UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
____________
FORM
10-Q
____________
☒
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended December 31 2014
Or
☐
TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from ___________ to ___________
Commission
File Number: 1-12850
AVALON
OIL & GAS, INC.
(Exact
Name of Small Business Issuer as specified in its charter)
Nevada |
|
84-1168832 |
(State or other jurisdiction of incorporation
or organization) |
|
(I.R.S. employer identification no.) |
310
Fourth Avenue South, Suite 7000
Minneapolis,
MN 55415
(Address
of principal executive offices) (Zip Code)
Registrant's
telephone number, including area code:
(952)
746-9652
Indicate
by check mark whether the Issuer:
(1)
Has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports): Yes ☒ No
☐
(2) Has
been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting
company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer |
☐ |
Accelerated Filer |
☐ |
|
|
|
|
Non-Accelerated Filer |
☐ |
Smaller Reporting Company |
☒ |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
☒
16,548,062
shares of our common stock were issued and outstanding as of June 1, 2015.
Table
of Contents
|
Page |
PART I FINANCIAL
INFORMATION |
|
|
|
|
Item 1. |
Financial Statements |
2 |
|
Consolidated Balance Sheets as of December
31, 2014 (Unaudited) and March 31, 2014 |
2 |
|
Consolidated
Statements of Operations for the Three months ended December 31, 2014 and 2013 (Unaudited)
Consolidated
Statements of Operations for the Nine Months Ended December 31, 2014 and 2013
(Unaudited) |
4 |
|
Consolidated Statements of Cash
Flows for the Nine Months Ended December 31, 2014 and 2013 (Unaudited) |
5 |
|
Notes to Consolidated Financial
Statements |
7 |
|
|
|
Item 2. |
Management's Discussion and Analysis
of Financial Condition and Results of Operation |
19 |
Item 3. |
Qualitative and Quantitative Disclosures
About Market Risk |
24 |
Item 4. |
Controls and Procedures |
24 |
|
|
|
PART II OTHER INFORMATION |
Item 1. |
Legal Proceedings |
25 |
Item 2. |
Unregistered Sales of Equity Securities
and Use of Proceeds |
25 |
Item 3. |
Defaults upon Senior Securities |
25 |
Item 4. |
Mine Safety Disclosures |
25 |
Item 5. |
Other Information |
25 |
Item 6. |
Exhibits and Reports on Form 8-K |
26 |
Signatures |
27 |
Avalon
Oil & Gas, Inc. |
Consolidated Balance
Sheets |
| |
| | | |
| | |
| |
| | | |
| | |
| |
| (Unaudited) | | |
| | |
| |
| December
31, 2014 | | |
| March 31,
2014 | |
| |
| | | |
| | |
Assets | |
| | | |
| | |
| |
| | | |
| | |
Current Assets: | |
| | | |
| | |
Cash and cash
equivalents | |
$ | 118,249 | | |
$ | 223,914 | |
Accounts receivable, net of
allowance for doubtful | |
| | | |
| | |
accounts of $0 and $0 | |
| 63,413 | | |
| 54,226 | |
Notes receivable | |
| 11,429 | | |
| 15,714 | |
Deposits and prepaid expenses | |
| 312,733 | | |
| 302,057 | |
Receivables from joint interests,
net of allowance | |
| | | |
| | |
for
doubtful accounts of $131,236 and $136,872 | |
| 20,000 | | |
| 20,000 | |
| |
| | | |
| | |
Total current assets | |
| 525,824 | | |
| 615,911 | |
Prepaid expenses | |
| 64,546 | | |
| — | |
Notes receivable | |
| — | | |
| 2,857 | |
Property and equipment, net | |
| 19,258 | | |
| — | |
Unproven oil & gas properties | |
| 1,867,183 | | |
| 1,867,183 | |
Producing oil & gas properties,
net | |
| 238,006 | | |
| 149,477 | |
Intellectual
property rights, net | |
| 63,878 | | |
| 95,815 | |
| |
| | | |
| | |
Total Assets | |
$ | 2,778,695 | | |
$ | 2,731,243 | |
| |
| | | |
| | |
Liabilities
and Stockholders' Equity | |
| | | |
| | |
| |
| | | |
| | |
Current Liabilities: | |
| | | |
| | |
Accounts payable and accrued
liabilities | |
| 537,512 | | |
| 579,536 | |
Accrued payroll - related
parties | |
| 207,367 | | |
| 207,817 | |
Dividends payable | |
| 139,641 | | |
| 66,730 | |
Accrued liabilities to joint
interest | |
| 10,567 | | |
| 11,596 | |
Notes payable - related party | |
| 26,000 | | |
| 26,000 | |
Notes
payable, net of discount | |
| 374,300 | | |
| — | |
| |
| | | |
| | |
Total current liabilities | |
| 1,295,387 | | |
| 891,679 | |
| |
| | | |
| | |
Notes payable, net of discount | |
| — | | |
| 514,300 | |
Accrued
asset retirement obligation (ARO) liability | |
| 121,397 | | |
| 112,927 | |
| |
| | | |
| | |
Total Liabilities | |
| 1,416,784 | | |
| 1,518,906 | |
| |
| | | |
| | |
Commitments and contingencies | |
| | | |
| | |
| |
| | | |
| | |
Stockholders' Equity | |
| | | |
| | |
| |
| | | |
| | |
Preferred stock, authorized 1,000,000;
$0.1 par value | |
| | | |
| | |
Preferred stock, Series A, $0.10 par value,
1,000 shares authorized; 100 shares issued
and outstanding stated at redemption value, as of December 31, 2014 and
March 31, 2014 respectively. | |
| 10 | | |
| 10 | |
Preferred stock, Series B, $0.10 par value,
2,000 shares authorized; 1,540 and 1,300
shares issued and outstanding stated at redemption value as of December 31, 2014
and March 31, 2014, respectively. | |
| 154 | | |
| 130 | |
Common stock, $.001 par value: 200,000,000 shares authorized
14,508,062 and 11,658,062 shares issued and outstanding at December 31, 2014 and March 31, 2014,
respectively | |
| 14,508 | | |
| 11,659 | |
Additional paid in capital | |
| 32,407,753 | | |
| 32,024,126 | |
Accumulated deficit | |
| (31,060,514 | ) | |
| (30,823,588 | ) |
| |
| | | |
| | |
Total Stockholders
Equity | |
| 1,361,911 | | |
| 1,212,337 | |
| |
| | | |
| | |
Total Liabilities
and Stockholders' Equity | |
$ | 2,778,695 | | |
$ | 2,731,243 | |
| |
| | | |
| | |
| |
| | | |
| | |
| |
| | | |
| | |
The accompanying notes are
an integral part of these financial statements. |
Avalon
Oil & Gas, Inc. |
Consolidated Statements
of Operations |
| |
| |
|
| |
| For
the three Months ended December 31, 2014 | | |
| For
the three Months ended December 31, 2013 | |
| |
| (Unaudited) | | |
| (Unaudited) | |
| |
| | | |
| | |
Oil & Gas Sales | |
$ | 46,991 | | |
$ | 34,944 | |
| |
| | | |
| | |
Operating expenses: | |
| | | |
| | |
Lease operating expense, severance
taxes | |
| | | |
| | |
and ARO accretion | |
| 39,467 | | |
| 10,695 | |
Selling, general and administrative
expenses | |
| 67,469 | | |
| 84,224 | |
Stock based compensation | |
| 2,121 | | |
| 47,000 | |
Depreciation,
depletion, and amortization | |
| 24,403 | | |
| 16,995 | |
| |
| | | |
| | |
Total operating expenses | |
| 133,460 | | |
| 158,914 | |
| |
| | | |
| | |
Operating loss | |
| (86,469 | ) | |
| (123,970 | ) |
| |
| | | |
| | |
Other income (expense): | |
| | | |
| | |
| |
| | | |
| | |
Other miscellaneous income | |
| — | | |
| — | |
Gain (Loss) on extinguishment
of notes payable | |
| 207,500 | | |
| (9,900 | ) |
Interest
expense, net | |
| (11,054 | ) | |
| (24,731 | ) |
| |
| | | |
| | |
Total other income
(expense) | |
| 196,446 | | |
| (34,631 | ) |
| |
| | | |
| | |
Income (loss) before income tax | |
| 109,977 | | |
| (158,601 | ) |
| |
| | | |
| | |
Provision for income
taxes | |
| — | | |
| — | |
| |
| | | |
| | |
Net income (loss) | |
