UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C.
20549
AMENDMENT
NO. 2
TO
FORM 10
GENERAL
FORM FOR REGISTRATION OF SECURITIES
PURSUANT
TO SECTION 12(b) OR 12(g) OF
THE
SECURITIES EXCHANGE ACT OF 1934
ASHERXINO
CORPORATION
(Exact
Name of Registrant as Specified in Its Charter)
|
Delaware
|
93-0962072
|
|
|
(State
or Other Jurisdiction of Incorporation or Organization)
|
(I.R.S.
Employer Identification No.)
|
|
|
AsherXino
Corporation
5847
San Felipe Street, 17th Floor
Houston,
Texas
|
77002
|
|
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
713-413-3345
(Registrant’s
telephone number, including area code)
Copy
to:
Gerald V.
Niesar, Esq.
June L.
Lin, Esq.
Niesar
& Whyte, LLP
90 New
Montgomery Street, 9th
Floor
San
Francisco, CA 94105
(415)
882-5300
Securities to be registered pursuant
to Section 12(b) of the Act: None
Securities
to be registered pursuant to Section 12(g) of the Act
|
Title
of each class to be so registered
|
Name
of each exchange on which
each
class is to be registered
|
|
|
Common
Stock, par value $0.01 per share
|
None
|
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):
Large
accelerated
filer Accelerated
filer
Non-accelerated
filer Smaller
reporting company þ
(Do not
check if a smaller reporting company)
- 1
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INFORMATION
REQUIRED IN REGISTRATION STATEMENT
GENERAL
CAUTIONARY STATEMENT
This Form
10 contains “forward looking statements” (as that term is defined in Section
27A(i)(1) of the Securities Act of 1933), including statements concerning plans,
objectives, goals, strategies, expectations, future events or performance and
underlying assumptions and other statements which are other than statements of
historical facts. Such forward looking statements involve risks and
uncertainties which could cause actual results or outcomes to differ materially
from those expressed in the forward looking statements. Some of the
factors that could cause actual results to differ materially from those
expressed in such forward looking statements are set forth in the section
entitled “Risk Factors” and elsewhere throughout this Form 10. Our
expectations, beliefs and projections are expressed in good faith and are
believed by us to have a reasonable basis, but there can be no assurance that
our expectations, beliefs or projections will result or be achieved or
accomplished. We have no obligation to update or revise forward
looking statements to reflect the occurrence of future events or
circumstances.
ITEM
1. BUSINESS
AsherXino
Corporation (the “Company”) was originally incorporated in the State of Colorado
on June 9, 1981 under the name “Blue Grass Breeders, Inc.” In the
subsequent twenty-two years, the Company became a public reporting company,
changed its state of incorporation to the State of Delaware, went through
various name changes and engaged in various businesses, as described in the
section entitled “Prior history” below.
The
Company has had no operating business since 2003. In 2003 the Company
ceased filing its periodic reports with the Securities and Exchange Commission
(“SEC”) due to the fact that it had no operations, and the Company’s securities
were subsequently deregistered by the SEC on April 30, 2009.
The
Company’s Board of Directors has recently taken the decision to enter into the
business of owning and operating oil and gas assets by acquiring certain oil
related assets (“Asher Assets”) from certain individuals (“Asher
Shareholders”). The Asher Shareholders acquired beneficial ownership
of the Asher Assets acting through ASHER Energy Corporation as their agent, and
they became shareholders in the Company upon the Company’s acquisition of the
Asher Assets. Because the Asher Shareholders seek the perceived
advantages of being shareholders of a publicly held corporation, the Company is
re-registering its common stock by filing this Form 10 pursuant to Section 12(g)
of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). In connection with the Company’s acquisition of the Asher
Assets, the Asher Shareholders have become directors and officers of the Company
(see Item 5, “Directors and Executive Officers”) and will provide the Company
with additional management and technical team members with diverse experience in
the oil and gas industry. The Company intends to comply with the
periodic reporting requirements of the Exchange Act for so long as it is subject
to those requirements.
Through
its acquisition of the Asher Assets, the Company has acquired a 40% leasehold
interest in and operatorship of an offshore oil exploration and development
block in Nigeria, Oil Prospecting License (OPL) 2012, which has an indefinite
lease term. See Item 3, “Properties”. In consideration for
the asset acquisition, the Company has issued 105,000,000 shares1 of its common
stock, or 87.5% of the Company’s total outstanding common stock, to the Asher
Shareholders and a related party. The rights to OPL 2012 acquired by
the Company are subject to the Company performing the following obligations: (i)
a signature bonus of $12,500,000 payable immediately to the Nigerian government
and (ii) a $10,000,000 farm-in fee payable to a local partner. The
Company is in the final stages of securing funding to pay both the signature
bonus and the farm-in fee.
Through
its wholly-owned subsidiary, ASHER Energy Transactions Services Limited, a
Nigerian registered company, the Company will operate and develop OPL 2012 under
a joint venture arrangement with two Nigerian local partners, Grasso Nigeria
Limited (which owns a 20% interest in OPL 2012) and Sigmund Oilfield Limited
(which owns a 40% interest in OPL 2012), and the state-owned Nigerian National
Petroleum Corporation (“NNPC”), which manages all oil block concessions in
Nigeria to ensure compliance with government regulations. A
percentage of the revenues generated from OPL 2012 will be paid to the Nigerian
government as royalties. The prevailing royalty rate applicable to
OPL 2012 is 12%, with a 50% discount for the first five years.
As the
technical and financial partner, the Company will be the sole company
responsible for the development of OPL 2012, providing financial resources and
technical services for the exploration, appraisal, development and production of
hydrocarbons (including drilling and mining activities) within OPL 2012 and when
OPL 2012 is converted to an Oil Mining License (OML). To date, part
of OPL 2012 is in the exploitation phase; the remainder of the block is still
under exploration and development. Once hydrocarbons are discovered,
the first $10,000,000 of revenue generated from the sale of hydrocarbons
produced from the property will be paid to Sigmund Oilfield Limited as a
“Discovery Bonus”. The Company will fund 100% of the development
costs of OPL 2012, including the signature bonus, farm-in fee, reserve audit
report cost, seismic and engineering, drill cost and production, which the
Company will recover from future revenue generated from OPL 2012 once the
Discovery Bonus and government royalties are paid. Some of these
development costs, such as the reserve audit report cost and the cost of a 2D
seismic survey, have already been paid. The Company’s original
estimated total development cost includes the cost of implementing a 3D seismic
program of between $10,000,000 and $15,000,000; however, the Company now
believes that based on existing vintage 2D seismic data on OPL 2012, there is a
chance that a 3D seismic program may not need to be undertaken. See
Item 2, “Financial Information – Management’s Discussion and Analysis of
Financial Condition and Results of Operations”. The Company will be
entitled to 60% of the revenue from OPL 2012 (after the Discovery Bonus and
government royalties are paid) until it recovers all of its development costs,
together with a reasonable rate of interest, after which time its share of
revenues (after government royalties are paid) shall be 40%.
OPL 2012
was carved by the Nigerian government in 2007 from a larger oil block OML 137
operated by Addax Petroleum. Once the signature bonus of $12,500,000
is paid to the Nigerian government, which the Company expects to occur in the
near future based on discussions with financial institutions in Nigeria who are
finalizing their due diligence process, the Company may be in a position to
negotiate with the owner of the adjacent block, Eni Agip Nigeria Limited
(“Eni/Agip”), to receive unitization revenue from
Eni/Agip. Unitization refers to the joint, coordinated operation of a
petroleum reservoir by all the owners of rights in the separate tracts overlying
the reservoir. Such unitization revenue is subject to approval by the
Nigerian government. 50% of any unitization revenue received from
Eni/Agip will be payable to Sigmund Oilfield Limited, the co-owner of the OPL
2012 leasehold interest.
See Item
3, “Properties”, for a more detailed description of the OPL 2012
asset.
The
Company intends to finance its operations through a combination of debt and
equity financing. See Item 2, “Financial Information – Management’s
Discussion and Analysis of Financial Condition and Results of
Operations”.
The
Company’s principal business objectives are to achieve long-term growth
potential through its exploitation of the Asher Assets, and to position itself
as a leading independent oil exploration and production company and an
“operator” of choice in the Gulf of Guinea, one of the world’s most prolific
hydrocarbon regions. Nigeria is the largest oil producer in Africa
and contains many small oil fields which have been considered “marginal” by the
major multinational oil companies and thus have gone undeveloped. The
market for independent oil producers in Nigeria has grown substantially in
recent years. Not only is the Company’s management team experienced
in identifying, negotiating and executing on attractive prospects and managing
oil and gas projects, but it also possesses a good understanding of the Nigerian
petroleum system and Nigeria’s people, culture, business environment, community
and environmental issues. The Company plans to use cutting edge
technologies and experienced oil and gas professionals to exploit, develop and
produce oil and gas while maintaining high ethical standards in all facets of
its business, including minimizing any negative impact of its operations on
local communities and embarking on community development programs in the areas
where it has activities.
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The
Company’s immediate objective is to create value from the production and
exploration opportunities in OPL 2012. In the short term the Company
intends to implement a drilling program for OPL 2012, which will entail the
hiring of about fifty to one hundred full-time employees. The
Company’s longer term objective is to acquire and exploit prolific oil and gas
deposits across the Gulf of Guinea by acquiring additional leaseholds in and
operatorships of offshore blocks. Although the Company intends to
build an asset base focused on the Gulf of Guinea (Nigeria, Ghana, Cote
d’Ivoire), as an independent oil exploration and production company the Company
will seek to acquire oil and gas assets anywhere in the world where management
identifies lucrative prospects.
Management
intends to purchase a corporate insurance program standard for the Company’s
industry with specific coverage against property damage,
sabotage and terrorism, general, product and environmental liability,
loss of cargo, crime and Directors’ and Officers’ liability.
