750 | - | ||||||||||||||||
Michael E. Donnelly
|
- | 58,172 | 14,280 | 72,452 | - | |||||||||||||||
David Drennen
|
- | 5,100 | 5,100 | - | ||||||||||||||||
David Drennen
|
- | 1,672 | 503 | 2,175 | - | |||||||||||||||
Anita Dudley
|
- | 750 | 500 | 1,250 | - | |||||||||||||||
Greg Fulton
|
- | 13,990 | 4,217 | 18,207 | - | |||||||||||||||
Zenas N. Gurley
|
- | 48,563 | 13,750 | 62,313 | - | |||||||||||||||
Richard T. Huebner
|
- | 13,668 | 4,035 | 17,703 | - | |||||||||||||||
Mathew Kelsall
|
- | 5,438 | 3,000 | 8,438 | - | |||||||||||||||
Andrea Kidd
|
- | 2,500 | 1,000 | 3,500 | - | |||||||||||||||
Jon B. Kruljac
|
- | 182,690 | 34,425 | 217,115 | - | |||||||||||||||
Joseph Lavinge
|
- | 2,250 | 2,250 | - | ||||||||||||||||
Michael J. Morgan
|
- | 6,123 | 1,732 | 7,855 | - | |||||||||||||||
Eugene L. Neidiger
|
- | 6,833 | 1,933 | 8,766 | - | |||||||||||||||
Guy Newman
|
- | 25,425 | 31,750 | 57,175 | - | |||||||||||||||
Robert L. Parrish
|
- | 2,775 | 770 | 3,545 | - | |||||||||||||||
Fulton Partners
|
- | 23,225 | 7,000 | 30,225 | - | |||||||||||||||
Anthony B. Petrelli
|
- | 19,477 | 5,537 | 25,014 | - | |||||||||||||||
Steve Quoy
|
- | 750 | 750 | - | ||||||||||||||||
Regina L. Roesener
|
- | 13,354 | 3,778 | 17,132 | - | |||||||||||||||
Nancy Stratton
|
- | 750 | 500 | 1,250 | - | |||||||||||||||
Katie Walker
|
- | 465 | 140 | 605 | - | |||||||||||||||
- | 510,000 | 150,000 | 660,000 | - |
(1)
|
The Series B and Series D warrants were issued to GVC Capital, LLC, the placement agent for our 2010 and 2011 private offerings. GVC Capital subsequently assigned the Series B and D warrants to a number of its registered representatives and employees, as well as selected dealers participating in the private offerings. The selected dealers, in turn, assigned most of the Series B and D warrants to a number of their registered representatives and employees.
|
Name of Selling Shareholder
|
Shares Owned |
Share Issuable Upon Exercise
of Series E Warrants (1)
|
Shares to
Be Sold In
This Offering
|
Ownership After
Offering
|
||||||||||||
Northland Securities
|
- | 80,224 | 80,224 | - | ||||||||||||
MLV & Co.
|
- | 151,578 | 151,578 | - | ||||||||||||
GVC Capital
|
- | 146,162 | 146,162 | - | ||||||||||||
Ted Warner
|
- | 2,400 | 2,400 | - | ||||||||||||
Nick Shermeta
|
- | 9,600 | 9,600 | - | ||||||||||||
Roger Tadsen
|
- | 2,400 | 2,400 | - | ||||||||||||
Scott Tadsen
|
- | 1,200 | 1,200 | - | ||||||||||||
Rob Herje
|
- | 19,968 | 19,968 | - | ||||||||||||
Bill O’Connor
|
- | 21,000 | 21,000 | - | ||||||||||||
Toby Labelle
|
- | 1,200 | 1,200 | - | ||||||||||||
Karen Cady
|
- | 1,200 | 1,200 | - | ||||||||||||
Shawn Messner
|
- | 30,684 | 30,684 | - | ||||||||||||
Jeff Peterson
|
- | 15,342 | 15,342 | - | ||||||||||||
Eric Hansen
|
- | 15,342 | 15,342 | - | ||||||||||||
Neidiger Tucker Bruner, Inc.
|
- | 39,060 | 39,060 | - |
(1)
|
The Series E warrants were issued to Northland Capital Markets, MLV & Co. and GVC Capital, LLC, the placement agents for our 2012 private offering. The placement agents subsequently assigned the Series E warrants to affiliates, a number of their registered representatives and employees, as well as a selected dealer participating in the offering.
|
Name of Shareholder
|
Controlling Person | |
Burcham Family Revocable Trust
|
William J. Burcham,
|
|
Name of Shareholder
|
Controlling Person
|
|
Butera Family Trust
|
Roy T. Butera
|
|
The Burns Partnership LLC
|
David A. Burns,
|
|
Duncan Family Trust 1997
|
Stephen Flores
|
|
Zenas N. Gurley, IRA
|
Zenas N. Gulrey
|
|
William and Cheryl Hughes Family Trust
|
William Hughes
|
|
Douglas H. Kelsall, IRA
|
Douglas H. Kelsall
|
|
Robin Kert Trust
|
Robin Kert
|
|
Mundon Anticline Investment LLC
|
Kent E. Mundon
|
|
Rack Properties, LLP
|
Kent E. Mundon
|
|
Earl W. Sauder Irrevocable Trust
|
Earl W. Sauder
|
|
Earl W. Sauder, LLC
|
Earl W. Sauder
|
|
Sauder Family LLC
|
Earl W. Sauder
|
|
Sunset Hill Investments Retirement Plan
|
Daniel M. Popylisen
|
|
Fulton Partners | Greg Fulton | |
Northland Securities
|
Randy Nitzksche
|
|
MLV & Co.
|
Dean Colucci | |
GVC Capital
|
Vicki D. E. Barone
|
|
Neidiger Tucker Bruner, Inc.
|
Charles Burner
|
●
|
a block trade in which a broker or dealer so engaged will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;
|
●
|
purchases by a broker or dealer as principal and resale by such broker or dealer for its account pursuant to this prospectus;
|
●
|
ordinary brokerage transactions and transactions in which the broker solicits purchasers; and
|
●
|
face-to-face transactions between sellers and purchasers without a broker/dealer.
|
●
|
there is no public market for the Series C warrants;
|
●
|
the Class A warrants trade on the OTC Bulletin Board under the symbol VNGEW; and
|
●
|
the terms of the Series C warrants are identical to those of the Class A warrants;
|
|
● 1% of the total number of shares of the same class then outstanding, or
|
|
● the average weekly trading volume of such shares during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale,
|
|
● shares issued in connection with an acquisition of oil and gas properties, the acquisition of an unaffiliated company, a joint venture or similar strategic transaction where the primary purpose is not to raise cash; or
|
|
● securities issued upon the conversion of the notes or the exercise of our Series D warrants.
|
|
● during any 20 trading days within a period of 30 consecutive trading days, the closing price of our common stock is $5.00 or greater and our common stock has an average daily trading volume of 50,000 shares or more during the 20 trading days; or
|
|
● we complete a registered public offering of our common stock at an offering price of $4.00 per share or more with a minimum offering size of at least $2,000,000.
|
|
● we fail to make any interest or principal payment when due;
|
|
● we breach any representation, warranty or covenant or defaults in the timely performance of any other obligation in our agreements with the note holders and the breach or default continues uncured for a period of five business days after the date on which notice of the breach or default is first given to us, or ten trading days after we become, or should have become, aware of such breach or default; or
|
|
● we file for protection from our creditors under the federal bankruptcy code, or a third party files an involuntary bankruptcy petition against us.
|
|
●
|
the terms of the new financing are more favorable than the terms of the Notes we sold in 2010;
|
|
●
|
the lien of any new creditor may only extend to our first four wells and the undeveloped portion of our 230 are lease in the Batson Dome Field;
|
|
●
|
the amount borrowed cannot exceed $3,400,000; and
|
|
●
|
any amounts borrowed can only be used to repay any Notes sold in 2010,
|
|
CP =
|
the Conversion Price in effect immediately prior to the issuance of common stock or securities convertible into common stock
|
|
S1 =
|
the number of shares of our common stock outstanding immediately prior to the issuance;
|
|
S2 =
|
the amount we received from the sale of the securities in the transaction (plus any amounts receivable upon the conversion of any securities or the exercise of any warrants sold in the transaction) divided by the average closing price of our common stock over the five trading days prior to the sale of the securities;
|
|
S3 =
|
the number of shares of common stock outstanding immediately after the transaction, or which would be outstanding if:
|
|
●
|
all convertible securities which we sold in the transaction were converted into shares of our common stock (at the lowest price at which the securities could be converted into our common stock), and
|
|
●
|
all warrants we sold in the transaction were exercised.