$ | 109,977 | | |
$ | (158,601 | ) |
| |
| | | |
| | |
Preferred stock
dividends | |
$ | (46,938 | ) | |
$ | (14,000 | ) |
| |
| | | |
| | |
Net income (loss)
attributable to common shareholders | |
$ | 63,039 | | |
$ | (172,601 | ) |
| |
| | | |
| | |
Net loss per share - basic | |
| 0.005 | | |
| (0.015 | ) |
Net loss per share - diluted | |
| 0.005 | | |
| — | |
| |
| | | |
| | |
Weighted average shares outstanding
- basic | |
| 12,343,932 | | |
| 11,308,388 | |
Weighted average shares outstanding
- diluted | |
| 22,015,973 | | |
| — | |
| |
| | | |
| | |
| |
| | | |
| | |
The accompanying
notes are an integral part of these financial statements. |
Avalon
Oil & Gas, Inc. |
Consolidated Statements
of Operations |
| |
| |
|
| |
| For
the nine Months ended December 31, 2014 | | |
| For
the nine Months ended December 31, 2013 | |
| |
| (Unaudited) | | |
| (Unaudited) | |
| |
| | | |
| | |
Oil & Gas Sales | |
$ | 109,925 | | |
$ | 93,969 | |
| |
| | | |
| | |
Operating expenses: | |
| | | |
| | |
Lease operating expense, severance
taxes | |
| | | |
| | |
and ARO accretion | |
| 78,260 | | |
| 70,545 | |
Selling, general and administrative
expenses | |
| 245,149 | | |
| 243,859 | |
Stock based compensation | |
| 16,121 | | |
| 150,001 | |
Depreciation,
depletion, and amortization | |
| 64,635 | | |
| 48,041 | |
| |
| | | |
| | |
Total operating expenses | |
| 404,165 | | |
| 512,446 | |
| |
| | | |
| | |
Operating loss | |
| (294,240 | ) | |
| (418,477 | ) |
| |
| | | |
| | |
Other income (expense): | |
| | | |
| | |
| |
| | | |
| | |
Other miscellaneous income | |
| 10,100 | | |
| — | |
Gain (Loss) on extinguishment
of notes payable | |
| 207,500 | | |
| (57,050 | ) |
Interest
expense, net | |
| (32,375 | ) | |
| (74,476 | ) |
| |
| | | |
| | |
Total other income
(expense) | |
| 185,225 | | |
| (131,526 | ) |
| |
| | | |
| | |
Loss before income tax | |
| (109,015 | ) | |
| (550,003 | ) |
| |
| | | |
| | |
Provision for income
taxes | |
| — | | |
| — | |
| |
| | | |
| | |
Net Loss | |
$ | (109,015 | ) | |
$ | (550,003 | ) |
| |
| | | |
| | |
Preferred stock
dividends | |
$ | (127,911 | ) | |
$ | (41,780 | ) |
| |
| | | |
| | |
Net loss attributable
to common shareholders | |
$ | (236,926 | ) | |
$ | (591,783 | ) |
| |
| | | |
| | |
Net loss per share - basic and diluted | |
| (0.020 | ) | |
| (0.062 | ) |
| |
| | | |
| | |
Weighted average shares outstanding
- basic and diluted | |
| 12,003,153 | | |
| 9,578,644 | |
| |
| | | |
| | |
| |
| | | |
| | |
| |
| | | |
| | |
The accompanying
notes are an integral part of these financial statements. |
Avalon
Oil & Gas, Inc. |
Consolidated Statement of
Cash Flows |
| |
| |
|
| |
| (Unaudited) | | |
| (Unaudited) | |
| |
| For
the nine Months ended December 31, 2014 | | |
| For
the nine Months ended December
31, 2013 | |
| |
| | | |
| | |
Cash flows from operating
activities: | |
| | | |
| | |
Net (loss) | |
$ | (109,015 | ) | |
$ | (550,003 | ) |
Adjustments to reconcile net loss to net
cash used | |
| | | |
| | |
in operating activities: | |
| | | |
| | |
Stock issued for
services | |
| 16,121 | | |
| 150,001 | |
Common stock issued
for licenses | |
| 15,000 | | |
| | |
(Gain) Loss on extinguishment
on notes payable | |
| (207,500 | ) | |
| 57,050 | |
Stock issued for reduction
of interest on notes payable | |
| 90,000 | | |
| — | |
Depreciation | |
| 3,399 | | |
| — | |
Depletion | |
| 29,299 | | |
| 16,103 | |
Depreciation and ARO
liability | |
| 2,172 | | |
| 2,172 | |
Amortization of intangible
assets | |
| 31,937 | | |
| 31,938 | |
Net change in operating assets and
liabilities: | |
| | | |
| | |
Accounts receivable | |
| (9,187 | ) | |
| 18,934 | |
Accounts payable and
other accrued expenses | |
| (43,503 | ) | |
| 33,805 | |
Due to related party | |
| — | | |
| 5,000 | |
Asset
retirement obligation | |
| 8,470 | | |
| 7,700 | |
| |
| | | |
| | |
Net
cash (used) in operationg activities | |
| (172,807 | ) | |
| (227,300 | ) |
| |
| | | |
| | |
Cash flows from investing activities: | |
| | | |
| | |
Deposit on the purchase
of additional assets | |
| 22,657 | | |
| (119,400 | ) |
Acquisition of oil producing
assets | |
| (120,000 | ) | |
| — | |
Acquisition of property
and equipment | |
| (22,657 | ) | |
| | |
Principal
payments received on notes receivable | |
| 7,142 | | |
| 6,434 | |
| |
| | | |
| | |
Net
cash provided in investing activities | |
| (112,858 | ) | |
| (112,966 | ) |
| |
| | | |
| | |
Cash flows from financing activities: | |
| | | |
| | |
Proceeds from notes payable | |
| 60,000 | | |
| — | |
Common stock issued for cash | |
| — | | |
| 300,000 | |
Dividends paid | |
| (55,000 | ) | |
| (28,300 | ) |
Preferred
stock B issued for cash | |
| 175,000 | | |
| 50,000 | |
| |
| | | |
| | |
Net
cash provided in financing activities | |
| 180,000 | | |
| 321,700 | |
| |
| | | |
| | |
The
accompanying notes are an integral part of these financial statements. |
Avalon
Oil & Gas, Inc. |
Consolidated Statement of
Cash Flows (Continued) |
| |
| |
|
| |
| (Unaudited) | | |
| (Unaudited) | |
| |
| For
the nine | | |
| For
the nine | |
| |
| Months
ended | | |
| Months
ended | |
| |
| December
31, 2014 | | |
| December
31, 2013 | |
| |
| | | |
| | |
Net (decrease) in cash and
cash equivalents | |
| (105,665 | ) | |
| (18,566 | ) |
| |
| | | |
| | |
Cash and cash equivalents
at beginning of period | |
| 223,914 | | |
| 129,931 | |
| |
| | | |
| | |
Cash
and cash equivalents at end of period | |
$ | 118,249 | | |
$ | 111,365 | |
| |
| | | |
| | |
Supplemental disclosures of cash flow
information: | |
| | | |
| | |
Cash paid during the
period for: | |
| | | |
| | |
Interest | |
$ | — | | |
$ | — | |
Taxes | |
$ | — | | |
$ | — | |
Common stock issued in exchange for
consulting services | |
$ | 99,000 | | |
$ | 150,001 | |
Common stock issued
in exchange for licenses | |
$ | 15,000 | | |
$ | — | |
Common stock issued for extinguishment
of note payable, | |
| | | |
| | |
accrued interest,
and assumption of debt | |
$ | 32,500 | | |
$ | — | |
Preferred stock issued in exchange
for consulting services | |
$ | 15,000 | | |
$ | — | |
Preferred
stock issued for extinguishment of note payable, accrued interest, and assumption of debt | |
$ | 50,000 | | |
$ | 57,500 | |
The
accompanying notes are an integral part of these financial statements. |
AVALON
OIL & GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
The Three and Nine Month Periods Ended December 31, 2014 and 2013
(Unaudited)
NOTE
1: DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of
Operations
Avalon
Oil & Gas, Inc. (the "Company") was originally incorporated in Colorado in April 1991 under the name Snow Runner
(USA), Inc. The Company was the general partner of Snow Runner (USA) Ltd.; a Colorado limited partnership to sell proprietary
snow skates under the name "Sled Dogs" which was dissolved in August 1992. In late 1993, the Company relocated its operations
to Minnesota and in January 1994 changed our name to Snow Runner, Inc. In November 1994 we changed our name to the Sled Dogs Company.
