SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K/A
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d)
OFTHE
SECURITIES EXCHANGE ACT OF 1934
Date of
Report (Date of earliest event reported): February 11,
2011
Management
Energy, Inc.
(Exact
name of registrant as specified in its charter)
Nevada
|
333-152608
|
26-1749145
|
(State of
|
(Commission File
|
(IRS Employer
|
incorporation)
|
Number)
|
Identification Number)
|
2626
Cole Avenue, Suite 610
Dallas,
Texas 75204
(Address
of principal executive offices)
Registrant's telephone number,
including area code: (214) 880-0400
Check the
appropriate box if the Form 8-K filing is intended to simultaneously satisfy the
reporting obligation of the registrant under any of the following
provisions:
¨
|
Written
communications pursuant to Rule 425 under the Securities
Act
|
¨
|
Soliciting
material pursuant to Rule 14a-12 of the Exchange
Act
|
¨
|
Pre-commencement
communications pursuant to Rule 14d-2(b) Exchange
Act
|
¨
|
Pre-commencement
communications pursuant to Rule 13e-4(c) Exchange
Act
|
On
September 29, 2010, we filed a Current Report on Form 8-K to report our merger
with Maple Carpenter Creek Holdings, Inc. This amendment on Form
8-K/A includes certain financial statements required to be filed by amendment to
such earlier report pursuant to Rule 3-05 of Regulation S-X. This rule states
that audited financial statements should be included for all individually
significant acquisitions. In addition, reviewed financial statements
of the acquisitions are included in instances in which the audited financial
statements have become stale. The acquisitions will be accounted for
as a reverse acquisition with a development stage company. In reverse
acquisition accounting, the historical financial statements presented represent
that of the legal acquiree, which are the consolidated financial statements of
the acquired companies as of the first period presented. As a result,
no proforma financial statements are included in this filing. The two
acquisitions that are presented in this filing are Maple Carpenter Creek, LLC
and Subsidiary and Armadillo Holdings Group Corp. and Subsidiary. The
ownership of these two companies was structured to allow a new entity, Maple
Carpenter Creek Holdings, Inc, to own a majority stake in both entities
immediately prior to completing the acquisition.
2
Item
9.01 Financial
Statements and Exhibits
TABLE
OF CONTENTS
Maple
Carpenter Creek, LLC and Subsidiary
|
|
Report
of Independent Registered Public Accounting Firm
|
F-1
|
Consolidated
Balance Sheets
|
F-2
|
Consolidated
Statements of Operations
|
F-3
|
Consolidated
Statements of Members’ Interests
|
F-4
|
Consolidated
Statements of Cash Flows
|
F-5
|
Notes
to Consolidated Financial Statements
|
F-6
|
Armadillo
Holdings Corp. and Subsidiary
|
|
Report
of Independent Registered Public Accounting Firm
|
F-17
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Consolidated
Balance Sheets
|
F-18
|
Consolidated
Statements of Operations
|
F-19
|
Consolidated
Statements of Stockholders’ Equity (Deficit)
|
F-20
|
Consolidated
Statements of Cash Flows
|
F-21
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Notes
to Consolidated Financial Statements
|
F-22
|
3
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
MANAGEMENT
ENERGY, INC.
|
||
Date: February
11, 2011
|
By:
|
/s/ Jack W.
Hanks
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Jack
W. Hanks, President and
|
||
Chief
Executive Officer
|
4
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors
Maple
Carpenter Creek, LLC and Subsidiary
We have
audited the accompanying consolidated balance sheets of Maple Carpenter Creek,
LLC and subsidiary (the “Company”) as of April 30, 2010 and 2009 and the related
statements of operations, members' interests and cash flows for the twelve month
periods then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We
conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Maple Carpenter Creek, LLC and
subsidiary as of April 30, 2010 and 2009 and the results of its operations and
cash flows for the periods described above in conformity with accounting
principles generally accepted in the United States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has insufficient working capital, which raises
substantial doubt about its ability to continue as a going concern. Management’s
plans regarding those matters also are described in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/
M&K CPAS, PLLC
www.mkacpas.com
Houston,
Texas
January
10, 2011
F-1
MAPLE
CARPENTER CREEK, LLC & SUBSIDIARY
(An
Exploration Stage Company)
Consolidated
Balance Sheets
October 31,
|
April 30,
|
April 30,
|
||||||||||
2010
|
2010
|
2009
|
||||||||||
|
(Unaudited)
|
|||||||||||
Assets
|
||||||||||||
Current
assets:
|
||||||||||||
Cash
|
$ | 923 | $ | 314 | $ | 38,478 | ||||||
Intercompany
advances
|
687,548 | 378,353 | - | |||||||||
Prepaid
expenses
|
50,534 | 65,793 | 57,795 | |||||||||
Total
current assets
|
682,014 | 444,460 | 96,273 | |||||||||
Property
and equipment, net
|
29,946 | 18,208 | 21,952 | |||||||||
Other
assets:
|
||||||||||||
Investments
in property owned by related party
|
- | 1,413,253 | 1,413,253 | |||||||||
Deposits
|
10,000 | 10,000 | 10,000 | |||||||||
Total
Assets
|
$ | 721,960 | $ | 1,885,921 | $ | 1,541,478 | ||||||
Liabilities
and Stockholders' Equity (Deficit)
|
||||||||||||
Current
liabilities:
|
||||||||||||
Accounts
payable, including related party amounts
|
||||||||||||
of
$75,648, $135,347 and $8,657 at October 31, 2010,
|
||||||||||||
April
30, 2010 and April 30, 2009, respectively
|
$ | 448,053 | $ | 270,482 | $ | 181,770 | ||||||
Accrued
interest
|
118,539 | 90,328 | - | |||||||||
Current
maturities of notes payable, including related party
|
||||||||||||
amounts
of $300,000, $300,000 and $-0- at October 31, 2010,
|
||||||||||||
April
30, 2010 and April 30, 2009, respectively
|
600,000 | 600,000 | - | |||||||||
Total
current liabilities
|
1,149,601 | 960,810 | 181,770 | |||||||||
Long
term portion of notes payable, related party
|
789,048 | 798,446 | 818,988 | |||||||||
Total
Liabilities
|
1,938,649 | 1,759,256 | 1,000,758 | |||||||||
Stockholders'
Equity (Deficit):
|
||||||||||||
Members'
Capital
|
(1,117,966 | ) | 197,662 | 540,720 | ||||||||
Non-controlling
interest
|
(98,723 | ) | (70,997 | ) | - | |||||||
Total
Stockholders' Equity (Deficit)
|
(1,216,689 | ) | 126,665 | 540,720 | ||||||||
Total
Liabilities and Stockholders' Equity (Deficit)
|
$ | 721,960 | $ | 1,885,921 | $ | 1,541,478 |
The
accompanying notes are an integral part of the financial
statements.
F-2
MAPLE
CARPENTER CREEK, LLC & SUBSIDIARY
(An
Exploration Stage Company)
Consolidated
Statements of Operations
For the period from
|
||||||||||||||||||||
For the six
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For the six
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May 23, 2007
|
||||||||||||||||||
months ended
|
months ended
|
For the year ended
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For the year ended
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(Inception) through
|
||||||||||||||||
October 31, 2010
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October 31, 2009
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April 30, 2010
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April 30, 2009
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October 31, 2010
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||||||||||||||||
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(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||||||
Revenue:
|
||||||||||||||||||||
Revenues
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Operating
Expenses:
|
||||||||||||||||||||
Exploration
and development
|
253,736 | 270,210 | 456,896 | 788,674 | 3,475,875 | |||||||||||||||
General
and administrative
|
110,962 | 69,988 | 225,034 | 527,448 | 1,599,058 | |||||||||||||||
Payroll
and taxes
|
29,338 | 68,393 | 182,831 | 424,397 | 1,308,988 | |||||||||||||||
Professional
fees
|
188,785 | 400,780 | 513,539 | 896,195 | 2,163,939 | |||||||||||||||
Depreciation
and amortization
|
3,587 | 2,499 | 5,064 | 1,744 | 11,029 | |||||||||||||||
Total
operating expenses
|
586,408 | 811,870 | 1,383,364 | 2,638,458 | 8,558,889 | |||||||||||||||
Net
operating (loss)
|
(586,408 | ) | (811,870 | ) | (1,383,364 | ) | (2,638,458 | ) | (8,558,889 | ) | ||||||||||
Other
income (expense):
|
||||||||||||||||||||
Interest
income
|
- | - | - | - | 59 | |||||||||||||||
Other
income
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- | - | 10,000 | 5,000 | - | |||||||||||||||
Interest
expense
|
(67,488 | ) | (47,490 | ) | (147,045 | ) | (36,858 | ) | (266,631 | ) | ||||||||||
Total
other income (expense)
|
(67,488 | ) | (47,490 | ) | (137,045 | ) | (31,858 | ) | (266,572 | ) | ||||||||||
Net
(loss) before income taxes
|
||||||||||||||||||||
and
non-controlling interest
|
(653,896 | ) | (859,360 | ) | (1,520,409 | ) | (2,670,316 | ) | (8,825,461 | ) | ||||||||||
Provision
for income taxes
|
- | - | - | - | - | |||||||||||||||
Non-controlling
interest in loss
|
||||||||||||||||||||
of
consolidated subsidiaries
|
27,726 | 93,021 | 119,277 | - | 785,915 | |||||||||||||||
Net
(loss)
|
$ | (626,170 | ) | $ | (766,339 | ) | $ | (1,401,132 | ) | $ | (2,670,316 | ) | $ | (8,039,546 | ) |
The
accompanying notes are an integral part of the financial
statements.