|
|
NCP =
|
New Conversion Price
|
●
|
securities or options issued to our employees, officers or directors pursuant to any stock or option plan duly adopted for such purpose, by a majority of the non-employee members of our Board of Directors or a majority of the members of a committee of non-employee directors established for such purpose,
|
●
|
securities issued and outstanding on the date of this Private Offering Memorandum which are exercisable or exchangeable for, or convertible into, shares of common stock, provided that such securities have not been amended since the date of this Private Offering Memorandum to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities.
|
●
|
securities issued in connection with an acquisition of oil and gas properties, the acquisition of an unaffiliated company, a joint venture or similar strategic transaction where the primary purpose is not to raise cash;
|
●
|
securities upon the conversion of the Notes in this offering; or
|
●
|
securities issued upon the Placement Agents’ Series E warrants.
|
|
●
|
We fail to make any interest or principal payment when due;
|
|
●
|
We breach any representation, warranty or covenant or defaults in the timely performance of any other obligation in our agreements with the note holders and the breach or default continues uncured for a period of five business days after the date on which notice of the breach or default is first given to us, or ten trading days after we become, or should have become, aware of such breach or default; and
|
|
●
|
We file for protection from our creditors under the federal bankruptcy code, or a third party files an involuntary bankruptcy petition against us.
|
|
● Lease rentals and leasehold maintenance costs;
|
|
● Landowners' royalties;
|
|
● Overriding royalties;
|
|
● Taxes, except any taxes based upon our net income;
|
|
● Lease operating expenses;
|
|
● The cost of reworking, repairing, or plugging any wells (including, without limitation, any salt water disposal or injection wells);
|
|
● Fracturing and reservoir stimulation costs;
|
|
● The costs of any equipment associated with the well, installed after completion, as well as the costs of replacing or repairing any equipment;
|
|
● Environmental remedial and land restoration costs; and
|
|
● All regulatory compliance costs.
|
Audited Financial Statements as of and for the Year Ended September 30, 2011 and for the Period July 19, 2010 (Inception) through September 30, 2010; | ||||
Report of Independent Registered Public Accounting Firm
|
F-1 | |||
Consolidated Balance Sheets
|
F-2 | |||
Consolidated Statements of Operations
|
F-3 | |||
Consolidated Statements of Stockholders' Equity
|
F-4 | |||
Consolidated Statements of Cash Flows
|
F-5 | |||
Notes to the Consolidated Financial Statements
|
F-6 | |||
Unaudited Consolidated Financial Statements as of June 30, 2012 and for the three and nine month periods then ended: | ||||
Consolidated Balance Sheets
|
F-24 | |||
Consolidated Statements of Operations
|
F-25 | |||
Consolidated Statement of Cash Flows
|
F-26 | |||
Notes to the Unaudited Consolidated Financial Statements
|
F-28 |
September 30,
|
September 30,
|
|||||||
ASSETS
|
2011
|
2010
|
||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$ | 453,243 | $ | 156,936 | ||||
Accounts receivable
|
257,147 | 4,900 | ||||||
Other assets
|
4,428 | 50,000 | ||||||
Total current assets
|
714,818 | 211,836 | ||||||
Property and equipment
|
||||||||
Oil and gas, on the basis of full cost accounting
|
||||||||
Proved properties
|
3,606,967 | - | ||||||
Unproved properties and properties under
|
||||||||
development, not being amortized
|
619,679 | 367,533 | ||||||
Furniture and equipment
|
2,014 | - | ||||||
Less: accumulated depreciation, depletion and amortization
|
(264,657 | ) | - | |||||
Total property and equipment
|
3,964,003 | 367,533 | ||||||
Debt issuance costs
|
338,345 | - | ||||||
Other assets
|
527,886 | - | ||||||
Total assets
|
$ | 5,545,052 | $ | 579,369 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities
|
||||||||
Accounts payable
|
$ | 180,031 | $ | 1,945 | ||||
Other liabilities
|
75,056 | - | ||||||
Note payable
|
- | 285,668 | ||||||
Total current liabilities
|
255,087 | 287,613 | ||||||
Notes payable, net of discount of $1,066,539 and $0
|
2,333,461 | - | ||||||
Participation liability
|
1,172,315 | - | ||||||
Conversion feature liability
|
720,593 | - | ||||||
Warrant liabilities
|
400,319 | - | ||||||
Asset retirement obligations
|
24,629 | - | ||||||
Total liabilities
|
4,906,404 | 287,613 | ||||||
Commitments and contingencies
|
- | - | ||||||
Stockholders' equity
|
||||||||
Preferred stock, $0.00001 par value; 5,000,000 shares
|
||||||||
authorized, none issued or outstanding
|
- | - | ||||||
Common stock, $0.00001 par value; 50,000,000 shares authorized,
|
||||||||
7,865,822 and 5,912,500 shares issued and outstanding
|
79 | 59 | ||||||
Additional paid-in capital
|
1,866,110 | 409,841 | ||||||
Accumulated deficit
|
(1,227,541 | ) | (118,144 | ) | ||||
Total stockholders' equity
|
638,648 | 291,756 | ||||||
Total liabilities and stockholders' equity
|
$ | 5,545,052 | $ | 579,369 |
Fiscal Year
Ended
September 30, 2011
|
July 19, 2010
(Inception) to
September 30, 2010
|
|||||||
Revenues
|
||||||||
Oil and gas sales
|
$ | 1,899,584 | $ | - | ||||
Costs and expenses
|
||||||||
Lease operating expense
|
200,742 | - | ||||||
Production taxes
|
87,217 | - | ||||||
Depreciation, depletion and amortization
|
264,657 | - | ||||||
Asset retirement obligation accretion
|
3,260 | - | ||||||
General and administrative
|
987,778 | 107,033 | ||||||
Other
|
25,526 | 11,111 | ||||||
Total costs and expenses
|
1,569,180 | 118,144 | ||||||
Income from operations
|
330,404 | (118,144 | ) | |||||
Other income (expense)
|
||||||||
Interest income
|
904 | - | ||||||
Interest expense
|
(679,629 | ) | - | |||||
Change in fair value of warrant and conversion
|
||||||||
feature liabilities
|
(761,076 | ) | - | |||||
Total other income (expense)
|
(1,439,801 | ) | - | |||||
Loss before income taxes
|
(1,109,397 | ) | (118,144 | ) | ||||
Provision for income taxes
|
- | - | ||||||
Net loss
|
$ | (1,109,397 | ) | $ | (118,144 | ) | ||
Loss per share – Basic and diluted
|
$ | (0.15 | ) | $ | (0.02 | ) |
Total
|
||||||||||||||||||||
Common Stock
|
Additional
|
Accumulated
|
Stockholders’
|
|||||||||||||||||
Shares
|
Amount
|
Paid In Capital
|
Deficit
|
Equity
|
||||||||||||||||
Balance at
|
||||||||||||||||||||
July 19, 2010
|
- | $ | - | $ | - | $ | - | $ | - | |||||||||||
(Inception)
|
||||||||||||||||||||
Issuance of
|
||||||||||||||||||||
common stock units
|
5,912,500 | 59 | 409,841 | - | 409,900 | |||||||||||||||
Net loss
|
- | - | - | (118,144 | ) | (118,144 | ) | |||||||||||||
Balance at
|
||||||||||||||||||||
September 30, 2010
|
5,912,500 | 59 | 409,841 | (118,144 | ) | 291,756 | ||||||||||||||
Stock-based
|
||||||||||||||||||||
compensation
|
- | - | 258,731 | - | 258,731 | |||||||||||||||
Exercise of warrants
|
453,322 | 5 | 181,299 | - | 181,304 | |||||||||||||||
Issuance of
|
||||||||||||||||||||
common stock units
|
1,500,000 | 15 | 1,016,239 | - | 1,016,254 | |||||||||||||||
Net loss
|
- | - | - | (1,109,397 | ) | (1,109,397 | ) | |||||||||||||
Balance at
|
||||||||||||||||||||
September 30, 2011
|
7,865,822 | $ | 79 | $ | 1,866,110 | $ | (1,227,541 | ) | $ | 638,648 |
Fiscal Year
Ended
September 30,
2011
|
July 19, 2010
(Inception) to
September 30,
2010
|
|||||||
Cash flows from operating activities
|
||||||||
Net loss
|
$ |
(1,109,397
|
) |
$
|
(118,144)
|
|||
Adjustments to reconcile net loss to net cash from
|
||||||||
operating activities:
|
||||||||
Depreciation, depletion and amortization
|
264,657
|
-
|
||||||
Amortization of debt issuance costs
|
205,697
|
-
|
||||||
Asset retirement obligation accretion
|
3,260
|
-
|
||||||
Amortization of long-term debt discount
|
280,256
