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EX-32.1 - VERDE SCIENCE, INC.ex32-1.txt
EX-31.1 - VERDE SCIENCE, INC.ex31-1.txt
EX-31.2 - VERDE SCIENCE, INC.ex31-2.txt
EX-32.2 - VERDE SCIENCE, INC.ex32-2.txt

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURUTIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2011

                        Commission file number 000-53253

                               RANGO ENERGY, INC.
             (Exact Name of Registrant as Specified in Its Charter)

            Nevada                                               20-8387017
(State or Other Jurisdiction of                               (I.R.S. Employer
 Incorporation or Organization)                              Identification No.)

                               213 E Arkansas Ave
                              Vivian, LA 71082, USA
               (Address of Principal Executive Offices & Zip Code)

                                  318-734-4737
                               (Telephone Number)

           Securities registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to section 12(g) of the Act:
                          Common Stock, $.001 par value

Indicate by check mark if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act. Yes [ ] No [X]

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section 15(d) of the Act Yes [ ] No [X]

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 (ss.232.405 of
this chapter)  during the  preceding 12 months (or for such shorter  period that
the registrant was required to submit and post such files). YES [X] NO [ ]

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

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. (Check one):

Non-accelerated filer [ ]                          Accelerated filer [ ]
Large accelerated filer [ ]                        Smaller reporting company [X]
(Do not check if a smaller reporting company)

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

The aggregate  market value of the voting and  non-voting  common equity held by
non-affiliates  of the registrant on June 30, 2011, based on a closing price was
approximately  $70,755  (computed by reference to the last sale price of a share
of the  registrant's  common  stock on that  date as  reported  by OTC  Bulletin
Board).

As of May 10, 2012, the  registrant had 1,088,543  shares of common stock issued
and outstanding.

