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| AEDC > SEC Filings for AEDC > Form 8-K/A on 1-Jun-2012 | All Recent SEC Filings |
1-Jun-2012
Completion of Acquisition or Disposition of Assets, Unregiste
On March 12, 2012, American Energy Development Corp. (the "Registrant") closed the Agreement (the "Purchase Agreement") with Pepper Canister Nominees Limited (the "Seller") pursuant to which the Registrant acquired all of the issued and outstanding shares of the Seller's wholly-owned subsidiary, Reservoir Resources Limited ("Reservoir Resources"), in exchange for the purchase price of 12,500,000 shares of the Registrant's common stock ("Purchase Price"). Reservoir Resources, through its wholly-owned subsidiary, Fairfax Shelfco 307 Limited ("Fairfax 307"), is the owner of a ninety-five percent (95%) share in the Petroleum Exploration and Development Licence for UK Onshore Block SU97, known as licence PEDL236 (the "Licence"), which grants to Fairfax 307 an exclusive licence during the term of the Licence to search, bore for and obtain petroleum in UK Onshore Block SU97, a 24,700 acre onshore exploration prospect located in the Weald Basin in Windsor, United Kingdom. Reservoir Resources also owns two-dimensional seismic data and information relating to certain areas of the Licence.
Pursuant to the terms of the Purchase Agreement and the Licence, the Registrant
is subject to development requirements which specify that the Registrant must
drill a minimum of one well to a depth of 400 meters to be spudded prior to
December 31, 2012 ("Target Date"). The Target Date may be extended to March 13,
2013 if a force majeure event occurs. If the Registrant fails to drill to such
depth in accordance with the Licence on or before the Target Date, the Seller
will have the option for a period of sixty (60) days after the Target Date to:
(i) cancel the Purchase Agreement and re-acquire all of the shares of Reservoir
Resources, and (ii) retain 6,250,000 shares issued to the Seller as part of the
Purchase Price and return the remaining 6,250,000 shares to the Registrant for
cancellation.
Also, pursuant to the terms of the Purchase Agreement, the Registrant and the Seller have agreed, after the closing of the Purchase Agreement, to create an overriding royalty interest agreement in which the Registrant will grant to the Seller an overriding royalty interest of 2.5% of the overall gross market value at the time of production of all oil and gas produced from the licensed areas from proceeds of the sale of oil and gas produced. This brief description of the Purchase Agreement is only a summary of the material terms and is qualified in its entirety by reference to the full text of the Purchase Agreement as attached as Exhibit 10.1 to the Current Report on Form 8-K previously filed with the Securities and Exchange Commission on September 20, 2011.
The shares of Registrant's common stock issued to the Seller were issued in a transaction which the Registrant believes satisfies the requirements of that exemption from the registration and prospectus delivery requirements of the Securities Act of 1933, as amended, which exemption is specified by the provisions of Regulation S promulgated pursuant to that act by the Securities and Exchange Commission.
See Item 2.01 for a description of the Purchase Agreement and the disclosure related to the issuance of 12,500,000 shares of Registrant's common stock to the Seller, which are hereby incorporated by reference.
On March 16, 2012, the Registrant issued a press release to announce the closing of the Purchase Agreement and the acquisition of Reservoir Resources. A copy of the release is attached as Exhibit 99.1 in the Registrant's Original Report.
This information shall not be deemed "filed" for purposes of Section 18 of the Securities and Exchange Act 1934, as amended, and is not incorporated by reference into any filing of the Registrant, whether made before or after the date of this report, regardless of any general incorporation language in the filing, except to the extent expressly set forth by specific reference in such a filing.
Item 9.01 Exhibits.
(a) Financial statements of businesses acquired.
The following financial statements are set forth below:
The audited financial statements of Reservoir Resources Limited for the years ended December 31, 2011 and 2010 and the accompanying notes to those financial statements.