|
-
|
||||||
Accretion of participation liability
|
108,503
|
-
|
||||||
Stock-based compensation expense
|
258,731
|
-
|
||||||
Change in fair value of warrant and conversion
|
||||||||
feature liabilities
|
761,076
|
-
|
||||||
Change in operating assets and liabilities:
|
-
|
|||||||
Accounts receivable
|
(252,247
|
) |
(4,900)
|
|||||
Other assets
|
42,977
|
(50,000)
|
||||||
Accounts payable
|
93,721
|
1,945
|
||||||
Other liabilities
|
(179,968
|
) |
-
|
|||||
Net cash from operating activities
|
477,266
|
(171,099)
|
||||||
Cash flows from investing activities
|
||||||||
Purchase of furniture and equipment
|
(2,014
|
) |
-
|
|||||
Purchase of oil and gas properties
|
(309,247
|
) |
(40,000)
|
|||||
Capital expenditures on oil and gas properties
|
(3,087,047
|
) |
(41,865)
|
|||||
Net cash from investing activities
|
(3,398,308
|
) |
(81,865)
|
|||||
Cash flows from financing activities
|
||||||||
Debt issuance costs
|
(400,051
|
) |
-
|
|||||
Pre-issuance equity offering costs
|
(525,291
|
) |
-
|
|||||
Proceeds from issuance of common stock units
|
1,340,155
|
409,900
|
||||||
Proceeds from exercise of warrants
|
45,289
|
-
|
||||||
Repayment of note payable
|
(642,753
|
) |
-
|
|||||
Proceeds from issuance of notes payable
|
3,400,000
|
-
|
||||||
Net cash from financing activities
|
3,217,349
|
409,900
|
||||||
Net change in cash and cash equivalents
|
296,307
|
156,936
|
||||||
Cash and cash equivalents
|
||||||||
Beginning of period
|
156,936
|
-
|
||||||
End of period
|
$ |
453,243
|
$
|
156,936
|
●
|
Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
●
|
Level 3—Unobservable inputs reflecting the Company's own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
|
Consideration paid -- cash
|
$ | 259,247 | ||
Recognized amounts of identifiable assets
|
||||
acquired and liabilities assumed:
|
||||
Proved developed and undeveloped properties
|
274,463 | |||
Asset retirement obligations
|
(15,216 | ) | ||
Total identifiable net assets
|
$ | 259,247 |
Fiscal Year
|
July 19, 2010 | |||||||||||||||
Ended
|
(Inception) to | |||||||||||||||
September 30, 2011
|
September 30, 2010 | |||||||||||||||
Actual
|
Proforma
|
Actual
|
Proforma
|
|||||||||||||
Revenues
|
$ | 1,899,584 | $ | 1,906,804 | $ | - | $ | 7,896 | ||||||||
Net loss
|
(1,109,397 | ) | (1,107,798 | ) | (118,144 | ) | (118,183 | ) | ||||||||
Loss per share – Basic and diluted
|
(0.15 | ) | (0.15 | ) | (0.02 | ) | (0.02 | ) |
Asset retirement obligations at beginning of period
|
$ | - | ||
Obligations assumed in acquisition
|
15,216 | |||
Additional retirement obligations incurred
|
6,153 | |||
Accretion expense
|
3,260 | |||
Asset retirement obligations at end of period
|
$ | 24,629 | ||
Fiscal Year
|
July 19, 2010
|
|||||||
Ended
|
(Inception) to
|
|||||||
September 30, 2011
|
September 30, 2010
|
|||||||
Current
|
$ | - | $ | - | ||||
Deferred
|
- | - | ||||||
Total
|
$ | - | $ | - | ||||
Fiscal Year
|
19-Jul-10
|
|||||||
Ended
|
(Inception to
|
|||||||
September 30,
2011
|
September 30,
2010
|
|||||||
Income tax expense computed at statutory rates
|
$ | (377,195 | ) | $ | (40,169 | ) | ||
Non-deductible items
|
259,666 | - | ||||||
Change in valuation allowance
|
117,529 | 40,169 | ||||||
Total
|
$ | - | $ | - |
September 30, |
September 30,
|
|||||||
2011 | 2010 | |||||||
Deferred tax assets
|
||||||||
Net operating loss carry forwards | $ | 824,260 | $ | 35,145 | ||||
Stock-based compensation | 82,869 | - | ||||||
Other | - | 5,024 | ||||||
Deferred tax liability – oil & gas properties
|
(749,431 | ) | - | |||||
Net deferred tax assets before valuation
|
157,698 | 40,169 | ||||||
Valuation allowance
|
(157,698 | ) | (40,169 | ) | ||||
Net deferred tax asset
|
$ | - | $ | - |
|
Exercise
|
Warrants Outstanding
|
||||||||||||||||
Series
|
Issuance Date
|
Expiration Date
|
|
Price
|
2011
|
2010
|
||||||||||||
A |
December 1, 2010
|
October 31, 2014
|
|
$ | 4.00 | 1,700,000 | 1,700,000 | |||||||||||
B |
December 1, 2010
|
October 31, 2014
|
|
$ | 1.20 | 340,000 | 340,000 | |||||||||||
B |
December 1, 2010
|
October 31, 2014
|
|
$ | 4.00 | 170,000 | 170,000 | |||||||||||
B |
December 1, 2010
|
March 31, 2011
|
(1 | ) | $ | 0.10 | - | 453,322 | ||||||||||
C |
February 28, 2011
|
February 28, 2016
|
$ | 2.00 | 1,500,000 | - | ||||||||||||
D |
February 28, 2011
|
February 28, 2016
|
$ | 1.20 | 150,000 | - | ||||||||||||
(1) Exercised in March 2011.
|
Risk-free interest rate
|
0.99 | % | ||
Expected dividend rate
|
0.00 | % | ||
Expected volatility
|
40.80 | % | ||
Expected life (years)
|
3 | |||
Calculated value of options granted
|
$ | 0.29 |
September 30,
|
September 30,
|
|||||||||||
Level
|
2011 | 2010 | ||||||||||
Participation liability
|
3 | $ | 1,172,315 | $ | - | |||||||
Conversion feature liability
|
3 | 720,593 | - | |||||||||
Warrant liabilities
|
3 | 400,319 | - | |||||||||
Total liabilities
|
$ | 2,293,227 | $ | - |
Participation
Liability
|
Conversion Feature Liability
|
Warrant
Liabilities
|
Total
|
|||||||||||||
Balance at September 30, 2010
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Purchases, issuances and settlements
|
(1,063,812 | ) | (26,771 | ) |
(293,590
|
) |
(1,384,173
|
) | ||||||||
Gains (losses) included in earnings
|
(108,503 | ) | (693,822 | ) | (106,729 | ) | (909,054 | ) | ||||||||
Balance at September 30, 2011
|
$ (1,172,315
|
) | $ | (720,593 | ) | $ (400,319 | ) |
$ (2,293,227
|
) |
Fiscal Year
|
July 19, 2010
|
|||||||
Ended
|
(Inception) to
|
|||||||
September 30, 2011
|
September 30, 2010
|
|||||||
Interest paid
|
$ | 242,702 | $ | - | ||||
Interest capitalized (non-cash)
|
225,529 | - | ||||||
Noncash investing and financing activities:
|
||||||||
Capital expenditures included in accounts payable
|
84,365 | - | ||||||
Issuance of notes payable for oil and gas
|
357,085 | 285,668 | ||||||
Warrant liability settled on exercise
|
136,015 | - | ||||||
Recognition of liabilities for issuance of:
|
||||||||
Series A warrants
|
1,188 | - | ||||||
Series B warrants
|
143,948 | - | ||||||
Series C warrants
|
274,516 | - | ||||||
Series D warrants
|
49,385 | - | ||||||
Recognition of conversion feature liability
|
26,771 | - | ||||||
Recognition of participation liability
|
737,886 | - | ||||||
Asset retirement obligations incurred
|
4,588 | - | ||||||
Issuance of restricted shares
|
15,000 | - |
Fiscal Year
Ended
September 30, 2011
|
July 19, 2010 (Inception) to September 30, 2010
|
|||||||
Net revenues from production
|
||||||||
Third-party sales
|
$ | 1,899,584 | $ | - | ||||
Production costs
|
||||||||
Lease operating expense
|
200,742 | - | ||||||
Production taxes
|
87,217 | - | ||||||
Asset retirement obligation accretion
|
3,260 | - | ||||||
291,219 | - | |||||||
Depreciation, depletion and amortization
|
264,489 | - | ||||||
1,343,876 | - | |||||||
Income tax expense
|
455,843 | - | ||||||
Results of operations
|
$ | 888,033 | $ | - |
Fiscal Year
Ended
September 30, 2011
|
July 19, 2010 (Inception) to September 30, 2010
|
|||||||
Property acquisitions
|
||||||||
Unproved
|
$ | 407,085 | $ | 325,668 | ||||
Proved
|
259,247 | - | ||||||
Exploration
|
108,587 | 3,355 | ||||||
Development
|
3,084,194 | 38,510 | ||||||
Total Costs Incurred
|
$ | 3,859,113 | $ | 367,533 |
September 30,
2011
|
September 30,
2010
|
|||||||
Capitalized
|
||||||||
Unproved properties
|
$ | 619,679 | $ | 367,533 | ||||
Proved properties
|
3,606,967 | - | ||||||
4,226,646 | 367,533 | |||||||
Less: Accumulated DD&A
|
264,657 | - | ||||||
Net capitalized costs
|
$ | 3,961,989 | $ | 367,533 |
Total
|
Fiscal Year
Ended
September 30, 2011
|
July 19, 2010 (Inception) to September 30, 2010
|
||||||||||
Property acquisition costs
|
$ | 502,224 | $ | 259,652 | $ | 242,572 | ||||||
Exploration and development
|
73,882 | 34,110 | 39,772 | |||||||||
Capitalized interest
|
43,573 | 20,962 | 22,611 | |||||||||
Total
|
$ | 619,679 | $ | 314,724 | $ | 304,954 |
Oil
|
||||
(Bbls)