RANGO ENERGY, INC. (FORMERLY AVRO ENERGY, INC.) TABLE OF CONTENTS Item 1. Business............................................................. 3 Item 1A. Risk Factors......................................................... 7 Item 2. Properties...........................................................14 Item 3. Legal Proceedings....................................................14 Item 4. Submission of Matters to a Vote of Security Holders..................14 Item 5. Market for Common Equity and Related Stockholder Matters.............14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................15 Item 8. Financial Statements.................................................17 Item 9. Changes in and Disagreements with Accountants on Financial Disclosure...........................................................31 Item 9A. Controls and Procedures..............................................31 Item 10. Directors, Executive Officers and Control Persons....................32 Item 11. Executive Compensation...............................................34 Item 12. Security Ownership of Certain Beneficial Owners and Management.......34 Item 13. Certain Relationships and Related Transactions.......................35 Item 14. Principal Accounting Fees and Services...............................36 Item 15. Exhibits.............................................................36 Signatures....................................................................37 2
PART I ITEM 1. BUSINESS SUMMARY COMPANY OVERVIEW Rango Energy, Inc. (formerly Avro Energy, Inc.) (hereinafter referred to as the "Company") was incorporated on January 31, 2007 by filing Articles of Incorporation with the Nevada Secretary of State. The Company is engaged in the acquisition, exploration and development of oil and natural gas properties in North America, with current properties in the ArkLaTex region. The company seeks to develop low risk opportunities by itself or with joint venture partners in the oil and natural gas sectors. The Company filed its articles of incorporation with the Nevada Secretary of State on January 31, 2007, indicating Mike P. Kurtanjek as its Director and its President and sole executive officer. Mr. Michael Heenan was appointed as a Director of the Company on June 1, 2007. Ms. Marilyn Woodruff was appointed as a Director of the Company on June 1, 2007. Ms. Woodruff was also appointed as the Secretary for the Company effective June 1, 2007. On June 11, 2008 Ms. Woodruff resigned as Secretary and Director and Mr. Donny Fitzgerald replaced her as Secretary and Director. On March 3, 2011 Mike P. Kurtanjek resigned as Director and President and Mr. Donny Fitzgerald replaced him as President. On January 31, 2007 (inception), the Company issued 500,000 (25,000,000 pre-reverse split) founders' shares for $86,250. On September 1, 2007, the Company issued 5,280 (264,000 pre-reverse split) shares for $66,000. On October 1, 2007, the Company issued 3,731 (186,560 pre-reverse split) shares for $46,640. On May 31, 2010, the Company issued 20,000 (1,000,000 pre-reverse split) Units at a price of $0.25 per Unit for total proceeds of $250,000. Each Unit issued consisted of one restricted pre-reverse split common share and one half pre-reverse split share purchase warrant. Two half warrants entitles a Subscriber to acquire one restricted pre-reverse split common share at a purchase price of $0.50 per Share for a period of 18 months from the date of issue. On July 8, 2010 the company issued 22,500 (1,125,000 pre-reverse split) restricted shares at par for a total proceeds of $1,125. On September 13, 2010, the company entered agreements to convert various outstanding loans into restricted shares of the Company. The total amount owing to its creditors was $390,048, and each agreed to the issuance of restricted shares of the Company to settle this outstanding debt. As a result, the Company agreed to issue a total of 260,032 (13,001,600 pre-reverse split) shares in settlement of this debt, or at a price of $0.03 per pre-reverse split share. The total fair value of the shares was $650,080 based on the closing price resulting in a loss of settlement of debt of $260,032. On March 3, 2011, the Company pursuant to an SEC order cancelled 3,000 (150,000) pre-reverse split shares of common stock, and pursuant to non-performance cancelled 20,000 (1,000,000 pre-reverse split) shares of common stock. On August 23, 2011, the Company issued 300,000 (15,000,000 pre-reverse split) shares to Donny Fitzgerald for services valued at fair market value which was $75,000 at the time of issue. On May 24, 2011 the Company entered into a Farm-Out Agreement with First Pacific Oil and Gas Ltd. ("First Pacific"). Under this Agreement First Pacific has acquired the right to earn 50% of the Company's working interest in its existing 12 hydrocarbon wells located in Southern Arkansas. Under this Agreement First Pacific paid the Company $50,000 within 21 days of the Agreement date; will pay $200,000 within 45 days of the Agreement date; and will pay $800,000 on or before 6 months of the Agreement date. The initial $250,000 has been paid, however the $800,000 has been delayed by mutual verbal agreement until June 30, 2012. The $250,000 received from First Pacific has been recorded as deferred 3
gain. None of the twelve wells are currently producing. The Company title to 50% ownership does not vest with First Pacific until the Company receives the $800,000. On June 30, 2011, the Company entered into an Agreement with Fredco LLC of Hosston, Louisiana, to sell Fredco LLC the Herrings Lease, and the Muslow Lease, for $33,000 and has the option to retain a 20% working interest in the respective wells. We are planning to use the First Pacific funds to recomplete the company's 12 wells on the Arkansas Leasse. HOSS HOLMES LEASE On August 26, 2009, the Company entered into an agreement to acquire for $100,000 the Hoss Holmes Lease located near Hosston, Louisiana, from Fredco LLC, a Louisiana private oil and gas operator. The company closed the acquisition of the property on September 30, 2009. On February 23, 2010 the company divested the assets being the Hoss Holmes, near Hosston Louisiana for $60,000. HERRINGS LEASE On August 10, 2009, the Companyentered into an agreement to acquire various oil leases near Hosston, Louisiana, from S.A.M., a Louisiana private partnership, and private oil and gas operator. Under the terms of the agreement, the Company has agreed to pay a total of ten dollars ($10) plus a one-fifth royalty interest in exchange for the exclusive grant, lease, and let of the following oil and gas leases: One, Two, Three and Four (1-4) inclusive, Block One (1) Town of Hosston, together with all abandoned alleyways and streets insofar as it covers and affects the surface of the earth and the base of the Nacatosh Formation together with wells being Herring No. 1, Serial No 184124, and Herring No. 2, Serial No. 184735. On June 30, 3011, the Company divested the assets under the aforementioned sale to Fredco LLC and has the option to retain a 20% royalty interest in the respective wells. MUSLOW LEASE On September 9, 2009, the Company entered into an agreement and acquires four oil and gas leases in Caddo Parish, Louisiana, from a private oil and gas operator for $70,000. The first three leases are the Muslow A, B, and C Leases, which in total comprise of 8 wells and equipment, of which 2 are currently producing. The fourth lease is the Caddo Levee Board Lease, comprising of 13 wells and equipment, of which 4 are currently producing. On June 30, 3011, the Company divested the assets under the aforementioned sale to Fredco LLC and has the option to retain a 20% royalty interest in the respective wells. ARKANSA LEASE On October 24, 2009 the Company signed a letter agreement to acquire eleven producible deep oil wells north of Hosston, Louisiana, and in Southern Arkansas. Seven of these wells are in production. The deepest of these wells produce from the Smackover formation at 7800 feet. Four other wells are capable of production after work over operation has been completed. Also included with the agreement are three disposal wells. 4
The terms of this agreement allowed the Company to pay $385,000, over a seven month period, with the first payment of $50,000 paid on November 24, 2009. The terms of the agreement allow the Company to receive production starting from November 1, 2009. On June 30, 2010 the last payment to complete the purchase for this property was made. On May 24, 2011, the Company entered into the aforementioned First Pacific farm-in to fully develop these properties. Under this Agreement First Pacific has acquired the right to earn 50% of the Company's working interest in its existing 12 hydrocarbon wells located in Southern Arkansas. Under this Agreement First Pacific paid the Company $50,000 within 21 days of the Agreement date; will pay $200,000 within 45 days of the Agreement date; and will pay $800,000 on or before 6 months of the Agreement date. The initial $250,000 has been paid, however the $800,000 has been delayed by mutual verbal agreement until June 30, 2012. The $250,000 received from First Pacific has been recorded as deferred gain. None of the twelve wells are currently producing. The Company title to 50% ownership does not vest with First Pacific until the Company receives the $800,000. The Company plan is to use the proceed received to get the wells ready for production through pipe well logging, perforating zones of interest one interval at a time, as well as place down hole electrical pumps. BANKRUPTCY OR SIMILAR PROCEEDINGS We have not been the subject of a bankruptcy, receivership or similar proceedings. COMPETITION AND MARKETS We face competition from other oil and natural gas companies in all aspects of our business, including acquisition of producing properties and oil and natural gas leases, marketing of oil and natural gas, and obtaining goods, services and labor. Many of our competitors have substantially larger financial and other resources than we have. Factors that affect our ability to acquire producing properties include available funds, available information about prospective properties and our limited number of employees. The availability of a ready market for and the price of any hydrocarbons produced will depend on many factors beyond our control including, but not limited to, the amount of domestic production and imports of foreign oil and liquefied natural gas, the marketing of competitive fuels, the proximity and capacity of natural gas pipelines, the availability of transportation and other market facilities, the demand for hydrocarbons, the effect of federal and state regulation of allowable rates of production, taxation, the conduct of drilling operations and federal regulation of natural gas. All of these factors, together with economic factors in the marketing arena, generally affect the supply of and/or demand for oil and natural gas and thus the prices available for sales of oil and natural gas. REGULATORY CONSIDERATIONS Proposals and proceedings that might affect the oil and gas industry are periodically presented to Congress, the Federal Energy Regulatory Commission ("FERC"), the Minerals Management Service ("MMS"), state legislatures and commissions and the courts. We cannot predict when or whether any such proposals may become effective. This industry is heavily regulated. There is no assurance that the regulatory approach currently pursued by various agencies will continue indefinitely. Notwithstanding the foregoing, except for the water quality issue described below, we currently do not anticipate that compliance with existing federal, state and local laws, rules and regulations, will have a material or significantly adverse effect upon our capital expenditures, earnings or competitive position. No material portion of our business is subject to renegotiation of profits or termination of contracts or subcontracts at the election of the federal government. 5
