NOTES TO FINANCIAL STATEMENTS
March 31, 2014
Note
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1 Incorporation and Operating Activities
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Breezer Ventures Inc. was incorporated on May 18, 2005, under
the laws of the State of Nevada, U.S.A. Operations, as a development stage company started on that date.
We are operating as an independent emerging natural resources
company. The company’s focus is on the acquisition, exploration, development and production of oil, natural gas and minerals.
We believe that the world has entered a commodities super cycle caused by globalization and the industrialization of large emerging
countries and regions such as India, China and the Middle East. Our objective is to find, acquire and develop natural resources
at the lowest cost possible and recycle our cash flows into new projects yielding the highest returns with controlled risk.
Note
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2 Summary of Significant Accounting Policies
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Basis of Presentation
The Company follows accounting principles generally accepted
in the United States of America. In the opinion of management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected
herein.
Interim Financial Statements
The accompanying unaudited consolidated
financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and should
be read in conjunction with the Company’s audited financial statements and footnotes thereto for the year ended September
30, 2013, included in the Company’s Form 10-K. Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted
pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information
presented not misleading. The financial statements reflect all adjustments (consisting primarily of normal recurring adjustments)
that are, in the opinion of management necessary for a fair presentation of the Company’s financial position and results
of operations. The operating results for the six months ended March 31, 2014 are not necessarily indicative of the results to be
expected for any other interim period of a future year.
Revenue Recognition
Revenue is recognized when it is realized or realizable and
earned. Breezer considers revenue realized or realizable and earned when persuasive evidence of an arrangement exists, services
have been provided, and collectability is reasonably assured. Revenue that is billed in advance such as recurring weekly or monthly
services are initially deferred and recognized as revenue over the period the services are provided.
Use of Estimates
The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from these
estimates.
Reclassification
Certain amounts in the prior period financial statements
have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported net income
or losses.
Development Stage Company
The Company complies with the FASB Accounting Standards Codification
(ASC) Topic 915 Development Stage Entities and the Securities and Exchange Commission Exchange Act 7 for its characterization of
the Company as development stage.
Impairment of Long Lived Assets
Long-lived assets are reviewed for impairment in accordance
with ASC Topic 360, "Accounting for the Impairment or Disposal of Long-lived Assets". Under ASC Topic 360, long-lived
assets are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be
recoverable. An impairment charge is recognized or the amount, if any, which the carrying value of the asset exceeds the fair value.
Foreign Currency Translation
Our functional and reporting currency is the United States
dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with ASC Topic 830, "Foreign
Currency Translation" using the exchange rate prevailing at the balance sheet date. Gains and losses arising on settlement
of foreign currency denominated transactions or balances are included in the determination of income. We have not, to the date
of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
F-8
Fair Value of Financial Instruments
The respective carrying value of certain on-balance sheet
financial instruments approximate their fair values. These financial statements include cash, receivables, advances receivable,
cheques issued in excess of cash, accounts payable and property obligations payable. Unless otherwise noted, it is management's
opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.
Unless otherwise noted, fair values were assumed to approximate carrying values for these financial instruments since they are
short term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand.
Income Taxes
The company recognizes income taxes using an asset and liability
approach. Future income tax assets and liabilities are computed annually for differences between the financial statements
and bases using enacted tax laws and rates applicable to the periods in which the differences are expressed to affect taxable income.
Basic and Diluted Net Loss Per Common Share
Basic and diluted net loss per share calculations are calculated
on the basis of the weighted average number of common shares outstanding during the year. The per share amounts include the dilutive
effect of common stock equivalents in years with net income. Basic and diluted loss per share is the same due to the anti-dilutive
nature of potential common stock equivalents.
Stock Based Compensation
The Company accounts for stock-based employee compensation
arrangements using the fair value method in accordance with the provisions of ASC Topic 718 Compensation – Stock Compensation.
The company accounts for the stock options issued to non-employees in accordance with the provisions of ASC Topic 718, Compensation-Stock
Compensation.
On September 2, 2009, the Board of Directors of Breezer Ventures
Inc. declared the payment of a stock dividend consisting of three (3) additional shares of the Company’s common stock for
each one (1) share of the Company’s common stock held as of the record date. The record date will be September 14, 2009.
Such stock dividend will be paid on September 15, 2009. Holders of fractions of shares of the Company’s common stock will
receive a proportional number of shares rounded to the nearest whole share. In connection with this stock dividend, the ownership
of stockholders possessing 7,650,000 shares of the Company’s Common Stock will be thereby be increased to 30,600,000 shares
of common stock.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company
considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As
of March 31, 2014 and March 31, 2013, there were no cash equivalents.