The
Company currently has three employees: Bayo O. Odunuga, who serves as
the Company’s Chief Executive Officer, Patrick O. Okorodudu, who serves as the
Company’s General Counsel and Secretary, and Michael C. Hinton, who serves as
the Company’s President. Once this Form 10 becomes effective, Mr.
Hinton intends to resign from his positions as President and Director of the
Company and Mr. Odunuga will succeed him as President. Also, Warren
H. Anderson, a geologist and engineer with over thirty years of experience in
petroleum exploration and drilling operations in West Africa, has agreed to join
the Company as its Chief Technical Officer.
Prior
history
From 1981
to 1983, the Company was engaged in organizational efforts and raising equity
capital. From 1983 to 1991, the Company was engaged in the business
of acquiring, breeding and selling thoroughbreds and
quarterhorses. During this period the Company acquired all of the
assets of Equine Enterprises, Inc., a New Mexico corporation engaged in the
acquisition, breeding, racing and sale of thoroughbreds and quarterhorses, in
exchange for a controlling interest in the Company.
From 1993
to 1994, the Company was engaged in the manufacture and sale of computer
hardware and software.
The
Company eventually ceased operations in both industries due to continued losses
and the inability to meet obligations. From 1991 to 1993 and from
1994 to 1998 the Company was an inactive shell corporation, undergoing various
name changes including Southwestern Environmental Corp. and The Mentor Group
International Corporation as management of the Company considered various merger
or acquisition candidates.
At a
meeting of the shareholders in December 1997, Joseph Dunn and Michael Hinton
were elected to the Board of Directors with instructions to reorganize the
Company, complete necessary filings required by applicable law, and seek one or
more potential businesses to acquire.
Consequently,
in August 1998 the Company purchased all of the outstanding shares of common
stock of CITA Americas, Inc., a Nevada corporation, from Aviation Industries,
Inc., in exchange for certain non-voting convertible preferred stock of the
Company. In connection therewith the Company changed its name to
“CITA Biomedical, Inc.” CITA Americas, Inc., operating as a wholly
owned subsidiary of the Company, was engaged primarily in the business of
providing the technology, information, and administrative services necessary to
the rapid treatment and detoxification of persons addicted to opiate based
drugs. To this end, the Company licensed its proprietary Ultra Rapid
Opiate Detoxification (UROD) technology to hospitals for patient
treatment. The Company also established treatment centers with
medical facilities for its proprietary Detoxification and NeuroAdaptation (DNA)
treatment programs for cocaine and alcohol dependency. For a period
of time the Company ran a website providing on-line products, support and
services designed to aid drug addicts and recovering addicts.
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During
the years 2001 and 2002, the Company was hampered in its efforts to promote its
UROD programs and expand its operations due to insufficient working capital,
continuing operating losses and inability to make timely payments to certain
creditors. In 2003 all of the collateral pledged by the Company to
secure a $300,000 loan, including all the rights in intellectual property and
virtually all other personal property of the Company, was sold at a foreclosure
sale. From the foreclosure sale the Company received stock in Hythiam
Inc. (“Hythiam”), another company in the drug dependence treatment industry, and
had virtually no remaining operating assets. As part of the
foreclosure proceedings the Company was required to change its name as soon as
reasonably practicable. The Company therefore changed its name to
Xino Corp. in March 2004. The Company initially borrowed money using
the Hythiam stock as collateral to settle accounts payable of the
Company. The Company subsequently sold the Hythiam stock to settle
its remaining debts.
In May
2002 the Company changed its state of incorporation to the State of Delaware to
take advantage of that state’s modern and flexible corporation
laws.
In 2002
the Company became involved in a lawsuit with certain parties, including a
former director of the Company, over monies or stock purportedly owed by Hythiam
to the Company. The lawsuit was finally settled December 15,
2008.
ITEM
1A. RISK FACTORS
We are
subject to various risks that may materially harm our business, financial
condition and results of operations. Prospective investors should
carefully consider the risks and uncertainties described below and the other
information in this Form 10 before deciding to purchase the Company’s common
stock. If any of these risks or uncertainties actually materialize,
our business, financial condition or operating results could be materially
harmed. In that case, the trading price of our common stock could
decline significantly, and investors could lose all or part of their
investment.
The risk
factors described below are not the only ones that we face. Additional risks and
uncertainties that we are unaware of, or that we currently deem immaterial, may
also become important factors that affect us.
Risks
related to Nigeria’s political and regional environment
Nigeria
has experienced internal security issues that have had and could have in the
future a negative effect on Nigerian oil production and on us.
Nigeria
has experienced internal security issues, primarily due to the activities of
Nigeria’s military and militant groups in the southern delta region, within the
Gulf of Guinea. Nigeria’s main militant group, the Movement for the
Emancipation of the Niger Delta, or MEND, has been conducting guerilla attacks
on crude oil pipelines and other related infrastructure, kidnapping oil workers,
and generally disrupting the activities of oil companies with operations in
Nigeria for the last three years, reducing crude oil output by more than
20%. These activities and the violence associated with them have had
and may have in the future a negative impact on Nigerian oil production, and
could have a material adverse effect on our business and assets.
Companies
operating in Nigeria, including us, are subject to prevailing economic
conditions and investment climate in Nigeria, which may be less stable than
prevailing economic conditions in more developed countries.
Because,
at present, all of our operations are located in Nigeria, the market price of
our securities may be affected by the prevailing economic conditions in
Nigeria. In the past, economic growth in Nigeria has been negatively
affected by political instability, corruption and lower foreign direct
investment.
The
Nigerian government has exercised and continues to exercise substantial
influence over many aspects of the Nigerian economy, and has changed monetary,
fiscal, taxation, labor and other policies over time to influence the
performance of the Nigerian economy. We have no control over the
extent and timing of government intervention and policies.
If the
perception of improved overall security in Nigeria changes or if foreign direct
investment declines, the Nigerian economy may face a downturn which could
negatively affect our financial condition and results of
operation.
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Our
operations are subject to extensive regulation.
The
Nigerian oil and gas industry is subject to extensive regulation and supervision
by the Nigerian government in matters including the award of exploration and
production blocks, the imposition of specific drilling and exploration
obligations, restrictions on production, price controls, capital expenditures
and required divestments. The main supervisory and regulatory
petroleum related agencies in Nigeria are the Nigerian Ministry of Petroleum
Resources, Nigerian National Petroleum Corporation (“NPC”) and the Department of
Petroleum Resources (“DPR”). All the petroleum in Nigeria is vested
in the Nigerian federal government, which has absolute authority to control the
resources and only permits their exploitation under license. The
Nigerian government, through the Ministry of Petroleum Resources, allocates
acreages or licenses to operators in any areas deemed to have potential for
petroleum accumulation. The allocations are based on a set of
criteria that is made known to potential bidders at the time blocks are open for
bidding. The Nigerian government reserves the right to participate in
the operations of any block and to determine the type of contractual
arrangements between the licensee and the government.
The terms
and conditions of the agreements with the Nigerian Ministry of Petroleum
Resources under which we explore and produce crude oil generally reflect
negotiations with the Ministry of Petroleum Resources and other governmental
authorities and may vary by fields and basins discovered.
We are
required, as are all oil companies undertaking exploratory and production
activities in Nigeria, to pay a percentage of our production to the Nigerian
government as royalties. Royalty rates are as provided in the
Petroleum Act, CAP 350 Laws of the Federation of Nigeria 1990, and the
prevailing royalty regime applicable to OPL 2012 is 12%. As a new
company, we will benefit from a 50% discount for the first five
years. In the future, the Nigerian government may amend royalty
payment levels for our future acquisitions of oil assets and such changes could
have a material adverse effect on our financial condition or results of
operation.
We
are subject to extensive environmental regulations in Nigeria.
Our
operations are subject to extensive national, state and local environmental
regulations in Nigeria. Environmental rules and regulations cover oil
exploration and development activities as well as transportation, refining and
production activities. These regulations establish, among others,
quality standards for hydrocarbon products, air emissions, water discharges and
waste disposal, environmental standards for abandoned crude oil wells, remedies
for soil, water pollution and the general storage, handling, transportation and
treatment of hydrocarbons in Nigeria. As a result of the creation of
the Federal Ministry of Environment (“FME”) in 1999 and the enactment of more
rigorous laws, such as the Environmental Guidelines and Standards for the
Petroleum Industry in Nigeria (EGASPIN) 2002, environmental regulations will
substantially impact our operations and business results. Under the
Environmental Impact Assessment Act of 1992, all exploratory project drilling
must have an environmental impact assessment approved by the FME and must
receive an environmental permit from the local authorities. As the
operator of an Oil Prospecting License (OPL), we are required to prevent the
escape of petroleum into any water, well, spring, stream river, lake reservoir,
estuary or harbor, and government inspectors may examine our premises to ensure
that we comply with the regulations. The Department of Petroleum
Resources also regulates environmental issues by requiring operators in the oil
and gas industry to obtain permits for oil-related effluent discharges from
point sources and oil-related project development. Non-compliance
with environmental laws may result in fines, restrictions on operations or other
sanctions.
We are
also subject to state and local environmental regulations issued by the regional environmental
authorities, which oversee compliance with each state’s environmental laws and
regulations by oil and gas companies. If we fail to comply with any of these
national or local environmental regulations we could be subject to
administrative and criminal penalties, including warnings, fines and facilities
closure orders.
Environmental
compliance has become more stringent in Nigeria in recent years and as a result
we will be required to allocate a significant percentage of our capital
expenditures for compliance with these laws and regulations. These
costs may have a negative impact on the profitability of the projects we intend
to undertake or may make them economically unattractive, in turn having a
negative impact on our results of operations and financial
condition.
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We
currently operate only in Nigeria.
Because,
for the foreseeable future, our oil revenues will be entirely based upon
operations in Nigeria, the aforementioned risks unique to Nigeria may adversely
affect us more than they would a company operating in several different
countries.
Risks
related to our business
We are
an exploration stage company.