|
||||
June 21, 2010
|
- | |||
Purchases of reserves in place
|
164,950 | |||
Production
|
- | |||
September 30, 2010
|
164,950 | |||
Revisions of prior estimates
|
34,803 | |||
Purchases of reserves in place
|
362,790 | |||
Production
|
(26,733 | ) | ||
September 30, 2011
|
535,810 |
September 30,
2011
|
September 30,
2010
|
|||||||
Estimated Quantities of Proved Developed Reserves
|
163,963 | 31,791 | ||||||
Estimated Quantities of Proved Undeveloped Reserves
|
371,847 | 133,159 |
September 30,
2011
|
September 30,
2010
|
June 21,
2010
|
||||||||||
Future cash inflows
|
$ | 50,622,329 | $ | 13,672,292 | $ | - | ||||||
Future production costs
|
(6,273,765 | ) | (1,611,534 | ) | - | |||||||
Future development costs
|
(5,557,500 | ) | (2,750,000 | ) | - | |||||||
Future income taxes
|
(10,992,652 | ) | (2,381,361 | ) | - | |||||||
Future net cash flows
|
27,798,412 | 6,929,397 | - | |||||||||
Discount of future net cash flows at 10% per annum
|
(5,107,917 | ) | (2,381,915 | ) | - | |||||||
Standardized measure of discounted future net cash flows
|
$ | 22,690,495 | $ | 4,547,482 | $ | - |
Fiscal Year
Ended
September 30, 2011
|
July 19, 2010 (Inception) to September 30, 2010
|
|||||||
Sales of oil and gas produced, net of production costs
|
$ | (1,608,365 | ) | $ | - | |||
Purchases of minerals in place
|
11,457,772 | 4,547,482 | ||||||
Net changes in prices and production costs
|
4,459,237 | - | ||||||
Accretion of discount before income taxes
|
454,748 | - | ||||||
Changes in timing and other
|
3,379,621 | - | ||||||
Net change
|
$ | 18,143,013 | $ | 4,547,482 |
First Quarter
|
Second Quarter
|
Third Quarter
|
Fourth Quarter
|
|||||||||||||
Fiscal Year Ended September 30, 2011
|
||||||||||||||||
Revenues
|
$ | - | $ | 397,915 | $ | 917,067 | $ | 584,602 | ||||||||
Income (loss) from operations
|
(144,183 | ) | (227,246 | ) | 516,532 | 185,301 | ||||||||||
Net income (loss)
|
(172,399 | ) | (1,241,088 | ) | 270,552 | 33,538 | ||||||||||
Income (loss) per share – Basic and diluted (1)
|
$ | (0.03 | ) | $ | (0.18 | ) | $ | 0.03 | $ | 0.00 | ||||||
July 19, 2010 (Inception) to September 30, 2010
|
||||||||||||||||
Revenues
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Income from operations
|
- | - | - | (118,144 | ) | |||||||||||
Net income (loss)
|
- | - | - | (118,144 | ) | |||||||||||
Income (loss) per share – Basic and diluted (1)
|
$ | - | $ | - | $ | - | $ | (0.02 | ) |
(1)
|
The sum of the individual quarterly income (loss) per share amounts may not agree with year-to-date net income per common share as each quarterly computation is based on the weighted-average number of common shares outstanding during that period. Securities deemed anti-dilutive were excluded from each quarter in which the Company reported a net loss.
|
June 30,
|
September 30,
|
|||||||
ASSETS
|
2012
|
2011
|
||||||
(Unaudited)
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$ | 2,738,433 | $ | 453,243 | ||||
Accounts receivable
|
517,232 | 257,147 | ||||||
Other assets
|
12,813 | 4,428 | ||||||
Total current assets
|
3,268,478 | 714,818 | ||||||
Property and equipment
|
||||||||
Oil and gas, on the basis of full cost accounting
|
||||||||
Proved properties
|
7,193,771 | 3,606,967 | ||||||
Unproved properties and properties under
|
||||||||
development, not being amortized
|
1,347,507 | 619,679 | ||||||
Furniture and equipment
|
5,907 | 2,014 | ||||||
Less: accumulated depreciation, depletion and amortization
|
(791,143 | ) | (264,657 | ) | ||||
Total property and equipment
|
7,756,042 | 3,964,003 | ||||||
Debt issuance costs
|
598,841 | 338,345 | ||||||
Other assets
|
14,695 | 527,886 | ||||||
Total assets
|
$ | 11,638,056 | $ | 5,545,052 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities
|
||||||||
Accounts payable
|
$ | 283,079 | $ | 180,031 | ||||
Other liabilities
|
31,711 | 75,056 | ||||||
Current portion of notes payable, net of discount of $145,159 and $0
|
1,217,341 | - | ||||||
Current portion of conversion feature liabilities
|
13,180 | - | ||||||
Total current liabilities
|
1,545,311 | 255,087 | ||||||
Notes payable, net of discount of $326,945 and $1,066,539
|
4,395,555 | 2,333,461 | ||||||
Participation liability
|
928,439 | 1,172,315 | ||||||
Conversion feature liabilities
|
326,945 | 720,593 | ||||||
Warrant liabilities
|
177,752 | 400,319 | ||||||
Asset retirement obligations
|
74,632 | 24,629 | ||||||
Total liabilities
|
7,448,634 | 4,906,404 | ||||||
Commitments and contingencies
|
- | - | ||||||
Stockholders' equity
|
||||||||
Preferred stock, $0.00001 par value; 5,000,000 shares
|
||||||||
authorized, none issued or outstanding
|
- | - | ||||||
Common stock, $0.00001 par value; 50,000,000 shares authorized,
|
||||||||
12,741,512 and 7,865,822 shares issued and outstanding
|
127 | 79 | ||||||
Additional paid-in capital
|
5,473,288 | 1,866,110 | ||||||
Accumulated deficit
|
(1,283,993 | ) | (1,227,541 | ) | ||||
Total stockholders' equity
|
4,189,422 | 638,648 | ||||||
Total liabilities and stockholders' equity
|
$ | 11,638,056 | $ | 5,545,052 |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
June 30,
|
June 30, |
June 30,
|
June 30,
|
|||||||||||||
2012
|
2011
|
2012
|
2011
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||
Revenues
|
||||||||||||||||
Oil and gas sales
|
$ | 851,899 | $ | 917,067 | $ | 2,459,575 | $ | 1,314,982 | ||||||||
Costs and expenses
|
||||||||||||||||
Lease operating expense
|
258,923 | 19,425 | 496,559 | 49,942 | ||||||||||||
Production taxes
|
39,255 | 42,258 | 113,342 | 60,271 | ||||||||||||
Depreciation, depletion and amortization
|
214,642 | 164,688 | 526,486 | 213,959 | ||||||||||||
Asset retirement obligation accretion
|
3,142 | 1,116 | 5,259 | 2,168 | ||||||||||||
General and administrative
|
485,733 | 172,699 | 1,188,104 | 796,077 | ||||||||||||
Other
|
82 | 349 | 708 | 47,462 | ||||||||||||
Total costs and expenses
|
1,001,777 | 400,535 | 2,330,458 | 1,169,879 | ||||||||||||
Income (loss) from operations
|
(149,878 | ) | 516,532 | 129,117 | 145,103 | |||||||||||
Other income (expense)
|
||||||||||||||||
Interest income
|
493 | 511 | 2,205 | 1,337 | ||||||||||||
Interest expense
|
(299,561 | ) | (273,524 | ) | (791,629 | ) | (469,959 | ) | ||||||||
Change in fair value of warrant and
|
||||||||||||||||
conversion feature liabilities
|
427,162 | 27,033 | 910,270 | (819,416 | ) | |||||||||||
Loss on debt extinguishment
|
(306,415 | ) | - | (306,415 | ) | - | ||||||||||
Total other income (expense)
|
(178,321 | ) | (245,980 | ) | (185,569 | ) | (1,288,038 | ) | ||||||||
Income (loss) before income taxes
|
(328,199 | ) | 270,552 | (56,452 | ) | (1,142,935 | ) | |||||||||
Provision for income taxes
|
- | - | - | - | ||||||||||||
Net income (loss)
|
$ | (328,199 | ) | $ | 270,552 | $ | (56,452 | ) | $ | (1,142,935 | ) | |||||
Earnings (loss) per share – Basic
|
$ | (0.03 | ) | $ | 0.03 | $ | (0.00 | ) | $ | (0.16 | ) | |||||
Weighted average number of
|
||||||||||||||||
common shares
|
12,730,916 | 7,865,822 | 11,618,860 | 6,935,857 | ||||||||||||
Earnings (loss) per share – Diluted
|
$ | (0.03 | ) | $ | 0.03 | $ | (0.00 | ) | $ | (0.16 | ) | |||||
Weighted average number of common
|
||||||||||||||||
and potential common shares
|
12,730,916 | 7,865,822 | 11,618,860 | 6,935,857 |
Nine Months
|
Nine Months
|
|||||||
Ended
|
Ended
|
|||||||
June 30, 2012
|
June 30, 2011
|
|||||||
(Unaudited)
|
(Unaudited)
|
|||||||
Cash flows from operating activities
|
||||||||
Net loss
|
$ | (56,452 | ) | $ | (1,142,935 | ) | ||
Adjustments to reconcile net loss
|
||||||||
to net cash from operating activities:
|
||||||||
Loss on debt extinguishment
|
306,415 | - | ||||||
Depreciation, depletion and amortization
|
526,486 | 213,959 | ||||||
Amortization of debt issuance costs
|
158,448 | 152,881 | ||||||
Asset retirement obligation accretion
|
5,259 | 2,168 | ||||||
Amortization of debt discount
|
660,338 | 179,696 | ||||||