F-3
MAPLE
CARPENTER CREEK, LLC & SUBSIDIARY
(An
Exploration Stage Company)
Consolidated
Statement of Members' Interests
Members'
|
Capital
|
Non-controlling
|
Total Members'
|
|||||||||||||
Capital
|
Advances
|
Interests
|
Interests
|
|||||||||||||
Balance,
May 23, 2007 (Inception)
|
$ | - | $ | - | $ | - | $ | - | ||||||||
Acquisition
of subsidiary, Carpenter Creek, LLC, 75% interest
|
- | - | 69,411 | 69,411 | ||||||||||||
Note
receivable issued as capital contributions from members
|
523,231 | - | - | 523,231 | ||||||||||||
Acquisition
of subsidiary, Carpenter Creek, LLC, 2.5% interest
|
(57,598 | ) | - | 57,598 | - | |||||||||||
Capital
contributions from members
|
- | 3,353,500 | - | 3,353,500 | ||||||||||||
Net
(loss) for the period from May 23, 2007
|
||||||||||||||||
(Inception)
through April 30, 2008
|
(3,839,278 | ) | - | (127,009 | ) | (3,966,287 | ) | |||||||||
Balance,
April 30, 2008
|
$ | (3,373,645 | ) | $ | 3,353,500 | $ | - | $ | (20,145 | ) | ||||||
Capital
contributions from members
|
- | 3,231,181 | - | 3,231,181 | ||||||||||||
Net
(loss) for the year ended April 30, 2009
|
(2,670,316 | ) | - | - | (2,670,316 | ) | ||||||||||
Balance,
April 30, 2009
|
$ | (6,043,961 | ) | $ | 6,584,681 | $ | - | $ | 540,720 | |||||||
Acquisition
of subsidiary, Carpenter Creek, LLC, 2.5% interest
|
(548,280 | ) | - | 48,280 | (500,000 | ) | ||||||||||
|
||||||||||||||||
Capital
contributions from members
|
86,297 | 1,520,057 | - | 1,606,354 | ||||||||||||
Capital
advances converted to equity
|
7,517,350 | (7,517,350 | ) | - | - | |||||||||||
Net
(loss) for the year ended April 30, 2010
|
(1,401,132 | ) | - | (119,277 | ) | (1,520,409 | ) | |||||||||
Balance,
April 30, 2010
|
$ | (389,726 | ) | $ | 587,388 | $ | (70,997 | ) | $ | 126,665 | ||||||
Distribution
of property, Snider Ranch property
|
(1,413,253 | ) | - | - | (1,413,253 | ) | ||||||||||
Capital
contributions from shareholder
|
- | 440,743 | - | 440,743 | ||||||||||||
Capital
contributions from members
|
283,052 | - | - | 283,052 | ||||||||||||
Capital
advances converted to equity
|
1,028,131 | (1,028,131 | ) | - | - | |||||||||||
Net
(loss) for the six months ended October 31, 2010
|
(626,170 | ) | - | (27,726 | ) | (653,896 | ) | |||||||||
Balance,
October 31, 2010 (Unaudited)
|
$ | (1,117,966 | ) | $ | - | $ | (98,723 | ) | $ | (1,216,689 | ) |
The
accompanying notes are an integral part of the financial
statements.
F-4
MAPLE
CARPENTER CREEK, LLC & SUBSIDIARY
(An
Exploration Stage Company)
Consolidated
Statements of Cash Flows
For the period from
|
||||||||||||||||||||
For the six
|
For the six
|
May 23, 2007
|
||||||||||||||||||
months ended
|
months ended
|
For the year ended
|
For the year ended
|
(Inception) through
|
||||||||||||||||
October 31, 2010
|
October 31, 2009
|
April 30, 2010
|
April 30, 2009
|
October 31, 2010
|
||||||||||||||||
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||||||||||
Cash
flows from operating activities
|
||||||||||||||||||||
Net
(loss)
|
$ | (626,170 | ) | $ | (766,339 | ) | $ | (1,401,132 | ) | $ | (2,670,316 | ) | $ | (8,536,896 | ) | |||||
Non-controlling
interest in net loss
|
(27,726 | ) | (93,021 | ) | (119,277 | ) | - | (274,012 | ) | |||||||||||
Adjustments
to reconcile net (loss) to net cash used in operating
activities:
|
||||||||||||||||||||
Depreciation
and amortization expense
|
3,587 | 2,499 | 5,064 | 1,744 | 11,029 | |||||||||||||||
Write
off of related party balance
|
- | - | - | 101,724 | 101,724 | |||||||||||||||
Decrease
(increase) in assets:
|
||||||||||||||||||||
Other
receivables, related party
|
(390,195 | ) | - | (378,353 | ) | - | (945,557 | ) | ||||||||||||
Prepaid
expenses
|
15,259 | - | (7,998 | ) | 119,195 | (50,535 | ) | |||||||||||||
Deposits
|
- | - | - | - | (10,000 | ) | ||||||||||||||
Increase
(decrease) in liabilities:
|
||||||||||||||||||||
Accounts
payable
|
277,267 | 64,226 | (46,635 | ) | (154,142 | ) | 403,743 | |||||||||||||
Accounts
payable - related party
|
(59,696 | ) | 35,802 | 135,347 | (10,000 | ) | 240,593 | |||||||||||||
Accrued
expenses
|
28,211 | 17,589 | 90,328 | - | 118,539 | |||||||||||||||
Net
cash used in operating activities
|
(698,463 | ) | (739,244 | ) | (1,722,656 | ) | (2,611,795 | ) | (8,941,372 | ) | ||||||||||
Cash
flows from investing activities
|
||||||||||||||||||||
Purchase
of fixed assets
|
(15,325 | ) | (1,320 | ) | (1,320 | ) | (22,429 | ) | (40,975 | ) | ||||||||||
Amounts
paid to invest in property owned by a related party
|
- | - | - | (1,383,253 | ) | (1,413,253 | ) | |||||||||||||
Net
cash used in investing activities
|
(15,325 | ) | (1,320 | ) | (1,320 | ) | (1,405,682 | ) | (1,454,228 | ) | ||||||||||
Cash
flows from financing activities
|
||||||||||||||||||||
Capital
contributions
|
723,795 | 715,170 | 1,606,354 | 3,231,181 | 9,438,064 | |||||||||||||||
Acquisition
of non-controlling interest
|
- | (300,000 | ) | (500,000 | ) | - | (430,589 | ) | ||||||||||||
Proceeds
from long term debt
|
- | 300,000 | 600,000 | 1,000,000 | 1,600,000 | |||||||||||||||
Payments
on notes payable
|
(9,398 | ) | (8,933 | ) | (20,542 | ) | (181,012 | ) | (210,952 | ) | ||||||||||
Net
cash provided by financing activities
|
714,397 | 706,237 | 1,685,812 | 4,050,169 | 10,396,523 | |||||||||||||||
Net
increase (decrease) in cash
|
609 | (34,327 | ) | (38,164 | ) | 32,692 | 923 | |||||||||||||
Cash
- beginning
|
314 | 38,478 | 38,478 | 5,786 | - | |||||||||||||||
Cash
- ending
|
$ | 923 | $ | 4,151 | $ | 314 | $ | 38,478 | $ | 923 | ||||||||||
Supplemental
disclosures:
|
||||||||||||||||||||
Interest
paid
|
$ | 41,752 | $ | 36,858 | $ | 147,045 | $ | 36,858 | $ | 225,655 | ||||||||||
Income
taxes paid
|
$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
Non-cash
investing and financing transactions:
|
||||||||||||||||||||
Note
receivable issued as capital contributions
|
$ | - | $ | - | $ | - | $ | - | $ | 523,231 | ||||||||||
Distribution
of property, Snider Ranch
|
$ | (1,413,253 | ) | $ | - | $ | - | $ | - | $ | (1,413,253 | ) | ||||||||
Capital
advances converted to equity
|
$ | 1,028,131 | $ | - | $ | 7,517,350 | $ | - | $ | 8,545,481 |
The
accompanying notes are an integral part of the financial
statements.
F-5
Maple
Carpenter Creek, LLC & Subsidiary
Notes to
Consolidated Financial Statements
April 30,
2010 and 2009
(Information
for the six month periods ended
October
31, 2010 and 2009 is unaudited)
Note
1 – Nature of Business and Significant Accounting Policies
Basis of
Presentation
The
accompanying consolidated financial statements include the accounts of the
following entities, all of which are under common control and
ownership:
Form of
|
State of
|
||||||||
Name of Entity
|
%
|
Entity
|
Incorporation
|
Relationship
|
|||||
Maple
Carpenter Creek, LLC ("MCC”)
|
- |
LLC
|
Nevada
|
Parent
|
|||||
Carpenter
Creek, LLC (“CC”)
|
95 | % |
LLC
|
Delaware
|
Subsidiary
|
The
consolidated financial statements herein contain the operations of the above
listed subsidiaries as of the dates and for the periods as indicated. All
significant inter-company transactions have been eliminated in the preparation
of these financial statements.
These
statements reflect all adjustments, consisting of normal recurring adjustments,
which in the opinion of management are necessary for fair presentation of the
information contained therein.
The
Companies have adopted a fiscal year end of April 30th.
The
Company’s functional and reporting currency is the United States
dollar.
The
comparative financial statements herein include the fiscal years ended April 30,
2010 and April 30, 2009, and the six months ended October 31, 2010 and October
31, 2009.
Organization
Maple
Carpenter Creek, LLC (“MCC”), a Nevada corporation formed on May 23, 2007 to
pursue interests in various coal exploration projects in the United States, or
in the alternative to sell the projects, owns a 95% interest in the subsidiary,
Carpenter Creek, LLC (“CC”). Maple Carpenter Creek Holdings, Inc., (“MCCH”) a
Delaware Corporation, organized on October 15, 2009 as a holding Company owns an
80% interest in Maple Carpenter Creek, LLC (“MCC”).