On November 5, 1997, we filed for protection under Chapter 11 of the U.S. Bankruptcy Code. In September 1998, we emerged from
protection of Chapter 11 of the U.S. Bankruptcy Code. In May, 1999, we changed our state of domicile to Nevada and our name to
XDOGS.COM, Inc. On July 22, 2005, the Board of Directors and a majority of the Company's shareholders approved an amendment to
our Articles of Incorporation to change the Company's name to Avalon Oil & Gas, Inc., and to increase the authorized number
of shares of our common stock from 200,000,000 shares to 1,000,000,000 shares par value of $0.001, and engage in the acquisition
of producing oil and gas properties. On November 16, 2011, a majority of the Company's shareholders approved an amendment
to our Articles of Incorporation to increase the authorized number of shares of our common stock from 1,000,000,000 shares to
3,000,000,000 shares par value of $0.001. This amendment was not filed with the Nevada Secretary of State.
On
June 4, 2012 the Board of Directors approved an amendment to our Articles of Incorporation to a reverse split of the issued and
outstanding shares of Common Stock of the Corporation (“Shares”) such that each holder of Shares as of the record
date of June 4, 2012 shall receive one (1) post-split Share on the effective date of June 4, 2012 for each three hundred (300)
Shares owned. The reverse split was effective on July 23, 2012. On September 28, 2012, we held a special
meeting of Avalon’s shareholders and approved an amendment to the Company’s Articles of Incorporation such that the
Company would be authorized to issue up to 200,000,000 shares of common stock. We filed this amendment with the Nevada
Secretary of State on April 10, 2013.
The
Company is currently in the process of raising funds to acquire oil and gas properties and related oilfield technologies, which
the Company plans to develop into commercial applications.
On
November 9, 2006, the Company purchased all the outstanding shares of Intelli-Well Technologies, Inc. (IWTI) from Innovaro
Corporation for 20,000,000 shares of the Company's common stock valued at $594,000. The shares were valued at the average sales
price received in private placements for sales of restricted common stock for cash. ITWI became a wholly owned subsidiary of the
Company as of the date of acquisition. IWTI holds a non-exclusive license in the United States for a borehole casing technology
developed by the Regents of the University of California (the "Regents") through its researchers at Lawrence Livermore
National Laboratory.
On
September 22, 2007 the Company entered into an agreement with respect to its purchase of a 75.6% interest in Oiltek, Inc. (Oiltek)
for $50,000 and the right of Oiltek to market Avalon's intellectual property. Oiltek is consolidated in these financial statements
with a minority interest shown.
On
October 10, 2013, the Company entered into a Technology Scouting Agreement with IP Technology Exchange, Inc. ("IP TechEx"),
to identify potential technology acquisition and licensing opportunities. Our alliance with IP TechEx will enable us
to develop a portfolio of new and innovative technologies.
On
March 19, 2014, the Company formed Weyer Partners, LLC, a one hundred percent (100%) wholly owned a Minnesota Corporation. Weyer
Partners, LLC, was formed to operate oil and gas properties in Oklahoma and Texas.
On
May 9, 2014, the Company formed AFS Holdings, Inc., a one hundred percent (100%) wholly owned Nevada Corporation. AFS Holding,
Inc., was formed to leverage the Company’s relationship with IP TechEx, and market technology licensed from IP TechEx.
On
September 29, 2014 the Company acquired the assets of Kensington Energy Limited Partnership – 1985, Kensington Energy Limited
Partnership – 1986, Kensington Energy Limited Partnership – 1987, Kensington Energy Company, Kensington Group Venture,
Kensington Group Venture I, Kensington Group Venture II, and Kensington Group Venture III, for a combination of cash and debt.
AVALON
OIL & GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
The Three and Nine Month Periods Ended December 31, 2014 and 2013
(Unaudited)
Principles
of consolidation
The consolidated
financial statements include the accounts of the Company and The Company’s subsidiary’s Oiltek, Inc., Weyer Partners,
LLC, and AFS Holdings, Inc. All significant inter-company items have been eliminated in consolidation.
Basis of
Preparation of Financial Statements
The
accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form 10-Q. They do not include all of the
information and footnotes required by Accounting Principles generally accepted accounting principles in United States America
(“US GAAP”) for complete financial statements and related notes. The accompanying unaudited consolidated financial
statements and related notes should be read in conjunction with the audited consolidated financial statements of the Company and
notes thereto for the year ended March 31, 2014.
In
the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (which include
only normal recurring adjustments) necessary to present fairly the balance sheets of Avalon Oil and Gas Inc. and subsidiaries
as of December 31, 2014 and the results of their operations for the three and nine months ended December 31, 2014 and 2013, and
cash flows for the nine months ended December 31, 2014 and 2013 are not necessarily indicative of the results to be expected for
the entire year.
Going Concern
The
December 31, 2014, financial statements have been prepared assuming the Company will continue as a going concern. However, the
Company has incurred a loss of $31,060,514 from inception through December 31, 2014, and has a working capital deficiency of
$769,563 and stockholders’ equity of $1,361,911 as of December 31, 2014. The Company currently has minimal revenue
generating operations and expects to incur substantial operating expenses in order to expand its business. As a result, the Company
expects to incur operating losses for the foreseeable future. The Company will continue to seek equity and debt financing
to meet our operating losses. The accompanying consolidated financial statements do not include any adjustments that
might become necessary should the Company be unable to continue as a going concern.
Use of Estimates
The preparation
of financial statements in conformity with US GAAP requires us to make estimates and assumptions that affect the amounts reported
in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates and assumptions.
Basis of
Accounting
The Company's
financial statements are prepared using the accrual method of accounting. Revenues are recognized when earned and expenses when
incurred.
AVALON
OIL & GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
The Three and Nine Month Periods Ended December 31, 2014 and 2013
(Unaudited)
Cash and
Cash Equivalents
Cash
and cash equivalents consist primarily of cash on deposit, certificates of deposit, money market accounts, and investment grade
commercial paper that are readily convertible into cash and purchased with original maturities of three months or less. The Company
maintains its cash balances at several financial institutions. Accounts at the institutions are insured by the Federal Deposit
Insurance Corporation up to $250,000.
Fair Value
of Financial Instruments
The
Company's financial instruments are cash and cash equivalents, accounts receivable, accounts payable, notes payable, notes receivable
and long-term debt. The recorded values of cash and cash equivalents, accounts receivable, and accounts payable approximate their
fair values based on their short-term nature. The recorded values of notes payable, notes receivable and long-term debt approximate
their fair values, as interest approximates market rates.
Accounts
Receivable
Management
periodically assesses the collectability of the Company's accounts receivable. Accounts determined to be uncollectible are charged
to operations when that determination is made. The Company had an allowance of $131,236 and $136,872 for accounts receivable from
the joint working interests, respectively as of December 31, 2014 and March 31, 2014.
Oil and
Natural Gas Properties
The
Company follows the full cost method of accounting for natural gas and oil properties. Under the full cost concept,
all costs incurred in acquiring, exploring, and developing properties cost center are capitalized when incurred and are amortized
as mineral reserves in the cost center are produced, subject to a limitation that the capitalized costs not exceed the value of
those reserves. The unamortized costs relating to a property that is surrendered, abandoned, or otherwise disposed
of are accounted for as an adjustment of accumulated amortization, rather than as a gain or loss that enters into the determination
of net income, until all of the properties constituting the amortization base are disposed of, at which point gain or loss
is recognized. All acquisition, exploration, and development costs are capitalized. The Company capitalizes all internal costs,
including: salaries and related fringe benefits of employees directly engaged in the acquisition, exploration and development
of natural gas and oil properties, as well as other identifiable general and administrative costs associated with such activities. During
the three month and nine month periods ended December 31, 2014 and 2013, the Company purchased for cash and notes payable, $120,000
in oil and gas properties which were capitalized. Oil and natural gas properties are reviewed for recoverability at least
annually or when events or changes in circumstances indicate that its carrying value may exceed future undiscounted cash inflows.