Accretion of participation liability
|
75,560 | 86,409 | ||||||
Stock-based compensation expense
|
59,700 | 243,731 | ||||||
Change in fair value of warrant and conversion
|
||||||||
feature liabilities
|
(910,270 | ) | 819,416 | |||||
Change in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(260,085 | ) | (351,773 | ) | ||||
Other assets
|
(20,486 | ) | (5,038 | ) | ||||
Accounts payable
|
(39,015 | ) | 103,477 | |||||
Other liabilities
|
(343,454 | ) | (51,120 | ) | ||||
Net cash from operating activities
|
162,444 | 250,871 | ||||||
Cash flows from investing activities
|
||||||||
Purchase of furniture and equipment
|
(3,893 | ) | (1,199 | ) | ||||
Purchase of oil and gas properties
|
- | (309,247 | ) | |||||
Capital expenditures on oil and gas properties
|
(4,104,298 | ) | (2,924,136 | ) | ||||
Net cash from investing activities
|
(4,108,191 | ) | (3,234,582 | ) | ||||
Cash flows from financing activities
|
||||||||
Debt issuance costs
|
(478,214 | ) | (397,774 | ) | ||||
Equity offering costs
|
(199,849 | ) | (280,219 | ) | ||||
Proceeds from issuance of common stock and warrants
|
4,224,000 | 1,340,155 | ||||||
Proceeds from exercise of warrants
|
- | 45,289 | ||||||
Repayment of note payable
|
- | (642,753 | ) | |||||
Proceeds from issuance of notes payable
|
2,685,000 | 3,400,000 | ||||||
Net cash from financing activities
|
6,230,937 | 3,464,698 | ||||||
Net change in cash and cash equivalents
|
2,285,190 | 480,987 | ||||||
Cash and cash equivalents
|
||||||||
Beginning of period
|
453,243 | 156,936 | ||||||
End of period
|
$ | 2,738,433 | $ | 637,923 |
Total | 2012 | 2013 | 2014 | Thereafter | ||||||||||||||||
Convertible notes | $ | 6,085,000 | $ | 1,362,500 | - | - | $ | 4,722,500 | ||||||||||||
Office leases | $ | 24,630 | $ | 24,630 | - | - | - | |||||||||||||
Drilling commitment - Exxon/Mobil farmout | $ | 1,000,000 | $ | - | $ | 1,000,000 | - | - |
June 30,
|
September 30,
|
|||||||||||
Level | 2012 | 2011 | ||||||||||
Participation liability
|
3 | $ | 928,439 | $ | 1,172,315 | |||||||
Conversion feature liabilities
|
3 | 340,125 | 720,593 | |||||||||
Warrant liabilities
|
3 | 177,752 | 400,319 | |||||||||
Total liabilities
|
$ | 1,446,316 | $ | 2,293,227 |
Participation Liability
|
Conversion Feature Liabilities
|
Warrant Liabilities
|
Total
|
|||||||||||||
Balance at September 30, 2011
|
$ | 1,172,315 | $ | 720,593 | $ | 400,319 | $ | 2,293,227 | ||||||||
Purchases, issuances and settlements
|
(319,436 | ) | 307,235 | - | (12,201 | ) | ||||||||||
(Gains) losses included in earnings
|
75,560 | (687,703 | ) | (222,567 | ) | (834,710 | ) | |||||||||
Balance at June 30, 2012
|
$ | 928,439 | $ | 340,125 | $ | 177,752 | $ | 1,446,316 |
Nine Months
|
Nine Months
|
|||||||
Ended
|
Ended
|
|||||||
June 30, 2012
|
June 30, 2011
|
|||||||
Interest paid
|
$ | 204,000 | $ | 175,881 | ||||
Interest capitalized (non-cash)
|
306,718 | 192,908 | ||||||
Noncash investing and financing activities:
|
||||||||
Capital expenditures included in accounts payable
|
142,063 | 84,365 | ||||||
Issuance of notes payable for oil and gas
|
- | 357,085 | ||||||
Issuance of 2012 convertible notes
|
2,037,500 | |||||||
Warrant liability settled on exercise
|
- | 136,015 | ||||||
Recognition of liabilities for issuance of:
|
||||||||
Series A warrants
|
- | 1,188 | ||||||
Series B warrants
|
- | 143,948 | ||||||
Series C warrants
|
- | 274,516 | ||||||
Series D warrants
|
- | 49,385 | ||||||
Issuance of Series E Warrants to placement agent
|
48,668 | - | ||||||
Recognition of conversion feature liabilities
|
326,945 | 26,771 | ||||||
Recognition of participation liability
|
- | 737,886 | ||||||
Asset retirement obligations incurred
|
69,691 | 4,588 | ||||||
Issuance of restricted shares
|
60,699 | - |
SEC filing fee
|
$
|
455
|
||
Legal fees and expenses
|
20,000
|
|||
Accounting fees and expenses
|
5,000
|
|||
Miscellaneous expenses
|
4,545
|
|||
TOTAL
|
$
|
30,000
|
Note
Reference
|
||||
In July 2010 we sold 4,900,000 shares of our common stock to our officers and directors and other third parties at a price of $0.001 per share. During the three months ended September 30, 2010, 1,012,500 shares of our common stock were sold to a group of private investors at a price of $0.40 per share.
|
A | |||
Between October 2010 and December 2010, we sold 34 units to a group of private investors. The units were sold at a price of $100,000 per Unit. Each unit consisted of one promissory note in the principal amount of $100,000 and 50,000 Series A warrants. At any time after October 18, 2010, the Notes can be converted into shares of our common stock, initially at a conversion price of $1.00 per share. Each Series A warrant entitles the holder to purchase one share of our common stock at a price of $4.00 per share at any time on or before October 31, 2014. In connection with this private offering, we issued the placement agents warrants to purchase up to 963,322 shares of our common stock.
|
B | |||
In February and March 2011, we sold 1,500,000 units at a price of $1.00 per unit. Each unit consisted of one share of our common stock and one Series C warrant. Each Series C warrant allows the holder to purchase one share of our common stock at a price of $2.00 per share at any time on or before February 28, 2016. In connection with this private offering, we issued the placement agent warrants to purchase up to 150,000 shares of our common stock. The Placement Agent warrants are exercisable at a price of $1.20 per share at any time prior to February 28, 2016.
|
||||
In March 2011, we issued 453,322 shares of our common stock to a placement agent upon the exercise of warrants which had an exercise price of $0.10 per share.
|
A | |||
In December 2011, we issued 15,000 shares of our common stock to a consultant for investor relations services. | A | |||
In June and July 2012 we sold convertible promissory notes, in the total principal amount of $5,910,000, to a group of private investors. The notes bear interest at 15% per year, are payable quarterly, mature on June 30, 2015, and are convertible into shares of common stock at a conversion price of $1.25 per share, subject to adjustment.
|
B | |||
The placement agents for this offering received a cash commission of $427,900 as well as 461,000 Series E warrants. Each Series E warrant entitles the holder to purchase one share of our common stock. The Series E warrants may be exercised at any time on or before June 30, 2017 at a price of $1.55 per share. | B |
A.
|
We relied upon the exemption provided by Section 4(2) of the Securities Act of 1933 with respect to the issuance of these shares. The persons who acquired these shares were sophisticated investors and were provided full information regarding our business and operations. There was no general solicitation in connection with the offer or sale of these securities. The persons who acquired these shares acquired them for their own accounts. The certificates representing these shares bear a restricted legend providing that they cannot be sold except pursuant to an effective registration statement or an exemption from registration. No commission or other form of remuneration was given to any person in connection with the issuance of these shares.
|
B.
|
We relied upon the exemption provided by Rule 506 of the Securities and Exchange Commission with respect to the issuance of these securities. The persons who acquired these securities were sophisticated investors and were provided full information regarding the Company. There was no general solicitation in connection with the offer or sale of these securities. The persons who acquired these securities acquired them for their own accounts. The certificates representing these securities bear a restricted legend providing that they cannot be sold except pursuant to an effective registration statement or an exemption from registration.