Merger with Maple Carpenter
Creek Holdings, Inc
On
September 21, 2010, Management Energy, Inc entered into a merger agreement with
Maple Carpenter Creek Holdings, Inc. (“MCCH”) that closed on September 23, 2010.
Under the terms of the merger agreement, MCCH merged with a wholly owned
subsidiary of Management Energy, Inc., MCC Merger, Inc. (“MCCM”), which was
formed just prior to the merger and subsequently dissolved, in exchange for the
issuance of 65,000,000 shares of Management Energy, Inc common stock to the
owners of MCCH, of which 50,000,000 shares were issued on October 8, 2010 and
15,000,000 shares remain unissued and presented as common stock payable. The
merger resulted in the owners of MCCH gaining control of Management Energy,
Inc. The owners of MCCH also were granted the right to receive an
additional 15,000,000 shares of common stock as contingent consideration to vest
on certain milestones defined in the definitive merger agreement as
follows:
|
·
|
10,000,000
shares upon the closing of equity or debt financing that generates at
least 2 million in net proceeds,
|
|
·
|
2,500,000
shares upon the successful generation of $250,000 in revenue from coal
sales in any fiscal quarter,
|
|
·
|
2,500,000
shares upon the successful closing of additional equity or debt financing
that will generate at least $2,000,000 in net
proceeds.
|
F-6
Maple
Carpenter Creek, LLC & Subsidiary
Notes to
Consolidated Financial Statements
April 30,
2010 and 2009
(Information
for the six month periods ended
October
31, 2010 and 2009 is unaudited)
For
financial statement reporting purposes, the merger agreement was treated as a
reverse acquisition with MCCH deemed the accounting acquirer and the Company
deemed the accounting acquiree under the purchase method of accounting in
accordance with Accounting Standards Codification (“ASC”) 805-10-40, Business Combinations – Reverse Acquisitions. The
reverse merger is deemed a recapitalization and the consolidated financial
statements reflect the assets and liabilities of MCCH recognized and measured at
their carrying value before the combination and the assets and liabilities of
the Company (the legal acquirer/legal parent) are measured at fair value. The
carrying value of the Company’s net assets approximates fair value at the date
of acquisition. The fair value of the net assets acquired is
($70,832). The equity structure reflects the equity structure of the
Company, the legal parent, and the equity structure of MCCH, the accounting
acquirer, as restated using the exchange ratios established in the merger
agreement to reflect the numbers of shares of the legal parent. References to
the “Company” in these notes refer to Management Energy, Inc. and its wholly
owned subsidiary, MCCH, as well as, the previously discussed
subsidiaries.
MCCH is
engaged in the development of both thermal and metallurgical coal projects in
the U.S. and Colombia. MCCH had the following coal project interests as of the
date of closing of the merger:
|
·
|
Carpenter
Creek, Montana: An 80% interest in the Carpenter Creek coal prospect near
Round Up, Montana. – MCCH controls the surface rights covering a resource
potential of 345 million tons; and the mineral rights for a resource
potential of over 83 million tons of
coal.
|
|
|
|
·
|
Snider
Ranch, Montana: An 80% interest in the Snider Ranch real estate and coal
prospect and the Mattfield and Janich Ranch prospects, both of which
prospects are adjacent to the Signal Peak Mine, near Roundup, Montana.
MCCH controls the surface rights covering a resource potential of over 43
million tons of coal.
|
|
|
|
·
|
Armadillo
Group Holdings Corporation: An 80% ownership of Armadillo Mining Corp.
(“AMC”) in Colombia. As of the date of closing of the merger, AMC had
exclusive options to acquire two metallurgical coal mines in the
Cundinamarca province of Colombia: (i) Caparrapi is a permitted mine with
minimum production and with a resource potential of 11 million metric
tonnes; (ii) Yacopi has resource potential of 40 million metric tonnes. As
of the date of this filing, AMC has terminated the exclusive options for
the Caparrapi and Yacopi mines. AMC, is however, in active negotiations to
acquire an option to purchase a 50% interest in a permitted and operating
mine in Colombia producing metallurgical coal, with a potential resource
of 16 million tons. As of the date of this filing, Armadillo Group
Holdings Corporation has an 86.27% ownership interest in
AMC.
|
The
financial statements herein exclude the effects of the merger on September 21,
2010.
Nature of
Business
Our
current strategy is to pursue both the Carpenter Creek and interests in various
coal exploration projects in the United States and Colombia with development
partners, or in the alternative to sell the projects. We believe the benefits of
this strategy include reduced capital requirements on the Company, and the
ability to access industry technical development experience and marketing
expertise. In the event of a sale of the projects, it will allow the Company to
focus more on the potential acquisition of Colombia metallurgical coal assets
that are currently producing.
Exploration Stage
Company
The
Company is currently an exploration stage company. As an exploration stage
enterprise, the Company discloses the deficit accumulated during the exploration
stage and the cumulative statements of operations and cash flows from inception
to the current balance sheet date. The Company has incurred net losses of
$8,039,546 and used net cash in operations of $8,941,372 for the period from
inception (May 23, 2007) through October 31, 2010. An entity remains in the
exploration stage until such time as proven or probable reserves have been
established for its deposits. Upon the location of commercially mineable
reserves, the Company plans to prepare for mineral extraction and enter the
development stage. To date, the exploration stage of the Company’s operations
consists of contracting with geologists who sample and assess the mining
viability of the Company’s claims.
F-7
Maple
Carpenter Creek, LLC & Subsidiary
Notes to
Consolidated Financial Statements
April 30,
2010 and 2009
(Information
for the six month periods ended
October
31, 2010 and 2009 is unaudited)
Unaudited Interim Financial
Information
The
accompanying balance sheet as of October 31, 2010, statement of operations and
statements of cash flows for the six months ended October 31, 2010 and 2009,
statement of members’ interests for the six months ended October 31, 2010 and
2009 are unaudited. These unaudited interim financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”). In the opinion of the Company’s management,
the unaudited interim financial statements have been prepared on the same basis
as the audited financial statements and include all adjustments necessary for
the fair presentation of the Company’s statement of financial position at
October 31, 2010, its results of operations and its cash flows for the six
months ended October 31, 2010 and 2009. The results for the six months ended
October 31, 2010 and 2009 are not necessarily indicative of the results to be
expected for the fiscal year ending April 30, 2011.
Use of
estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
the disclosure 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 differ from those estimates.
Property and
equipment
Equipment
is recorded at the lower of cost or estimated net recoverable amount, and is
depreciated using the straight-line method over the estimated useful life of the
related asset as follows:
Furniture
and fixtures
|
5
years
|
Machinery
and equipment
|
5
years
|
Software
and hardware
|
5
years
|
Maintenance
and repairs will be charged to expense as incurred. Significant renewals and
betterments will be capitalized. At the time of retirement or other disposition
of equipment, the cost and accumulated depreciation will be removed from the
accounts and the resulting gain or loss, if any, will be reflected in
operations.
The
Company will assess the recoverability of equipment by determining whether the
depreciation and amortization of these assets over their remaining life can be
recovered through projected undiscounted future cash flows. The amount of
equipment impairment, if any, will be measured based on fair value and is
charged to operations in the period in which such impairment is determined by
management.
Fair value of financial
instruments
Under
FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a
framework for measuring fair value in generally accepted accounting principles
and expands disclosures about fair value measurements. This Statement
reaffirms that fair value is the relevant measurement attribute. The adoption of
this standard did not have a material effect on the Company’s financial
statements as reflected herein. The carrying amounts of cash, accounts payable
and accrued expenses reported on the balance sheet are estimated by management
to approximate fair value primarily due to the short term nature of the
instruments. The Company had no other items that required fair value measurement
on a recurring basis.
Advertising and
promotion
All costs
associated with advertising and promoting products are expensed as incurred. No
expenses were incurred for the six months ended October 31, 2010 and 2009,
respectively, or for the years ended April 30, 2010 and 2009,
respectively.
F-8
Maple
Carpenter Creek, LLC & Subsidiary
Notes to
Consolidated Financial Statements
April 30,
2010 and 2009
(Information
for the six month periods ended
October
31, 2010 and 2009 is unaudited)
Income
taxes
The
Company recognizes deferred tax assets and liabilities based on differences
between the financial reporting and tax bases of assets and liabilities using
the enacted tax rates and laws that are expected to be in effect when the
differences are expected to be recovered. The Company provides a valuation
allowance for deferred tax assets for which it does not consider realization of
such assets to be more likely than not.
Basic and diluted loss per
share
The basic
net loss per common share is computed by dividing the net loss by the weighted
average number of common shares outstanding. Diluted net loss per common share
is computed by dividing the net loss adjusted on an “as if converted” basis, by
the weighted average number of common shares outstanding plus potential dilutive
securities. For the periods presented, potential dilutive securities had an
anti-dilutive effect and were not included in the calculation of diluted net
loss per common share.
Stock-based
compensation
The
Company adopted FASB guidance on stock based compensation upon inception at May
23, 2007. Under FASB ASC 718-10-30-2, all share-based payments to employees,
including grants of employee stock options, are to be recognized in the income
statement based on their fair values. Pro forma disclosure is no longer an
alternative. For the periods presented, there were no share-based payments to
employees, or otherwise.
Uncertain tax
positions
Effective
upon the Company’s fiscal year ended April 30, 2009, the Company adopted new
standards for accounting for uncertainty in income taxes. These standards
prescribe a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. These standards also provide guidance on de-recognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition.
Various
taxing authorities periodically audit the Company’s income tax returns. These
audits include questions regarding the Company’s tax filing positions, including
the timing and amount of deductions and the allocation of income to various tax
jurisdictions. In evaluating the exposures connected with these various tax
filing positions, including state and local taxes, the Company records
allowances for probable exposures. A number of years may elapse before a
particular matter, for which an allowance has been established, is audited and
fully resolved. The Company has not yet undergone an examination by any taxing
authorities.