As of December 31, 2014 and March 31, 2014, the Company had not identified any such impairment.
AVALON
OIL & GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
The Three and Nine Month Periods Ended December 31, 2014 and 2013
(Unaudited)
Other Property
and Equipment
Other
property and equipment is reviewed for recoverability when events or changes in circumstances indicate that its carrying value
may exceed future undiscounted cash inflows. As of December 31, 2014 and 2013, the Company had not identified any such impairment.
Repairs and maintenance are charged to operations when incurred and improvements and renewals are capitalized.
Other
property and equipment are stated at cost. Depreciation is calculated using the straight-line method for financial reporting purposes
and accelerated methods for tax purposes.
Their estimated
useful lives are as follows:
|
Office Equipment: |
5-7 Years |
|
Vehicles |
5 Years |
Asset Retirement
Obligations
In
accordance with the provisions of Financial Accounting Standards Board “FASB” Accounting Standard Codification “ASC”
410-20-15, “Accounting for Asset Retirement Obligations”, the Company records the fair value of its liability for
asset retirement obligations in the period in which it is incurred and a corresponding increase in the carrying amount of the
related long live assets. Over time, the liability is accreted to its present value at the end of each reporting period, and the
capitalized cost is depreciated over the useful life of the related assets. Upon settlement of the liability, the Company will
either settle the obligation for its recorded amount or incur a gain or loss upon settlement. The Company's asset retirement obligations
relate to the plugging and abandonment of its oil properties.
Intangible
Assets
The cost
of licensed technologies acquired is capitalized and will be amortized over the shorter of the term of the licensing agreement
or the remaining life of the underlying patents.
The
Company evaluates recoverability of identifiable intangible assets whenever events or changes in circumstances indicate that intangible
assets carrying amount may not be recoverable. Such circumstances include, but are not limited to: (1) a significant decrease
in the market value of an asset, (2) a significant adverse change in the extent or manner in which an asset is used, or (3) an
accumulation of cost significantly in excess of the amount originally expected for the acquisition of an asset. The Company measures
the carrying amount of the assets against the estimated undiscounted future cash flows associated with it.
There was
not any impairment loss for the nine months and three months ended December 31, 2014 and 2013.
Should
the sum of the expected cash flows be less than the carrying amount of assets being evaluated, an impairment loss would be recognized.
The impairment loss would be calculated as the amount by which the carrying amount of the assets, exceed fair value. Estimated
amortization of intangible assets over the next five years is as follows:
December 31, |
|
|
|
|
|
|
|
2015 |
|
$ |
42,585 |
|
2016 |
|
|
21,293 |
|
|
|
|
|
|
|
|
$ |
63,878 |
|
|
|
|
|
|
AVALON
OIL & GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
The Three and Nine Month Periods Ended December 31, 2014 and 2013
(Unaudited)
Stock Based
Compensation
The
Company records share-based compensation expense for awards granted to non-employees in exchange for services at fair value in
accordance with the provisions of ASC 505-50, "Equity based" payment to non-employees. For the awards granted
to non-employees, the Company will record compensation expenses equal to the fair value of the share options at the measurement
date, which is determined to be the earlier of the performance commitment date or the service completion date.
Warrants
The
value of warrants issued is recorded at their fair values as determined by use of a Black Scholes Model at such time or over such
periods as the warrants vest.
Loss per
Common Share
ASC
260-10-45, “Earnings Per Share”, requires presentation of "basic" and "diluted" earnings per share
on the face of the statements of operations for all entities with complex capital structures. Basic earnings per share are computed
by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share
reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted
during the period. Dilutive securities having an anti-dilutive effect on diluted earnings per share are excluded from the calculation.
When the company is in loss position, no dilutive effect is considered.
Income Taxes
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 their respective tax bases. Deferred tax assets, including tax loss and
credit carry forwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of
a change in tax rates is recognized in income in the period that includes the enactment date. Deferred income tax expense represents
the change during the period in the deferred tax assets and deferred tax liabilities. The components of the deferred tax assets
and liabilities are individually classified as current and non-current based on their characteristics. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the
deferred tax assets will not be realized.
ASC
740-10-25, “Accounting for Uncertainty in Income Taxes”, is intended to clarify the accounting for uncertainty in
income taxes recognized in a company's financial statements and prescribes the recognition and measurement of a tax position taken
or expected to be taken in a tax return. ASC 740-10-25 also provides guidance on de-recognition, classification, interest and
penalties, accounting in interim periods, disclosure and transition.
Under
ASC 740-10-25, evaluation of a tax position is a two-step process. The first step is to determine whether it is more-likely-than-not
that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on
the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold
to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount
of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.
Tax
positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period
in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should
be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met.
AVALON
OIL & GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
The Three and Six Month Periods Ended September 30, 2014 and 2013
(Unaudited)
Revenue
Recognition
In
accordance with the requirements ASC topic 605 "Revenue Recognition", revenues are recognized at such time as (1) persuasive
evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the seller's price to the buyer
is fixed or determinable and (4) collectability is reasonably assured. Specifically, oil and gas sales are recognized as income
at such time as the oil and gas are delivered to a viable third party purchaser at an agreed price. Interest income is recognized
as it is earned.
Long-Lived
Assets
Equipment
is stated at acquired cost less accumulated depreciation. Office equipment is depreciated on the straight-line basis over the
estimated useful lives (five to seven years).
Impairment
of long-lived assets is recognized when events or changes in circumstances indicate that the carrying amount of the asset or related
group of assets may not be recoverable. If the expected future undiscounted cash flows are less than the carrying amount
of the asset, an impairment loss is recognized at that time. Measurement of impairment may be based upon appraisal,
market value of similar assets or discounted cash flows. There was no impairment for the three and nine months ended December
31, 2014 and 2013.
Recently
Issued Accounting Pronouncements
As of June
23, 2015, The FASB has issued up to ASU 2015-10, which are not expected to have a material impact on the consolidated financial
statements upon adoption.
AVALON
OIL & GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
The Three and Nine Month Periods Ended December 31, 2014 and 2013
(Unaudited)
NOTE
2: RECEIVABLE FROM JOINT INTERESTS
The
Company is the operator of certain wells acquired in the Expanded Bedford Agreement (see note 4). Pursuant to a joint interest
operating agreement (the “Joint Interest Agreement”), the Company charges the other owners of the Grace Wells
for their pro-rata share of operating and work over expenses. These receivables are carried on the Company’s
balance sheet as Receivable from Joint Interests. At December 31, 2014 and March 31, 2014 the Company deemed the collectability
of the receivable from joint interests in the amount of $131,236 and 136,872 as unlikely.
NOTE
3: INTELLECTUAL PROPERTY RIGHTS
A summary
of the intellectual property rights at December 31, 2014 and March 31, 2014, are as follows:
| |
December
31, 2014 | |
March
31, 2014 |
| |
(Unaudited) | |
|
Ultrasonic Mitigation Technology | |
$ | 425,850 | | |
$ | 425,850 | |
Less: accumulated
amortization | |
| (361,972 | ) | |
| (330,035 | ) |
Total | |
$ | 63,878 | | |
$ | 95,815 | |
Amortization
expense for the three and nine months ended December 31, 2014 and 2013 was $10,646 and $31,937 respectively.
NOTE 4:
OIL AND GAS PROPERTY ACTIVITY
The
table below shows the Company’s working interests in the Grace Wells as of December 31, 2014. There were not
any additional acquisitions during the three and nine month periods ended December 31, 2014.