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Exhibits
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||
1.1
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Form of Underwriting Agreement
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3.1*
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Articles of Incorporation
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3.2*
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Bylaws
|
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4.1*
|
Form of Common Stock Certificate
|
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4.2*
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Form of Unit Certificate
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4.3*
|
Form of Class A Warrant Certificate
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4.5*
|
Form of Warrant Agreement
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4.6*
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Form of Representative's Warrant
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4.7*
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Non-Qualified Stock Option Plan
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4.8 |
Form of Series A Warrant
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4.9 |
Form of Series B Warrant
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4.10 |
Form of Series C Warrant
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4.11 |
Form of Series D Warrant
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4.12 |
Form of Series E Warrant
|
|
Opinion of Counsel
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||
10.1*
|
Purchase Agreement between C.F.O., Inc. and Vanguard Energy Corporation
|
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10.2*
|
Purchase Agreement between Sidekick Xploration, LLC and Enecor, Inc.
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10.3*
|
Assignment between C.F.O., Inc. and Vanguard Energy Corporation
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10.4*
|
Employment Agreement with Warren Dillard
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10.5*
|
Employment Agreement with R. Gerald Bailey
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10.6*
|
Employment Agreement with Steven Powers
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|
10.7*
|
Farmout Agreement with Claire Oil & Gas, Inc.
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|
10.8*
|
Operating Agreement with C.F.O, Inc.
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|
10.9*
|
Farmout Agreement with Exxon/Mobil
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|
10.10*
|
Form of Convertible Note
|
|
10.11*
|
Amendment to Farmout Agreement with Claire Oil & Gas, Inc.
|
|
10.12*
|
Form of Lock-Up Agreement required by State Securities Administrators
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14*
|
Code of Ethics
|
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21*
|
Subsidiaries
|
|
Consent of Hart & Trinen
|
||
Consent of Briggs & Veselka Co.
|
||
23.3*
|
Consent of Nova Resource, Inc.
|
|
99*
|
Oil and Gas Reserve Report
|
VANGUARD ENERGY CORPORATION
|
|||
|
By:
|
/s/ Warren M. Dillard | |
Warren M. Dillard | |||
President and Chief Executive Officer | |||
Signature
|
Title
|
Date
|
||
/s/ Warren M. Dillard | ||||
Warren M. Dillard
|
Chief Executive, Financial and Accounting Officer and Director
|
October 1, 2012
|
||
/s/ Gerald Bailey | ||||
Gerald Bailey
|
Director
|
October 1, 2012
|
||
/s/ Steven M. Powers | ||||
Steven M. Powers
|
Director
|
October 1 2012
|
||
/s/ Rick A. Wilber | ||||
Rick A. Wilber
|
Director
|
October 1, 2012
|
||
/s/ John P. Barton | ||||
John P. Barton
|
Director
|
October 1, 2012
|
Dated: | Vanguard Energy Corporation | ||||
By: |
By:
|
||||
Secretary | Chief Executive Officer |
FOR VALUE RECEIVED, hereby sells, assigns and transfers to .
|
|||
(Please print name and address including zip code)
|
|||
Please insert social security, federal tax ID number or other identifying number:
|
|||
Warrants represented by this Warrant Certificate and does hereby irrevocably constitute and appoint , Attorney, to transfer said Warrants on the books of the Company with full power of substitution. | |||
Dated: |
|
||
Signature
|
|||
(Signature must conform in all respects to name of holder as specified on the face of this Warrant Certificate.)
|
Note:
|
Any transfer or assignment of this Warrant Certificate is subject to compliance with the restrictions on transfer imposed under the Warrant Terms.
|
TO THE COMPANY:
The undersigned hereby irrevocably elects to exercise Warrants represented by this Warrant Certificate and to purchase thereunder the full number of Shares issuable upon exercise of said Warrants and enclose $ as the purchase price therefor, and requests that certificates for such shares shall be issued in the name of, and cash for any fractional shares shall be paid to,
|
||||
Please insert Social Security Number or other identifying number:
|
||||
(Please print name and address, including zip code)
|
||||
and, if said number of Warrants shall not be all the Warrants evidenced by this Warrant Certificate, that a new Warrant Certificate for the unexercised number of Warrants may be assigned under the form of Assignment appearing hereon. | ||||
Dated: | Signature |
|
||
(Signature must conform in all respects to name of holder as specified on the face of this Warrant Certificate.) |
Dated: | Vanguard Energy Corporation | ||||
By: |
By:
|
||||
Secretary | Chief Executive Officer |
FOR VALUE RECEIVED, hereby sells, assigns and transfers to .
|
|||
(Please print name and address including zip code)
|
|||
Please insert social security, federal tax ID number or other identifying number:
|
|||
Warrants represented by this Warrant Certificate and does hereby irrevocably constitute and appoint , Attorney, to transfer said Warrants on the books of the Company with full power of substitution. | |||
Dated: |
|
||
Signature
|
|||
(Signature must conform in all respects to name of holder as specified on the face of this Warrant Certificate.)
|
Note:
|
Any transfer or assignment of this Warrant Certificate is subject to compliance with the restrictions on transfer imposed under the Warrant Terms.
|
TO THE COMPANY:
The undersigned hereby irrevocably elects to exercise Warrants represented by this Warrant Certificate and to purchase thereunder the full number of Shares issuable upon exercise of said Warrants and enclose $ as the purchase price therefor, and requests that certificates for such shares shall be issued in the name of, and cash for any fractional shares shall be paid to,
|
||||
Please insert Social Security Number or other identifying number:
|
||||
(Please print name and address, including zip code)
|
||||
and, if said number of Warrants shall not be all the Warrants evidenced by this Warrant Certificate, that a new Warrant Certificate for the unexercised number of Warrants may be assigned under the form of Assignment appearing hereon. | ||||
Dated: | Signature |
|
||
(Signature must conform in all respects to name of holder as specified on the face of this Warrant Certificate.) |
Dated: | Vanguard Energy Corporation | ||||
By: |
By:
|
||||
Secretary | Chief Executive Officer |
FOR VALUE RECEIVED, hereby sells, assigns and transfers to .
|
|||
(Please print name and address including zip code)
|
|||
Please insert social security, federal tax ID number or other identifying number:
|
|||
Warrants represented by this Warrant Certificate and does hereby irrevocably constitute and appoint , Attorney, to transfer said Warrants on the books of the Company with full power of substitution. | |||
Dated: |
|
||
Signature
|
|||
(Signature must conform in all respects to name of holder as specified on the face of this Warrant Certificate.)
|
Note:
|
Any transfer or assignment of this Warrant Certificate is subject to compliance with the restrictions on transfer imposed under the Warrant Terms.
|
TO THE COMPANY:
The undersigned hereby irrevocably elects to exercise Warrants represented by this Warrant Certificate and to purchase thereunder the full number of Shares issuable upon exercise of said Warrants and enclose $ as the purchase price therefor, and requests that certificates for such shares shall be issued in the name of, and cash for any fractional shares shall be paid to,
|
||||
Please insert Social Security Number or other identifying number:
|
||||
(Please print name and address, including zip code)
|
||||
and, if said number of Warrants shall not be all the Warrants evidenced by this Warrant Certificate, that a new Warrant Certificate for the unexercised number of Warrants may be assigned under the form of Assignment appearing hereon. | ||||
Dated: | Signature |
|
||
(Signature must conform in all respects to name of holder as specified on the face of this Warrant Certificate.) |
Dated: | Vanguard Energy Corporation | ||||
By: |
By:
|
||||
Secretary | Chief Executive Officer |
FOR VALUE RECEIVED, hereby sells, assigns and transfers to .