Property, Plant and Equipment
Property, plant and equipment consist of furniture and equipment
recorded at cost, with amortization provided over the estimated useful life of the asset, 5 years, straight-line.
Investment in Oil Lease
All direct costs related to the acquisition of oil lease
rights are capitalized. Exploration costs are charged to operations in the period incurred until such time as it has been determined
that an oil lease has economically recoverable reserves, at which time subsequent exploration costs and the costs incurred to develop
an oil lease are capitalized.
The Company reviews the carrying values of its oil lease
rights whenever events or changes in circumstances indicate that their carrying values may exceed their estimated net recoverable
amounts. An impairment loss is recognized when the carrying value of those assets is not recoverable and exceeds its fair value.
As of March 31, 2014, management has determined that there is no impairment in value for the purchase of the oil lease right purchased
in April 2011.
At such time as commercial production may commence, depletion
of each oil lease will be provided on a unit-of-production basis using estimated proven and probable recoverable reserves as the
depletion base. In cases where there are no proven or probable reserves, depletion will be provided on the straight-line basis
over the expected economic life of the oil lease.
The Company had no operating properties at March 31, 2014,
but the Company’s oil leases will be subject to standards for oil lease reclamation that is established by various governmental
agencies. For these non-operating leases, the Company accrues costs associated with environmental remediation obligations when
it is probable that such costs will be incurred and they are reasonably estimable. Costs of future expenditures for environmental
remediation are not discounted to their present value. Such costs are based on management's current estimate of amounts that are
expected to be incurred when the remediation work is performed within current laws and regulations.
It is reasonably possible that due to uncertainties associated
with defining the nature and extent of environmental contamination, application of laws and regulations by regulatory authorities,
and changes in remediation technology, the ultimate cost of remediation and reclamation could change in the future. The Company
continually reviews its accrued liabilities for such remediation and reclamation costs as evidence becomes available indicating
that its remediation and reclamation liability has changed.
The Company recognizes the fair value of a liability for
an asset retirement obligation in the period in which it is incurred, if a reasonable estimate of fair value can be made. The associated
asset retirement costs are capitalized as part of the carrying amount of the associated long-lived assets and depreciated over
the lives of the assets on a units-of-production basis. Reclamation costs are accreted over the life of the related assets and
are adjusted for changes resulting from the passage of time and changes to either the timing or amount of the original present
value estimate on the underlying obligation.
Any and all costs associated with exploration, development,
and rehabilitation in connection with all wells are capitalized on the balance sheet and will amortized when the well comes into
commercial production.
The Company looks at several indicators to determine whether
the carrying value of the oil lease is less than its fair value. These indicators may include, but are not limited to the following:
has there been a significant decrease in the market price of the particular oil well; whether there has been any adverse changes
in the physical condition of the well; whether there has been any significant cost overruns that have developed; whether there
has been any significant change in the legal or business environment; and whether there are any current period or future expected
operating or cash flow losses that indicate potential continued losses.
Recent Accounting Pronouncements
Breezer does not expect the adoption of recently issued accounting
pronouncements to have a significant impact on its results of operations, financial position or cash flow.
F-9
The Company's financial statements have been prepared on
a going concern basis, which contemplates the realization of assets and settlement of liabilities and commitments in the normal
course of business for the foreseeable future. Since inception, the Company has accumulated losses aggregating to $269,329 and
has insufficient working capital to meet operating needs for the next twelve months as of March 31, 2014, all of which raise substantial
doubt about the company's ability to continue as a going concern.
The Company does not have the necessary funds to cover the
anticipated operating expenses over the next twelve months. It will be necessary for the Company to raise additional funds through
the issuance of equity securities, through loans or debt financings. There can be no assurance that the Company will be successful
in raising the required capital or that actual cash requirements will not exceed our estimates. We do not have any agreements in
place for equity financing and or loan and debt financing. In the event that the Company is unsuccessful in its financing efforts,
the Company may seek to obtain short term loans.
We are in the process of developing a
new business plan for the Company. The Company’s management has been actively pursuing acquisitions of oil leases in the
United States specifically in the Fort Worth Basin area. In pursuing this business plan we executed our first asset purchase as
described below.