Well |
|
Working
Interest |
|
Grace #1 |
|
|
65.25 |
% |
Grace #2 |
|
|
55.75 |
% |
Grace #3 |
|
|
64.00 |
% |
Grace #5A |
|
|
52.00 |
% |
Grace #6 |
|
|
58.00 |
% |
AVALON
OIL & GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
The Three and Nine Month Periods Ended December 31, 2014 and 2013
(Unaudited)
NOTE 4:
OIL AND GAS PROPERTY ACTIVITY (Continued)
Producing
oil and gas properties consist of the following at December 31, 2014 and March 31, 2014:
| |
December
31, 2014 | |
March
31, 2014 |
| |
(Unaudited) | |
|
Lincoln County, Oklahoma | |
$ | 111,402 | | |
$ | 111,402 | |
Other properties, net | |
| 1,125,676 | | |
| 1,005,676 | |
Asset retirement obligation | |
| 38,400 | | |
| 40,572 | |
Property impairments | |
| (481,072 | ) | |
| (481,072 | ) |
Less: Depletion | |
| (556,400 | ) | |
| (527,101 | ) |
Net | |
$ | 238,006 | | |
$ | 149,477 | |
NOTE
5: ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts
payable and accrued liabilities consisted of the following:
| |
December
31, 2014 | |
March
31, 2014 |
| |
(Unaudited) | |
|
Accounts payable | |
$ | 393,156 | | |
$ | 375,272 | |
Accrued liabilities | |
| 144,356 | | |
| 204,264 | |
Total | |
$ | 537,512 | | |
$ | 579,536 | |
NOTE
6: NOTES PAYABLE
Notes Payable
are summarized as follows:
|
|
Note |
|
|
|
Amount |
|
March 31, 2014: |
|
|
|
|
Notes payable – long-term portion |
|
$ |
514,300 |
|
Notes payable – current portion |
|
|
-0- |
|
Total |
|
$ |
514,300 |
|
AVALON
OIL & GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
The Three and Nine Month Periods Ended December 31, 2014 and 2013
(Unaudited)
|
|
Note |
|
|
|
Amount |
|
December 31, 2014 (Unaudited): |
|
|
|
Notes payable –
long-term portion |
|
$ |
-0- |
|
Notes payable
– current portion |
|
|
374,300 |
|
Total |
|
$ |
374,300 |
|
NOTE 7:
RELATED PARTY TRANSACTIONS
Preferred
Stock
The
100 shares of Series A Preferred Stock, issued to an officer/director as payment for $500,000 in promissory notes, are convertible
into the number of shares of common stock sufficient to represent forty percent (40%) of the fully diluted shares outstanding
after their issuance. The Series A Preferred Stock pays an eight percent (8%) dividend. The dividends are cumulative and payable
quarterly. The Series A Preferred Stock carries liquidating preference, over all other classes of stock, equal to the amount paid
for the stock plus any unpaid dividends. The Series A Preferred Stock provides for voting rights on an "as converted to common
stock" basis.
During
the three and nine months ended December 31, 2014 and 2013, the Company incurred $10,000 and $30,000 in Series A preferred
stock dividends, paid $13,500 and $4,000 for the three months ended December 31, 2014 and 2013, and paid $39,000 and $28,300 for
the nine months ended December 31, 2014 and 2013. As of December 31, 2014 and March 31, 2014, the accrued balance due Mr. Rodriguez
was $32,950 and 41,950 respectively.
The
holders of the Series A Preferred Stock have the right to convert each share of preferred stock into a sufficient number of shares
of common stock to equal 40% of the then fully-diluted shares outstanding. Fully diluted shares outstanding is computed as the
sum of the number of shares of common stock outstanding plus the number of shares of common stock issuable upon exercise, conversion
or exchange of outstanding options, and warrants. In the event that the Company does not have an adequate number of shares of
Common Stock authorized, upon a conversion request, only the maximum allowable number of shares of Series A preferred stock shall
convert into Common Stock and the remaining shares of Series A preferred Stock shall convert upon lapse of the applicable restrictions.
AVALON
OIL & GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
The Three and Nine Month Periods Ended December 31, 2014 and 2013
(Unaudited)
Employment
Agreements
KENT
RODRIGUEZ
In
2009, Mr. Rodriguez, our President, was under an employment agreement dated April 1, 2008 that expires on March 31, 2016, pursuant
to which he was compensated at an annual rate of $120,000. On April 1, 2011 Mr. Rodriguez voluntarily reduced his compensation
to an annual rate of $48,000, subject to an increase by the Company’s Board of Directors. The Company charged
to operations the amount of $12,000 and $36,000 for the three and nine month periods ended December 31, 2014 and 2013, of which
$14,000 and $36,450 was paid to him during the three month and nine month periods ending December 31, 2014, and $9,700 and $29,500
during the three and nine month periods ending December 31, 2013 respectively. As of December 31, 2014, and March 31,
2014, the balances of accrued and unpaid salaries were $207,367 and $207,817.
NOTE
8: INCOME TAXES
Deferred
income taxes result from the temporary difference arising from the use of accelerated depreciation methods for income tax purposes
and the straight-line method for financial statement purposes, and an accumulation of New Operating Loss carry-forwards for income
tax purposes with a valuation allowance against the carry-forwards for book purposes.
In
assessing the value of deferred tax assets, management considers whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Included in deferred tax assets are Federal and State net operating loss carry forwards
of approximately $31,060,514, which will expire beginning in 2028. The ultimate realization of deferred tax assets
is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.
Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies
in making this assessment. Based upon our cumulative losses through December 31, 2014, we have provided a valuation allowance
reducing the net realizable benefits of these deductible differences to $0 at December 31, 2014. The amount of the
deferred tax asset considered realizable could change in the near term if projected future taxable income is realized. Due
to significant changes in the Company's ownership, the Company's future use of its existing net operating losses may be limited.
NOTE
9: STOCKHOLDERS' EQUITY
Series A
Preferred Stock
The Company
is authorized to issue 1,000,000 shares of preferred stock, par value $0.10 per share. As of December 31, 2014, the
Company has 100 shares of Series A preferred stock issued and outstanding.
During
the three and nine months December 31, 2014 and 2013, the Company incurred $10,000 and $30,000 respectively in Series A preferred
stock dividends, and paid $13,500 and $4,000for the three months ended December 31, 2014 and 2013 respectively, and paid $39,000
and $28,300 for the nine months ended December 31, 2014 and 2013 respectively. As of December 31, 2014 and March 31, 2014, the
accrued balance due Mr. Rodriguez was $32,950 and $41,950 respectively.
The
100 shares of Series A Preferred Stock, issued to an officer/director as payment for $500,000 in promissory notes, are convertible
into the number of shares of common stock sufficient to represent 40 percent (40%) of the fully diluted shares outstanding after
their issuance. The Series A Preferred Stock pays an eight percent (8%) dividend. The dividends are cumulative and payable quarterly.
The Series A Preferred Stock carries liquidating preference, over all other classes of stock, equal to the amount paid for the
stock plus any unpaid dividends. The Series A Preferred Stock provides for voting rights on an "as converted to common stock"
basis.
The
holders of the Series A Preferred Stock have the right to convert the preferred stock into shares of common stock such that if
converted simultaneously, they shall represent forty percent (40%) of the fully diluted shares outstanding after their issuance.
Fully diluted shares outstanding is computed as the sum of the number of shares of common stock outstanding plus the number of
shares of common stock issuable upon exercise, conversion or exchange of outstanding options, warrants, or convertible securities.
Series B Preferred
Stock
In
March, 2013, our Board of Directors authorized the issuance of 2,000 shares of Series B Preferred Stock (the "Series B Preferred
Stock"). The face amount of share of the Series B Preferred Stock is $1,000. As of December 31, 2014,
the Company has 1,540 shares of Series B preferred stock issued and outstanding.
AVALON
OIL & GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
The Three and Nine Month Periods Ended December 31, 2014 and 2013
(Unaudited)
NOTE
9: STOCKHOLDERS' EQUITY (continued)
The
Series B Preferred Stock accrues dividends at the rate of nine percent (9%) per annum on the original purchase price for the shares.
These dividends are payable annually on April 1. We are prohibited from paying any dividends on our Common Stock until all accrued
dividends are paid on our Series B Preferred Stock. The Series B Preferred Stock ranks junior to the Series A Preferred
Stock owned by our President and Chief Executive Officer, as to Dividends and to a distribution of assets in the event of a liquidation
of assets.
The Holders
of Series B Preferred Stock do not have any voting rights and their consent is not required to take any sort of corporate action.