The
assessment of the Company’s tax position relies on the judgment of management to
estimate the exposures associated with the Company’s various filing
positions.
Recently issued accounting
pronouncements
In April
2010, the FASB issued ASU No. 2010-18 regarding improving comparability by
eliminating diversity in practice about the treatment of modifications of loans
accounted for within pools under Subtopic 310-30 – Receivable – Loans and Debt
Securities Acquired with Deteriorated Credit Quality (“Subtopic 310-30”).
Furthermore, the amendments clarify guidance about maintaining the integrity of
a pool as the unit of accounting for acquired loans with credit
deterioration. Loans accounted for individually under Subtopic 310-30
continue to be subject to the troubled debt restructuring accounting provisions
within Subtopic 310-40, Receivables—Troubled Debt Restructurings by
Creditors. The amendments in this Update are effective for
modifications of loans accounted for within pools under Subtopic 310-30
occurring in the first interim or annual period ending on or after July 15,
2010. The amendments are to be applied prospectively. Early adoption
is permitted. The adoption of this ASU did not have a material impact on our
financial statements.
In
February 2010, the FASB issued ASU No. 2010-09 regarding subsequent events and
amendments to certain recognition and disclosure requirements. Under this ASU, a
public company that is a SEC filer, as defined, is not required to disclose the
date through which subsequent events have been evaluated. This ASU is effective
upon the issuance of this ASU. The adoption of this ASU did not have a material
impact on our financial statements.
F-9
Maple
Carpenter Creek, LLC & Subsidiary
Notes to
Consolidated Financial Statements
April 30,
2010 and 2009
(Information
for the six month periods ended
October
31, 2010 and 2009 is unaudited)
In
January 2010, the FASB issued ASU No. 2010-06 regarding fair value measurements
and disclosures and improvement in the disclosure about fair value
measurements. This ASU requires additional disclosures regarding
significant transfers in and out of Levels 1 and 2 of fair value measurements,
including a description of the reasons for the transfers. Further,
this ASU requires additional disclosures for the activity in Level 3 fair value
measurements, requiring presentation of information about purchases, sales,
issuances, and settlements in the reconciliation for fair value
measurements. This ASU is effective for fiscal years beginning after
December 15, 2010, and for interim periods within those fiscal years. We are
currently evaluating the impact of this ASU; however, we do not expect the
adoption of this ASU to have a material impact on our financial
statements.
In June
2009, the Financial Accounting Standards Board (“FASB”) issued the FASB
Accounting Standards Codification (the “ASC”). The ASC has become the single
source of non-governmental accounting principles generally accepted in the
United States (“GAAP”) recognized by the FASB in the preparation of financial
statements. The Company adopted the ASC as of July 1, 2009. The ASC does not
change GAAP and did not have an effect on the Company’s financial position,
results of operations or cash flows.
In May
2009, the FASB issued ASC 855-10 entitled “Subsequent Events”. Companies are now
required to disclose the date through which subsequent events have been
evaluated by management. This was amended with ASU 2010-09 in February of 2010
to enable companies to not disclose the specific date. Public entities (as
defined) must conduct the evaluation as of the date the financial statements are
issued, and provide disclosure that such date was used for this evaluation. ASC
855-10 provides that financial statements are considered “issued” when they are
widely distributed for general use and reliance in a form and format that
complies with GAAP. ASC 855-10 is effective for interim and annual periods
ending after June 15, 2009 and must be applied prospectively. The adoption of
ASC 855-10 upon inception did not have a significant effect on the Company’s
financial statements as of that date or for the period then ended. In connection
with preparing the accompanying financial statements for the periods presented,
management evaluated subsequent events through the date that such financial
statements were issued.
Note
2 – Going Concern
Our
financial statements are prepared using accounting principles generally accepted
in the United States of America applicable to a going concern, which contemplate
the realization of assets and liquidation of liabilities in the normal course of
business. We have incurred continuous losses from operations, have accumulated
net losses of $8,039,546 and $7,413,376 and a working capital deficit of
$467,587 and $516,360 at October 31, 2010 and April 30, 2010, respectively, and
have reported negative cash flows from operations since inception. In addition,
we do not currently have the cash resources to meet our operating commitments
for the next twelve months, and we expect to have ongoing requirements for
capital investment to implement our business plan. Finally, our ability to
continue as a going concern must be considered in light of the problems,
expenses and complications frequently encountered by entrance into established
markets and the competitive environment in which we operate.
Since
inception, our operations have primarily been funded through private debt and
equity financing, as well as capital contributions by our subsidiaries’
partners, and we expect to continue to seek additional funding through private
or public equity and debt financing.
Our
ability to continue as a going concern is dependent on our ability to generate
sufficient cash from operations to meet our cash needs and/or to raise funds to
finance ongoing operations and repay debt. However, there can be no assurance
that we will be successful in our efforts to raise additional debt or equity
capital and/or that our cash generated by our operations will be adequate to
meet our needs. These factors, among others, indicate that we may be unable to
continue as a going concern for a reasonable period of time.
The
financial statements do not include any adjustments that might result from the
outcome of any uncertainty as to the Company’s ability to continue as a going
concern. The financial statements also do not include any adjustments relating
to the recoverability and classification of recorded asset amounts, or amounts
and classifications of liabilities that might be necessary should the Company be
unable to continue as a going concern.
F-10
Maple
Carpenter Creek, LLC & Subsidiary
Notes to
Consolidated Financial Statements
April 30,
2010 and 2009
(Information
for the six month periods ended
October
31, 2010 and 2009 is unaudited)
Note
3 – Related Party Transactions
On July
30, 2008, Maple Resources Corporation (“MRC”), a related party via common
control from the Company’s CEO, Jack Hanks, purchased the Snider Ranch in
Musselshell and Yellowstone Counties, Montana for $1,615,000. Simultaneously,
MCC and MRC executed an option agreement whereby MCC became responsible for all
principal and interest payments on a $1,000,000 bank note payable issued in
MRC’s name in connection with its acquisition of the Snider Ranch and all other
payments made by MRC to acquire the Snider Ranch. MRC has agreed that upon
successful repayment of the note, it will transfer the Snider Ranch title to
MCC. MCC also has issued MRC a $0.08/ton royalty from all future production
generated from the Snider Ranch prospect as consideration for MRC and Jack W.
Hanks, personally, guaranteeing the loan. The expected fair value of
this royalty could not readily be determined, and as such, was not recognized.
The value of the property was periodically measured for impairment and $201,747
of impairment charges were recognized during the year ended, April 30, 2010. On
September 2, 2010, the option to purchase the Snider Ranch was distributed to
the owners of MCC and recorded as a dividend in the amount of $1,413,253. In the
merger with MEI, MCC partners, The Maple Gas Corporation and AAM Investments,
LLC assigned their rights under the option agreement to the Company.
Subsequently, on December 21, 2010, Maple Resources Corporation sold the Snider
Ranch property located in Yellowstone and Musselshell counties, Montana, to
Great Northern Properties Limited Partnership, and the Company’s subsidiary
relinquished its option right to acquire this property. The gross sales price of
the property was $1,500,000, of which MCC’s and therefore the Company’s portion
of the net proceeds was approximately $113,000.
On August
5, 2008, Maple Resource Company, a mutually owned entity under common management
by the Company’s CEO, Jack Hanks, received a promissory note in the original
principal balance of $1,000,000, a mutually owned company of the CEO, Jack
Hanks, and assigned to Carpenter Creek, LLC, along with the investment in
property, carries a 7% interest rate, matures on August 11, 2013, secured by an
investment in the Snider Ranch property.
From time
to time the Company pays expenses on behalf of related parties. The expenses
paid on behalf of related parties resulted in intercompany receivables,
presented as other receivables in these financial statements, of $687,548,
$378,353 and $-0- at October 31, 2010, April 30, 2010 and April 30, 2009,
respectively. These receivable balances will be eliminated for all
periods presented upon consolidation with Management Energy, Inc.
On July
15, 2009, MCC entered into a loan agreement with an Irrevocable Trust, of which
the Company’s CEO is the trustee. The $300,000 unsecured promissory note,
carried a 20% placement fee until maturity at July 15, 2010, at which time the
principal and 20% placement fee (or $60,000), was compounded and extended under
an amended agreement carrying a 10% placement fee that is being amortized over
the extended life of the loan. The promissory note matures on July 15, 2011.
Accrued interest (placement fees) of $70,533, $47,342 and $-0- was outstanding
at October 31, 2010, April 30, 2010 and April 30, 3009,
respectively.
On
September 2, 2010 the Company’s subsidiary, Maple Carpenter Creek, LLC, a Nevada
limited liability company entered into a distribution resolution and agreement
to distribute the Snider Ranch investment property, carrying a value of
$1,413,253 at the time of distribution, to its partners; Garb Holdings, LLC, AAM
Investments, LLC, and Maple Resources Corporation. The Company’s Officers and
Directors are majority owners of AAM Investments, LLC and Maple Resources
Corporation.