|
|||
(Please print name and address including zip code)
|
|||
Please insert social security, federal tax ID number or other identifying number:
|
|||
Warrants represented by this Warrant Certificate and does hereby irrevocably constitute and appoint , Attorney, to transfer said Warrants on the books of the Company with full power of substitution. | |||
Dated: |
|
||
Signature
|
|||
(Signature must conform in all respects to name of holder as specified on the face of this Warrant Certificate.)
|
Note:
|
Any transfer or assignment of this Warrant Certificate is subject to compliance with the restrictions on transfer imposed under the Warrant Terms.
|
TO THE COMPANY:
The undersigned hereby irrevocably elects to exercise Warrants represented by this Warrant Certificate and to purchase thereunder the full number of Shares issuable upon exercise of said Warrants and enclose $ as the purchase price therefor, and requests that certificates for such shares shall be issued in the name of, and cash for any fractional shares shall be paid to,
|
||||
Please insert Social Security Number or other identifying number:
|
||||
(Please print name and address, including zip code)
|
||||
and, if said number of Warrants shall not be all the Warrants evidenced by this Warrant Certificate, that a new Warrant Certificate for the unexercised number of Warrants may be assigned under the form of Assignment appearing hereon. | ||||
Dated: | Signature |
|
||
(Signature must conform in all respects to name of holder as specified on the face of this Warrant Certificate.) |
Dated: __________________________________ | Vanguard Energy Corporation |
By: _________________________________ | |
Warren Dillard, Chief Executive Officer |
FOR VALUE RECEIVED, hereby sells, assigns and transfers to .
|
|||
(Please print name and address including zip code)
|
|||
Please insert social security, federal tax ID number or other identifying number:
|
|||
Warrants represented by this Warrant Certificate and does hereby irrevocably constitute and appoint , Attorney, to transfer said Warrants on the books of the Company with full power of substitution. | |||
Dated: |
|
||
Signature
|
|||
(Signature must conform in all respects to name of holder as specified on the face of this Warrant Certificate.)
|
Note:
|
Any transfer or assignment of this Warrant Certificate is subject to compliance with the restrictions on transfer imposed under the Warrant Terms.
|
TO THE COMPANY:
The undersigned hereby irrevocably elects to exercise Warrants represented by this Warrant Certificate and to purchase thereunder the full number of Shares issuable upon exercise of said Warrants and enclose $ as the purchase price therefor, and requests that certificates for such shares shall be issued in the name of, and cash for any fractional shares shall be paid to,
|
||||
Please insert Social Security Number or other identifying number:
|
||||
(Please print name and address, including zip code)
|
||||
and, if said number of Warrants shall not be all the Warrants evidenced by this Warrant Certificate, that a new Warrant Certificate for the unexercised number of Warrants may be assigned under the form of Assignment appearing hereon. | ||||
Dated: | Signature |
|
||
(Signature must conform in all respects to name of holder as specified on the face of this Warrant Certificate.) |
Signature ________________________________________ | Dated _______________________________ |
Warrant No. [__] | Original Issue Date:______, 2012 |
VANGUARD ENEGRY CORPORATION | |
By: ________________________________ | |
Name: ______________________________ | |
Its: ________________________________ |
Date
|
Number of Warrant
Shares Available
to be Exercised
|
Number of Warrant
Shares Exercised
|
Number of Warrant
Shares Remaining
to be Exercised
|
|||
William T. Hart, P.C. | Email: harttrinen@aol.com | |
Donald T. Trinen | (303) 839-0061 | Facsimile: (303) 839-5414 |
●
|
1,500,000 Class A warrants to the holders of the Company’s Series C warrants;
|
●
|
up to 1,500,000 shares of common stock to the holders of the Class A warrants if and when the warrants are exercised; and the sale by certain shareholders of the Company of:
|
●
|
up to 2,360,000 shares of common stock which are issuable upon the exercise of the Company’s Series A, B and D warrants;
|
Very truly yours,
|
|||
|
HART & TRINEN | ||
/s/ William T. Hart
|
|||
William T. Hart
|
|||
Very truly yours,
|
|||
|
HART & TRINEN, L.L.P.
|
||
/s/ William T. Hart
|
|||
William T. Hart
|
|||
Denver, Colorado | |||
October 4, 2012 |
6. Contractual Obligations Schedule (Details) (USD $)
|
9 Months Ended | 12 Months Ended | |
---|---|---|---|
Jun. 30, 2012
|
Dec. 31, 2014
|
Dec. 31, 2013
|
|
Notes to Financial Statements | |||
Convertible notes | $ 1,362,500 | $ 0 | $ 0 |
Office leases | 24,630 | 0 | 0 |
Drilling commitment - Exxon/Mobil farmout | 1,000,000 | 0 | 0 |
Convertible notes Thereafter | 4,722,500 | ||
Office leases Thereafter | 0 | ||
Drilling commitment - Exxon/Mobil farmout Thereafter | 0 | ||
Convertible notes Total | 6,085,000 | ||
Office leases Total | 24,630 | ||
Drilling commitment - Exxon/Mobil farmout Total | $ 1,000,000 |
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
9 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2012
|
Sep. 30, 2011
|
|
Notes to Financial Statements | ||
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
As of June 30, 2012, Vanguards significant accounting policies are consistent with those discussed in the audited financial statements as of September 30, 2011.
Earnings (Loss) Per Share Basic earnings (loss) per share have been calculated based upon the weighted-average number of common shares outstanding. Diluted earnings (loss) per share have been calculated based upon the weighted-average number of common and potential common shares. The calculation of diluted weighted-average shares outstanding for the three and nine-month periods ended June 30, 2012 excludes 12,216,000 shares and for the three and nine-month periods ended June 30, 2011 excludes 4,710,000 shares issuable pursuant to outstanding warrants, stock options and debt conversion features because their effect is anti-dilutive.
Recently Issued Accounting Pronouncements In April 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2010-13. ASU 2010-13 provides amendments to Topic 718, Stock Compensation, to clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity's equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The amendments in ASU No. 2010-13 are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The Companys adoption of the new guidance did not have a material effect on the Companys consolidated financial statements.
In December 2010, the FASB issued ASU 2010-29, which addresses diversity in practice concerning the interpretation of the pro forma revenue and earnings disclosure requirements for business combinations. This ASU specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. This ASU also expands the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. ASU 2010-29 is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The adoption of this guidance did not have a material impact on the Company's financial statements.
In May 2011, the FASB issued ASU 2011-04, which clarifies some existing fair value measurement concepts, eliminates wording differences between U.S. GAAP and International Financial Reporting Standards (IFRS), and in some limited cases, changes some fair value measurement principles to achieve convergence between U.S. GAAP and IFRS. ASU 2011-04 is effective for the Company beginning after December 15, 2011. The adoption of this guidance did not have a material impact on the Company's financial statements. |
Principles of Consolidation and Basis of Presentation The consolidated financial statements include the accounts of Vanguard Energy Corporation and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
The Company's fiscal year-end is September 30th. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows.
Management EstimatesThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as certain financial statement disclosures. While management believes that the estimates and assumptions used in the preparation of the financial statements are appropriate, actual results could differ from these estimates. Significant estimates made in preparing these financial statements include the fair value of acquired assets and liabilities (Note 3), asset retirement obligations (Note 4), participation, conversion feature and warrant liabilities (Note 5), income taxes (Note 6) and the estimate of proved oil and gas reserves and related present value estimates of future net cash flows therefrom (Note 12).
Cash and Cash EquivalentsThe Company considers all highly liquid investments purchased with a maturity date of three months or less to be cash equivalents.
Oil and Gas PropertiesThe Company follows the full cost accounting method to account for oil and natural gas properties, whereby costs incurred in the acquisition, exploration and development of oil and gas reserves are capitalized. Such costs include lease acquisition, geological and geophysical activities, rentals on nonproducing leases, drilling, completing and equipping of oil and gas wells and administrative costs directly attributable to those activities and asset retirement costs. Disposition of oil and gas properties are accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship between capital costs and proved reserves of oil and gas, in which case the gain or loss is recognized to income.
The capitalized costs of oil and gas properties, excluding unevaluated and unproved properties, are amortized as depreciation, depletion and amortization expense using the units-of-production method based on estimated proved recoverable oil and gas reserves.
The costs associated with unevaluated and unproved properties, initially excluded from the amortization base, relate to unproved leasehold acreage, wells and production facilities in progress and wells pending determination of the existence of proved reserves, together with capitalized interest costs for these projects. Unproved leasehold costs are transferred to the amortization base with the costs of drilling the related well once a determination of the existence of proved reserves has been made or upon impairment of a lease. Costs associated with wells in progress and completed wells that have yet to be evaluated are transferred to the amortization base once a determination is made whether or not proved reserves can be assigned to the property. Costs of dry wells are transferred to the amortization base immediately upon determination that the well is unsuccessful.