During
the three month period ended December 31, 2014, the Company issued 15 shares of Series B Preferred Stock to one accredited investor
in exchange for consulting in the amount of $15,000. The consulting agreement is for a 36 month period and the $15,000 will be
amortized over this period in the amount of $417 per month.
During
the three month periods ended December 31, 2014 and 2013, the Company incurred $36,938 and $4,000 in dividends and $97,911 and
$11,780 for the nine month periods ended December 31, 2014 and 2013, respectively on Series B preferred stock. The
Company did not pay any dividends for the three month periods ended December 31, 2014 and 2013 and paid 16,000 and none in dividends
for the nine month period December 31, 2014 and 2013 respectively.
Total dividends
payable from both A and B preferred shares at December 31, 2014 and March 31, 2014 were $139,641 and $66,730 respectively.
Common Stock
During
the nine month period ended December 31, 2014 the Company issued the following shares:
200,000
shares of Common Stock to a consultant, the value of these shares in the amount of $14,000, or $0.02 per share was charged
to operations, and was valued at closing bid price of the Company's common stock on the date the Consulting Agreement was executed
by the Company.
1,700,000
shares of Common Stock to a consultant, the value of these shares in the amount of $85,000, or $0.05 per share was charged
to operations, and was valued at closing bid price of the Company's common stock on the date the Consulting Agreement was executed
by the Company. The consulting agreement is for a 36 month period and the $85,000 will be amortized over this period in the amount
of $2,361 per month.
650,000
shares of Common Stock in exchange for the reduction of $150,000 in a note payable and $90,000 of accrued interest, the value
of these shares in the amount of $32,500, or $0.05 per share and was valued at closing bid price of the Company's common stock
on the date the Agreement was executed by the Company. $207,500 was treated as a gain from this transaction.
300,000
shares of Common Stock to an individual for a licensing agreement, the value of these shares in the amount of $15,000, or
$0.05 per share was charged to operations, and was valued at closing bid price of the Company's common stock on the date the Licensing
Agreement was executed by the Company.
AVALON
OIL & GAS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
For
The Three Month and six Periods Ended September 30, 2014 and 2013
(Unaudited)
Warrants
The
following table summarizes the warrants outstanding and the related prices for the shares of the Company’s common stock
issued to non-employees of the Company at December 31, 2014:
Warrants
Outstanding |
|
|
Warrants
Exercisable |
|
|
|
|
|
|
|
Weighted
Average |
|
|
|
|
|
|
|
|
Weighted
Average |
|
|
Exercise |
|
|
Number |
|
|
Remaining
Contractual |
|
|
Weighted
Average |
|
|
Number |
|
|
Remaining
Contractual |
|
|
Prices |
|
|
Outstanding |
|
|
Life
(years) |
|
|
Exercise
Price |
|
|
Exercisable |
|
|
Life
(years) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
600.00 |
|
|
|
167 |
|
|
|
0.25 |
|
|
|
$ 600.00 |
|
|
|
167 |
|
|
|
0.25 |
|
|
|
|
|
|
|
167 |
|
|
|
0.25 |
|
|
|
|
|
|
|
167 |
|
|
|
0.25 |
|
|
Transactions
involving warrants are summarized as follows:
|
|
Number
of Shares |
|
|
Weighted
Average
Price
Per
Share |
|
Outstanding at March 31, 2014 |
|
|
167 |
|
|
$ |
600.00 |
|
Granted |
|
|
- |
|
|
|
- |
|
Exercised |
|
|
- |
|
|
|
- |
|
Cancelled or expired |
|
|
-167- |
|
|
|
-600.00- |
|
Outstanding at December 31, 2014 |
|
|
-- |
|
|
$ |
|
|
NOTE
10: EARNINGS PER SHARE
ASC
260-10-45 requires a reconciliation of the numerator and denominator of the basic and diluted earnings per share (EPS)
computations. As the Company is in a loss position during the nine month period ended December 31, 2014 there is no
dilutive effect included, we have included the basic and diluted earnings per share (EPS) computation for the three month
period ended December 31, 2014.
NOTE
11: COMMITMENTS AND CONTINGENCIES
Commitments
and contingencies through the date of these financial statements were issued have been considered by the Company and none were
noted which were required to be disclosed.
NOTE
12: SUBSEQUENT EVENTS
The Company
has evaluated subsequent events through the issuance of the consolidated financial statements and no subsequent event is identified.
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following
discussion and analysis should be read in conjunction with our financial statements and the notes related thereto. The discussion
of results, causes and trends should not be construed to infer conclusions that such results, causes or trends necessarily
will continue in the future.
Business
Development
Avalon
Oil & Gas, Inc. (the "Company") was originally incorporated in Colorado in April 1991 under the name Snow Runner
(USA), Inc. The Company was the general partner of Snow Runner (USA) Ltd.; a Colorado limited partnership to sell proprietary
snow skates under the name "Sled Dogs" which was dissolved in August 1992. In late 1993, the Company relocated its operations
to Minnesota and in January 1994 changed our name to Snow Runner, Inc. In November 1994 we changed our name to the Sled Dogs Company.
On November 5, 1997, we filed for protection under Chapter 11 of the U.S. Bankruptcy Code. In September 1998, we emerged from
protection of Chapter 11 of the U.S. Bankruptcy Code. In May, 1999, we changed our state of domicile to Nevada and our name to
XDOGS.COM, Inc. On July 22, 2005, the Board of Directors and a majority of the Company's shareholders approved an amendment to
our Articles of Incorporation to change the Company's name to Avalon Oil & Gas, Inc., and to increase the authorized number
of shares of our common stock from 200,000,000 shares to 1,000,000,000 shares par value of $0.001, and engage in the acquisition
of producing oil and gas properties. On November 16, 2011, a majority of the Company's shareholders approved an amendment to our
Articles of Incorporation to increase the authorized number of shares of our common stock from 1,000,000,000 shares to 3,000,000,000
shares par value of $0.001. This amendment was not filed with the Nevada Secretary of State.
On
June 4, 2012 the Board of Directors approved an amendment to our Articles of Incorporation to a reverse split of the issued and
outstanding shares of Common Stock of the Corporation (“Shares”) such that each holder of Shares as of the record
date of June 4, 2012 shall receive one (1) post-split Share on the effective date of June 4, 2012 for each three hundred (300)
Shares owned. The reverse split was effective on July 23, 2012. On September 28, 2012, we held a special
meeting of Avalon’s shareholders and approved an amendment to the Company’s Articles of Incorporation such that the
Company would be authorized to issue up to 200,000,000 shares of common stock. We filed this amendment with the Nevada
Secretary of State on April 10, 2013.
Acquisition
Strategy
Our
strategy is to acquire oil and gas producing properties that have proven reserves and established in-field drilling locations
with a combination of cash, debt, and equity. We believe that acquisition of such properties minimizes our risk, allows us to
generate immediate cash flow, and provides in-field drilling locations to expand production within the proven oil and gas fields.
We will aggressively develop these low cost/low risk properties in order to enhance shareholder value. In addition, Avalon's technology
group acquires oil production enhancing technologies. Through its strategic partnership with IP Technology Exchange, Inc., a
transfer technology company, Avalon is building an asset portfolio of innovative.
In
furtherance of the foregoing strategy, we have engaged in the following transactions during the last three years:
On
July 1, 2013, the Company acquired a fifty percent (50%) working interest in the Moody and West Lease, Duval County, Texas.
On
October 10, 2013, the Company entered into a Technology Scouting Agreement with IP Technology Exchange, Inc. ("IP TechEx"),
to identify potential technology acquisition and licensing opportunities. Our alliance with IP TechEx will enable us
to develop a portfolio of new technologies within the oil and gas industry.
On
March 19, 2014, the Company formed Weyer Partners, LLC, a one hundred percent (100%) wholly owned a Minnesota Corporation. Weyer
Partners, LLC, was formed to operate oil and gas properties in Oklahoma and Texas.
On
May 9, 2014, the Company formed AFS Holdings, Inc., a one hundred percent (100%) wholly owned Nevada Corporation. AFS Holding,
Inc., was formed to leverage the Company’s relationship with IP TechEx, and market technology licensed from IP TechEx.