Our operations are subject to various types of regulation at the federal, state and local levels. This regulation includes requiring permits for drilling wells, maintaining bonding requirements in order to drill or operate wells and regulating the location of wells, the method of drilling and casing wells, the surface use and restoration of properties upon which wells are drilled, the plugging and abandoning of wells and the disposal of fluids used or generated in connection with operations. Our operations are also subject to various conservation laws and regulations. These include the regulation of the size of drilling and spacing units or proration units and the density of wells which may be drilled and the unitization or pooling of oil and natural gas properties. In addition, state conservation laws sometimes establish maximum rates of production from oil and natural gas wells, generally prohibit the venting or flaring of natural gas and impose certain requirements regarding the ratability of production. The effect of these regulations may limit the amount of oil and natural gas we can produce from our wells in a given state and may limit the number of wells or the locations at which we can drill. Currently, there are no federal, state or local laws that regulate the price for our sales of natural gas, natural gas liquids, crude oil or condensate. However, the rates charged and terms and conditions for the movement of gas in interstate commerce through certain intrastate pipelines and production area hubs are subject to regulation under the Natural Gas Policy Act of 1978, as amended. Pipeline and hub construction activities are, to a limited extent, also subject to regulations under the Natural Gas Act of 1938, as amended. While these controls do not apply directly to us, their effect on natural gas markets can be significant in terms of competition and cost of transportation services, which in turn can have a substantial impact on our profitability and costs of doing business. Additional proposals and proceedings that might affect the natural gas and crude oil extraction industry are considered from time to time by Congress, FERC, state regulatory bodies and the courts. We cannot predict when or if any such proposals might become effective and their effect, if any, on our operations. We do not believe that we will be affected by any action taken in any materially different respect from other crude oil and natural gas producers, gatherers and marketers with whom we compete. State regulation of gathering facilities generally includes various safety, environmental and in some circumstances, nondiscriminatory take requirements. This regulation has not generally been applied against producers and gatherers of natural gas to the same extent as processors, although natural gas gathering may receive greater regulatory scrutiny in the future. Various federal, state and local laws regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, directly impact oil and natural gas exploration, development and production operations, and consequently may impact our operations and costs. These regulations include, among others, (i) regulations by the Environmental Protection Agency ("EPA"), and various state agencies regarding approved methods of disposal for certain hazardous and non-hazardous wastes; (ii) the Comprehensive Environmental Response, Compensation and Liability Act, and analogous state laws, which regulate the removal or remediation of previously disposed wastes (including wastes disposed of or released by prior owners or operators), property contamination (including groundwater contamination), and remedial plugging operations to prevent future contamination; (iii) the Clean Air Act and comparable state and local requirements, which may require certain pollution controls with respect to air emissions from our operations; (iv) the Oil Pollution Act of 1990, which contains numerous requirements relating to the prevention of and response to oil spills into waters of the United States; (v) the Resource Conservation and Recovery Act, which is the principal federal statute governing the treatment, storage and disposal of hazardous wastes. To date, compliance with environmental laws and regulations has not required the expenditure of any material amount of money. Since environmental laws and regulations are periodically amended, we are unable to predict the ultimate cost of compliance. To our knowledge, other than the potential water quality issue described above, there are currently no material adverse environmental conditions that exist on any of our properties and there are no current or 6
threatened actions or claims by any local, state or federal agency, or by any private landowner against us pertaining to such a condition. Further, we are not aware of any currently existing condition or circumstance that may give rise to such actions or claims in the future. EMPLOYEES The Company appointed Donny Fitzgerald as director and consultant in 2011 to work on operation in the Louisiana and Arkansas area. Any other work is performed by contractors as required by the company. During 2011, Mr. Fitzgerald was paid 15,000,000 shares for services rendered which was valued based on the fair market value of $0.005 on the date of grant. RESEARCH AND DEVELOPMENT EXPENDITURES We have not incurred any research or development expenditures since our incorporation. PATENTS AND TRADEMARKS We do not own, either legally or beneficially, any patents or trademarks. REPORTS TO SECURITIES HOLDERS We provide an annual report that includes audited financial information to our shareholders. We will make our financial information equally available to any interested parties or investors through compliance with the disclosure rules of Regulation S-K for a small business issuer under the Securities Exchange Act of 1934. We are subject to disclosure filing requirements including filing Form 10K annually and Form 10Q quarterly. In addition, we will file Form 8K and other proxy and information statements from time to time as required. We do not intend to voluntarily file the above reports in the event that our obligation to file such reports is suspended under the Exchange Act. The public may read and copy any materials that we file with the Securities and Exchange Commission, ("SEC"), at the SEC's Public Reference Room at 100 F Street NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. ITEM 1A. RISK FACTORS WE ARE IN THE OIL BUSINESS AND WE EXPECT TO INCUR OPERATING LOSSES FOR THE FORESEEABLE FUTURE. We were incorporated on January 31, 2007 and to date have recently been involved in the organizational activities, and acquisition of our claims. We have no way to evaluate the likelihood that our business will be successful. We have earned minimal revenues as of the date of this annual report. Potential investors should be aware of the difficulties normally encountered by exploration companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration and development of the properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates. Prior to completion of our exploration stage, we anticipate that we will incur increased operating expenses without greatly increasing our revenues. We expect to incur significant losses into the foreseeable future. We recognize that if production is not forthcoming, we will not be able to continue business 7
operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and it is doubtful that we will generate significant revenues to achieve profitable operations. If we are unsuccessful in addressing these risks, our business will most likely fail. WE HAVE YET TO EARN SIGNIFICANT REVENUE TO ACHIEVE PROFITABILITY AND OUR ABILITY TO SUSTAIN OUR OPERATIONS IS DEPENDENT ON OUR ABILITY TO RAISE ADDITIONAL FINANCING TO COMPLETE OUR PROGRAM IF WARRANTED. AS A RESULT, OUR ACCOUNTANT BELIEVES THERE IS SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN. We have accrued accumulated net losses of $1,498,219 for the period from inception (January 31, 2007) to December 31, 2011, and have revenues of $365,316 to date. Our future is dependent upon our ability to obtain financing and upon future profitable operations from the development of our business. These factors raise substantial doubt that we will be able to continue as a going concern. Our independent auditors, has expressed substantial doubt about our ability to continue as a going concern. This opinion could materially limit our ability to raise additional funds by issuing new debt or equity securities or otherwise. If we fail to raise sufficient capital when needed, we will not be able to complete our business plan. As a result we may have to liquidate our business and you may lose your investment. You should consider our auditor's comments when determining if an investment in our company is suitable. BECAUSE OF THE UNIQUE DIFFICULTIES AND UNCERTAINTIES INHERENT IN OIL AND GAS VENTURES, WE FACE A HIGH RISK OF BUSINESS FAILURE. You should be aware of the difficulties normally encountered by exploration companies and the high rate of failure of such enterprises. The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the exploration and development of the properties that we plan to undertake. These potential problems include, but are not limited to, unanticipated problems relating to exploration, and additional costs and expenses that may exceed current estimates. If the results of our development program do not reveal viable commercialization options, we may decide to abandon our claim and acquire new claims. Our ability to acquire additional claims will be dependent upon our possessing adequate capital resources when needed. If no funding is available, we may be forced to abandon our operations. BECAUSE OF THE INHERENT DANGERS INVOLVED IN OIL AND GAS OPERATIONS, THERE IS A RISK THAT WE MAY INCUR LIABILITY OR DAMAGES AS WE CONDUCT OUR BUSINESS. The extracting of oil and gas involves numerous hazards. As a result, we may become subject to liability for such hazards, including pollution, cave-ins and other hazards against which we cannot insure or against which we may elect not to insure. At the present time we have no insurance to cover against these hazards. The payment of such liabilities may result in our inability to complete our planned program and/or obtain additional financing to fund our program. AS WE UNDERTAKE DEVELOPMENT OF OUR PROPERTIES, WE WILL BE SUBJECT TO COMPLIANCE WITH GOVERNMENT REGULATION THAT MAY INCREASE THE ANTICIPATED COST OF OUR PROGRAM. There are several governmental regulations that materially restrict oil extraction. We will be subject to regulations and laws as we carry out our program. We may be required to obtain work permits, post bonds and perform remediation work for any physical disturbance to the area in order to comply with these laws. The cost of complying with permit and regulatory environment laws will be greater because the impact on the project area is greater. Permits and regulations will control all aspects of the production program if the project continues to that stage. Examples of regulatory requirements can include: 8