To the Board of Directors and Stockholders
Reservoir Resources Limited
New York, NY
We have audited the accompanying balance sheets of Reservoir Resources Limited (an exploration stage company) as of December 31, 2011 and 2010, and the related statements of operations, stockholder's equity (deficit), and cash flows for the years then ended and for the period from inception (January 25, 2008) through December 31, 2011. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Reservoir Resources Limited (an exploration stage company) as of December 31, 2011 and 2010, and the results of its operations and cash flows for the years then ended and for the period from inception (January 25, 2008) through December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 3, the Company has incurred recurring operating losses and has an accumulated deficit. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments may result from the outcome of this uncertainty.
Q Accountancy Corporation
Irvine, California
May 29, 2012
RESERVOIR RESOURCES LIMITED
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2011 2010
ASSETS
CURRENT ASSETS
Cash $ 250 $ 2,330
Total current assets 250 2,330
Oil and gas license, unevaluated 42,400 39,730
TOTAL ASSETS $ 42,650 $ 42,060
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued
liabilities $ 19,461 $ 7,202
Total current liabilities 19,461 7,202
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock; 1,000,000 shares
authorized, $1.47 par value (€1.00 par
value);
50,000 shares issued and outstanding
as of December 31, 2011 and 2010,
respectively 73,685 73,685
Accumulated deficit (43,820 ) (33,050 )
Accumulated other comprehensive
income/(loss) (6,676 ) (5,777 )
Total stockholders' equity (deficit) 23,189 34,858
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 42,650 $ 42,060
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The accompanying notes are an integral part of these financial statements.
RESERVOIR RESOURCES LIMITED
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE
PERIOD FROM
INCEPTION
(JANUARY
FOR THE FOR THE 25, 2008)
YEAR ENDED YEAR ENDED THROUGH
DECEMBER DECEMBER DECEMBER
31, 2011 31, 2010 31, 2011
REVENUES $ - $ - $ -
OPERATING EXPENSES
General and administrative 10,240 2,081 43,907
TOTAL OPERATING EXPENSES 10,240 2,081 43,907
LOSS FROM OPERATIONS (10,240 ) (2,081 ) (43,907 )
OTHER INCOME (EXPENSE)
Foreign currency exchange
gain/(loss) (530 ) 617 87
TOTAL OTHER INCOME (EXPENSE) (530 ) 617 87
NET LOSS BEFORE INCOME TAXES (10,770 ) (1,464 ) (43,820 )
INCOME TAX (BENEFIT) EXPENSE - - -
NET LOSS $ (10,770 ) $ (1,464 ) $ (43,820 )
BASIC AND DILUTED NET LOSS PER
COMMON SHARE 50,000 50,000
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING $ (0.22 ) $ (0.03 )
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The accompanying notes are an integral part of these financial statements.
RESERVOIR RESOURCES LIMITED
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION (JANUARY 25, 2008) THROUGH DECEMBER 31, 2011
Other Total
Stock Comprehensive Accumulated Stockholders'
Shares Amount Income/(Loss) Deficit Deficit
Balance - January 25, 2008 - $ - $ $ - $ -
Stock issued for cash 50,000 73,685 - - 73,685
Foreign currency translation
gain/(loss) - - (5,107 ) - (5,107 )
Net Loss - - - (31,586 ) (31,586 )
Balance December 31, 2009 50,000 73,685 (5,107 ) (31,586 ) 36,992
Foreign currency translation
gain/(loss) - - (670 ) (670 )
Net Loss - - - (1,464 ) (1,464 )
Balance - December 31, 2010 50,000 73,685 (5,777 ) (33,050 ) 34,858
Foreign currency translation
gain/(loss) - - (899 ) - (899 )
Net Loss - - (10,770 ) (10,770 )
Balance - December 31, 2011 50,000 $ 73,685 $ (6,676 ) $ (43,820 ) $ 23,189
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The accompanying notes are an integral part of these financial statements.