Following
our acquisition of the Asher Assets, we are an exploration stage
company. An exploration stage company is one in which
substantial efforts are devoted to establishing a new business, but the planned
principal business has not commenced, or, has commenced but has not
generated significant revenues. As
a result, we have a limited history upon which an evaluation of our prospects
and future performance can be made. Our proposed operations are
subject to all business risks associated with new enterprises. The
likelihood of our success must be considered in light of the problems, expenses,
difficulties, complications, and delays frequently encountered in connection
with the expansion of a business, operation in a competitive industry, and the
development of a customer base. We have not generated revenue since
our acquisition of the Asher Assets and are unlikely to become profitable for
some time. It is expected that we will sustain losses in the
future. Management will face the challenge of raising capital as well
as building a management team able to execute our plans. There can be
no assurance that these challenges will be met and overcome.
We
are dependent on financing.
As a new
company with plans for major development activity, we will be reliant upon
funding to fully implement our business plans and expand our
business. There can be no assurance that we will be able to obtain
the necessary funding on commercially reasonable terms in a timely fashion,
especially given the current global economy. Failure to receive the
funding could have a material adverse effect on our business, prospects, and
financial condition.
We intend
to raise financing in the form of floating rate indebtedness and/or equity to
pay the $12,500,000 signature bonus and $10,000,000 farm-in fee for our
leasehold interest in Oil Prospecting License (OPL) 2012, and we expect to
require further debt and/or equity financing in the amount of $218,000,000 to
$262,500,000 to exploit OPL 2012. Accordingly, if market interest
rates (principally LIBOR) rise, our financing expenses could increase which
could have an adverse effect on our results of operations and financial
condition. The size of our indebtedness may restrict our
growth. We will need to use a portion of our cash flow to pay
principal and interest on such indebtedness, which may delay or even prevent us
from pursuing certain new business opportunities. Some loan
agreements may contain restrictive covenants which may impair our operating
flexibility. Failure to meet certain financial covenants could cause
us to violate the terms of loan agreements obtained in the future, if any, and
thereby result in acceleration of our indebtedness, impair our liquidity and
limit our ability to raise additional capital. Our failure to make
required debt payments could result in an acceleration of our indebtedness, and,
if unpaid, a judgment in favor of such lender would be senior to the rights of
holders of our common stock. A judgment creditor would have the right
to foreclose on any of our assets resulting in a material adverse effect on our
business, operating results or financial condition and the possible loss of all
value in our common stock.
We
are dependent on key personnel.
Our
success will depend largely on the efforts and abilities of our senior
management. In particular, we are dependent upon our Chief Executive
Officer, Bayo O. Odunugu, and our General Counsel and Secretary, Patrick O.
Okorodudu, who are responsible for developing our operations and business
plans. The loss of services of senior management could have a
substantial adverse effect on us. The expansion of our business will
be largely contingent on our ability to attract and retain highly qualified
corporate and operations level management team. There is no assurance
that the Company can find suitable management personnel or will have financial
resources to attract or retain such people if found.
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Our
business will depend substantially on international prices for crude oil and
refined products, and prices for these products are volatile. A sharp
decrease in such prices could materially and adversely affect our business
prospects and future results of operations.
Crude oil
prices have traditionally fluctuated as a result of a variety of factors
including, among others, the following:
• Changes in international
prices of natural gas and refined products;
• Changes in global and
regional demand for and supplies of crude oil, natural gas and refined
products;
• Regulatory and tax
changes;
• Inventory
levels;
• Increase in the cost of
capital;
• Adverse economic
conditions;
• Development of new
technologies;
• Economic and political
events, especially in the Middle East and elsewhere with high levels of crude
oil production;
• The willingness and ability
of the Organization of the Petroleum Exporting Countries or OPEC and its members
to set production levels and prices;
• Price and availability of
alternative competing fuels;
• Cost of, and disruptions in,
shipping bulk oil;
• Weather conditions;
and
• Terrorism and global
conflict.
We
anticipate that our revenues will come from sales of crude oil and natural
gas. A significant and sustained decrease in crude oil prices could
have a negative impact on our results of operations and financial condition. In
addition, a reduction of international crude oil prices could result in a delay
in our capital expenditure plan, in particular delaying exploration and
development activities, thereby delaying the incorporation of
reserves.
The
current global financial crisis and uncertain economic environment have led to
lower oil prices that, if sustained, may negatively affect our future cash flow
and make it difficult for us to achieve our growth objectives.
The
current global financial crisis and uncertain economic environment that worsened
in the second half of 2008 have led to a worldwide decrease in demand for oil
products. As a result, prices for oil products have fallen since the
middle of 2008, from a high of approximately $137 per barrel (all countries spot
price as estimated by the U.S. Energy Information Administration) to a low of
approximately $34 per barrel at the beginning of 2009. Since the
beginning of 2009 oil prices have recovered somewhat, currently averaging about
$68 per barrel over the first three weeks of September 2009. If
oil prices remain low, we may be required to revise our growth objectives,
particularly in light of substantial decreases in the availability of credit in
the capital markets. The global financial and economic situation may
also have a negative impact on third parties with whom we do, or may do,
business. Any of these factors may affect our results of operations,
financial condition and liquidity.
We
do not own any of the crude oil and natural gas reserves in
Nigeria.
A
guaranteed source of crude oil and natural gas reserves is essential to an oil
and gas company's sustained production and generation of income. As
mentioned above, under Nigerian law, the Nigerian government owns all crude oil
and natural gas reserves in Nigeria and the concessionaire owns the oil and gas
it produces. We possess the exclusive right to develop our reserves
pursuant to concession agreements awarded to our local partners by the Nigerian
government and we will own our percentage of the hydrocarbons we produce under
the concession agreements, but if the Nigerian government were to restrict or
prevent us from exploiting these crude oil and natural gas reserves, our ability
to generate income would be adversely affected.
Achieving
our long-term growth prospects depends on our ability to execute our strategic
plan, in particular discovering additional reserves and successfully developing
them, and failure to do so could prevent us from achieving our long-term goals
for growth in production.
The
ability to achieve our long-term growth objectives depends on discovering or
acquiring new reserves as well as successfully developing them by completing
long lead-time, capital-intensive projects timely and on budget. Our
exploration activities expose us to the inherent risks of drilling, including
the risk that we will not discover commercially productive crude oil or natural
gas reserves. As described below, the costs associated with drilling
wells are often uncertain, and numerous factors beyond our control may cause
drilling operations to be curtailed, delayed or cancelled.
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If we are
unable to conduct successful exploration and development activities, or if we do
not acquire properties having proved reserves, our level of proved reserves will
decline as reserves are extracted. Failure to secure additional
reserves at acceptable costs may impede us from achieving our growth and
production targets and may have a negative effect on our results of operations
and financial condition.
Our
future drilling activities are capital intensive and may not be
productive.
Drilling
for crude oil and natural gas involves numerous risks, including the risk that
we will not encounter commercially productive crude oil or natural gas
reservoirs. The costs of drilling, completing and operating wells are
high or uncertain, and drilling operations may be curtailed, delayed or canceled
as a result of a variety of factors, including:
• Unexpected drilling
conditions;
• Pressure or irregularities
in formations;
• Security
problems;
• Equipment failures or
accidents;
• Fires, explosions, blow-outs
and surface cratering;
• Title problems;
• Other adverse weather
conditions; and
• Shortages or delays in the
availability or in the delivery of equipment.
Certain
of our future drilling activities may not be successful and, if unsuccessful,
this failure could reduce the ratio at which we replace our reserves, which
could have an adverse effect on our results of operations and financial
condition.
Competition
from local and foreign crude oil companies may have a negative impact on our
ability to gain access to additional crude oil and natural gas reserves in
Nigeria and the surrounding region.
NNPC and
DPR under the Nigerian Ministry of Petroleum Resources are the key governmental
entities responsible for promoting oil and gas investments in Nigeria,
establishing reference terms for exploration rounds and assigning exploration
blocks to oil and gas companies. Under current regulations, only the holder of a
concession or assignee or other accredited contractors can engage in petroleum
exploration and production operations in Nigeria. We will be
competing with local and foreign oil companies for additional interests in
blocks offered for exploration by the Nigerian government. Our
ability to obtain access to potential production fields also will depend on our
ability to evaluate and select potential hydrocarbon-producing fields and to
adequately bid for these exploration fields.
We will
face similar competition from local market players and international oil
companies in Ghana and other parts of the Gulf of Guinea.
If we are
unable to adequately compete with foreign and local oil companies, or if we
cannot enter into joint ventures with market players with properties where we
could potentially find additional reserves, we may be obligated to conduct
exploration activities in less attractive blocks and our results of operations
and financial condition may be adversely affected.
- 9
-
In
addition, many of our competitors are better capitalized than we are and have
substantially greater marketing and technological resources, which could give
them a significant competitive advantage. There is the possibility
that our competitors could capture a significant share of our intended market
with a materially adverse effect on our anticipated financial
performance.
We
may experience difficulties in recruiting and retaining qualified
personnel.
The
increase in worldwide activity in the oil and gas sector has resulted in an
increase in the demand for qualified industry personnel. Compensation for oil
engineers and other experienced industry personnel has risen in recent years
making it harder for oil companies with smaller budgets to recruit and retain
top talent. We will need to allocate resources to identifying and
recruiting highly qualified personnel for our future drilling and other
development activities. If we are unable to recruit the necessary
personnel or if we cannot retain existing personnel, we may not be able to
operate adequately or meet our growth plans which could adversely affect our
results of operations.
Our
operations may be disrupted as a result of external factors.
We will
operate in both urban areas and remote and sometimes inhospitable
regions. We are exposed to several risks that may disrupt our
activities. These risks include, among others, adverse weather, fire
disasters, explosions, malfunction of pipelines and emission of toxic
substances. As a result of the occurrence of any of the above, our
operational activities could be significantly affected or paralyzed. These risks
could result in property damage, loss of revenue, cost of human lives, pollution
and harm to the environment, among others. If any of these occur, we
may be exposed to economic sanctions, fines or penalties.