(a) Water discharge will have to meet drinking water standards; (b) Dust generation will have to be minimal or otherwise re-mediated; (c) Dumping of material on the surface will have to be re-contoured and re-vegetated with natural vegetation; (d) An assessment of all material to be left on the surface will need to be environmentally benign; (e) Ground water will have to be monitored for any potential contaminants; (f) The socio-economic impact of the project will have to be evaluated and if deemed negative, will have to be remediated; and There is a risk that new regulations could increase our costs of doing business and prevent us from carrying out our exploration program. We will also have to sustain the cost of reclamation and environmental remediation for all exploration work undertaken. Both reclamation and environmental remediation refer to putting disturbed ground back as close to its original state as possible. Other potential pollution or damage must be cleaned-up and renewed along standard guidelines outlined in the usual permits. Reclamation is the process of bringing the land back to its natural state after completion of exploration activities. Environmental remediation refers to the physical activity of taking steps to remediate, or remedy, any environmental damage caused. The amount of these costs is not known at this time as we do not know the extent of the exploration program that will be undertaken beyond completion of the recommended work program. If remediation costs exceed our cash reserves we may be unable to complete our exploration program and have to abandon our operations. IF ACCESS TO OUR PROPERTIES IS RESTRICTED BY INCLEMENT WEATHER, WE MAY BE DELAYED IN ANY FUTURE MINING EFFORTS. It is possible that adverse weather could cause accessibility to our properties difficult and this would delay in our timetables. BASED ON CONSUMER DEMAND, THE GROWTH AND DEMAND FOR ANY OIL OR GAS WE MAY RECOVER FROM OUR CLAIMS MAY BE SLOWED, RESULTING IN REDUCED REVENUES TO THE COMPANY. Our success will be dependent on the growth of demand for petroleum products. If consumer demand slows our revenues may be significantly affected. This could limit our ability to generate revenues and our financial condition and operating results may be harmed. BECAUSE OUR CURRENT OFFICERS AND DIRECTORS HAVE OTHER BUSINESS INTERESTS, THEY MAY NOT BE ABLE OR WILLING TO DEVOTE A SUFFICIENT AMOUNT OF TIME TO OUR BUSINESS OPERATIONS, CAUSING OUR BUSINESS TO FAIL. Mr. Donny Fitzgerald, our CEO and director, currently devotes up to 10 hours per week providing services to the company. While he presently possesses adequate time to attend to our interest, it is possible that the demands on him from other obligations could increase, with the result that he would no longer be able to devote sufficient time to the management of our business. This could negatively impact our business development. Our other Directors spend similar amounts of time providing services to the company and there is no guarantee that they will have sufficient time to devote to the management of our business. 9
WE MAY BE UNABLE TO OBTAIN ADDITIONAL CAPITAL THAT WE MAY REQUIRE TO IMPLEMENT OUR BUSINESS PLAN. THIS WOULD RESTRICT OUR ABILITY TO GROW. The proceeds from our private offerings completed in 2007 and funds borrowed since this private offering, provide us with a limited amount of working capital and is not sufficient to fund our proposed operations. We will require additional capital to continue to operate our business and our proposed operations. We may be unable to obtain additional capital as and when required. Future acquisitions and future development, production and marketing activities, as well as our administrative requirements (such as salaries, insurance expenses and general overhead expenses, as well as legal compliance costs and accounting expenses) will require a substantial amount of additional capital and cash flow. We may not be successful in locating suitable financing transactions in the time period required or at all, and we may not obtain the capital we require by other means. If we do not succeed in raising additional capital, the capital we have received to date may not be sufficient to fund our operations going forward without obtaining additional capital financing. Any additional capital raised through the sale of equity may dilute your ownership percentage. This could also result in a decrease in the fair market value of our equity securities because our assets would be owned by a larger pool of outstanding equity. The terms of securities we issue in future capital transactions may be more favorable to our new investors, and may include preferences, superior voting rights and the issuance of warrants or other derivative securities, and issuances of incentive awards under equity employee incentive plans, which may have a further dilutive effect. Our ability to obtain needed financing may be impaired by such factors as the capital markets (both generally and in the resource industry in particular), our status as a new enterprise without a demonstrated operating history, the location of our properties and the price of oil and gas on the commodities markets (which will impact the amount of asset-based financing available to us) or the retention or loss of key management. Further, if oil and gas prices on the commodities markets decrease, then our revenues will likely decrease, and such decreased revenues may increase our requirements for capital. If the amount of capital we are able to raise from financing activities is not sufficient to satisfy our capital needs, we may be required to cease our operations. We may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which may adversely impact our financial condition. AMENDMENTS TO CURRENT LAWS AND REGULATIONS GOVERNING OUR PROPOSED OPERATIONS COULD HAVE A MATERIAL ADVERSE IMPACT ON OUR PROPOSED BUSINESS. Our business will be subject to substantial regulation under state and federal laws relating to the exploration for, and the development, upgrading, marketing, pricing, taxation, and transportation of oil and other matters. Amendments to current laws and regulations governing operations and activities of resource operations could have a material adverse impact on our proposed business. In addition, there can be no assurance that income tax laws, royalty regulations and government incentive programs related to the resource industry generally, will not be changed in a manner which may adversely affect us and cause delays, inability to complete or abandonment of properties. 10
Permits, leases, licenses, and approvals are required from a variety of regulatory authorities at various stages of mining and extraction. There can be no assurance that the various government permits, leases, licenses and approvals sought will be granted to us or, if granted, will not be cancelled or will be renewed upon expiration. ESTIMATES OF OIL RESERVES THAT WE MAKE MAY BE INACCURATE WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON US There are numerous uncertainties inherent in estimating quantities of oil resources, including many factors beyond our control, and no assurance can be given that expected levels of resources or recovery of oil will be realized. In general, estimates of recoverable oil resources are based upon a number of factors and assumptions made as of the date on which resource estimates are determined, such as geological and engineering estimates which have inherent uncertainties and the assumed effects of regulation by governmental agencies and estimates of future commodity prices and operating costs, all of which may vary considerably from actual results. All such estimates are, to some degree, uncertain and classifications of resources are only attempts to define the degree of uncertainty involved. For these reasons, estimates of the recoverable oil, the classification of such resources based on risk of recovery, prepared by different engineers or by the same engineers at different times, may vary substantially. ABANDONMENT AND RECLAMATION COSTS ARE UNKNOWN AND MAY BE SUBSTANTIAL. We will be responsible for compliance with terms and conditions of environmental and regulatory approvals and all laws and regulations regarding the abandonment of our properties and reclamation of lands at the end of their economic life, which abandonment and reclamation costs may be substantial. A breach of such legislation and/or regulations may result in the issuance of remedial orders, the suspension of approvals, or the imposition of fines and penalties, including an order for cessation of operations at the site until satisfactory remedies are made. It is not possible to estimate with certainty the abandonment and reclamation costs since they will be a function of regulatory requirements at the time. INCREASES IN OUR OPERATING EXPENSES WILL IMPACT OUR OPERATING RESULTS AND FINANCIAL CONDITION. Extraction, development, production, marketing (including distribution costs) and regulatory compliance costs (including taxes) will substantially impact the net revenues we derive from oil that we produce. These costs are subject to fluctuations and variation in different locales in which we will operate, and we may not be able to predict or control these costs. If these costs exceed our expectations, this may adversely affect our results of operations. In addition, we may not be able to earn net revenue at our predicted levels, which may impact our ability to satisfy our obligations. PENALTIES WE MAY INCUR COULD IMPAIR OUR BUSINESS. Failure to comply with government regulations could subject us to civil and criminal penalties, could require us to forfeit property rights, and may affect the value of our assets. We may also be required to take corrective actions, such as installing additional equipment or taking other actions, each of which could require us to make substantial capital expenditures. We could also be required to indemnify our employees in connection with any expenses or liabilities that they may incur individually in connection with regulatory action against them. As a result, our future business prospects could deteriorate due to regulatory constraints, and our profitability could be impaired by our obligation to provide such indemnification to our employees. 11
ENVIRONMENTAL RISKS MAY ADVERSELY AFFECT OUR BUSINESS. Oil extraction operations present environmental risks and hazards and are subject to environmental regulation pursuant to a variety of federal, state, and local laws and regulations. Environmental legislation provides for, among other things, restrictions and prohibitions on spills, releases or emissions of various substances produced in association with resource operations. The legislation also requires that facility sites be operated, maintained, abandoned and reclaimed to the satisfaction of applicable regulatory authorities. Compliance with such legislation can require significant expenditures and a breach may result in the imposition of fines and penalties, some of which may be material. Environmental legislation is evolving in a manner we expect may result in stricter standards and enforcement, larger fines and liability and potentially increased capital expenditures and operating costs. The discharge of pollutants into the air, soil or water may give rise to liabilities to governments and third parties and may require us to incur costs to remedy such discharges. The application of environmental laws to our business may cause us to curtail our production or increase the costs of our production, development or exploration activities. CHALLENGES TO TITLE TO OUR PROPERTIES MAY IMPACT OUR FINANCIAL CONDITION. Title to oil interests is often not capable of conclusive determination without incurring substantial expense. While we intend to make appropriate inquiries into the title of properties and other development rights we acquire, title defects may exist. In addition, we may be unable to obtain adequate insurance for title defects, on a commercially reasonable basis or at all. If title defects do exist, it is possible that we may lose all or a portion of our right, title and interests in and to the properties to which the title defects relate. THE LIMITED TRADING OF OUR COMMON STOCK ON THE OTC BULLETIN BOARD MAY IMPAIR YOUR ABILITY TO SELL YOUR SHARES. There have been thin volumes of trading of our common stock. The lack of trading of our common stock and the low volume of any future trading may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. Such factors may also impair our ability to raise capital by selling shares of capital stock and may impair our ability to acquire other companies or technologies by using common stock as consideration. THE MARKET PRICE OF OUR COMMON STOCK IS LIKELY TO BE HIGHLY VOLATILE AND SUBJECT TO WIDE FLUCTUATIONS. Assuming we are able to establish an active trading market for our common stock, the market price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to a number of factors that are beyond our control, including: * dilution caused by our issuance of additional shares of common stock and other forms of equity securities, which we expect to make in connection with future capital financings to fund our operations and growth, to attract and retain valuable personnel and in connection with future strategic partnerships with other companies; * announcements of acquisitions, reserve discoveries or other business initiatives by our competitors; * fluctuations in revenue from our business as new reserves come to market; * changes in the market for commodities or in the capital markets generally; 12