Note
4 – Prepaid Expenses
As of
October 31, 2010, April 30, 2010 and April 30, 2009 prepaid expenses included
the following:
F-11
Maple
Carpenter Creek, LLC & Subsidiary
Notes to
Consolidated Financial Statements
April 30,
2010 and 2009
(Information
for the six month periods ended
October
31, 2010 and 2009 is unaudited)
October 31,
|
April 30,
|
April 30,
|
||||||||||
2010
|
2010
|
2009
|
||||||||||
Prepaid
Utilities
|
$ | 4,169 | $ | 4,169 | $ | 4,169 | ||||||
Prepaid
Legal Services
|
- | 10,000 | - | |||||||||
Prepaid
Leases
|
46,365 | 51,624 | 53,626 | |||||||||
$ | 50,534 | $ | 65,793 | $ | 57,795 |
Note
5 – Property and Equipment
Property
and Equipment consists of the following:
October 31,
|
April 30,
|
April 30,
|
||||||||||
2010
|
2010
|
2009
|
||||||||||
Furniture
and fixtures
|
$ | 6,001 | $ | 6,001 | $ | - | ||||||
Software
and hardware
|
34,974 | 19,649 | 24,330 | |||||||||
40,975 | 25,650 | 24,330 | ||||||||||
Less
accumulated depreciation and amortization
|
(11,029 | ) | (7,442 | ) | (2,378 | ) | ||||||
$ | 29,946 | $ | 18,208 | $ | 21,952 |
Depreciation
and amortization expense totaled $3,587 and $2,499 for the six months ended
October 31, 2010 and 2009, respectively, and $5,064 and $1,744 for the years
ended April 30, 2010 and 2009, respectively.
Note
6 – Investments in Property Owned by a Related Party
On July
30, 2008, Maple Resources Corporation (“MRC”), a related party via common
control from the Company’s CEO, Jack Hanks, purchased the Snider Ranch in
Musselshell and Yellowstone Counties, Montana for $1,615,000. Simultaneously,
the MCC and MRC executed an option agreement whereby the Company will be
responsible for all principal and interest payments on a $1,000,000 bank note
payable issued in MRC’s name in connection with its acquisition of the Snider
Ranch and all other payments made by MRC to acquire the Snider Ranch. MRC has
agreed that upon successful repayment of the note, it will transfer the Snider
Ranch title to the Company. The Company has issued MRC a $0.08/lb. royalty from
all future production generated from the Snider Ranch prospect. The expected
fair value of this royalty could not readily be determined, and as such, was not
recognized. The value of the property was periodically measured for impairment
and $201,747 of impairment charges were recognized during the year ended, April
30, 2010. On September 2, 2010, the option to purchase the Snider Ranch was
distributed to the owners of the Company and recorded as a dividend in the
amount of $1,413,253. Subsequently, on December 21, 2010, Maple
Resources Corporation sold the Snider Ranch property located in Yellowstone and
Musselshell counties, Montana, to Great Northern Properties Limited Partnership,
and the Company’s subsidiary relinquished its option right to acquire this
property. The gross sales price of the property was $1,500,000.
Note
7 – Acquisition of Subsidiary, Carpenter Creek, LLC
On June
19, 2007, the Company acquired a 75% equity interest in Carpenter Creek, LLC by
assuming $208,233 in payables from John Baugues, the previous sole owner. In
addition, the Company had previously loaned CC $750,000 which was assumed in the
acquisition. The operations of Carpenter Creek are included in the accompanying
financial statements beginning June 19, 2007.
The
allocation of the purchase price to the Company’s assets and liabilities at the
time of closing was as follows:
F-12
Maple
Carpenter Creek, LLC & Subsidiary
Notes to
Consolidated Financial Statements
April 30,
2010 and 2009
(Information
for the six month periods ended
October
31, 2010 and 2009 is unaudited)
Coal
properties and mineral rights
|
$ | 1,023,055 | ||
Other
long-term assets
|
10,000 | |||
Total
assets
|
$ | 1,033,055 | ||
Accounts
payable
|
$ | 5,411 | ||
Intercompany
note payable
|
750,000 | |||
Minority
interest
|
69,411 | |||
Member’s
equity
|
208,233 | |||
Total
liabilities and member’s equity
|
$ | 1,033,055 |
On March
10, 2008, the Company acquired an additional 2.5% interest from John Baugues in
Carpenter Creek for $150,000. On June 29, 2009, the Company acquired John
Baugues remaining 17.5% share in Carpenter Creek for $500,000 cash, forgiveness
of a note receivable from Mr. Baugues for $315,000 and a note payable to Mr.
Baugues for $213,276, resulting in the Company owning 95% of Carpenter Creek,
LLC. The excess paid over the carrying value was charged to members’ capital in
2008 and 2009.
Note
8 – Notes Payable
Long term
debt consists of the following at October 31, 2010, April 30, 2010 and April 30,
2009, respectively:
October 31,
|
April 30,
|
April 30,
|
||||||||||
2010
|
2010
|
2009
|
||||||||||
Unsecured
promissory note, matured on July 15, 2009, carrying a 10% default rate.
Accrued interest of $47,986, $42,986 and $-0- was outstanding at October
31, 2010, April 30, 3010 and April 30, 2009, respectively.
|
$ | 300,000 | $ | 300,000 | $ | - | ||||||
Related
party, unsecured promissory note, carried a 20% placement fee until
maturity at July 15, 2010, at which time the principal and 20% placement
fee (or $60,000), was compounded and extended under a an amended agreement
carrying a 10% placement fee that is being amortized over the extended
life of the loan. Matures on July 15, 2011. Accrued interest (placement
fees) of $70,533, $47,342 and $-0- was outstanding at October 31, 2010,
April 30, 3010 and April 30, 2009, respectively.
|
300,000 | 300,000 | - | |||||||||
Promissory
note in the original principal balance of $1,000,000 owed by Maple
Resources Company, a mutually owned company of the CEO, Jack Hanks, and
assigned to Carpenter Creek, LLC, along with the investment in property,
carries a 7% interest rate, matures on August 11, 2013, secured by an
investment in property; Snider Ranch.
|
789,048 | 798,446 | 818,988 | |||||||||
Total
notes payable
|
1,389,048 | 1,398,446 | 818,988 | |||||||||
Less:
current maturities
|
600,000 | 600,000 | - | |||||||||
Long
term portion of notes payable
|
$ | 789,048 | $ | 798,446 | $ | 818,988 |
F-13
Maple
Carpenter Creek, LLC & Subsidiary
Notes to
Consolidated Financial Statements
April 30,
2010 and 2009
(Information
for the six month periods ended
October
31, 2010 and 2009 is unaudited)
The
Company recorded interest expense on long term debt in the amount of $67,488 and
$47,490 for the six months ended October 31, 2010 and 2009, respectively, and
$171,905 and $36,858 for the years ended April 30, 2010 and 2009,
respectively.
Note
9 – Changes in Members’ Interests
The
initial equity contribution of $523,233 to the Company on June 19, 2007 included
$208,233 of cash and a $315,000 note receivable from a related party. During the
period from May 23, 2007 (inception) through April 30, 2008 cash contributions
of $3,353,500 were contributed by its members.
During
the year ended April 30, 2009 cash contributions of $3,231,181 were contributed
by its members.
During
the year ended April 30, 2010 cash contributions of $1,606,354 were contributed
by its members.
On
September 2, 2010, the option to purchase the Snider Ranch was distributed to
the owners of MCC and recorded as a dividend in the amount of
$1,413,253.
During
the six months ended October 31, 2010 cash contributions of $440,743 were
contributed by its shareholders.
During
the six months ended October 31, 2010 cash contributions of $283,052 were
contributed by its members through related party transactions.
Note
10 – Commitments and Contingencies
Legal
There
were no legal proceedings against the Company.
Operating Leases
Commitments
Bergin
Lease:
Under the
terms of the Bergin Lease, the Company is required to pay to the lessors (1) a
minimum annual payment in an amount equal to $41,451 in each year during the
initial ten (10) year term of the Bergin Lease, subject to increases in future
years and (2) a royalty equal to 12.5% of the gross proceeds on all coal mined
from the Mattfield Property. In addition, unless coal is mined from
minerals owned by the lessors, for each ton of coal mined from, stored on or
transported across the Bergin Property, the Company is required to pay a damage
fee of $0.15 per ton for such coal.
Brewer
Lease:
Under the
terms of the Brewer Lease, the Company is required to pay to the lessors (1) a
minimum annual payment in an amount equal to $36,670 in each year during the
initial ten (10) year term of the Brewer Lease, subject to increases in future
years and (2) a royalty equal to 12.5% of the gross proceeds on all coal mined
from the Brewer Property. In addition, unless coal is mined from
minerals owned by the lessors, for each ton of coal mined from, stored on or
transported across the Brewer Property, the Company is required to pay a damage
fee of $0.15 per ton for such coal.
Wilson
Lease:
Under the
terms of the Wilson Lease, the Company is required to pay to the lessors (1) a
minimum annual payment in an amount equal to $40,400 in each year during the
initial ten (10) year term of the Wilson Lease, subject to increases in future
years and (2) a royalty equal to 12.5% of the gross proceeds on all coal mined
from the Wilson Property. In addition, unless coal is mined from
minerals owned by the lessors, for each ton of coal mined from, stored on or
transported across the Wilson Property, the Company is required to pay a damage
fee of $0.15 per ton for such coal.
F-14
Maple Carpenter Creek, LLC &
Subsidiary
Notes to
Consolidated Financial Statements
April 30,
2010 and 2009
(Information
for the six month periods ended
October
31, 2010 and 2009 is unaudited)
Hougen Lease:
Under the
terms of the Hougen Lease, the Company is required to pay to the lessors (1) a
minimum annual payment in an amount equal to $50,311 in each year during the
initial ten (10) year term of the Hougen Lease, subject to increases in future
years and (2) a royalty equal to 12.5% of the gross proceeds on all coal mined
from the Hougen Property. In addition, unless coal is mined from
minerals owned by the lessors, for each ton of coal mined from, stored on or
transported across the Hougen Property, the Company is required to pay a damage
fee of $0.15 per ton for such coal.