Management
intends to purchase a corporate insurance program standard for our industry with
specific coverage against property damage, sabotage and terrorism,
general, product and environmental liability, loss of cargo and crime; however
it is uncertain on what terms such insurance will be available to
us. Due to the nature of our business, we are a highly vulnerable
company, and could face losses due to risks excluded from or within deductibles
of our corporate insurance program. Some other unexpected or
unforeseen factors may affect our ability to continue our normal operations and
materially affect our financial position.
Our
business will subject us to liability risks.
We intend
to produce, transport, refine and market materials with potential toxicity, and
purchase, handle and dispose of other potentially toxic materials in the course
of our business. Our operations will also produce byproducts, which
may be considered pollutants. Any of these activities could result in
liability, either as a result of an accidental, unlawful discharge or as a
result of new conclusions on the effects of our operations on human health or
the environment.
Working
with joint venture partners decreases our ability to manage risk.
We will
conduct many of our operations through joint ventures in which we share control
with other parties such as local partners and local
government. Differences in views among the joint venture participants
may result in delayed decisions or in failures to agree on major
issues. There is the risk that our partners may at any time have
economic, business or legal interests or goals that are inconsistent with those
of the project or us. There is also the risk our partners may be
unable to meet their economic or other obligations and we may be required to
fulfill those obligations alone. Our failure to adequately manage the
risks associated with working with joint venture partners could have a material
adverse effect on our financial condition or results of operations.
We
anticipate entering into additional joint ventures with other
entities. There is no assurance that we will undertake such joint
ventures or, if undertaken, that such joint ventures will be
successful.
Regulation
of greenhouse gas emissions could increase our operational costs and reduce
demand for our products.
Management
expects continued political attention to issues concerning climate change, and
the role of human activity in it and potential remediation or mitigation through
regulation that could materially affect our operations.
- 10
-
Our
financial performance will depend on a number of factors, including, among
others, the greenhouse gas emissions reductions required by law, the price and
availability of emission allowances and credits, the extent to which we would be
entitled to receive emission allowances or need to purchase them in the open
market or through auctions and the impact of legislation on our ability to
recover the costs incurred through the pricing of our
products. Material cost increases or incentives to conserve or use
alternative energy sources could reduce demand for our products. To
the extent these costs are not ultimately reflected in the price of our
products, our operating results will be adversely affected.
Compliance
with Sarbanes-Oxley Act of 2002.
We will
be exposed to significant costs and risks associated with complying with
increasingly stringent and complex regulations of corporate governance and
disclosure standards imposed on public companies. Changing laws,
regulations and standards relating to corporate governance and public
disclosure, including the Sarbanes-Oxley Act of 2002, new SEC regulations and
stock exchange rules require a growing expenditure of management time and
external resources. In particular, Section 404 of the Sarbanes-Oxley
Act of 2002 requires management’s annual review and evaluation of our internal
controls, and attestations of the effectiveness of our internal controls by our
independent registered public accounting firm. Unless the SEC grants
another extension, we will be required to provide our first management review
and auditor attestation report in our SEC annual report for the fiscal year
ending December 31, 2009. This process will require us to hire
additional personnel and outside advisory services and will result in
significant accounting, audit and legal expenses.
Risks
related to our common stock
We
do not have a recent trading history of common stock.
Our
shares of common stock have not been traded publicly since April 30, 2009, which
is prior to our acquisition of the Asher Assets and entry into the oil and gas
industry. Prior to April 30, trading in our securities was very
limited because we had no operating business for several years. This
filing will not in and of itself provide the basis for a public
market. If and when our common stock is registered for trading in the
public market, an active and liquid public market for our common stock may not
develop or be sustained. Illiquid or inactive trading markets
generally result in higher price volatility and lower efficiency in the
execution of sale and purchase orders in the securities markets. The
market price of our common stock may fluctuate significantly in response to a
number of factors, some of which may be beyond our control. In the
event that the trading price of our common stock declines, investors may lose
all or part of their investment in our common stock.
We
do not intend to pay dividends.
No
dividends have been paid on our common stock. We do not anticipate the payment
of cash dividends in the foreseeable future. If our operations become
profitable, it is anticipated that, for the foreseeable future, any income
received would be devoted to our future operations and that cash dividends would
not be paid to our shareholders.
Investors
may suffer dilution.
We intend
to seek equity financing to fund our future operations and growth. If
we raise additional funds by issuing equity securities, stockholders may
experience dilution of their ownership interest (both with respect to the
percentage of total securities held, and with respect to the book value of their
securities) and such securities may have rights senior to those of the holders
of our common stock.
Our
common stock is concentrated in the hands of a few owners.
Currently,
our officers and directors and their related parties own the vast majority of
the Company’s outstanding shares and are able to elect all of the directors and
control the Company. Investors will likely own a minority percentage
of our entire voting stock and have minority voting rights. Investors
will not likely have the ability to control either a vote of our shareholders or
Board of Directors. See Item 4, “Security Ownership of Certain
Beneficial Owners and Management”.
- 11
-
ITEM
2. FINANCIAL INFORMATION
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
Since the
Company has had no business operations from 2003 until its recent acquisition of
the Asher Assets, and therefore no income from operations, this discussion
involves only the plan of operation.
The
Company’s Board of Directors has recently taken the decision to enter into the
business of owning and operating oil and gas assets by acquiring certain oil
related assets. The Company’s immediate objective is to create value
from the production and exploration opportunities in its significant working
interest in OPL 2012 by embarking on a work program that will include drilling
operations and the hiring of about fifty to one hundred full-time
employees. The Company intends to finance its operations through a
combination of debt and equity financing. In addition, management may
decide to farm-out or sell some of the Company’s interest in OPL 2012 to finance
the development of the block. The Company also intends to acquire
additional leaseholds in and operatorships of offshore blocks in Nigeria and
Ghana. In the long term, the Company aims to acquire and exploit the
prolific oil and gas deposits across the Gulf of Guinea and
worldwide.
The
Company currently has few capital resources and is unlikely to generate
significant revenues for some time. This raises substantial doubt
about the Company’s ability to continue as a going concern. See Notes
to the Company’s Financial Statements in Item 13, “Financial Statements and
Supplementary Data”. Without realization of additional capital, it
would be unlikely that the Company could continue as a going
concern. However, management has been in discussions with several
financial institutions (i.e. banks, private equity funds, sovereign funds,
energy companies and other corporate entities) to procure funding for the
development of OPL 2012 through the issuance of debt and/or
equity. Based on these discussions management anticipates obtaining
sufficient funding to perform the Company’s obligations related to OPL 2012 over
the next year.
Management
is in the process of concluding financing arrangements with financial
institutions in Nigeria who are finalizing their due diligence and economic
modeling for the project. Management anticipates raising sufficient
funds to pay the $12,500,000 signature bonus to the Nigerian government and the
$10,000,000 farm-in fee to the Company’s local partner in the near
future.
Upon the
payment of the signature bonus, the development of OPL 2012 will take place in
two phases over a three year period. In Phase 1 (Year 1), the Company
will pursue one of two scenarios. Scenario 1 involves working jointly
with Eni/Agip to develop OPL 2012 through the unitization process, which enables
owners of two straddled oil fields to proceed with the development and operation
of the field as a single unit, to ensure maximum hydrocarbons recovery with no
duplication of costs. Scenario 2 involves pursuing an international
joint venture partnership with Superior Well Drilling LLC and its local Nigerian
partner Omega Maritime & Energy Limited (collectively, “Superior”) to drill
and complete one vertical well at 4,000 feet. Superior will provide
rigs and drill the well, and Superior will be paid from proceeds of hydrocarbons
recovered. Engineering and environmental work will be done prior to
drilling and completing the vertical well. Such engineering and
environmental work will include the casing and design of the well.
In either
Scenario 1 or 2, revenue sharing between the Company and Eni/Agip or Superior
will be negotiated and agreed by the parties. Also, neither scenario
includes provision for a 3D seismic program, as the Company now believes that,
based on technical evaluation of OPL 2012, there is a chance that a 3D seismic
survey may not need to be performed given there exists vintage 2D seismic data
on OPL 2012.
Scenario
1 is the Company’s preferred option because it is more cost
effective. Production facilities are available in Eni/Agip’s
neighboring OML 116, and only require that the lateral well from OML 116 be
extended into OPL 2012. Under Scenario 1, the Company may be able to
avoid any further engineering work since all technical data relating to OPL 2012
will be provided from ongoing development and production in OML
116. However, the Company has not yet obtained Eni/Agip’s agreement
to jointly develop OPL 2012. In the event the Company is unsuccessful
in obtaining Eni/Agip’s timely agreement, the Company will proceed with Scenario
2. An international Joint Venture Agreement (“JV Agreement”) was
previously executed by the Asher Shareholders and Superior pursuant to which
Superior would execute drilling and operations for oil drilling projects secured
by the Company (such as Scenario 2) and be reimbursed for providing such
services by the joint venture from crude oil sales. The Asher
Shareholders have assigned their rights in the JV Agreement to the
Company. (See tables below)
- 12
-
YEAR
1 (Project Phase 1) – Authorization For Expenditure (AFE)
SCENARIO 1 (With agreement to unitize
with Eni/Agip)
|
DESCRIPTION
|
TIME/DATE
|
AMOUNT
|
SOURCE
|
|
|
Signature
Bonus
|
Pre-Day
1
|
$12,500,000
|
Banks/Pr.
Equity funds
|
|
|
Farm-In
Fees
|
Pre-Day
1
|
$10,000,000
|
Banks/Pr.
Equity funds
|
|
|
Unitization
with AGIP (to extend lateral well into OPL 2012)
|
Day
1-60
|
$10,000,000
|
Banks/Pr.