On
September 29, 2014 the Company acquired the assets of Kensington Energy Limited Partnership – 1985, Kensington Energy Limited
Partnership – 1986, Kensington Energy Limited Partnership – 1987, Kensington Energy Company, Kensington Group Venture
Kensington Group Venture I, Kensington Group Venture II, and Kensington Group Venture III for a combination of cash and debt.
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
We
plan to raise additional capital during the coming fiscal year, but currently have not identified additional funding sources.
Our ability to continue operations is highly dependent upon our ability to obtain additional financing, or generate revenues from
our acquired oil and gas leasehold interests, none of which can be guaranteed.
Ultimately,
our success is dependent upon our ability to generate revenues from our acquired oil and gas leasehold interests, and to achieve
profitability, which is dependent upon a number of factors, including general economic conditions and the sustained profitability
resulting from the operation of the acquired oil and gas leaseholds. There is no assurance that even with adequate financing or
combined operations, we will generate revenues and be profitable.
PATENTS,
TRADEMARKS, AND PROPRIETARY RIGHTS
On
November 9, 2006, The Company acquired Intelli-Well Technologies, Inc., ("IWT"). IWT holds a license for borehole casing
technology developed by researchers at Lawrence Livermore National Laboratory.
On
August 16, 2007, Kent Rodriguez, the Company's President and CEO, presented a proposal to the Board of Directors to spin-off Oiltek
Inc. ("Oiltek"), which specializes in oil and gas recovery technology to Avalon's shareholders. The oil and gas technology
include, but are not limited, to the Patent; a system to detect hazardous gas leaks including small leaks in natural gas pipelines;
and a system for intelligent drilling and completion sensors to provide real-time oil reservoir monitoring of subsurface information.
On
September 22, 2007 the Company entered into an agreement with respect to its purchase of a 75.6% interest in Oiltek for $50,000
and the right of Oiltek to promote Avalon's intellectual property.
On
October 10, 2013, the Company entered into a Technology Scouting Agreement with IP Technology Exchange, Inc. ("IP TechEx"),
to identify potential technology acquisition and licensing opportunities. Our alliance with IP TechEx will enable us
to develop a portfolio of new technologies within the oil and gas industry.
On
May 9, 2014, the Company formed AFS Holdings, Inc., a one hundred percent (100%) wholly owned Nevada Corporation. AFS Holding,
Inc., was formed to leverage the Company’s relationship with IP TechEx, and market technology licensed from IP TechEx.
GOING CONCERN
The
December 31, 2014, financial statements have been prepared assuming the Company will continue as a going concern. However, the
Company has incurred a loss of $31,060,514 from inception through December 31, 2014, and has a working capital deficiency of
$769,563 and stockholders’ equity of $1,361,911 as of December 31, 2014. The Company currently has minimal revenue
generating operations and expects to incur substantial operating expenses in order to expand its business. As a result, the Company
expects to incur operating losses for the foreseeable future. The Company will continue to seek equity and debt financing
to meet our operating losses. The accompanying consolidated financial statements do not include any adjustments that
might become necessary should the Company be unable to continue as a going concern.
Financing
Activities
We
have been funding our obligations through the issuance of our Common Stock for services rendered and for notes payable owed
or for cash in private placements. The Company may seek additional funds in the private or public equity or debt markets
in order to execute its plan of operation and business strategy. There can be no assurance that we will be able to attract
capital or obtain such financing when needed or on acceptable terms in which case the Company's ability to execute its business strategy
will be impaired.
Results
of Operations
Three and
nine month periods ended December 31, 2014 compared to the three and nine month periods ended December 31, 2013:
Revenues
Revenues
for the three months ended December 31, 2014 were $46,991, an increase of $12,047 or approximately 34% compared to revenue of
$34,944 for the three months ended December 31, 2013. Revenues increased as a result of a production related to the
Kensington Energy Assets wells.
Revenues
for the nine months ended December 31, 2014 were $109,925, an increase of $15,956 or approximately 17 % compared to revenue of
$93,969 for the nine months ended December 31, 2013. Revenues increased as a result of the higher market price for
natural gas, as well as production from the Kensington Energy Assets wells.
Lease
Operating Expenses
During
the three months ended December 31, 2014, our lease operating expenses were $39,467, an increase of $28,772 or approximately 269%
compared to $10,695 for the three months ended December 31, 2013. The increase was due to larger than expected workover
expenses incurred on the Company's properties in Miller County, Arkansas.
During
the nine months ended December 31, 2014, our lease operating expenses were $78,260, an increase of $7,715 or approximately 11%
compared to $70,545 for the nine months ended December 31, 2013. The increase was due to larger than expected workover expenses
incurred on the Company's properties in Miller County, Arkansas.
Selling,
General, and Administrative Expenses
Selling,
general and administrative expenses for the three months ended December 31, 2014 were $67,469, a decrease of $16,755 or approximately
20% compared to selling, general and administrative expenses of $84,224 during the three months ended December 31, 2013. Selling,
general and administrative expenses for the three months ended December 31, 2014 consisted primarily of payroll and related costs
of $12,000; legal and accounting fees in the amount of $10,500; travel and entertainment expenses of $20,206; office expenses
of $1,108; facilities costs in the amount of $3,000; licensing fees of $15,530; and investor relations costs of $3,162 and the
other expenses of $1,963.
Selling,
general and administrative expenses for the nine months ended December 31, 2014 were $245,149, an increase of $1,290 or approximately
1% compared to selling, general and administrative expenses of $243,859 during the nine months ended December 31, 2013. Selling,
general and administrative expenses for the nine months ended December 31, 2014 consisted primarily of payroll and related costs
of $36,000; legal and accounting fees in the amount of $49,269; cash and non-cash consulting fees in the amount of $28,334; travel
and entertainment expenses of $46,734; office expenses of $21,460; facilities costs in the amount of $15,913; licensing fees of
$16,295; and investor relations costs of $6,122.
Stock
Based Compensation
There
was $2,121 of non-cash compensation for the three months ended December 31, 2014, compared to non-cash compensation of $47,000
for the three months ended December 31, 2013, a decrease of $44,879, or 95%.
There
was no non-cash compensation for the nine months ended December 31, 2014 was $16,121, compared to non-cash compensation of
$150,001 for the nine months ended December 31, 2013, or a decrease of $133,880 or 89%. This decrease was due to less
common stock issuances for services rendered during the nine month period ended December 31, 2014.
Depreciation,
Depletion, and Amortization
Depreciation,
depletion, and amortization was $24,403 for the three months ended December 31, 2014, an increase of $7,408 or approximately 44%
compared to $16,995 for the three months ended December 31, 2013. Depreciation, depletion and amortization increased
as a result of the acquisition of the Kensington Energy Assets.
Depreciation,
depletion, and amortization was $64,635 for the nine months ended December 31, 2014, an increase of $16,594 or approximately 35%
compared to $48,041 for the nine months ended December 31, 2013. Depreciation, depletion and amortization increased as a result
of the acquisition of the Kensington Energy Assets.
Interest
Expense, net of Interest Income
Interest
expense, net of interest income was $11,054 for the three months ended December 31, 2014, a decrease of $13,677, or approximately
55% compared to $24,731 for the three months ended December 31, 2013.
Interest
expense, net of interest income was $32,375 for the nine months ended December 31, 2014, a decrease of $42,101 or approximately
57% compared to $74,476 for the nine months ended December 31, 2013.
Net
Income (Loss)
Our net
income for the three months ended December 31, 2014, was $109,977 an increase of $268,578 or approximately 169% compared to a
net loss of $158,601, during the three months ended December 31, 2013. The increase in net income was due to a gain on the conversion
of $150,000 in notes payable for 650,000 shares of the Company’s common stock.
Our net
loss for the nine months ended December 31, 2014, was $109,015 a decrease of $440,988 or approximately 80% compared to a net loss
of $550,003, during the nine months ended December 31, 2013. The decrease in net loss was due to a gain on the conversion of $150,000
in notes payable for 650,000 shares of the Company’s common stock.
LIQUIDITY
AND CAPITAL RESOURCES
The
December 31, 2014, financial statements have been prepared assuming the Company will continue as a going concern. However, the
Company has incurred a loss of $31,060,514 from inception through December 31, 2014, and has a working capital deficiency of
$769,563 and stockholders’ equity of $1,361,911 as of December 31, 2014. The Company currently has minimal revenue generating
operations and expects to incur substantial operating expenses in order to expand its business. As a result, the Company expects
to incur operating losses for the foreseeable future. The Company will continue to seek equity and debt financing to
meet our operating losses. The accompanying consolidated financial statements do not include any adjustments that might
become necessary should the Company be unable to continue as a going concern.