All items classified as unproved property are assessed on a quarterly basis for possible impairment or reduction in value. Properties are assessed on an individual basis or as a group if properties are individually insignificant. The assessment includes consideration of various factors, including, but not limited to, the following: intent to drill; remaining lease term; geological and geophysical evaluations; drilling results and activity; assignment of proved reserves; and economic viability of development if proved reserves are assigned. During any period in which these factors indicate an impairment, the cumulative drilling costs incurred to date for such property and all or a portion of the associated leasehold costs are transferred to the full cost pool and become subject to amortization.
Under full cost accounting rules for each cost center, capitalized costs of evaluated oil and gas properties, including asset retirement costs, less accumulated amortization and related deferred income taxes, may not exceed an amount (the "cost ceiling") equal to the sum of (a) the present value of future net cash flows from estimated production of proved oil and gas reserves, based on current economic and operating conditions, discounted at ten percent (10%), plus (b) the cost of properties not being amortized, plus (c) the lower of cost or estimated fair value of any unproved properties included in the costs being amortized, less (d) any income tax effects related to differences between the book and tax basis of the properties involved. If capitalized costs exceed this limit, the excess is charged to earnings.
Given the volatility of oil and gas prices, it is reasonably possible that the estimate of discounted future net cash flows from proved oil and gas reserves could change in the near term. If oil and gas prices decline in the future, even if only for a short period of time, it is possible that impairments of oil and gas properties could occur. In addition, it is reasonably possible that impairments could occur if costs are incurred in excess of any increases in the present value of future net cash flows from proved oil and gas reserves, or if properties are sold for proceeds less than the discounted present value of the related proved oil and gas reserves.
Revenue RecognitionOil and gas sales result from undivided interests held by the Company in oil and gas properties. Sales of oil and gas produced from oil and gas operations are recognized when the product is delivered to the purchaser and title transfers to the purchaser. The Company had no natural gas sales imbalance positions at September 30, 2011 or 2010. Charges for gathering and transportation are included in production expenses.
Asset Retirement ObligationsThe Company records a liability for asset retirement obligations ("ARO") associated with its oil and gas wells when those assets are placed in service. The corresponding cost is capitalized as an asset and included in the carrying amount of oil and gas properties and is depleted over the useful life of the properties. Subsequently, the ARO liability is accreted to its then-present value.
Inherent in the fair value calculation of an ARO are numerous assumptions and judgments including the ultimate settlement amounts, inflation factors, credit adjusted discount rates, timing of settlement, and changes in the legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the oil and gas property balance. Settlements greater than or less than amounts accrued as ARO are recorded as a gain or loss upon settlement.
Capitalized InterestInterest is capitalized as part of the historical cost of developing and constructing assets for significant projects. Significant oil and gas investments in unproved properties, significant exploration and development projects for which depreciation, depletion and amortization expense is not currently recognized, and exploration or development activities that are in progress qualify for interest capitalization. Interest is capitalized until the asset is ready for service. Capitalized interest is determined by multiplying the Company's weighted-average borrowing cost on debt by the average amount of qualifying costs incurred. Once an asset subject to interest capitalization is completed and placed in service, the associated capitalized interest is expensed through depreciation or impairment, along with other capitalized costs related to that asset.
Debt Issuance CostsCosts incurred in connection with the issuance of long-term debt are capitalized and amortized over the term of the related debt.
Participation LiabilityThe participation liability associated with outstanding long-term debt is recorded at fair value as determined utilizing a present value factor of 10 applied to proved developed reserves. Payments made for the participation liability are reported as interest expense. Changes in the fair value of the participation liability are recorded as additions or deductions to the discount on the long-term debt.
Conversion Feature Liability and Warrant LiabilitiesThe conversion feature liability and warrant liabilities are recorded at fair value based upon valuation models utilizing relevant factors such as expected life, estimated volatility, risk-free interest and expected dividend rate. Changes in the fair value of these liabilities are reported in the statements of operations.
Share-Based CompensationThe Company accounts for employee share-based compensation using the fair value method. The fair value attributable to share options is calculated based on the Black-Scholes option pricing model and is amortized to expense over the service period which is equivalent to the time required to vest the share options.
Income TaxesIncome taxes are provided based on the liability method for financial reporting purposes. Under this method deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized.
Uncertain tax positions are recognized in the financial statements only if that position is more likely than not of being sustained upon examination by taxing authorities, based on the technical merits of the position. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.
The Company is required to file federal income tax returns in the United States and in various state and local jurisdictions. The Company's tax returns filed since inception are subject to examination by taxing authorities in the jurisdictions in which it operates in accordance with the normal statutes of limitations in the applicable jurisdiction. Earnings (Loss) Per ShareBasic earnings (loss) per share have been calculated based upon the weighted-average number of common shares outstanding. The weighted-average number of common shares outstanding used in the computations of earnings (loss) per share was 7,170,906 for 2011 and 5,570,205 for the period from inception through September 30, 2010. The calculation of diluted weighted-average shares outstanding for 2011 excludes 8,110,000 shares issuable pursuant to outstanding warrants, stock options and debt conversion features because their effect is anti-dilutive. For the period from inception through September 30, 2010, the Company had no dilutive instruments outstanding.
Concentration of Credit RiskThe Company is subject to credit risk resulting from the concentration of its oil and natural gas receivables with significant purchasers. One purchaser accounted for all of the Company's oil and gas sales revenues for 2011. The Company does not require collateral. While the Company believes its recorded receivable will be collected, in the event of default the Company would follow normal collection procedures. The Company does not believe the loss of this purchaser would materially impact its operating results as oil and gas are fungible products with well-established markets and numerous purchasers.
At times, the Company maintains deposits in federally insured financial institutions in excess of federally insured limits. Management monitors the credit ratings and concentration of risk with these financial institutions on a continuing basis to safeguard cash deposits.
Fair Value MeasurementsThe carrying value of cash and cash equivalents, accounts receivable, accounts payable and short-term borrowings, as reflected in the balance sheets, approximate fair value because of the short-term maturity of these instruments. The estimated fair value of long-term debt was determined by discounting future cash flows using rates currently available to the Company for debt with similar terms and remaining maturities. The Company calculated that the estimated fair value of the long term debt is not significantly different than the carrying value of the debt. The participation liability associated with outstanding long-term debt was determined by utilizing a present value factor of 10 applied to proved developed reserves associated with the wells drilled with the proceeds of the notes.
Fair value is defined as the price that would be received to sell an asset or price paid to transfer a liability in an orderly transaction between market participants at the measurement date. Inputs used in determining fair value are classified for disclosure purposes according to a hierarchy that prioritizes those inputs based upon the degree to which they are observable. The three levels of the fair-value-measurement hierarchy are as follows:
· Level 1Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. · Level 2Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the asset or the liability; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. · Level 3Unobservable inputs reflecting the Company's own assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. In determining fair value, the Company utilizes observable market data when available, or models that incorporate observable market data. In addition to market information, the Company incorporates transaction-specific details that, in management's judgment, market participants would take into account in measuring fair value. The Company utilizes the most observable inputs available for the valuation technique employed. If a fair value measurement reflects inputs at multiple levels within the hierarchy, the fair-value measurement of both financial and nonfinancial assets and liabilities are characterized based upon the lowest level of input that is significant to the fair value measurement.
Recently Issued Accounting PronouncementsIn December 2010, the FASB issued Accounting Standards Update ("ASU") 2010-28 which amends IntangiblesGoodwill and Other. The ASU modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting entities, they are required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. An entity should consider whether there are any adverse qualitative factors indicating that impairment may exist. The qualitative factors are consistent with the existing guidance, which requires that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances changes that would more likely than not reduce the fair value of a reporting unit below its carrying amount. ASU 2010- 28 is effective for fiscal years, and interim periods within those years beginning after December 15, 2010. The adoption of this guidance is not expected to have a material impact on the Company's financial statements.
In December 2010, the FASB issued ASU 2010-29 which address diversity in practice about the interpretation of the pro forma revenue and earnings disclosure requirements for business combinations. This ASU specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. This ASU also expands the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. ASU 2010-29 is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on the Company's financial statements.
In May 2011, the FASB issued ASU 2011-04, which clarifies some existing concepts, eliminates wording differences between U.S. GAAP and International Financial Reporting Standards (IFRS), and in some limited cases, changes some principles to achieve convergence between U.S. GAAP and IFRS. ASU 2011-04 will be effective for the Company beginning after December 15, 2011. The adoption of this guidance is not expected to have a material impact on the Company's financial statements.
In June 2011, the FASB issued ASU 2011-05, which 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. ASU 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of equity. ASU 2011-05 is effective for the Company beginning after December 15, 2011. The adoption of this guidance is not expected to have a material impact on the Company's financial statements.
In September 2011, the FASB issued ASU 2011-08, which permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. ASU 2011-08 is effective for the Company beginning after December 15, 2011. The adoption of this guidance is not expected to have a material impact on the Company's financial statements. |