Equity funds
|
|
|
Salaries
and Operating Expenses
|
Day
1-365
|
$3,000,000
|
Banks/Pr.
Equity funds
|
|
|
WORK
PROGRAM COSTS
|
Day
1-365
|
$35,500,000
|
SCENARIO 2 (To partner with
Superior and drill and complete one vertical well)
|
DESCRIPTION
|
TIME/DATE
|
AMOUNT
|
SOURCE
|
|
|
Signature
Bonus
|
Pre-Day
1
|
$12,500,000
|
Banks/Pr.
Equity funds
|
|
|
Farm-In
Fees
|
Pre-Day
1
|
$10,000,000
|
Banks/Pr.
Equity funds
|
|
|
Engineering
& Environmental Work (Casing & Design)
|
Day
1-60
|
$4,500,000
|
Banks/Pr.
Equity funds
|
|
|
Drill
and Complete One Vertical Well @ 4,000 feet
|
Day
61-91
|
$50,000,000
|
JV
Partners and Banks/Pr. Equity funds
|
|
|
Salaries
and Operating Expenses
|
Day
1-365
|
$3,000,000
|
Banks/Pr.
Equity funds
|
|
|
WORK
PROGRAM COSTS
|
Day
1-365
|
$80,000,000
|
The project activities listed above are scheduled to run consecutively. Upon the payment of the signature bonus, the Company will submit its work program to the Nigerian government agencies responsible for oil exploration and production, Department of Petroleum Resources (DPR) and the Nigerian National Petroleum Corporation (NNPC), who will each have to review the work program and approve it before any exploration or production can commence. Once the government agencies approve the work program, management will decide on the appropriate scenario to pursue for Phase 1. Day 1, the official start date of the OPL 2012 development project, will occur as soon as management determines which scenario it will follow.
In Phase
2 (Year 2 and 3), two or three additional wells will be drilled at an estimated
total cost of $205,000,000. (See table below)
YEAR
2 - 3 (Project Phase 2)
|
DESCRIPTION
|
TIME/DATE
|
AMOUNT
|
SOURCE
|
|
|
Drill
and complete 2 Directional Drilling (DD) wells @ 5,000
feet
|
Day
366 - 1095
|
$200,000,000
|
JV
Partners & Crude Oil Sale & Pr. Equity funds
|
|
|
Salaries
and Operating Expenses
|
Day
366 - 1095
|
$5,000,000
|
Banks/Pr.
Equity funds
|
|
|
WORK
PROGRAM COSTS
|
Day
366 - 1095
|
$205,000,000
|
Should
the Company be unable to fund any of the development costs related to OPL 2012,
its local partner Sigmund Oilfield Limited would notify the Company of its
non-performance and formally request that the Company perform its agreed
obligations. The Company would be given the opportunity to rectify or
cure such fundamental non-performance issues if they are within the Company’s
control. In case of further default, Sigmund Oilfield Limited would
have the option to seek to terminate its agreements with the Company and
potentially terminate the Company’s interest in OPL 2012. However,
the OPL 2012 agreements were not drafted in such a manner that allows for
immediate repercussions or sanctions imposed on the Company in the event the
Company is unable to fund any of the development costs. Rather, the
agreements provide for a dispute resolution process and contemplate discussion
and negotiation among the parties in the event of the Company’s inability to
perform. For example, although the $12,500,000 signature bonus and
$10,000,000 farm-in fee were each deemed payable on May 15, 2009, the Company
has suffered no negative consequences from being delinquent in paying these
amounts since it has regularly updated Sigmund Oilfield Limited on the status of
when payments would be made and
Sigmund Oilfield Limited has granted informal extensions of time for the Company
to make such payments.
ITEM
3. PROPERTIES
The
Company leases office space at 5847 San Felipe Street, 17th Floor, Houston,
Texas 77002. The Company is seeking to lease office space
in Nigeria, but has not yet identified an acceptable location.
Currently,
all of the Company’s oil assets are located in Nigeria. Under
Nigerian law, the federal government owns all crude oil and natural gas reserves
in Nigeria, and the Company has certain rights to explore and produce those
reserves in areas awarded by the Nigerian government after public
bidding. The Company holds a 40% leasehold interest in and
operatorship of the Nigerian offshore oil block OPL 2012, located in the Niger
Delta. OPL 2012 has an indefinite lease term, and only terminates if
after ten years no development is undertaken by the leaseholders on the oil
block.
- 13
-
Description
of OPL 2012
OPL 2012
is situated within the central portion of the offshore Niger Delta in what is
usually referred to as the “nose of the Delta”. This is an area
associated with maximum deltaic progradation and sedimentation, usually evident
in the maximum seaward growth of the delta within this region. The
block is situated within the continental shelf, in water depths ranging from
sixty meters to one hundred meters. OPL 2012 was carved out of what
used to be OPL 225 (now OML 137) operated by Addax Petroleum. The
block was recently awarded by the Nigerian Department of Petroleum Resources to
a consortium led by Grasso Nigeria Limited. Previous drilling
activities in the former block OPL 225 were concentrated in the southern part of
the block. None of the wells drilled into the oil generating
window.
In April
2009, the Asher Shareholders commissioned an independent audit on OPL
2012. Bayphase Limited, a United Kingdom based oil and gas
consultancy, performed the study. The purpose of the study was to
categorize and evaluate the “Reserves, Contingent and Prospective” resources
within OPL 2012 in accordance with the Petroleum Resources Management System
(2007), proposed by the Society of Petroleum Engineers (SPE), American
Association of Petroleum Geologists (AAPG), World Petroleum Council (WPC) and
the Society of Petroleum Engineers (SPEE) as standardized definitions of
petroleum resources and how they are estimated.
The study
was performed through a review of seismic data and interpretations and well data
reports. From seismic data and interpretations, there are two major
structures in OPL 2012. One structure in OPL 2012 contains an
extension of the producing Agbara field (located in OML 116 and operated by
Eni/Agip). This structure is an “exploitation” development and less
risky to develop because of existing production and production facilities in the
Agbara field. Accordingly, the resources associated with this
structure have been classified by Bayphase Limited in its audit report as
“reserves”. The second structure is located in the southeast of OPL
2012 (Shokoloko Discovery Extension in OML 137 operated by Addax Petroleum) and
is an “exploration” development because there is no production or production
facilities nearby, hence it is more risky to develop. This structure
was accordingly categorized by Bayphase Limited as “contingent resources” since
there is currently no viable commercial recovery of known accumulation under
development in or around this structure.
The
Company believes that the presence of at least fifteen commercial oil fields in
adjacent blocks indicates that the prospects of recovering oil from OPL 2012 are
extremely high. However, the Company currently has no entitlement to any
of these adjacent fields, and the locality of OPL 2012 does not assure that OPL
2012 will experience recoveries similar to its neighboring fields.
As of
July 30, 2009 and according to the public disclosures from the respective
international oil company and the government regulatory agency responsible for
hydrocarbon production in Nigeria (i.e. the Department of Petroleum Resources),
three major multi-national oil companies, Shell, Eni/Agip and Addax Petroleum,
have had great success around OPL 2012:
|
|
Ø
|
To
the east: Addax
Petroleum’s OML 126 (Okwori and Nda fields) has produced an estimated 265
million barrels of oil. Production commenced in March 2005 and
averaged 41,250 barrels of oil per day (BOPD) in 2007. Further
east is Eni/Agip’s OML 119 (Okono and Okpono fields) which has produced an
estimated 240 million barrels of
oil.
|
|
|
Ø
|
To
the west: Eni/Agip’s OML 116 (Agbara field) is
reported to have produced 100 to 120 million barrels of oil to
date. Production commenced in 1989, and according to the
production log with the Nigerian Department of Petroleum Resources, the
average production from OML 116 in 2008 was 7,500
BOPD.
|
|
|
Ø
|
To
the north and northeast: Shell’s OML 72 (Kalaeuele field), OML
74 (JK field) and OML 77 (HD
field).
|
|
|
Ø
|
To
the south: Addax Petroleum’s OML 137 (formerly OPL 225)
(Shokoloko field) from which OPL 2012 was carved. (See diagrams
1 and 2)
|
- 14
-
Diagram
1: OPL 2012
Diagram
2: Addax Petroleum OML 137 and 126 fields
Source: Addax
Petroleum
http://www.addaxpetroleum.com/operations/nigeria/license_areas_overview/offshore_license_areas/oml126-137
Agbara
field in nearby Eni/Agip’s OML 116 (formerly OPL 472) has been found to extend
significantly into block OPL 2012. OML 116 is currently producing
from the Agbara field and OPL 2012. About 30% of OML 116’s original
proven reserves of between 100 and 200 million barrels of oil as at 1988 extend
into OPL 2012. The Company intends to pursue the unitization of
Agbara field hydrocarbon production with ENI/Agip. One major
structure on OPL 2012 that could be a potential prospect for hydrocarbon
accumulations is of close proximity to OML 116. (See diagram
3)
- 15
-
Diagram
3: ENI/AGIP OML 116 and ASHERXINO OPL 2012
OML 116 –
AGBARA
Agbara
Deep Dir WELL – Level PQ – Depth
Map OPL
2012 Datum: mean sea level
C.I.: 10m
Source: ENI
Exploration and Production division
There is
currently no 3D seismic acquisition on OPL 2012. However, about 1400
kilometers of 2D seismic data exist in the block. These seismic data
show good reflection quality down to five seconds of two way travel time, or
down to depths of about 4,000 to 5,000 feet. Sedimentary packages
typical of the paralic and marine paralic Agbada formation can be seen down to
the equivalent depths.
Although
geologic structure alone is insufficient for hydrocarbon deposits, seismic
structural review also shows the OPL 2012 block to be dissected by several
synthetic and antithetic faults, some of which are associated with structural
closures that could be potential prospects for hydrocarbon
accumulations. A major structure building fault close to Addax
Petroleum's OML 137 and OML 126 has been identified. It proceeds from
Addax Petroleum’s OML 119 (formerly OPL 90), cuts into the southeastern portion
of the OPL 2012 block, and proceeds through the block into Shell’s OML 74
(another producing block) in the northwest end of the OPL 2012
block.