Mussellshell County
Lease:
Under the
terms of the Mussellshell County Lease, the Company is required to pay to the
lessors (1) a minimum annual payment in an amount equal to $26,939 in each year
during the initial ten (10) year term of the Mussellshell County Lease, subject
to increases in future years and (2) a royalty equal to 12.5% of the gross
proceeds on all coal mined from the Mussellshell County Property. In
addition, unless coal is mined from minerals owned by the lessors, for each ton
of coal mined from, stored on or transported across the Musselshell County
Property, the Company is required to pay a damage fee of $0.15 per ton for such
coal.
Meredith
Lease:
Under the
terms of the Meredith Lease, the Company is required to pay to the lessors (1) a
minimum annual payment in an amount equal to $43,679 in each year during the
initial ten (10) year term of the Meredith Lease, subject to increases in future
years and (2) a royalty equal to 12.5% of the gross proceeds on all coal mined
from the Meredith Property. In addition, unless coal is mined from
minerals owned by the lessors, for each ton of coal mined from, stored on or
transported across the Meredith Property, the Company is required to pay a
damage fee of $0.15 per ton for such coal.
Mattfield
Lease:
Under the
terms of the Mattfield Lease, the Company is required to pay to the lessors (1)
a minimum annual payment in an amount equal to $50,000 in each year during the
initial ten (10) year term of the Mattfield Lease, subject to increases in
future years and (2) a royalty equal to 12.5% of the gross proceeds on all coal
mined from the Mattfield Property. In addition, unless coal is mined
from minerals owned by the lessors, for each ton of coal mined from, stored on
or transported across the Mattfield Property, the Company is required to pay a
damage fee of $0.15 per ton for such coal.
Knapp
Lease:
Under the
terms of the Knapp Lease, the Company is required to pay to the lessors (1) a
minimum annual payment in an amount equal to $15,450 in each year during the
initial ten (10) year term of the Knapp Lease, subject to increases in future
years and (2) a royalty equal to 12.5% of the gross proceeds on all coal mined
from the Knapp Property. In addition, unless coal is mined from minerals owned
by the lessors, for each ton of coal mined from, stored on or transported across
the Knapp Property, the Company is required to pay a use fee of $0.15 per ton or
.75% gross proceeds for such coal, whichever is greater.
Janich
Lease:
Under the
terms of the Janich Lease, the Company is required to pay to the lessors (1) a
minimum annual payment in an amount equal to $30,051 in each year during the
initial ten (10) year term of the Janich Lease, subject to increases in future
years and (2) a royalty equal to 12.5% of the gross proceeds on all coal mined
from the Janich Property. In addition, unless coal is mined from
minerals owned by the lessors, for each ton of coal mined from, stored on or
transported across the Janich Property, the Company is required to pay a use fee
of $0.15 per ton for such coal.
TY Checketts Lease (assigned
from Fulton):
Under the
terms of the Ty Checketts Lease, the Company is required to pay to the lessors
(1) a minimum annual payment in an amount equal to $88,050 in each year during
the initial ten (10) year term of the Lease, subject to increases in future
years and (2) a royalty equal to 12.5% of the gross proceeds on all coal mined
from the Checketts Property. In addition, unless coal is mined from
minerals owned by the lessors, for each ton of coal mined from, stored on or
transported across the Checketts Property, the Company is required to pay a
damage fee of $0.15 per ton or .75% of gross proceeds for such coal, whichever
is greater.
F-15
Maple Carpenter Creek, LLC &
Subsidiary
Notes to
Consolidated Financial Statements
April 30,
2010 and 2009
(Information
for the six month periods ended
October
31, 2010 and 2009 is unaudited)
Marsh / Snider Ranch
Lease:
Under the
terms of the Marsh / Snider Ranch Option to Lease, the Company is required to
pay to the lessors a minimum monthly payment of $1,000 for twenty-four (24)
months term of the option. The surface lease to be negotiated upon exercise of
the option will have a term of ten years, with a minimum monthly payment of
$1,000 subject to increases in future years. In addition, unless coal
is mined from minerals owned by the lessors, for each ton of coal mined from,
stored on or transported across the Marsh Property, the Company is required to
pay a damage fee of $0.15 or .75% of gross sales price per ton for such
coal.
Future
minimum lease payments required under operating leases are as
follows:
Year
Ending
|
||||
April
30,
|
Amount
|
|||
2011
|
$ | 224,055 | ||
2012
|
70,764 | |||
Thereafter
|
- | |||
$ | 294,819 |
Lease
expense was $447,381 and $56,282 for the six months ended October 31, 2010 and
2009, respectively, and $438,587 and $431,438 for the years ended April 30, 2010
and 2009, respectively.
Note
11 – Non-controlling Interests
On
October 31, 2010, non-controlling interests held a 5% residual interest in MCC
through a related party interest by Garb Holdings, LLC in MCC’s subsidiary,
CC.
Note
12 – Subsequent Events
The
Company, through its ownership interest in Armadillo Mining Corp, had exclusive
options to acquire the Caparrapi and Yacopi metallurgical coal mines in the
Cundinamarca province of Colombia. Effective November 24, 2010, the Company
elected not to pursue the exercise of these options although it is continuing to
explore other suitable coal properties in Colombia.
MCC owned
a 95% interest in an option to acquire the Snider Ranch real estate and coal
prospect adjacent to the Signal Peak Mine, near Roundup, Montana, subject to the
outstanding indebtedness for this property. The option was granted by Maple
Resources Corporation. On December 21, 2010, Maple Resources Corporation sold
the Snider Ranch property located in Yellowstone and Musselshell counties,
Montana, to Great Northern Properties Limited Partnership, and the Company’s
subsidiary relinquished its option right to acquire this property. The gross
sales price of the property was $1,500,000, of which the Company’s portion of
the net proceeds was approximately $500,000. Contemporaneously with this
transaction, the Company issued 313,339 shares to Steve Eppig in exchange for
Mr. Eppig’s 1.88% interest in the equity of its Armadillo Holdings Group
Corporation subsidiary. The total fair value of the common stock was
$65,801 based on the closing price of the Company’s common stock on the date of
grant.
In
accordance with ASC 855-10, all subsequent events have been reported through the
filing date.
F-16
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of
Directors
Armadillo Holdings Group Corp. and Subsidiary
We have audited the accompanying
consolidated balance sheet of Armadillo Holdings Group Corp. and subsidiary (the “Company”) as of October 31, 2010 and the related
statement of operations, stockholders’ equity (deficit) and cash flows from inception on February 1, 2010 until October 31,
2010. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our
audit.
We conducted our audit in accordance
with standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements
referred to above present fairly, in all material respects, the financial
position of Armadillo Holdings Group Corp. and subsidiary as of October 31,
2010 and the results of its operations and cash flows for the period described
above in conformity with accounting principles generally accepted in the United
States of America.
The accompanying financial statements
have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has insufficient working capital, which raises
substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are
described in Note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ M&K CPAS,
PLLC
www.mkacpas.com
Houston, Texas
January 10, 2011
F-17
ARMADILLO
HOLDINGS GROUP CORP. & SUBSIDIARY
(An
Exploration Stage Company)
Consolidated
Balance Sheets
October 31,
|
||||
2010
|
||||
Assets
|
||||
Current
assets:
|
||||
Cash
|
$ | - | ||
Total
current assets
|
- | |||
Total
Assets
|
$ | - | ||
Liabilities
and Stockholders' Equity (Deficit)
|
||||
Current
liabilities:
|
||||
Accounts
payable, including related party amounts
|
||||
of
$904,601 and $378,353 at October 31, 2010
|
||||
and
April 30, 2010, respectively
|
$ | 1,019,125 | ||
Accrued
expenses
|
2,940 | |||
Current
maturities of notes payable
|
100,000 | |||
Total
current liabilities
|
1,122,065 | |||
Long
term portion of notes payable
|
- | |||
Total
Liabilities
|
1,122,065 | |||
Stockholders'
Equity (Deficit):
|
||||
Common
stock, $1.00 par value, 10,000 shares
|
||||
authorized,
10,000 shares issued and outstanding
|
10,000 | |||
Additional
paid in capital
|
(10,000 | ) | ||
Non-controlling
interest
|
(219,010 | ) | ||
Accumulated
(deficit)
|
(903,055 | ) | ||
Total
Stockholders' Equity (Deficit)
|
(1,122,065 | ) | ||
Total
Liabilities and Stockholders' Equity (Deficit)
|
$ | - |
The
accompanying notes are an integral part of the financial
statements.
F-18
ARMADILLO
HOLDINGS GROUP CORP. & SUBSIDIARY
(An
Exploration Stage Company)
Consolidated
Statements of Operations
For the period from
|
||||
February 1, 2010
|
||||
(Inception) through
|
||||
October 31, 2010
|
||||
Revenue:
|
||||
Revenues
|
$ | - | ||
Operating
Expenses:
|
||||
General
and administrative
|
522,475 | |||
Payroll
and taxes
|
403,329 | |||
Professional
fees
|
193,321 | |||
Total
operating expenses
|
1,119,125 | |||
Net
operating (loss)
|
(1,119,125 | ) | ||
Other
income (expense):
|
||||
Interest
expense
|
(2,940 | ) | ||
Total
other income (expense)
|
(2,940 | ) | ||
Net
(loss) before income taxes
|
||||
and
non-controlling interest
|
(1,122,065 | ) | ||
Provision
for income taxes
|
- | |||
Non-controlling
interest in loss
|
||||
of
consolidated subsidiaries
|
219,010 | |||
Net
(loss)
|
$ | (903,055 | ) | |
Weighted
average number of common
|
||||
shares
outstanding - basic and fully diluted
|
10,000 | |||
Net
(loss) per share - basic and fully diluted
|
$ | (90.31 | ) |
The
accompanying notes are an integral part of the financial
statements.