* quarterly variations in our revenues and operating expenses; * changes in the valuation of similarly situated companies, both in our industry and in other industries; * changes in analysts' estimates affecting us, our competitors or our industry; * changes in the accounting methods used in or otherwise affecting our industry; * additions and departures of key personnel; * fluctuations in interest rates and the availability of capital in the capital markets; and These and other factors are largely beyond our control, and the impact of these risks, singly or in the aggregate, may result in material adverse changes to the market price of our common stock and our results of operations and financial condition. OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY, AND THESE FLUCTUATIONS MAY CAUSE OUR STOCK PRICE TO DECLINE. Our operating results will likely vary in the future primarily as the result of fluctuations in our revenues and operating expenses, expenses that we incur, the price of oil and gas in the commodities markets and other factors. If our results of operations do not meet the expectations of current or potential investors, the price of our common stock may decline. WE DO NOT EXPECT TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE. We do not intend to declare dividends for the foreseeable future, as we anticipate that we will reinvest any future earnings in the development and growth of our business. Therefore, investors will not receive any funds unless they sell their common stock, and stockholders may be unable to sell their shares on favorable terms or at all. Investors cannot be assured of a positive return on investment or that they will not lose the entire amount of their investment in the common stock. APPLICABLE SEC RULES GOVERNING THE TRADING OF "PENNY STOCKS" WILL LIMIT THETRADING AND LIQUIDITY OF OUR COMMON STOCK, WHICH MAY AFFECT THE TRADING PRICE OF OUR COMMON STOCK. Our common stock is presently considered to be a "penny stock" and is subject to SEC rules and regulations which impose limitations upon the manner in which such shares may be publicly traded and regulate broker-dealer practices in connection with transactions in "penny stocks." Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, 13
the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules which may increase the difficulty investors may experience in attempting to liquidate such securities. FORWARD-LOOKING STATEMENTS This Form 10-K contains forward-looking statements that involve risks and uncertainties. We use words such as anticipate, believe, plan, expect, future, intend and similar expressions to identify such forward-looking statements. You should not place too much reliance on these forward-looking statements. Our actual results are likely to differ materially from those anticipated in these forward-looking statements for many reasons. ITEM 2. PROPERTIES We currently do not own any physical property or own any real property. Our principal executive office is located at 213 E Arkansas Ave, Vivian, LA 71082, USA. ITEM 3. LEGAL PROCEEDINGS We are not currently involved in any legal proceedings and we are not aware of any pending or potential legal actions. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of the security holders during the year ended December 31, 2011. PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS NO PUBLIC MARKET FOR COMMON STOCK Our common stock is listed for trading under the symbol "AVOE". As of the date of this report we have approximately 90 shareholders of record. We have paid no cash dividends and have no outstanding options. We have no securities authorized for issuance under equity compensation plans. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of Securities' laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny 14
stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type, size and format, as the SEC shall require by rule or regulation. The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a suitably written statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock if it becomes subject to these penny stock rules. Therefore, if our common stock becomes subject to the penny stock rules, stockholders may have difficulty selling those securities. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD LOOKING STATEMENTS This section of this report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of our report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions. We are an exploration stage company and have yet to generated enough revenues to achieve profitability. RESULTS OF OPERATIONS We have generated limited revenues to date. We incurred expenses of $370,392 for the year ending December 31, 2011. These expenses consisted of general operating expenses, professional fees incurred in connection with the day to day operation of our business and the preparation and filing of our periodic reports and recognition of impairment loss on our property for the year ended December 31, 2011. Due to disposition of our properties we had a gain of $115,000 on the extinguishment of our environmental liability (ARO). We also had a gain on sale of certain mineral leases of $33,000. Our net loss for the year ending December 31, 2011 was $71,168. Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. This is because we have only begun generating revenues and there is no assurance we will ever reach profitability. We have generated minimal revenues to date. The following table provides selected financial data about our company for the years ended December 31, 2011, and 2010. 15
Balance Sheet Data: 12/31/11 12/31/10 ------------------- -------- -------- Cash $ 233,585 $ 1,994 Total assets $ 233,085 $ 5,783 Total liabilities $ 277,875 $ 304,406 Deferred Gain $ 250,000 $ -- Shareholders' deficit $(294,791) $(298,623) LIQUIDITY AND CAPITAL RESOURCES Our cash balance at December 31, 2011 was $233,585 with outstanding liabilities of $527,876. Management believes our current cash balance will be unable to sustain operations for the next 12 months. We will be forced to raise additional funds by issuing new debt or equity securities or otherwise. If we fail to raise sufficient capital when needed, we will not be able to complete our business plan. PLAN OF OPERATION Our cash balance is $233,585 and $1,994 as of December 31, 2011 and 2010, respectively. We believe our cash balance is insufficient to fund our levels of operations for the next twelve months. As a result we will be forced to raise additional funds by issuing new debt or equity securities or otherwise. If we fail to raise sufficient capital when needed, we will not be able to complete our business plan. We have generated limited revenue of $365,316 since inceptions. Our auditor has issued a going concern opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. This is because we have generated minimal revenues to date. There is no assurance we will ever profitability. OFF-BALANCE SHEET ARRANGEMENTS We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors. 16
ITEM 8. FINANCIAL STATEMENTS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors Rango Energy, Inc. (formerly Avro Energy, Inc. ) We have audited the accompanying balance sheets of Rango Energy, Inc. (formerly Avro Energy, Inc.) as of December 31, 2011 and 2010, and the related statements of operations, shareholders' equity (deficit) and cash flows for the years 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 audits. We conducted our audits 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 audits 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 audits provide 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 Rango Energy, Inc. as of December 31, 2011 and 2010, 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 1 to the financial statement, the Company suffered recurring losses from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are also described in Note 1. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that may result should the Company be unable to continue as a going concern. /s/ M&K CPAS, PLLC -------------------------------------- www.mkacpas.com Houston, Texas May 10, 2012 17
RANGO ENERGY, INC. (FORMERLY AVRO ENERGY, INC.) BALANCE SHEETS December 31, December 31, 2011 2010 ------------ ------------ ASSETS CURRENT Cash $ 233,085 $ 1,994 Accounts Receivable -- 3,789 ------------ ------------ TOTAL ASSETS $ 233,085 $ 5,783 ============ ============ LIABILITIES CURRENT LIABILITIES Related Party Loan $ 6,657 $ 4,157 Loan Payable 815 815 Deferred Gain 250,000 -- Accounts payable and accrued liabilities 150,404 64,434 ------------ ------------ TOTAL CURRENT LIABILITIES 407,876 69,406 LONG TERM LIABILITIES ARO Obligation 120,000 235,000 ------------ ------------ TOTAL LONG TERM LIABILITIES 120,000 235,000 ------------ ------------ TOTAL LIABILITIES 527,876 304,406 ------------ ------------ STOCKHOLDERS' (DEFICIT) Common Stock, authorized 100,000,000 shares, $0.001 par value, 1,088,543 and 810,943 issued and outstanding as of December 31, 2011 and 2010, respectively) 1,089 812 Additional Paid in Capital 1,199,536 1,124,812 Accumulated other comprehensive income 2,803 2,803 Accumulated Deficit (1,498,219) (1,427,051) ------------ ------------ TOTAL STOCKHOLDERS' (DEFICIT) (294,791) (298,623) ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) $ 233,085 $ 5,783 ============ ============ The Accompanying notes are integral part of these financial statements. 18
RANGO ENERGY, INC. (FORMERLY AVRO ENERGY, INC.) STATEMENTS OF OPERATIONS Year Ended December 31, December 31, 2011 2010 ---------- ---------- REVENUES Oil Revenues $ 151,224 $ 177,409 ---------- ---------- TOTAL REVENUES 151,224 177,409 ---------- ---------- EXPENSES Operations Expense 267,738 288,709 Accounting and Professional Fees 15,000 23,883 Office and Administration 87,654 5,700 ---------- ---------- TOTAL EXPENSES 370,392 553,292 ---------- ---------- Net Income (Loss) from operations (219,168) (375,883) OTHER INCOME AND EXPENSES Gain on sale of lease properties 148,000 60,000 Loss on conversion of debt -- (260,032) Accretion Expense -- (235,000) Interest Expense -- (21,299) ---------- ---------- TOTAL OTHER INCOME AND EXPENSES 148,000 (456,331) ---------- ---------- Net Income (Loss) (71,168) (597,214) ---------- ---------- TOTAL COMPREHENSIVE INCOME (LOSS) $ (71,168) $ (597,214) ========== ========== BASIC AND DILUTED INCOME PER SHARE $ (0.09) $ (0.98) ========== ========== WEIGHTED AVERAGE # OF SHARES OUTSTANDING 797,544 610,069 ========== ========== The Accompanying notes are integral part of these financial statements. 19
RANGO ENERGY, INC. (FORMERLY AVRO ENERGY, INC.) STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT) for the Years Ended December 31, 2011 and 2010 Accumulated Common Stock Other -------------------- Paid in Comprehensive Accumulated Total Shares Amount Capital Income Deficit Equity ------ ------ ------- ------ ------- ------ Balance, December 31, 2009 509,011 $ 509 $ 202,611 $ 2,803 $ (829,837) $(623,914) Imputed Interest 21,299 21,299 Stock issued for Cash May 31, 2010 20,000 20 249,980 250,000 Stock issued for Cash July 8, 2010 22,500 23 1,102 1,125 Stock issued for to settle debt September 13, 2010 260,032 260 389,788 390,048 Loss on debt settlement 260,032 260,032 Net (Loss) for period (597,214) (597,214) --------- --------- ---------- -------- ----------- --------- Balance, December 31, 2010 811,543 812 1,124,812 2,803 (1,427,051) (298,624) Stock Cancelled March 3, 2011 (23,000) (23) 23 -- Stock issued for services August 23, 2011 300,000 300 74,700 75,000 Income(Loss) for period (71,168) (71,168) --------- --------- ---------- -------- ----------- --------- Balance, December 31, 2011 1,088,543 $ 1,089 $1,199,535 $ 2,803 $(1,498,219) $(294,791) ========= ========= ========== ======== =========== ========= The Accompanying notes are integral part of these financial statements 20