ITEM
4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As of the
date of this Form 10, the Company had outstanding 120,000,000 shares of common
stock and 0 shares of preferred stock.
The
following table contains certain information as of the date of this Form 10 as
to the number of shares of common stock of the Company beneficially owned by
each person who holds of record, or is known by management of the Company to own
beneficially, more than 5% of the common stock outstanding, and by all directors
and officers of the Company individually and as a group. Except as
noted below, to the knowledge of management, each person named in the table has
sole voting and investment power with respect to all shares of the Company’s
common stock beneficially owned by such person.
- 16
-
|
Title
of Class
|
Name
and Address of Beneficial Owner
|
Amount
and Nature of
Beneficial
Ownership
|
Percent
of Class
|
|||
|
Common
Stock
|
Bayo
O. Odunuga
3102
Commonwealth Way
Alpharetta,
Georgia 30004
|
37,500,000
|
31.3%
|
|||
|
Common
Stock
|
Patrick
O. Okorodudu
10314
Sedgehill Drive
Indianapolis,
Indiana 46239
|
37,500,000
|
31.3%
|
|||
|
Common
Stock
|
Michael
C. Hinton
3355
North Academy Boulevard
Colorado
Springs, Colorado 80917
|
6,400,331
|
5.3%
|
|||
|
Common
Stock
|
Asher
MHG Foundation1
10314
Sedgehill Drive
Indianapolis,
Indiana 46239
|
30,000,000
|
25.0%
|
|||
|
Common
Stock
|
All
Directors and Officers as a group (three persons)
|
81,400,331
|
67.8%
|
|
1.
|
Patrick
Okorodudu, the Company’s Secretary and Director, is the Chief Executive
Officer of Asher MHG Foundation. Bayo Odunuga, the Company’s
Chief Executive Officer and Director, is a Director of Asher MHG
Foundation. Messrs. Okorodudu and Odunuga disclaim beneficial
ownership of shares held by Asher MHG
Foundation.
|
The
Company knows of no arrangement, including the pledge by any person of
securities of the Company, which may at a subsequent date result in a change of
control of the Company.
ITEM
5. DIRECTORS AND EXECUTIVE OFFICERS
|
Name
|
Age
|
Position
|
||
|
Bayo
O. Odunuga
|
42
|
Chief
Executive Officer, Director
|
||
|
Patrick
O. Okorodudu
|
43
|
Secretary/General
Counsel, Director
|
||
|
Michael
C. Hinton
|
64
|
President,
Director
|
Officers
of the Company serve at the will of the Board of Directors. Presently
the Company has no employment contracts with any of its officers.
Brief
biographies of the officers and directors of the Company are set forth
below. Each director holds office until the next annual meeting or
until his death, resignation, retirement, removal, disqualification or until a
successor has been elected and qualified. Vacancies in the existing
board are filled by a majority of the remaining directors.
Bayo O. Odunuga became Chief
Executive Officer of the Company and joined its Board of Directors upon the
Company’s acquisition of the Asher Assets. Mr. Odunuga has more than
nineteen years of experience as an energy advisor, management consultant and
project manager with Price Waterhouse Coopers and EDS Corporation. He
has extensive experience advising oil companies in field acquisition and
development. He is a co-founder and former President and Chief
Executive Officer of Rosegate Synergistic, Inc., a management consulting
company, from July 2001 to December 2006. He was President of Apex
Star Energy Corporation from January to August 2007. Since 2007, Mr.
Odunuga, together with Patrick Okorodudu, has worked on the acquisition of the
Asher Assets and related activities such as negotiating contracts with the
Nigerian government and local Nigerian partners to obtain the rights to OPL
2012, performing due diligence on OPL 2012, commissioning an independent audit
and arranging a 2D seismic study on OPL 2012.
- 17
-
Patrick O. Okorodudu became
Secretary and General Counsel of the Company and joined its Board of Directors
upon the Company’s acquisition of the Asher Assets. Mr. Okorodudu has
over twenty years of experience as an attorney and consultant to local and
international oil and gas companies in Africa and other international business
entities. In 2001 he founded a company called Patina Group Inc.,
which specializes in executing oil and gas service contracts for West African
exploration and production companies and provides legal and business development
services for North American exploration and production companies seeking to do
business in Western Africa. As President of Patina Group, Mr.
Okorodudu's business tasks have included development of independent energy power
and agro-allied sector development projects in emerging market
economies. He has consulted with state governments in Nigeria on the
establishment of city and rural gas-powered electricity projects; he has also
assisted private refinery owners in the financing and construction of
60,000-100,000 bpd (barrels per day) capacity refineries. Patina
Group has collaborated with local and international oil companies to form joint
venture companies to embark on Directional Drilling projects, sub-sea
development work, and oil and gas financing. Since 2007, Mr.
Okorodudu, together with Bayo Odunuga, has worked on the acquisition of the
Asher Assets and related activities such as negotiating contracts with the
Nigerian government and local Nigerian partners to obtain the rights to OPL
2012, performing due diligence on OPL 2012, commissioning an independent audit
and arranging a 2D seismic study on OPL 2012. Mr. Okorodudu is an
associate member of the American Bar Association and the American Academy of
Legal Studies in Business. He serves on the boards of several
agro-allied and energy companies. Since 2003, Mr. Okorodudu has
been teaching Business Law, Leadership and Ethics courses for several U.S.
universities while taking time to complete doctoral studies in corporate
governance law.
Michael C. Hinton has been an
officer and director of the Company since December 15, 1997, holding the office
of Secretary from 1997 to 2003 and the office of President from 2003 until the
present. Since 1990, he has been engaged in managing his own
investments and is the sole owner of Multimarket Americas Export Corp. which is
engaged in exporting telephone and construction equipment and the import of food
products. Mr. Hinton received a bachelor's degree in economics from Colorado
State University.
Once this
Form 10 becomes effective, Mr. Hinton intends to resign from his positions as
President and Director of the Company and Mr. Odunuga will succeed him as
President. Warren H. Anderson, a geologist and engineer with over
thirty years of experience in petroleum exploration and drilling operations in
West Africa, has agreed to join the Company as its Chief Technical
Officer. The Company also intends to expand its Board of Directors to
include Chris K. Wilmot and Jimmy G. Delano, both of whom have agreed to join
the Company’s Board of Directors. Mr. Wilmot has held several
executive management positions with major oil companies including Atlantic
Richfield Company (ARCO) and has worked on business development initiatives in
various African countries. Mr. Delano is a certified accountant with
more than twenty-five years of international business experience, a substantial
portion of which was in Africa.
ITEM
6. EXECUTIVE COMPENSATION
None of
the current officers or directors has received any compensation or remuneration
from the Company for serving in these positions in the last two fiscal years of
the Company.
Future
salaries of the officers and directors will be set by the Board of Directors
depending upon the financial condition of the Company and market rates for small
to medium sized energy companies, and may include bonuses, health insurance and
other compensation as the Board of Directors may award.
ITEM
7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Michael
Hinton, the President and a shareholder of the Company, provided the Company
with working capital advances in 2007 which were repaid by the Company in
2008. In 2008 the Company repaid Mr. Hinton the amount of $30,263 for
prior working capital advances, which represented an overpayment on the loan
from Mr. Hinton to the Company due to an oversight. Mr. Hinton was
therefore indebted to the Company in the amount of $10,664 at December 31, 2008
due to such oversight, which was subsequently corrected in
2009. During the six months ended June 30, 2009, Mr. Hinton advanced
the Company a total of $17,900. The Company did not repay Mr. Hinton any
amount during this period and the amount owed by the Company to Mr. Hinton at
June 30, 2009 totaled $16,323 (including $9,087 of Hythiam stock owed by the
Company to Mr. Hinton). On July 1, 2009, Mr. Hinton released the Company
for $9,087 of this obligation.
There are
currently no independent directors on the Board of Directors, although the
Company anticipates that the Board of Directors will be expanded and two
independent directors will join the Board of Directors following the
effectiveness of this Form 10, as described in Item 5, “Directors and
Executive Officers”.
- 18
-
ITEM
8. LEGAL PROCEEDINGS
Presently,
there are no material pending legal proceedings to which the Company is a party,
and no such proceedings are known to the Company to be threatened or
contemplated against it.
ITEM
9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The
Company's common stock was previously listed for quotation in the Electronic
Bulletin Board owned and maintained by NASDAQ, trading under the symbol
"DTOX".
However,
as of April 30, 2009, the registration of the Company’s common stock under the
Securities Exchange Act of 1934 was revoked, and there is currently no
established public trading market for the Company’s Common
Stock. There has been no active trading market for the Company’s
common stock for at least five years.
The
approximate number of record holders of the Company’s common stock as of the
date of this Form 10 is 2656.
Holders
of common stock of the Company are entitled to receive such dividends as may be
declared by the Company's Board of Directors. No dividends on the Company’s
common stock have been paid by the Company to date nor does the Company
anticipate that dividends will be paid in the foreseeable future.
ITEM
10. RECENT SALES OF UNREGISTERED SECURITIES
In
consideration for the Company’s acquisition of the Asher Assets on June 30,
2009, the Company issued 105,000,000 shares of its common stock to the Asher
Shareholders and a related party. See Item 1,
“Business”. Such issuance of common stock was exempt from the
registration requirements of the Securities Act of 1933 pursuant to Rule 506 of
Regulation D thereunder.
ITEM
11. DESCRIPTION OF REGISTRANT’S SECURITIES TO BE REGISTERED
The
Company’s authorized capital consists of 300,000,000 shares of common stock,
with a par value of $0.01.