RESERVOIR RESOURCES LIMITED
(AN EXPLORATION STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE
PERIOD FROM
INCEPTION
(JANUARY
FOR THE FOR THE 25, 2008)
YEAR ENDED YEAR ENDED THROUGH
DECEMBER DECEMBER DECEMBER
31, 2011 31, 2010 31, 2011
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (10,770 ) $ (1,464 ) $ (43,820 )
Change in assets and liabilities
Increase in accounts payable and
accrued expenses 12,259 5,159 19,461
Net cash provided by (used in)
operating activities 1,489 3,695 (24,359 )
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CASH FLOWS USED IN INVESTING
ACTIVITIES:
Oil and gas license costs,
unevaluated (2,670 ) (9,870 ) (42,400 )
Net cash (used in) investing
activities (2,670 ) (9,870 ) (42,400 )
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CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds received from issuance of
common stock - - 73,685
Net cash provided by financing
activities - - 73,685
EFFECT OF EXCHANGE RATES ON CASH (899 ) (670 ) (6,676 )
NET INCREASE (DECREASE) IN CASH (2,080 ) (6,845 ) 250
CASH - BEGINNING OF PERIOD 2,330 9,175 -
CASH - END OF PERIOD $ 250 $ 2,330 $ 250
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The accompanying notes are an integral part of these financial statements.
NOTE 1- NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Nature of Operations
On January 25, 2008, Reservoir Resources Limited (the "Company") was formed in Dublin, Ireland. Our principal business is the acquisition of leasehold interests in petroleum and natural gas rights, either directly or indirectly, and the exploitation and development of properties subject to these leases. In these notes, the terms "Reservoir", "Company", "we", "us" or "our" mean Reservoir Resources Limited.
On September 4, 2008, the Company formed a wholly owned subsidiary, Fairfax Shelfco 307 Ltd., a Company formed in the United Kingdom for the purpose of developing our UK Onshore Block SU97.
Exploration Stage
The Company has not produced any revenues from its principal business and is in the exploration stage company as defined by ASC 915, Development Stage Entities.
The Company is engaged in the acquisition, exploration, development and producing of oil and gas properties. As of December 31, 2011, the Company owns a 95% working interest in the UK Onshore Block SU97.
The Company's success will depend in large part on its ability to obtain and develop oil interests within the United States and other countries. There can be no assurance that oil and gas properties obtained by the Company will contain reserves or that properties with reserves will be profitable to extract. The Company will be subject to local and national laws and regulations which could impact our ability to execute our business plan.
As discussed in Note 3, the accompanying financial statements have been prepared assuming the Company will continue as a going concern.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with the Generally Accepted Accounting Principles in the United States of America ("GAAP") and are expressed in United States dollars ("USD").
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported periods. Actual results could materially differ from those estimates.
Principles of Consolidation
We consolidate all investments in which we have more than a 50% voting interest. The accompanying consolidated financial statements include the accounts of Reservoir Resources Limited and our wholly owned subsidiary Fairfax Shelfco 307 Ltd., a United Kingdom registered company. All significant intercompany accounts and transactions have been eliminated in consolidation.
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Foreign Currency Translation and Transaction
The functional currency for Reservoir Resources Limited and subsidiaries is the
Euro. Reservoir translates assets and liabilities to US dollars using
period-end exchange rates, fixed assets using historical exchange rates, and
translates revenues and expenses using average exchange rates during the period.
Exchange gains and losses arising from translation of foreign entity financial
statements are included as a component of other comprehensive loss.
Transactions denominated in currencies other than the functional currency of the legal entity are re-measured to the functional currency of the legal entity at the period-end exchange rates. Any associated transactional currency re-measurement gains and losses are recognized in current operations.
Comprehensive Loss
Comprehensive loss reflects changes in equity that results from transactions and economic events from non-owner sources. The Company had $899 and $670 in accumulated other comprehensive loss for the years ended December 31, 2011 and 2010, respectively, from its foreign currency translation. As a result, total comprehensive losses for the years ended December 31, 2011 and 2010 were $69,883 and $58,726, respectively.