RANGO ENERGY, INC. (FORMERLY AVRO ENERGY, INC.) STATEMENTS OF CASH FLOWS Year Ended December 31, December 31, 2011 2010 ---------- ---------- OPERATING ACTIVITIES Net income (loss) for the period $ (71,168) $ (597,214) Adjustment for non-cash expenses Shares issued for service 75,000 Imputed interest -- 21,299 Accretion Expense (Gain) (148,000) 235,000 Loss on conversion of debt -- 260,032 Change in: Accounts Receivable 3,790 21,156 Accounts payable and accrued liabilities 85,969 (325,099) ---------- ---------- CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (54,408) (384,826) ---------- ---------- INVESTING ACTIVITIES Deferred Gain on sale of working interest 250,000 -- Cash received on sale of mineral leases 33,000 -- ---------- ---------- CASH PROVIDED BY INVESTING ACTIVITIES 288,000 -- ---------- ---------- FINANCING ACTIVITIES Capital Stock issued -- 251,125 Loan Payable - related party 2,499 121,650 ---------- ---------- CASH FROM FINANCING ACTIVITIES 2,499 372,775 ---------- ---------- INCREASE (DECREASE) IN CASH FOR PERIOD 231,091 (12,051) Cash, beginning of period 1,994 14,045 ---------- ---------- Cash, end of period $ 233,085 $ 1,994 ========== ========== Cash paid for interest $ -- $ -- ========== ========== Cash paid for income tax $ -- $ -- ========== ========== Shares cancelled $ 23 $ -- ========== ========== The Accompanying notes are integral part of these financial statements 21
RANGO ENERGY, INC. (FORMERLY AVRO ENERGY, INC.) Footnotes to the Financial Statements For the Years Ended December 31, 2011 and 2010 (Stated in US Dollars) NOTE 1. NATURE OF OPERATIONS DESCRIPTION OF BUSINESS AND HISTORY - Rango Energy, Inc. (formerly Avro Energy, Inc.) (hereinafter referred to as the "Company") was incorporated on January 31, 2007 by filing Articles of Incorporation with the Nevada Secretary of State. The Company was formed to engage in the exploration of resource properties. On January 31, 2012, the Company changed its name from Avro Energy, Inc. to Rango Energy, Inc. The Company is currently engaged in the acquisition, exploration and development of oil and natural gas properties in the United States ArkLaTex region. The company seeks to develop low risk opportunities by itself or with joint venture partners in the oil and natural gas sectors. The Company has applied to reverse split its issued and outstanding shares on the basis of fifty (50) existing shares for one of the post split shares. The application has been accepted by the SEC and FINRA and is expected to become effective in mid-May 2012. The shares have been retroactively applied for the reverse split. GOING CONCERN - The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company suffered reoccurring net losses from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that may result should the Company be unable to continue as a going concern. As shown in the accompanying financial statements, the Company has incurred a accumulated loss of $1,498,219 for the period from January 31, 2007 (inception) to December 31, 2011 and has generated revenues of $365,316 over the same period. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of acquisitions. Management has plans to seek additional capital through a private placement and public offering of its common stock. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RESOURCE PROPERTIES - Company follows the successful efforts method of accounting for its oil and gas properties. Unproved oil and gas properties are periodically assessed and any impairment in value is charged to exploration expense. The costs of unproved properties, which are determined to be productive are transferred to proved resource properties and amortized on an equivalent unit-of-production basis. Exploratory expenses, including geological and geophysical expenses and delay rentals for unevaluated resource properties, are charged to expense as incurred. Exploratory drilling costs are charged as expenses until it is determined that the company has proven oil and gas reserves. 22
BASIS OF PRESENTATION -These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. dollars. The Company's fiscal year-end is December 31. USE OF ESTIMATES - The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of net revenue and expenses in the reporting period. We regularly evaluate our estimates and assumptions related to the useful life and recoverability of long-lived assets, stock-based compensation and deferred income tax asset valuation allowances. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by us may differ materially and adversely from our estimates. To the extent there are material differences between our estimates and the actual results, our future results of operations will be affected. CASH AND CASH EQUIVALENTS - The Company considers all highly liquid instruments with original maturities of three months or less when acquired, to be cash equivalents. We had no cash equivalents at December 31, 2011 or 2010, respectively. ASSET RETIREMENT OBLIGATION (ARO) - The estimated costs of restoration and removal of facilities are accrued. The fair value of a liability for an asset's retirement obligation is recorded in the period in which it is incurred and the corresponding cost capitalized by increasing the carrying amount of the related long-lived asset. The liability is accreted to its then present value each period, if the liability is settled for an amount other than the recorded amount, a gain or loss is recognized. At December 31, 2011 and 2010, the ARO of $120,000 and $235,000 is included in liabilities. INCOME TAXES - Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740, INCOME TAXES, as of its inception. Pursuant to ASC 740, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years. COMPREHENSIVE LOSS - ASC 220, COMPREHENSIVE INCOME, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As of December 31, 2011 and 2010, the Company has no items that represent comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements. STOCK BASED COMPENSATION - ASC 718, STOCK-BASED COMPENSATION, establishes standards for the reporting and display of stock based compensation in the financial statements. During the year ended December 31, 2011, the Company issued 15,000,000 shares to the Company's president for services value at $75,000. The shares issued were valued at $0.005 per share which is based on the fair market value on the date of grant. LOSS PER COMMON SHARE - The Company computes net loss per share in accordance with ASC 260, EARNINGS PER SHARE, which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares 23
assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. FAIR VALUE OF FINANCIAL INSTRUMENTS - ASC 820, "FAIR VALUE MEASUREMENTS" and ASC 825, Financial Instruments, requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value: LEVEL 1 Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. LEVEL 2 Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data. LEVEL 3 Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities. The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheets as of December 31, 2011 and 2010: Fair Value Measurement at December 31, 2011 ------------------------------------------- Level 1 Level 2 Level 3 -------- -------- -------- LIABILITIES Asset Retirement Obligations $ -- $ -- $120,000 -------- -------- -------- $ -- $ -- $120,000 -------- -------- -------- Fair Value Measurement at December 31, 2010 ------------------------------------------- Level 1 Level 2 Level 3 -------- -------- -------- LIABILITIES Asset Retirement Obligations $ -- $ -- $235,000 -------- -------- -------- $ -- $ -- $235,000 -------- -------- -------- There were no transfers of financial assets or liabilities between Level 1 and Level 2 inputs for the years ended December 31, 2011and 2010. 24
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS In January 2010, the FASB issued an amendment to ASC 820, Fair Value Measurements and Disclosure, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis. This standard, for which the Company is currently assessing the impact, is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010. In January 2010, the FASB issued an amendment to ASC 505, Equity, where entities that declare dividends to shareholders that may be paid in cash or shares at the election of the shareholders are considered to be a share issuance that is reflected prospectively in EPS, and is not accounted for as a stock dividend. This standard is effective for interim and annual periods ending on or after December 15, 2009 and is to be applied on a retrospective basis. The adoption of this standard is not expected to have a significant impact on the Company's financial statements. In February 2010, the FASB Accounting Standards Update 2010-10 (ASU 2010-10), "Consolidation (Topic 810): Amendments for Certain Investment Funds." The amendments in this Update are effective as of the beginning of a reporting entity's first annual period that begins after November 15, 2009 and for interim periods within that first reporting period. Early application is not permitted. The Company's adoption of provisions of ASU 2010-10 did not have a material effect on the financial position, results of operations or cash flows. In February 2010, the FASB issued ASU No. 2010-09 "Subsequent Events (ASC Topic 855) "Amendments to Certain Recognition and Disclosure Requirements" ("ASU No. 2010-09"). ASU No. 2010-09 requires an entity that is an SEC filer to evaluate subsequent events through the date that the financial statements are issued and removes the requirement for an SEC filer to disclose a date, in both issued and revised financial statements, through which the filer had evaluated subsequent events. The adoption did not have an impact on the Company's financial position and results of operations. In March 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards Update 2010-11 (ASU 2010-11), "Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives." The amendments in this Update are effective for each reporting entity at the beginning of its first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each entity's first fiscal quarter beginning after issuance of this Update. The Company does not expect the provisions of ASU 2010-11 to have a material effect on the financial position, results of operations or cash flows of the Company. In December 2010, the FASB Accounting Standards Update 2010-29 Business Combinations Topic 805, which requires a public entity to disclose pro forma information for business combinations that occurred in the current reporting period. The disclosures include pro forma revenue and earnings of the combined entity for the current reporting period as though the acquisition date for all business combinations that occurred during the year had been as of the beginning of the annual reporting period. If comparative financial statements are presented, the pro forma revenue and earnings of the combined entity for the comparable prior reporting period should be reported as though the acquisition date for all business combinations that occurred during the current year had been as of the beginning of the comparable prior annual reporting period. Effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The adoption did not have an impact on the Company's financial position and results of operations. 25