Shareholders
have pro rata rights to such dividends, if any, as may be declared by the
Company’s Board of Directors out of legally available funds. In
the event of liquidation, dissolution or winding up of the Company, shareholders
will be entitled to share ratably in the net assets legally available for
distribution to shareholders after the payment of the Company’s debts and other
liabilities. There are no preemption, redemption or conversion
rights.
Shareholders
are entitled to one vote for each share on all matters voted upon by the
shareholders, including the election of directors.
No
personal liability attaches to shareholders by reason of the ownership of such
shares.
ITEM
12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The
Company’s Certificate of Incorporation provides that its directors shall not be
personally liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director. Section 102(7) of the Delaware General
Corporate Law (“DGCL”), however, states that such a provision may not eliminate
or limit the liability of a director (i) for any breach of the director’s duty
of loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL, relating to unlawful dividends,
distributions or the repurchase or redemption of stock, or (iv) for any
transaction from which the director derives an improper personal
benefit.
The
Company may enter into agreements to indemnify its directors and officers in
addition to the indemnification provided for in its Certificate of
Incorporation. Such agreements, among other things, would indemnify the
Company’s directors and officers for certain expenses (including attorneys’
fees), judgments, fines and settlement amounts incurred by such person in any
action or proceeding, including any action by or in the Company’s rights, on
account of services as the Company’s director or officer, or as a director or
officer of any other company or enterprise to which the person provides services
at the Company’s request.
- 19
-
The
Company intends to obtain directors and officers’ liability insurance providing
coverage for its directors and officers.
ITEM
13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The
financial information beginning on page F-1 hereof is provided in accordance
with the requirements of Article 8 of Regulation S-X and Item 302 of Regulation
S-K.
[Balance
of Page Intentionally Left Blank]
- 20
-
Index
to Financial Statements
|
Page
|
|
|
Contents
|
|
|
Report
of Independent Registered Public Accounting Firm
|
F-2
|
|
Annual
Financial Statements
|
|
|
Balance
Sheets at December 31, 2008 and 2007
|
F-3
|
|
Statements
of Operations for the years ended December 31, 2008 and
2007
|
F-4
|
|
Statement
of Changes in Shareholders' Equity (Deficit) for the period from January
1, 2007 through December 31, 2008
|
F-5
|
|
Statements
of Cash Flows for the years ended December 31, 2008 and
2007
|
F-6
|
|
Notes
to Financial Statements
|
F-7
|
|
Interim
Financial Statements
|
|
|
Consolidated
Balance Sheets at June 30, 2009 and December 31, 2008
(unaudited)
|
F-13
|
|
Consolidated
Statements of Operations for the six months ended June 30, 2009 and 2008
(unaudited)
|
F-14
|
|
Consolidated
Statements of Cash Flows for the six months ended June 30, 2009 and 2008
(unaudited)
|
F-15
|
|
Notes
to Consolidated Financial Statements
|
F-16
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of
Directors and Shareholders
AsherXino
Corporation (Formerly CITA Biomedical, Inc.)
We have
audited the accompanying balance sheets of AsherXino Corporation (formerly CITA
Biomedical, Inc.) as of December 31, 2008 and 2007 and the related statements of
operations, shareholders’ equity (deficit), and cash flows for each of the two
years in the two-year period ended December 31, 2008. 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 the 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 also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, 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 AsherXino Corporation at December
31, 2008 and 2007, and the results of its operations and its cash flows for each
of the two years in the two-year period ended December 31, 2008, in conformity with
accounting principles generally accepted in the United States of
America.
As
disclosed in Note 1 to the financial statements, in 2008 AsherXino Corporation
reorganized as a public shell company.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company had an accumulated deficit at December 31,
2008 and 2007, which raises substantial doubt about its ability to continue as a
going concern. Management’s plans regarding those matters also are
described in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/
Cordovano and Honeck LLP
Cordovano
and Honeck LLP
Englewood,
Colorado
May 14,
2009, except for Note 8 – Subsequent Events – Common Stock Split, which is June
19, 2009
F-2
ASHERXINO
CORPORATION
(Formerly
CITA Biomedical, Inc.)
Balance
Sheets
|
December
31,
|
||||
|
2008
|
2007
|
|||
|
Assets
|
||||
|
Cash
and cash equivalents
|
$ 3,752
|
$ 134
|
||
|
Property
and equipment, net (Note 5)
|
2,306
|
3,776
|
||
|
Due
from related party (Note 2)
|
10,664
|
—
|
||
|
Investment
in trading securities, marked-to-market (Note 4)
|
17,394
|
281,895
|
||
|
Total
Assets
|
$ 34,116
|
$ 285,805
|
||
|
Liabilities
and Shareholders’ Equity (Deficit)
|
||||
|
Current
liabilities:
|
||||
|
Accrued
liabilities
|
$ 9,087
|
$ 19,520
|
||
|
Due
to Broker-dealer (Note 4)
|
—
|
83,778
|
||
|
Indebtedness
to related party (Note 2)
|
—
|
19,599
|
||
|
Note
payable to related parties (Note 1)
|
—
|
171,000
|
||
|
Total
current liabilities
|
9,087
|
293,897
|
||
|
Contingency (Note
7)
|
—
|
—
|
||
|
Shareholders’
equity (deficit) (Note 8):
|
||||
|
Common
stock , $0.01 par value. Authorized 300,000,000 shares, issued
and outstanding 9,876,750 and 9,876,750 shares,
respectively
|
98,768
|
98,768
|
||
|
Additional
paid-in capital
|
9,346,848
|
9,346,848
|
||
|
Accumulated
deficit
|
(9,420,587)
|
(9,453,708)
|
||
|
Total
shareholders' equity (deficit)
|
25,029
|
(8,092)
|
||
|
Total
liabilities and shareholders' equity
|
$ 34,116
|
$ 285,805
|
||
See
accompanying notes to financial statements.
F-3
ASHERXINO
CORPORATION
(Formerly
CITA Biomedical, Inc.)
Statements
of Operations
|
Years
Ended December 31,
|
||||
|
2008
|
2007
|
|||
|
General
and administrative expenses:
|
||||
|
Telephone
|
$ 2,041
|
$ 2,298
|
||
|
License
permits
|
1,255
|
883
|
||
|
Legal
|
100
|
28,223
|
||
|
Other
|
28,058
|
17,214
|
||
|
31,454
|
48,619
|
|||
|
Loss
before nonoperating income and expense, interest expense and income
taxes
|
(31,454)
|
(48,619)
|
||
|
Net
realized loss from sale of trading securities (Note 4)
|
(51,304)
|
(1,024,023)
|
||
|
Net
unrealized holding loss on trading securities (Note 4)
|
(54,102)
|
(474,780)
|
||
|
Gain
on settlement of lawsuit with related party (Note
1)
|
171,000
|
—
|
||
|
Other
nonoperating income
|
22
|
2,788
|
||
|
Nonoperating
expense
|
(60)
|
—
|
||
|
Gain
on realization of contingent asset (Note 4)
|
—
|
379,950
|
||
|
Interest
expense
|
(981)
|
(55,156)
|
||
|
Income
(Loss) before income taxes
|
33,121
|
(1,219,839)
|
||
|
Income
tax provision (Note 6)
|
—
|
—
|
||
|
Net
income (loss)
|
$ 33,121
|
$ (1,219,839)
|
||
|
Basic
and diluted gain (loss) per share
|
$ 0.00
|
$
(0.12)
|
||
|
Weighted
average common shares outstanding
|
9,876,750
|
9,876,750
|
||
See
accompanying notes to financial statements.
F-4
ASHERXINO
CORPORATION
(Formerly
CITA Biomedical, Inc.)
Statement
of Changes in Shareholders’ Equity (Deficit)
|
Common
Stock
|
|||||||||
|
Shares
|
Par
Value
|
Additional
Paid-in Capital
|
Accumulated
Deficit
|
Total
|
|||||
|
Balance
at December 31, 2006
|
9,876,750
|
$ 98,768
|
$9,346,848
|
$ (8,233,869)
|
$ 1,211,747
|
||||
|
Net
loss
|
—
|
—
|
—
|
(1,219,839)
|
(1,219,839)
|
||||
|
Balance
at December 31, 2007
|
9,876,750
|
98,768
|
$9,346,848
|
(9,453,708)
|
(8,092)
|
||||
|
Net
income
|
—
|
—
|
—
|
33,121
|
33,121
|
||||
|
Balance
at December 31, 2008
|
9,876,750
|
$ 98,768
|
$
9,346,848
|
$ (9,420,587)
|
$ 25,029
|
||||
See
accompanying notes to financial statements.
F-5
ASHERXINO
CORPORATION
(Formerly
CITA Biomedical, Inc.)
Statements
of Cash Flows
|
Years
Ended December 31,
|
||||
|
2008
|
2007
|
|||
|
Cash
flows from operating activities:
|
||||
|
Net
income (loss)
|
$ 33,121
|
$ (1,219,839)
|
||
|
Adjustments
to reconcile net income (loss) to net cash used by operating
activities:
|
||||
|
Depreciation
and amortization
Unrealized
(gain) loss on trading securities
|
1,470
54,102
|
1,470
474,780
|
||
|
Gain
on settlement of lawsuit (Note 1)
|
(171,000)
|
—
|
||
|
Increase/decrease
in:
|
||||
|
Due
to/from related party (Note 2)
|
(30,263)
|
19,599
|
||
|
Investment
in trading securities
|
210,399
|
1,553,325
|
||
|
Accounts
payable
|
—
|
(1,679)
|
||
|
Due
to Broker-dealer (Note 4)
|
(83,778)
|
(596,337)
|
||
|
Accrued
expenses
|
(10,433)
|
(234,579)
|
||
|
Net
cash provided by (used in) operating activities
|
3,618
|
(3,260)
|
||
|
Net
change in cash and cash equivalents
|
3,618
|
(3,260)
|
||
|
Cash
and cash equivalents:
|
||||
|
Beginning
of period
|
134
|
3,394
|
||
|
End
of period
|
$ 3,752
|
$ 134
|
||
|
Supplemental
disclosure of cash flow information:
|
||||
|
Cash
paid during the year for:
|
||||
|
Income
taxes
|
$ —
|
$ —
|
||
|
Interest
|
$ 981
|
$ 55,156
|
||
See
accompanying notes to financial statements.