Our
cash and cash equivalents were $118,249 on December 31, 2014, compared to $223,914 on March 31, 2014. We met our liquidity needs
through the issuance of our common and preferred stock for cash and the revenue derived from our oil and gas operations.
We
need to raise additional capital during the fiscal year, but currently have not acquired sufficient additional funding. Our ability
to continue operations as a going concern is highly dependent upon our ability to obtain immediate additional financing, or generate
revenues from our acquired oil and gas leasehold interest, and to achieve profitability, none of which can be guaranteed. Unless
additional funding is located, it is highly unlikely that we can continue to operate. There is no assurance that even with adequate
financing or combined operations, we will generate revenues and be profitable.
Ultimately,
our success is dependent upon our ability to generate revenues from our acquired oil and gas leasehold interests.
Investing
activities
During the
nine months ended December 31, 2014, we invested $112,858 a decrease of $108 compared to the nine months ended December 31, 2013.
Financing
Activities
During
the nine months ended December 31, 2014, we received $175,000 from the sale of preferred stock, borrowed $60,000 and incurred
dividends on preferred stock of $55,000. During the nine months ended December 31, 2013 we received $300,000 from the sale of
common stock and $50,000 from the sale of Series B Preferred Stock and incurred dividends on preferred stock of $28,300.
Operating
activities
Our
net income for the three months ended December 31, 2014, was $109,977 an increase of $268,578 or approximately 169% compared to
a net loss of $158,601, during the three months ended December 31, 2013. The increase in net income was due to a gain on the conversion
of $150,000 in notes payable for 650,000 shares of the Company’s common stock.
Our net
loss for the nine months ended December 31, 2014, was $109,015 a decrease of $440,988 or approximately 80% compared to a net loss
of $550,003, during the nine months ended December 31, 2013. The decrease in net loss was due to a gain on the conversion of $150,000
in notes payable for 650,000 shares of the Company’s common stock.
Critical
Accounting Policies
The
consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United
States of America. As such, we are required to make certain estimates, judgments and assumptions that we believe are reasonable
based on information available. These estimates and assumptions affect the reporting amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the reporting period. A summary of the
significant accounting policies is described in Note 1 to the financial statements.
Recently
Issued Accounting Pronouncements
Management
does not believe that any recently issued, but not yet effective, accounting standards or pronouncements, if currently adopted,
would have a material effect on the Company’s condensed consolidated financial statements.
Off-Balance
Sheet Arrangements
We have
no off-balance sheet arrangements.
Material
Commitments
We have
no material commitments during the next twelve (12) months.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This information
has been omitted, as the Company qualifies as a smaller reporting company.
ITEM
4. CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
Our
principal executive and financial officer, after evaluating the effectiveness of our "disclosure controls and procedures"
(as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered
by this report (the "Evaluation Date"), has concluded that as of the Evaluation Date, our disclosure controls and
procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports
that we file or submit under the Exchange Act (i) is accumulated and communicated to our management, including our Chief
Executive Officer, as appropriate to allow timely decisions regarding required disclosure, and (ii) is recorded, processed,
summarized and reported within the time periods specified in the Commission's rules and forms.
There
has been no change in our internal control over financial reporting identified during the period covered by this report which
have materially affected or is likely to materially affect.
PART
II
ITEM
1. LEGAL PROCEEDINGS
None.
ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On April
25, 2014, the Company issued 200,000 shares of Common Stock to a consultant, the value of these shares in the amount of $14,000,
or $0.02 per share was charged to operations, and was valued at closing bid price of the Company's common stock on the date the
Consulting Agreement was executed by the Company
During the
nine month period ended December 31, 2014, The Company issued 50 shares of Series B Preferred Stock to one accredited investor
in exchange for a note payable in the amount of $50,000.
During the
nine month period ended December 31, 2014, The Company issued 175 shares of Series B Preferred Stock to one accredited investor
for $175,000 for cash.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM
4. MINE SAFETY DISCLOSURES
None.
ITEM
5. OTHER INFORMATION
None.
ITEM
6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Form
8-K
NONE
(b) Exhibits
Exhibit
Number |
|
Description |
|
|
|
3.1 |
|
Restated Articles of Incorporation (Incorporated by reference to
Exhibit 3.1 to Registration Statement on Form SB-2, Registration No. 33-74240C).* |
3.2 |
|
Restated Bylaws (Incorporated by reference to Exhibit 3.2 to Registration
Statement on Form SB-2, Registration No. 33-74240C). * |
3.3 |
|
Articles of Incorporation for the State of Nevada. (Incorporated
by reference to Exhibit 2.2 to Form 10-KSB filed February 2000) * |
3.4 |
|
Articles of Merger for the Colorado Corporation and the Nevada
Corporation (Incorporated by reference to Exhibit 3.4 to Form 10-KSB filed February 2000) * |
3.5 |
|
Bylaws of the Nevada Corporation (Incorporated by reference to
Exhibit 3.5 to Form 10-KSB filed February 2000) * |
4.1 |
|
Specimen of Common Stock (Incorporated by reference to Exhibit
to Registration Statement on Form SB-2, Registration No. 33-74240C). * |
10.1 |
|
Employment Agreement between the Company and Kent Rodriguez dated
April 1, 2011 * |
10.2 |
|
Promissory Note between the Company and Peter Messerli dated
January 6, 2011, in the amount of $200.000 * |
10.3 |
|
Promissory Note between the Company and Maerki Baumann & Company
AG dated January 11, 2011, in the amount of $250,000 * |
10.4 |
|
Promissory Note between the Company and Maerki Baumann & Company
AG dated January 27, 2012, in the amount of $200,000 * |
10.5 |
|
Certificate of Designation Series B Preferred Stock* |
31.1 |
|
Certification |
32.1 |
|
Certification |
____________
* Incorporated
by reference to a previously filed exhibit or report.
SIGNATURES
In accordance
with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
Avalon Oil & Gas, Inc. |
|
|
|
|
|
Date: June 30, 2015 |
By: |
/s/ Kent Rodriguez
|
|
|
|
Kent Rodriguez |
|
|
|
Chief Executive Officer |
|
|
|
Chief Financial and Accounting Officer |
|
Exhibit
31.1
CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Kent
Rodriguez, certify that:
1. |
I have reviewed this Form 10-Q of Avalon Oil &
Gas, Inc.; |
|
|
2. |
Based on my knowledge, this report does not contain
any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
|
3. |
Based on my knowledge, the financial statements, and
other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
|
4. |
The registrant's other certifying officer(s) and I
are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for
the registrant and have: |
|
|
a. |
Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared; |
|
|
b. |
Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles; |
|
|
c. |
Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation; and |
|
|
d. |
Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the registrant's internal control over financial reporting; and |
|
|
5. |
The registrant's other certifying officer(s) and I
have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors
and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
|
a. |
All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial information; and |
|
|
b. |
Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control over financial reporting. |
|
|
|
Date: June 30, 2015 |
By: |
/s/ Kent Rodriguez |
|
|
|
Kent Rodriguez |
|
|
|
Chief
Executive Officer, President,
Secretary
and Principal Financial Officer |
|
Exhibit
32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection
with the Annual Report of Avalon Oil & Gas, Inc. (the "Company") on Form 10-Q for the period ending September 30,
2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Kent Rodriguez, Chief
Executive Officer and Chief Accounting Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to
ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Report fully complies with the requirements
of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
|
(2) |
The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the Company. |
Date: June 30, 2015 |
By: |
/s/ Kent Rodriguez |
|
|
|
Kent Rodriguez |
|
|
|
Chief
Executive Officer, President,
Secretary
and Principal Financial Officer |
|
Groove Botanicals (PK) (USOTC:GRVE)
과거 데이터 주식 차트
부터 5월(5) 2024 으로 6월(6) 2024
Groove Botanicals (PK) (USOTC:GRVE)
과거 데이터 주식 차트
부터 6월(6) 2023 으로 6월(6) 2024