In April 2011, the FASB issued ASU 2011-02, "Receivables (Topic 310): A Creditor's Determination of Whether a Restructuring is a Troubled Debt Restructuring". This amendment explains which modifications constitute troubled debt restructurings ("TDR"). Under the new guidance, the definition of a troubled debt restructuring remains essentially unchanged, and for a loan modification to be considered a TDR, certain basic criteria must still be met. For public companies, the new guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructuring occurring on or after the beginning of the fiscal year of adoption. The Company does not expect that the guidance effective in future periods will have a material impact on its financial statements. In June 2011, the FASB issued ASU 2011-05, "Comprehensive Income (Topic 220): Presentation of Comprehensive Income", which is effective for annual reporting periods beginning after December 15, 2011. ASU 2011-05 will become effective for the Company on January 1, 2012. This guidance eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. In addition, items of other comprehensive income that are reclassified to profit or loss are required to be presented separately on the face of the financial statements. This guidance is intended to increase the prominence of other comprehensive income in financial statements by requiring that such amounts be presented either in a single continuous statement of income and comprehensive income or separately in consecutive statements of income and comprehensive income. The adoption of ASU 2011-05 is not expected to have a material impact on our financial position or results of operations. In May 2011, the FASB issued ASU 2011-04, "Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs", which is effective for annual reporting periods beginning after December 15, 2011. This guidance amends certain accounting and disclosure requirements related to fair value measurements. Additional disclosure requirements in the update include: (1) for Level 3 fair value measurements, quantitative information about unobservable inputs used, a description of the valuation processes used by the entity, and a qualitative discussion about the sensitivity of the measurements to changes in the unobservable inputs; (2) for an entity's use of a nonfinancial asset that is different from the asset's highest and best use, the reason for the difference; (3) for financial instruments not measured at fair value but for which disclosure of fair value is required, the fair value hierarchy level in which the fair value measurements were determined; and (4) the disclosure of all transfers between Level 1 and Level 2 of the fair value hierarchy. ASU 2011-04 will become effective for the Company on January 1, 2012. We are currently evaluating ASU 2011-04 and have not yet determined the impact that adoption will have on our financial statements. In September 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-08, Intangibles - Goodwill and Other (Topic 350): Testing Goodwill for Impairment. The guidance in ASU 2011-08 is intended to reduce complexity and costs by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The amendments also improve previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Also, the amendments improve the examples of events and circumstances that an entity having a reporting unit with a zero or negative carrying amount should consider in determining whether to measure an impairment loss, if any, under the second step of the goodwill impairment test. The amendments in this ASU are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity's financial statements for the most recent annual or interim period have yet been issued. The adoption of this guidance is not expected to have a material impact on the Company's financial position or results of operations. 26
NOTE 3. OIL AND GAS PROPERTIES The oil and gas properties that the company has have had all costs related to the properties expensed in accordance with Generally Accepted Accounting Principles for the industry. Currently the Company does not have proven reserves confirmed with a geological study and will only be able to capitalize properties once reserves have been proven. The company performed an impairment analysis at the end of 2009 and determined that the properties were not economically viable, at that point the company impaired the properties. JOINT VENTURE On May 24, 2011, the Company entered into a Farm-Out Agreement with First Pacific Oil and Gas Ltd. ("First Pacific"). Under this Agreement First Pacific has acquired the right to earn 50% of the Company's working interest in its existing 12 hydrocarbon wells located in Southern Arkansas. Under this Agreement First Pacific has paid the Company $250,000; and will pay $800,000 on or before June 30, 2012. The Company retains a 50% working interest. First Pacific will earn its working interest upon improvements of the existing hydrocarbon wells being completed with the final $800,000 investment. The $250,000 received has been recorded as Deferred Gain. The initial $250,000 has been paid, however the $800,000 has been delayed by mutual verbal agreement until June 30, 2012. None of the twelve wells are currently producing. Title to 50% ownership does not vest with First Pacific until the Company receives the $800,000. HOSS HOLMES LEASE On August 26, 2009, the Company entered into an agreement to acquire for $100,000 the Hoss Holmes Lease located near Hosston, Louisiana, from Fredco LLC, a Louisiana private oil and gas operator. The company closed the acquisition of the property on September 30, 2009. On February 23, 2010, the Company divested a non-core assets being the Hoss Holmes, near Hosston Louisiana for $60,000. The sale resulted in a gain on sale of $60,000 recorded as other income. HERRINGS LEASE On August 10, 2009, the Company entered into an agreement to acquire various oil leases near Hosston, Louisiana, from S.A.M., a Louisiana private partnership, and private oil and gas operator. Under the terms of the agreement, the Company has agreed to pay a total of ten dollars ($10) plus a one-fifth royalty interest in exchange for the exclusive grant, lease, and let of the following oil and gas leases: One, Two, Three and Four (1-4) inclusive, Block One (1) Town of Hosston, together with all abandoned alleyways and streets insofar as it covers and affects the surface of the earth and the base of the Nacatosh Formation together with wells being Herring No. 1, Serial No 184124, and Herring No. 2, Serial No. 184735. On June 30, 2011, the Company's interest in the Herrings Lease and the Muslow Lease were sold for $33,000 plus a 20% royalty interest in these mineral leases. The sale resulted in a gain of $148,000 recorded as other income, which includes gain of $115,000 due to the decrease in ARO from $235,000 as of December 31, 2010. MUSLOW LEASE On September 9, 2009, the Company entered into an agreement and acquires four oil and gas leases in Caddo Parish, Louisiana, from a private oil and gas operator for $70,000. The first three leases are the Muslow A, B, and C Leases, 27
which in total comprise of 8 wells and equipment, of which 2 are currently producing. The fourth lease is the Caddo Levee Board Lease, comprising of 13 wells and equipment, of which 4 are currently producing. On June 30, 2011, the Company's interest in the Herrings Lease and the Muslow Lease were sold for $33,000 plus an option to retain 20% royalty interest in these mineral leases. The sale resulted in a gain of $148,000, which includes $115,000 gain on decrease in Assets Retirement Obligation from $235,000 in December 31, 2010. ARKANSAS LEASE On October 24, 2009 the Company signed a letter agreement to acquire eleven producible deep oil wells north of Hosston, Louisiana, and in Southern Arkansas. Seven of these wells are in production. The deepest of these wells produce from the Smackover formation at 7800 feet. Four other wells are capable of production after work over operation has been completed. Also included with the agreement are three disposal wells. The terms of this agreement allowed the Company to pay $385,000, over a seven month period, with the first payment of $50,000 paid on November 24, 2009. The terms of the agreement allow the Company to receive production starting from November 1, 2009. On June 30, 2010 the last payment to complete the purchase for this property was made. NOTE 4. RELATED PARTY The loans are payable to shareholders of $815 and $4,157 as of December 31, 2011 and 2010, respectively. The loans are unsecured, are payable in five years from August 2009 and bear interest at 3%. Due to the small size of the loans, no imputed interest has been calculated. On September 13, 2010, the company entered agreements to convert various outstanding loans into restricted shares of the Company. The total amount owing to its creditors was $390,048, and each agreed to the issuance of restricted shares of the Company to settle this outstanding debt. As a result, the Company agreed to issue a total of 260,032 (13,001,600 pre-reverse split) shares in settlement of this debt, or at a price of $0.03 per share. The total fair value of the shares was $650,080 based on the closing price resulting in a loss of settlement of debt of $260,032. On December 14, 2011, Donny Fitzgerald, the Company's president advanced the Company $2,500. There is no repayment terms or interest. On August 23, 2011, the Company issued to Donny Fitzgerald, 300,000 (15,000,000 pre-reverse split) shares in exchange for services valued at $75,000. The shares issued were value based on the fair market value on the date of grant. NOTE 5. INCOME TAXES Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. The company does not have any uncertain tax positions. 28
The Company currently has net operating loss carry forwards aggregating $1,044,798 and $900,630, as of December 31, 2011 and 2010, respectively, which expire through 2029. The deferred tax asset of $365,679 related to the carry forwards has been fully reserved. The Company has deferred income tax assets, which have been fully reserved, as follows as of December 31, 2011 and 2010: 2011 2010 ---------- ---------- Deferred tax assets $ 365,769 $ 315,220 Valuation allowance for deferred tax assets (365,769) (315,220) ---------- ---------- Net deferred tax assets $ -- $ -- ========== ========== NOTE 6. COMMON STOCK On May 31, 2010, the Company issued 50,000 (1,000,000 pre-reverse split) Units at a price of $0.25 per pre-reverse split Unit for total proceeds of $250,000. Each Unit issued consisted of one restricted pre-reverse split common share and one half share purchase warrant. Two half warrants entitles a Subscriber to acquire one restricted pre-reverse split common share at a purchase price of $0.50 per Share for a period of 18 months from the date of issue. There relative fair market value of the warrants is $4,851. On July 8, 2010 the company issued 22,500 (1,125,000 pre-reverse split) restricted shares at par for total proceeds of $1,125. On September 13, 2010, the company entered agreements to convert various outstanding loans into restricted shares of the Company. The total amount owing to its creditors was $390,048, and each agreed to the issuance of restricted shares of the Company to settle this outstanding debt. As a result, the Company agreed to issue a total of 260,032 (13,001,600 pre-reverse split) shares in settlement of this debt, or at a price of $0.03 per share. The total fair value of the shares was $650,080 based on the closing price resulting in a loss of settlement of debt of $260,032. On March 3, 2011 the Company cancelled 3,000 (150,000 pre-reverse split) share per SEC order. This was due to a investigation, by the SEC, of an unrelated party that allegedly touted U.S. microcap companies. All shares owned by the unrelated party was ordered by the SEC to be returned to their respective companies. Further, 20,000 (1,000,000 pre-reverse split) shares was cancelled due to non-performance of service contract On August 23, 2011, the Company issued 300,000 (15,000,000 pre-reverse split) shares to its Director in exchange for services valued at the fair value of the common stock as quoted on the OTC at the date of grant of $75.000. NOTE 7. ASSET RETIREMENT OBLIGATION The Company accounts for asset retirement obligations as required by the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 410--Asset Retirement and Environmental Obligations. Under these standards, the fair value of a liability for an asset retirement obligation is recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. If a reasonable estimate of fair value cannot be made in the period the asset retirement obligation is incurred, the liability is recognized when a reasonable estimate of fair value can be made. If a tangible long-lived asset with an existing asset retirement obligation is acquired, a liability for that obligation shall be recognized at the asset's acquisition 29