F-19
ARMADILLO
HOLDINGS GROUP CORP. & SUBSIDIARY
(An
Exploration Stage Company)
Consolidated
Statement of Stockholders' Equity (Deficit)
Total
|
||||||||||||||||||||||||
Common Stock
|
Additional Paid
|
Accumulated
|
Non-controlling
|
Stockholder's
|
||||||||||||||||||||
Shares
|
Amount
|
In Capital
|
(Deficit)
|
Interests
|
Equity (Deficit)
|
|||||||||||||||||||
Balance,
February 1, 2010 (Inception)
|
- | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||
Founder's
shares of common stock issued
|
10,000 | 10,000 | (10,000 | ) | - | - | - | |||||||||||||||||
Net
(loss) for the period from February 1, 2010
|
||||||||||||||||||||||||
(inception)
to October 31, 2010
|
- | - | - | (903,055 | ) | (219,010 | ) | (1,122,065 | ) | |||||||||||||||
Balance,
October 31, 2010
|
10,000 | $ | 10,000 | $ | (10,000 | ) | $ | (903,055 | ) | $ | (219,010 | ) | $ | (1,122,065 | ) |
The
accompanying notes are an integral part of the financial
statements.
F-20
ARMADILLO
HOLDINGS GROUP CORP. & SUBSIDIARY
(An
Exploration Stage Company)
Consolidated
Statements of Cash Flows
For the period from
|
||||
February 1, 2010
|
||||
(Inception) through
|
||||
October 31, 2010
|
||||
Cash
flows from operating activities
|
||||
Net
(loss)
|
$ | (903,055 | ) | |
Non-controlling
interest in net loss
|
(219,010 | ) | ||
Adjustments
to reconcile net (loss) to
|
||||
net
cash used in operating activities:
|
||||
Increase
(decrease) in liabilities:
|
||||
Accounts
payable
|
1,019,125 | |||
Accrued
expenses
|
2,940 | |||
Net
cash used in operating activities
|
(100,000 | ) | ||
Cash
flows from financing activities
|
||||
Proceeds
from long term debt
|
100,000 | |||
Net
cash provided by financing activities
|
100,000 | |||
Net
increase (decrease) in cash
|
- | |||
Cash
- beginning
|
- | |||
Cash
- ending
|
$ | - | ||
Supplemental
disclosures:
|
||||
Interest
paid
|
$ | - | ||
Income
taxes paid
|
$ | - | ||
Non-cash
investing and financing transactions:
|
||||
Par
value of founder's shares
|
||||
of
common stock issued
|
$ | 10,000 |
The
accompanying notes are an integral part of the financial
statements.
F-21
Armadillo Holdings Group Corp. &
Subsidiary
Notes to
Consolidated Financial Statements
Note
1 – Nature of Business and Significant Accounting Policies
Basis of
Presentation
The
accompanying consolidated financial statements include the accounts of the
following entities, all of which are under common control and
ownership:
Form of
|
State of
|
|||||||||
Name of Entity
|
%
|
Entity
|
Incorporation
|
Relationship
|
||||||
Armadillo
Holdings Group Corp. (“AHGC”)
|
- |
Corporation
|
British
Virgin Isl.
|
Parent
|
||||||
Armadillo
Mining Corp. (“AMC”)
|
80 | % |
Corporation
|
British
Virgin Isl.
|
Subsidiary
|
The
consolidated financial statements of Armadillo Holdings Group Corporation herein
contain the operations of the subsidiary of Armadillo Mining Corporation as of
the dates and for the periods as indicated. All significant inter-company
transactions have been eliminated in the preparation of these financial
statements.
These
statements reflect all adjustments, consisting of normal recurring adjustments,
which in the opinion of management are necessary for fair presentation of the
information contained therein.
The
Companies have adopted a fiscal year end of April 30th.
The Company’s functional and reporting currency is
the United States dollar. Monetary assets and liabilities denominated in foreign
currencies are translated in accordance with ASC 820, 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. Foreign currency transactions are primarily undertaken in the Colombian
peso. The Company has not, to the date of these financial
statements, entered into derivative instruments to offset the impact of foreign
currency fluctuations.
The
comparative financial statements herein include the fiscal year ended April 30,
2010 and the six months ended October 31, 2010.
Organization
Armadillo Holdings Group Corporation
(the Company or “AHGC”) was formed in the British Virgin
Islands on August 11, 2010 as a holding company for South American coal mining
businesses beginning with Armadillo Mining Corporation (“AMC”), which is engaged in coal mining exploration activities in
Colombia. AHGC owns 80% of Armadillo Mining Corporation, which was formed on
July 21, 2010 in the British Virgin Islands. The AMC subsidiary incurred
significant expenses prior to its legal formation. As such, February 1, 2010 was
considered the Company’s date of inception.
AHGC is engaged in the development of
metallurgical coal projects in Colombia. AMC has exclusive options to acquire
two metallurgical coal mines in the Cundinamarca province of Colombia: (i)
Caparrapi is a permitted
mine with minimum production and with a resource potential of 11 million metric
tonnes; (ii) Yacopi has resource potential of 40 million metric tonnes. As of
the date of this filing, AMC has terminated the exclusive options for the
Caparrapi and Yacopi mines. AMC subsequently
entered into an Option Agreement, dated January 20, 2011, to acquire 50%
of the Colombian metallurgical coal company, C.I. Hunza Coal Ltda. (“Hunza”).
Hunza owns and operates a mine located in the Boyaca province of Colombia, which
is estimated to contain metallurgical coal resources of 16 million to 90 million
tons of high quality metallurgical coal. The Hunza mine is permitted and is
currently producing and marketing about 1,000 tons per month.
Nature of
Business
Our current strategy is to pursue
interests in various coal exploration projects in Colombia with development
partners, or in the alternative to sell the projects. We believe the benefits of
this strategy include reduced capital requirements on the Company, and the ability to access industry
technical development experience and marketing expertise. In the event of a sale
of the projects, it will allow the Company to focus more on the potential
acquisition of Colombia metallurgical coal assets that are currently
producing.
F-22
Armadillo Holdings Group Corp. &
Subsidiary
Notes to
Consolidated Financial Statements
Exploration Stage
Company
The
Company is currently an exploration stage company. As an exploration stage
enterprise, the Company discloses the deficit accumulated during the exploration
stage and the cumulative statements of operations and cash flows from inception
to the current balance sheet date. The Company has incurred net losses of
$921,161 and used net cash in operations of $100,000 for the period from
inception (February 1, 2010) through October 31, 2010. An entity remains in the
exploration stage until such time as proven or probable reserves have been
established for its deposits. Upon the location of commercially mineable
reserves, the Company plans to prepare for mineral extraction and enter the
development stage. To date, the exploration stage of the Company’s operations
consists of contracting with geologists who sample and assess the mining
viability of the Company’s claims.
Use of
estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
the disclosure 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 differ from those estimates.
Fair value of financial
instruments
Under
FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a
framework for measuring fair value in generally accepted accounting principles
and expands disclosures about fair value measurements. This Statement reaffirms
that fair value is the relevant measurement attribute. The adoption of this
standard did not have a material effect on the Company’s financial statements as
reflected herein. The carrying amounts of cash, accounts payable and accrued
expenses reported on the balance sheet are estimated by management to
approximate fair value primarily due to the short term nature of the
instruments. The Company had no
other items that required fair value measurement on a recurring
basis.
Advertising and
promotion
All costs
associated with advertising and promoting products are expensed as incurred. No
expenses were incurred for the six months ended October 31, 2010 and the period
from February 1, 2010 (inception) to April 30, 2010, respectively.
Income
taxes
The
Company recognizes deferred tax assets and liabilities based on differences
between the financial reporting and tax bases of assets and liabilities using
the enacted tax rates and laws that are expected to be in effect when the
differences are expected to be recovered. The Company provides a valuation
allowance for deferred tax assets for which it does not consider realization of
such assets to be more likely than not.
Basic and diluted loss per
share
The basic
net loss per common share is computed by dividing the net loss by the weighted
average number of common shares outstanding. Diluted net loss per common share
is computed by dividing the net loss adjusted on an “as if converted” basis, by
the weighted average number of common shares outstanding plus potential dilutive
securities. For the periods presented, potential dilutive securities had an
anti-dilutive effect and were not included in the calculation of diluted net
loss per common share.
Stock-based
compensation
The
Company adopted FASB guidance on stock based compensation upon inception at
February 1, 2010. Under FASB ASC 718-10-30-2, all share-based payments to
employees, including grants of employee stock options, are to be recognized in
the income statement based on their fair values. Pro forma disclosure is no
longer an alternative. For the periods presented, there were no share-based
payments to employees, or otherwise.
Uncertain tax
positions
Effective
upon the Company’s fiscal year ended April 30, 2010, the Company adopted new
standards for accounting for uncertainty in income taxes. These standards
prescribe a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. These standards also provide guidance on de-recognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition.
F-23
Armadillo Holdings Group Corp. &
Subsidiary
Notes to
Consolidated Financial Statements
Various
taxing authorities periodically audit the Company’s income tax returns. These
audits include questions regarding the Company’s tax filing positions, including
the timing and amount of deductions and the allocation of income to various tax
jurisdictions. In evaluating the exposures connected with these various tax
filing positions, including state and local taxes, the Company records
allowances for probable exposures. A number of years may elapse before a
particular matter, for which an allowance has been established, is audited and
fully resolved. The Company has not yet undergone an examination by any taxing
authorities.
The
assessment of the Company’s tax position relies on the judgment of management to
estimate the exposures associated with the Company’s various filing
positions.
Recently issued accounting
pronouncements
In April
2010, the FASB issued ASU No. 2010-18 regarding improving comparability by
eliminating diversity in practice about the treatment of modifications of loans
accounted for within pools under Subtopic 310-30 – Receivable – Loans and Debt
Securities Acquired with Deteriorated Credit Quality (“Subtopic 310-30”).