Note 4 Investment in Oil Lease
On April 7, 2011, we executed an asset purchase agreement
(the "Agreement") with Catalyst Capital Group, Inc., a California corporation whereby pursuant to the terms and conditions
of that Agreement we purchased Catalyst Capital Group, Inc.'s undivided 13/16th interest in and to Firecreek Global, Inc.'s right,
title and interest in and to the following (based on Firecreek Global, Inc.'s 93.75% working interest (for depths above 100 feet
below the top of the Ellenburger Formation) and 70.341796% net revenue interest in the ElmaJackson oil and gas; (i) Well #6 (API#
42-059-04612) together with the proration units designated for such well by the Texas Railroad Commission and the rights and appurtenances
incident to such well (such well and the associated proration units and rights and appurtenances, arising from the working Interests,
hereinafter referred to as the "Initial Well"); (ii) Firecreek's rights in, to and under, and obligations arising from,
agreements relating to the Lease to the extent the same are applicable to the Initial Well; (iii) Firecreek's interest in fixtures
and personal property used solely in connection with the operation of the Initial Well; and (iv) Firecreek's interest in books,
files, data and records in Seller's possession to the extent the same relate to the Initial Well provided that possession of same
will remain with Firecreek; and the right and option based on certain terms and conditions to acquire a 13/16th interest in and
rehabilitate certain other wells.
As consideration, Catalyst
Capital Group, Inc. was provided with 5,000,000 restricted common shares of our company and a one-time payment of $50,000 plus
15/16th of any excess total rehabilitation cost associated with Well #6,payable to Catalyst capital Group, Inc, pursuant to
the terms listed in the Agreement.
The 5,000,000 shared
issues to Catalyst were issued at par value which equates to a value of $5,000
Catalyst Capital Group Inc.
loaned $50,000 to the Company during the period ended September 30, 2011, which is unsecured, with no specific terms of repayment.
At March 31, 2014 the investment
in the oil lease was recorded at $72,094. This investment is comprised of $5,000 in common stock, a one-time payment of $50,000
plus $17,094 in rehabilitation costs associated with well #6. The total purchase price paid is $55,000.
On July 24, 2012, the Company entered into an agreement
with Firecreek Global Inc. to exchange its entire interest in Well #6 for an undivided 13/16th interest in Wells #27 and #30 and
to Firecreek Global, Inc.'s right, title and interest in and to the following (based on Firecreek Global, Inc.'s 93.75% working
interest (for depths above 100 feet below the top of the Ellenburger Formation) and 70.341796% net revenue interest in the ElmaJackson
oil and gas; (i) together with the proration units designated for such wells by the Texas Railroad Commission and the rights and
appurtenances incident to such well (such well and the associated proration units and rights and appurtenances, arising from the
working Interests, hereinafter referred to as the "Initial Well"); (ii) Firecreek's rights in, to and under, and obligations
arising from, agreements relating to the Lease to the extent the same are applicable to the Initial Well; (iii) Firecreek's interest
in fixtures and personal property used solely in connection with the operation of the Initial Well; and (iv) Firecreek's interest
in books, files, data and records in Seller's possession to the extent the same relate to the Initial Well provided that possession
of same will remain with Firecreek; and the right and option based on certain terms and conditions to acquire a 13/16th interest
in and rehabilitate certain other wells.. This was a straight exchange with no further consideration changing hands.
The Company is not able
to present financial statements and pro forma financial information of the oil and gas property acquired by the Company as there
is no financial information available pertaining to value, historic or otherwise, from the Acquiree (Firecreek Global, Inc.). The
Acquiree has further advised that the oil and gas well the Company purchased has a nil value on their records as the well was abandoned
and plugged.
Note
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5 Property, Plant and Equipment
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Property, Plant and Equipment consists of furniture and equipment,
which is being depreciated over 5 years.
The Company has tax losses, which may be applied against
future taxable income. The potential tax benefits arising from these loss carry forwards expire between 2025 and 2028 and
are offset by a valuation allowance due to the uncertainty of profitable operations in the future. The net operating loss carry
forward was $269,329 as of March 31, 2014, respectively.
F-10
Note7 Related Party Transaction
Due to the issuance of 5,000,000 shares
to Catalyst Capital Group Inc. during the period ended September 30, 2011, Catalyst Capital Group Inc. is considered a related-person
as defined in Instruction 1.b.i to item 404(a) of Regulation S-K. As of September 30, 2103, the outstanding balance owed by the
Company to Catalyst Capital Group was $70,000 which is unsecured and due on demand with no interest bearing. Catalyst Capital Group
has loaned $50,000 to the Company for the acquisition of Oil Lease Agreement (Refer to Note 4) and advanced $20,000 to the Company
as working capital. The total amount owed to Catalyst Capital Group is $92,368 as a loan payable as at March 31, 2014.
As of March 31, 2014, the outstanding
balance owed by the Company to Mr. Tang Xu, CEO of the Company, was $38,730 for working capital purposes. Imputed interest at 8%
in the amount of $784 for the three months ended March 31, 2014 and $1,568 for the six months ended March 31, 2014, respectively
has been included as an increase to additional paid in capital.
There are no reportable subsequent events to report to the
date of the financial statements.