date as if that obligation were incurred on that date. In addition, a liability for the fair value of a conditional asset retirement obligation is recorded if the fair value of the liability can be reasonably estimated. During the year ended December 31, 2010 the company incurred an accretion expense of $235,000 for the net present value cost of plugging all its oil wells upon the ending of the useful life of the wells. Due to the sale of some of the company's mineral leases and oil wells during 2011, the company was able to reduce its ARO liability to $120,000. NOTE 8. SUBSEQUENT EVENTS Company has changed its name from Avro Energy, Inc. to Rango Energy, Inc. and approved a reverse stock split of fifty (50) times previously shares for one new share. There are no other subsequent events through the date of the issuance of the financial statements that would warrant further disclosures. 30
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES DISCLOSURE CONTROLS AND PROCEDURES We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2011. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective. MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f). The Company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the Company's internal control over financial reporting as of December 31, 2011 using the criteria established in "INTERNAL CONTROL - INTEGRATED FRAMEWORK" issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of December 31, 2011, the Company determined that there were control deficiencies that constituted material weaknesses, as described below. 31
1) WE DO NOT HAVE AN AUDIT COMMITTEE - While not being legally obligated to have an audit committee, it is the management's view that such a committee, including a financial expert member, is an utmost important entity level control over the Company's financial statement. Currently the Board of Directors acts in the capacity of the Audit Committee, and does not include a member that is considered to be independent of management to provide the necessary oversight over management's activities. 2) WE DID NOT MAINTAIN APPROPRIATE CASH CONTROLS - As of December 31, 2011, the Company has not maintained sufficient internal controls over financial reporting for the cash process, including failure to segregate cash handling and accounting functions, and did not require dual signature on the Company's bank accounts. Alternatively, the effects of poor cash controls were mitigated by the fact that the Company had limited transactions in their bank accounts. 3) WE DID NOT IMPLEMENT APPROPRIATE INFORMATION TECHNOLOGY CONTROLS - As of December 31, 2011, the Company retains copies of all financial data and material agreements; however there is no formal procedure or evidence of normal backup of the Company's data or off-site storage of the data in the event of theft, misplacement, or loss due to unmitigated factors. Accordingly, the Company concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company's internal controls. As a result of the material weaknesses described above, management has concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2011 based on criteria established in Internal Control--Integrated Framework issued by COSO. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING There has been no change in our internal control over financial reporting identified in connection with our evaluation we conducted of the effectiveness of our internal control over financial reporting as of December 31, 2011, that occurred during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management's report in this annual report. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CONTROL PERSONS The names, ages and titles of our executive officers and director are as follows: Name and Address of Executive Officer and/or Director Age Position ----------------------- --- -------- Donny Fitzgerald 48 President, Secretary and Director 32
Mr. Donny Fitzgerald has worked in the Oil and Gas business as Manager of Fitzgerald Enterprises over the last 6 years. His expertise is in oil field supply and production within this industry. TERM OF OFFICE Our director is appointed to hold office until the next annual meeting of our stockholders or until his successor is elected and qualified, or until he resigns or is removed in accordance with the provisions of the State of Nevada Statutes. Our officer is appointed by our Board of Directors and holds office until removed by the Board. SIGNIFICANT EMPLOYEES We have no significant employees other than our officer and/or directors who collectively devote approximately 10 hours per week to company matters. Our officers and directors have not been the subject of any order, judgment, or decree of any court of competent jurisdiction, or any regulatory agency permanently or temporarily enjoining, barring, suspending or otherwise limited him from acting as an investment advisor, underwriter, broker or dealer in the securities industry, or as an affiliated person, director or employee of an investment company, bank, savings and loan association, or insurance company or from engaging in or continuing any conduct or practice in connection with any such activity or in connection with the purchase or sale of any securities. Our officers and directors have not been convicted in any criminal proceeding (excluding traffic violations) nor is he subject of any currently pending criminal proceeding. We conduct our business through agreements with consultants and arms-length third parties. We pay our consulting geologist the usual and customary rates received by geologists performing similar consulting services. CODE OF ETHICS Our board of directors adopted our code of ethical conduct that applies to all of our employees and directors, including our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. We believe the adoption of our Code of Ethical Conduct is consistent with the requirements of the Sarbanes-Oxley Act of 2002. Our Code of Ethical Conduct is designed to deter wrongdoing and to promote: * Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; * Full, fair, accurate, timely and understandable disclosure in reports and documents that we file or submit to the Securities & Exchange Commission and in other public communications made by us; * Compliance with applicable governmental laws, rules and regulations; * The prompt internal reporting to an appropriate person or persons identified in the code of violations of our Code of Ethical Conduct; and * Accountability for adherence to the Code. 33
ITEM 11. EXECUTIVE COMPENSATION MANAGEMENT COMPENSATION The table below summarizes all compensation awarded to, earned by, or paid to our executive officers by any person for all services rendered in all capacities to us for the past three years ending December 31, 2011: Annual Compensation Long Term Compensation ---------------------------------- --------------------------------- Restricted Other Annual Stock Options/* LTIP All Other Name Title Year Salary($) Bonus Compensation Awarded SARs (#) payouts($) Compensation ---- ----- ---- --------- ----- ------------ ------- -------- ---------- ------------ Donny President, 2009 $5,000 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Fitzgerald Secretary 2010 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 and 2011 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $75,000 Director Mike P. Past 2009 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Kurtanjek -President, 2010 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 CEO, CFO 2011 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 and Director Michael Director 2009 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Heenan 2010 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 2011 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Marilyn Past 2008 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Woodruff Director & Secretary There are no current employment agreements between the company and its officer/director. There are no annuity, pension or retirement benefits proposed to be paid to the officer or director or employees in the event of retirement at normal retirement date pursuant to any presently existing plan provided or contributed to by the company or any of its subsidiaries, if any. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information concerning the number of shares of our common stock owned beneficially as of May 10, 2012 by: (i) each person (including any group) known to us to own more than five percent (5%) of any class of our voting securities, (ii) our director, and or (iii) our officer. Unless otherwise indicated, the stockholder listed possesses sole voting and investment power with respect to the shares shown. 34
Amount and Nature Percentage of of Beneficial Common Title of Class Name and Address of Beneficial Owner Ownership Stock(1) -------------- ------------------------------------ --------- -------- Common Stock Donny Fitzgerald, 213 E Arkansas Ave 300,000 27% Vivian, LA 71082, USA Common Stock Officer and/or director as a Group 300,000 27% HOLDERS OF MORE THAN 5% OF OUR COMMON STOCK ---------- (1) A beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person's actual ownership or voting power with respect to the number of shares of common stock actually outstanding on May 10, 2012. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS None of our directors, or officers, any proposed nominee for election as a director, any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to all of our outstanding shares, any promoter, or any relative or spouse of any of the foregoing persons has any material interest, direct or indirect, in any transaction since our incorporation or in any presently proposed transaction which, in either case, has or will materially affect us other then the transactions described below. The Company has borrowed $4,157 from Mr. Mike P. Kurtanjek, our Past President and as of December 31, 2011 the loan has not been paid back. The loan has a 0% interest with no fixed payment date, and the Company has borrowed $2,500 from Donny Fitzgerald, our Current President and as of December 31, 2011 the loan has not been paid back. Our management is involved in other business activities and may, in the future become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between our business and their other business interests. In the event that a conflict of interest arises at a meeting of our directors, a director who has such a conflict will disclose his interest in a proposed transaction and will abstain from voting for or against the approval of such transaction. 35
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES For the year ended December 31, 2010, the total fees charged to the company for audit services, including quarterly reviews, were $7,455. For the year ended December 31, 2010, the total fees charged to the company for audit services, including quarterly reviews, were $15,000. PART IV ITEM 15. EXHIBITS Exhibit Number Description ------ ----------- 3.1 Articles of Incorporation - Filed by Form SB-1 on March 30, 2007 3.2 Bylaws - Filed by Form SB-1 on March 30, 2007 31.1 Sec. 302 Certification of Chief Executive Officer 31.2 Sec. 302 Certification of Chief Financial Officer 32.1 Sec. 906 Certification of Chief Executive Officer 32.2 Sec. 906 Certification of Chief Financial Officer 101 Interactive data files pursuant to Rule 405 of Regulation S-T.* ---------- * To Be Filed By Amendment 36
SIGNATURES Pursuant to the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. May 10, 2012 Rango Energy, Inc. (formerly Avro Energy, Inc.) By: /s/ Donny Fitzgerald ------------------------------------------- Donny Fitzgerald, President and Chief Executive Officer In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. May 10, 2012 Rango Energy, Inc. (formerly Avro Energy, Inc.) By: /s/ Donny Fitzgerald ------------------------------------------- Donny Fitzgerald, President, Treasurer and Chief Financial Officer (Principal Executive Officer and Principal Accounting Officer) 37