Furthermore, the amendments clarify guidance about maintaining the integrity of
a pool as the unit of accounting for acquired loans with credit
deterioration. Loans accounted for individually under Subtopic 310-30
continue to be subject to the troubled debt restructuring accounting provisions
within Subtopic 310-40, Receivables—Troubled Debt Restructurings by
Creditors. The amendments in this Update are effective for
modifications of loans accounted for within pools under Subtopic 310-30
occurring in the first interim or annual period ending on or after July 15,
2010. The amendments are to be applied prospectively. Early adoption
is permitted. The adoption of this ASU did not have a material impact on our
financial statements.
In
February 2010, the FASB issued ASU No. 2010-09 regarding subsequent events and
amendments to certain recognition and disclosure requirements. Under this ASU, a
public company that is a SEC filer, as defined, is not required to disclose the
date through which subsequent events have been evaluated. This ASU is effective
upon the issuance of this ASU. The adoption of this ASU did not have a material
impact on our financial statements.
In
January 2010, the FASB issued ASU No. 2010-06 regarding fair value measurements
and disclosures and improvement in the disclosure about fair value
measurements. This ASU requires additional disclosures regarding
significant transfers in and out of Levels 1 and 2 of fair value measurements,
including a description of the reasons for the transfers. Further,
this ASU requires additional disclosures for the activity in Level 3 fair value
measurements, requiring presentation of information about purchases, sales,
issuances, and settlements in the reconciliation for fair value
measurements. This ASU is effective for fiscal years beginning after
December 15, 2010, and for interim periods within those fiscal years. We are
currently evaluating the impact of this ASU; however, we do not expect the
adoption of this ASU to have a material impact on our financial
statements.
In June
2009, the Financial Accounting Standards Board (“FASB”) issued the FASB
Accounting Standards Codification (the “ASC”). The ASC has become the single
source of non-governmental accounting principles generally accepted in the
United States (“GAAP”) recognized by the FASB in the preparation of financial
statements. The Company adopted the ASC upon inception at February 1, 2010. The
ASC does not change GAAP and did not have an effect on the Company’s financial
position, results of operations or cash flows.
In May
2009, the FASB issued ASC 855-10 entitled “Subsequent Events”. Companies are now
required to disclose the date through which subsequent events have been
evaluated by management. This was amended with ASU 2010-09 in February of 2010
to enable companies to not disclose the specific date. Public entities (as
defined) must conduct the evaluation as of the date the financial statements are
issued, and provide disclosure that such date was used for this evaluation. ASC
855-10 provides that financial statements are considered “issued” when they are
widely distributed for general use and reliance in a form and format that
complies with GAAP. ASC 855-10 is effective for interim and annual periods
ending after June 15, 2009 and must be applied prospectively. The adoption of
ASC 855-10 upon inception did not have a significant effect on the Company’s
financial statements as of that date or for the period then ended. In connection
with preparing the accompanying financial statements for the periods ended
October 31, 2010 and April 30, 2010, management evaluated subsequent events
through the date that such financial statements were issued.
F-24
Armadillo Holdings Group Corp. &
Subsidiary
Notes to
Consolidated Financial Statements
Note
2 – Going Concern
Our
financial statements are prepared using accounting principles generally accepted
in the United States of America applicable to a going concern, which contemplate
the realization of assets and liquidation of liabilities in the normal course of
business. We have incurred continuous losses from operations, have an
accumulated deficit of $903,055 and a working capital deficit of $1,122,065 at
October 31, 2010, and have reported negative cash flows from operations since
inception. In addition, we do not currently have the cash resources to meet our
operating commitments for the next twelve months, and we expect to have ongoing
requirements for capital investment to implement our business plan. Finally, our
ability to continue as a going concern must be considered in light of the
problems, expenses and complications frequently encountered by entrance into
established markets and the competitive environment in which we
operate.
Since
inception, our operations have primarily been funded through private debt and
equity financing, as well as capital contributions by our subsidiaries’
partners, and we expect to continue to seek additional funding through private
or public equity and debt financing.
Our
ability to continue as a going concern is dependent on our ability to generate
sufficient cash from operations to meet our cash needs and/or to raise funds to
finance ongoing operations and repay debt. However, there can be no assurance
that we will be successful in our efforts to raise additional debt or equity
capital and/or that our cash generated by our operations will be adequate to
meet our needs. These factors, among others, indicate that we may be unable to
continue as a going concern for a reasonable period of time.
The
financial statements do not include any adjustments that might result from the
outcome of any uncertainty as to the Company’s ability to continue as a going
concern. The financial statements also do not include any adjustments relating
to the recoverability and classification of recorded asset amounts, or amounts
and classifications of liabilities that might be necessary should the Company be
unable to continue as a going concern.
Note
3 – Related Party Transactions
Neither
AHGC, or its subsidiary, AMC, hold bank accounts. As such, the Companies
expenses are paid by related parties. The expenses paid on behalf of AHGC and
AMC resulted in intercompany liabilities, included in accounts payable, of
$904,601 and $378,353 at October 31, 2010 and April 30, 2010,
respectively.
Common stock
(AHGC)
On August
11, 2010 the Company issued 9,812 founder’s shares of common stock to related
parties. The shares were valued at par value of $1.00 per share and recorded
against additional paid in capital.
On August
11, 2010 the Company issued 188 founder’s shares of common stock to a founder
and promissory note holder. The shares were valued at par value of $1.00 per
share and recorded against additional paid in capital.
Common stock of subsidiary
(AMC)
On July
21, 2010 the Company issued 9,000 founder’s shares of common stock to a related
party, Maple Carpenter Creek, LLC (“MCC”). The shares were valued at par value
of $1.00 per share and recorded against additional paid in capital. On August
11, 2010, MCC exchanged 7,200, or 80% of these shares with AHGC in a tax free
exchange, and on September 2, 2010 MCC distributed the remaining 1,800 shares to
a related party resulting in a 20% minority interest for AHGC.
Note
4 – Notes Payable
Long term
debt consists of the following at October 31, 2010 and April 30, 2010,
respectively:
F-25
Armadillo Holdings Group Corp. &
Subsidiary
Notes to
Consolidated Financial Statements
October 31,
|
April 30,
|
|||||||
2010
|
2010
|
|||||||
Promissory
note bearing interest at 13.25%, maturing on December 30, 2010, secured by
1.88% interest in AHGC. Carries a default rate of 18%. Accrued interest of
$2,940 and $-0- was outstanding at October 31, 2010 and April 30, 3010,
respectively.
|
$ | 100,000 | $ | - | ||||
Total
notes payable
|
100,000 | - | ||||||
Less:
current maturities
|
100,000 | - | ||||||
Long
term portion of notes payable
|
$ | - | $ | - |
The
Company recorded interest expense on long term debt in the amount of $2,940 and
$-0- for the six months ended October 31, 2010 and the period from February 1,
2010 (inception) to April 30, 2010, respectively.
Note
5 – Changes in Stockholders’ Equity (Deficit)
Common stock
(AHGC)
On August
11, 2010 the Company was organized in the British Virgin Islands and authorized
to issue 50,000 shares of common stock at a par value of $1.00 per share. There
were 10,000 shares issued and outstanding at October 31, 2010.
On August
11, 2010 the Company issued 9,812 founder’s shares of common stock to related
parties. The shares were valued at par value of $1.00 per share and recorded
against additional paid in capital.
On August
11, 2010 the Company issued 188 founder’s shares of common stock to a founder
and promissory note holder. The shares were valued at par value of $1.00 per
share and recorded against additional paid in capital.
Common stock of subsidiary
(AMC)
On July
21, 2010 the Company was organized in the British Virgin Islands and authorized
to issue 50,000 shares of common stock at a par value of $1.00 per share. There
were 9,000 shares issued and outstanding at October 31, 2010.
On July
21, 2010 the Company issued 9,000 founder’s shares of common stock to a related
party, Maple Carpenter Creek, LLC (“MCC”). The shares were valued at par value
of $1.00 per share and recorded against additional paid in capital. On August
11, 2010, MCC exchanged 7,200, or 80% of these shares with AHGC in a tax free
exchange, and on September 2, 2010 MCC distributed the remaining 1,800 shares to
a related party resulting in a 20% minority interest for AHGC.
Note
6 – Non-controlling Interests
On
October 31, 2010, non-controlling interests held a 20% residual interest in AMC
through a related party interest by Garb Holdings, LLC in AHGC’s subsidiary,
AMC.
Note
7 – Subsequent Events
The
Company, through its ownership interest in Armadillo Mining Corp, had exclusive
options to acquire the Caparrapi and Yacopi metallurgical coal mines in the
Cundinamarca province of Colombia. Effective November 24, 2010, the Company
elected not to pursue the exercise of these options although it is continuing to
explore other suitable coal properties in Colombia.
F-26
Armadillo Holdings Group Corp. &
Subsidiary
Notes to
Consolidated Financial Statements
On
December 21, 2010, a related party, Management Energy, Inc. (“MEI”) issued
313,339 shares to Steve Eppig in exchange for Mr. Eppig’s 1.88% interest in the
equity of its Armadillo Holdings Group Corporation subsidiary. The
total fair value of the common stock was $65,801 based on the closing price of
MEI’s common stock on the date of grant.
On January 20, 2011, the
Company’s subsidiary, AMC entered into an
Option Agreement to acquire 50% of the Colombian metallurgical coal company,
C.I. Hunza Coal Ltda. (“Hunza”). Hunza owns and operates a mine located in the
Boyaca province of Colombia, which is estimated to contain metallurgical coal
resources of 16 million to 90 million tons of high quality metallurgical coal.
The Hunza mine is permitted and is currently producing and marketing about 1,000
tons per month.
In
accordance with ASC 855-10, all subsequent events have been reported through the
filing date.
F-27