Revenue Recognition
The Company recognizes oil and gas revenue, if any, from interests in producing wells using the "sales method." Under this method of accounting, revenues are recognized based on volumes sold, which may differ from the volume to which we are entitled based on our working interest. An imbalance is recognized as a liability only when the estimated remaining reserves will not be sufficient to enable the under-produced owner(s) to recoup its entitled share through future production. Under the sales method, no receivables are recorded where we have taken less than our share of production. We had no net imbalance position at December 31, 2011 and 2010.
Concentration of Credit Risk
The Company collects its receivables on its working interests in oil and gas properties from the well operators. As such, the Company generally has relatively few customers. These receivables are unsecured and the Company performs ongoing credit evaluations of the well operators' financial condition whenever necessary. Bad debt is recognized on an account-by-account review after all means of collection have been exhausted and recovery is not probable. There has been no bad debt expense for the years ended December 31, 2011 and 2010.
Oil and Gas Properties
The Company follows the full cost method of accounting for its investments in oil and gas properties. Under the full cost method, all costs associated with the exploration of properties are capitalized into appropriate cost centers within the full cost pool. Internal costs that are capitalized are limited to those costs that can be directly identified with acquisition, exploration, and development activities undertaken and do not include any costs related to production, general corporate overhead, or similar activities. Cost centers are established on a country-by-country basis.
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Oil and Gas Properties (Continued)
Capitalized costs within the cost centers are amortized on the unit-of-production basis using proved oil and gas reserves. The cost of investments in unproved properties and major development projects are excluded from capitalized costs to be amortized until it is determined whether or not proved reserves can be assigned to the properties. Until such a determination is made, the properties are assessed annually to ascertain whether impairment has occurred. The costs of drilling exploratory dry holes are included in the amortization base immediately upon determination that the well is dry.
For each cost center, capitalized costs are subject to an annual ceiling test, in which the costs shall not exceed the cost center ceiling. The cost center ceiling is equal to i) the present value of estimated future net revenues computed by applying current prices of oil and gas reserves (with consideration of price changes only to the extent provided by contractual arrangements) to estimated future production of proved oil and gas reserves as of the date of the latest balance sheet presented, less estimated future expenditures (based on current costs) to be incurred in developing and producing the proved reserves computed using a discount factor of ten percent and assuming continuation of existing economic conditions; plus ii) the cost of properties not being amortized; plus iii) the lower of cost or estimated fair value of unproven properties included in the costs being amortized; less iv) income tax effects related to differences between the book and tax basis of the properties. If unamortized costs capitalized within a cost center, less related deferred income taxes, exceed the cost center ceiling, the excess is charged to expense and separately disclosed during the period in which the excess occurs.
Asset Retirement Obligations
ASC 410, Asset Retirement and Environmental Obligations addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. Specifically, ASC 410 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. In addition, the asset retirement cost is capitalized as part of the asset's carrying value and subsequently allocated to expense over the asset's useful life.
Fair Value of Financial Instruments
Unless otherwise indicated, the fair value of all reported assets and liabilities which represent financial instruments approximate the carrying values of such instruments due to their short-term maturity.
Recoverability of Long-Lived Assets
The Company has adopted Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment ("ASC 360-10"). ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Events relating to recoverability may include significant unfavorable changes in business conditions or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of intangible assets would be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell.
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Share-Based Compensation
The Company accounts for share-based compensation in accordance with Accounting Standards Codification subtopic 718-10, Stock Compensation ("ASC 718-10"). This requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including employee stock options and employee stock purchases related to an Employee Stock Purchase Plan based on the estimated fair values.
As of December 31, 2011, there were no outstanding employee stock options.
Recent Accounting Pronouncements
In December 2008, the SEC issued Release No. 33-8995,Modernization of Oil and . . .
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