F-6
ASHERXINO
CORPORATION
(Formerly
CITA Biomedical, Inc.)
Notes
to Financial Statements
Note
1 - Historical Business Operations and Significant Accounting
Policies
Historical
Business Operations
First
business operation- breeding and selling thoroughbreds
AsherXino
Corporation (formerly CITA Biomedical, Inc.) (the "Company") was incorporated in
Colorado on June 9, 1981, under the name "Blue Grass Breeders, Inc." The Company
was originally formed for the purpose of engaging in the business of acquiring,
breeding, racing and selling thoroughbred horses. The Company completed an
initial public offering of its $.0l par value common shares in February 1983,
receiving net proceeds of approximately $2,134,000. From 1983 to 1991, the
Company engaged in the business of breeding and selling horses. The business
proved unprofitable and in 1991, the Company abandoned the business of breeding
and selling horses.
Second
business operation- computers
The
Company lay dormant from 1991 through 1993. From October 1993 through
December 1994, the Company was engaged in the manufacture and sale of computer
hardware and software. The Company ceased operations due to continued
losses and the inability to meet obligations. The Company then lay
dormant again from 1994 through 1997.
Third
business operation- opiate detoxification
On August
12, 1998, the Company reorganized under new management and purchased 100 percent
of the outstanding capital stock of CITA Americas, Inc. (a Nevada corporation)
from Aviation Industries, Inc. for 1,000 Shares of the Company's Series A
Convertible Preferred Stock. Through its subsidiary, the Company
commenced to provide the technology, information, and administrative services
necessary to the treatment and rapid detoxification of persons addicted to
opiate based drugs whether natural or synthetic (i.e., Methadone, Heroin,
Codeine, Demerol, and Percocet). The Company's main product offering
was a process known as “UROD(R)” which stands for Ultra Rapid Opiate
Detoxification. This procedure was applied to detoxification from heroin,
methadone and other opiate-based drugs, including pharmaceuticals, to addicted
individuals. However, due to a failure to penetrate key markets and chronic
undercapitalization, the Company ran out of cash in June 2003 and ceased
operations. Concurrently, management stopped periodic reporting to
shareholders.
Third
corporate reorganization
Prior to
closing its doors in June 2003, the Company borrowed $300,000 from Hythiam Inc.
(“Hythiam”) assigning the rights to its UROD(R) process to Hythiam as
collateral. According to the terms of the transaction, the Company
was to receive an equity interest in any successor entity that employed the
UROD(R) process, should the Company default on its obligation to
Hythiam. In 2003, the Company defaulted on its obligation to
Hythiam. From 2004 to 2008, the Company received 310,000 shares of
Hythiam common stock.
Using
proceeds from sales of its shares of Hythiam’s stock, the Company reorganized
for a third time. Management worked out certain obligations with vendors and
lenders during 2005 and 2006 for cash. The Company defended itself against suits
filed in Kentucky and Los Angeles County by certain disgruntled former directors
and shareholders (the “Plaintiffs”). The Kentucky Court dismissed the
Kentucky suit in 2006. The Los Angeles County Superior Court ruled
that certain claims made by Plaintiffs were invalid. In 2008, the
Company reached an out-of-court settlement with the Plaintiffs on the remaining
claims and recorded a gain of $171,000 in the process.
In total,
the Company extinguished $171,000 in obligations through creditor settlements,
debt forgiveness by officers and directors, Court and out-of-court settlements
and the expiration of the statute of limitations during 2008 and
2007.
As a
result of this second reorganization, the Company emerged as a “shell” company
in 2008.
F-7
ASHERXINO CORPORATION
(Formerly
CITA Biomedical, Inc.)
Notes to Financial
Statements
Use
of Estimates
The
Company’s significant estimates include the securities fair value adjustment
(available-for-sale), accounts payable and accrued expenses. These
estimates and assumptions affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. While the Company believes that such
estimates are fair when considered in conjunction with the financial statements
taken as a whole, the actual amounts of such estimates, when known, will vary
from these estimates. If actual results significantly differ from the Company’s
estimates, the Company’s financial condition and results of operations could be
materially impacted.
Fair
Value of Financial Instruments
The
carrying amounts reported in the balance sheet for cash, accounts payable and
accrued expenses approximate their fair market value based on the short-term
maturity of these instruments. The fair value of the Company’s trading
securities at December 31, 2008 was based on quoted market prices.
Cash
and Cash Equivalents and Marketable Securities
The
Company's securities investments that are bought and held principally for the
purpose of selling them in the near term are classified as trading securities.
Trading securities are recorded at fair value on the balance sheet in current
assets, with the change in fair value during the period included in
earnings.
The
Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents and those with maturities greater
than three months are considered marketable securities.
Property
and Equipment
Property
and equipment are stated at cost, less accumulated depreciation. Depreciation is
computed using the straight-line method over the estimated useful lives of the
related assets. Equipment is depreciated over 3 years. The Company performs
ongoing evaluations of the estimated useful lives of the property and equipment
for depreciation purposes. The estimated useful lives are determined and
continually evaluated based on the period over which services are expected to be
rendered by the asset. Maintenance and repairs are expensed as
incurred.
Impairment
of Long-Lived Assets
In
accordance with Statement of Financial Accounting Standards (SFAS) No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets," the Company
periodically reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of the assets may not
be fully recoverable. The Company recognizes an impairment loss when the sum of
expected undiscounted future cash flows is less than the carrying amount of the
asset. The amount of impairment is measured as the difference between the
asset’s estimated fair value and its book value.
Earnings
or Loss per Share
The
Company computes earnings per share in accordance with the provisions of SFAS
No. 128, Earnings per share, which establishes standards for computing and
presenting basic and diluted earnings per share. Basic earnings per share
are computed by dividing net earnings available to common shareholders by the
weighted average number of shares outstanding during the period. Diluted
earnings per share are computed assuming the exercise of stock options under the
treasury stock method and the related income taxes effects, if not
anti-dilutive. For loss periods, common share equivalents are excluded
from the calculation, as their effect would be anti-dilutive.
Revenue
Recognition
We
recognize revenue on arrangements in accordance with Securities and Exchange
Commission Staff Accounting Bulletin No. 104, "Revenue Recognition" and related
interpretations. Revenue is recognized when the services have been rendered, the
products have been delivered and collection is reasonably assured.
Income
Taxes
The
Company accounts for income taxes under the liability method in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes". Under this method, deferred income tax assets and
liabilities are determined based on differences between the financial
reporting and tax basis of assets and liabilities and are
measured using the enacted tax rates and laws that will be in
effect when
the differences are expected to
reverse.
F-8
ASHERXINO CORPORATION
(Formerly
CITA Biomedical, Inc.)
Notes
to Financial Statements
Recent
Accounting Pronouncements
In
December 2007, the FASB issued FAS No. 141(R) “Applying the Acquisition Method”,
which is effective for fiscal years beginning after December 15,
2008. This statement retains the fundamental requirements in FAS 141
that the acquisition method be used for all business combinations and for an
acquirer to be identified for each business combination. FAS 141(R) broadens the
scope of FAS 141 by requiring application of the purchase method of accounting
to transactions in which one entity establishes control over another entity
without necessarily transferring consideration, even if the acquirer has not
acquired 100% of its target. Among other changes, FAS 141(R) applies
the concept of fair value and “more likely than not” criteria to accounting for
contingent consideration, and preacquisition contingencies. As a
result of implementing the new standard, since transaction costs would not be an
element of fair value of the target, they will not be considered part of the
fair value of the acquirer’s interest and will be expensed as incurred. The
Company does not expect that the impact of this standard will have a significant
effect on its financial condition and results of operations.
In
December 2007, the FASB also issued FAS No. 160, “Accounting for Noncontrolling
Interests”, which is effective for fiscal years beginning after December 15,
2008. This statement clarifies the classification of noncontrolling
interests in the consolidated statements of financial position and the
accounting for and reporting of transactions between the reporting entity and
the holders of non-controlling interests. The Company does not expect
that the adoption of this standard will have a significant impact on its
financial condition, results of operations, cash flows or
disclosures.
In
February 2007, the FASB issued FAS No. 159, “Fair Value Option” which provides
companies an irrevocable option to report selected financial assets and
liabilities at fair value. The objective is to improve financial
reporting by providing entities with the opportunity to mitigate volatility in
reported earnings caused by measuring related assets and liabilities differently
without having to apply complex hedge accounting provisions. FAS 159 is
effective for entities as of the beginning of the first fiscal year that begins
after November 15, 2007. The Company does not expect that the
adoption of this standard will have a significant impact on its financial
condition, results of operations, cash flows or disclosures.
In
September 2006, the Financial Accounting Standards Board (FASB) issued FAS
No. 157, “Fair Value Measurements” (“FAS 157”), which establishes a
framework for measuring fair value in accordance with GAAP and expands
disclosures about fair value measurements. FAS 157 does not
require any new fair value measurements but rather eliminates inconsistencies in
guidance found in various prior accounting pronouncements. FAS157 is effective
for fiscal years beginning after November 15, 2007. The Company does not
expect that the adoption of this standard will have a significant impact on its
financial condition, results of operations, cash flows or
disclosures.
In June
2008, the FASB issued FASB Staff Position EITF 03-6-1, “Determining Whether
Instruments Granted in Share-Based Payment Transactions Are Participating
Securities” (FSP EITF 03-6-1). FSP EITF 03-6-1 addresses whether instruments
granted in share-based payment transactions are participating securities prior
to vesting, and therefore necessitate inclusion in the computation of earnings
per share under the two-class method. FSP EITF 03-6-1 is effective for financial
statements issued for fiscal years beginning on or after December 15, 2008
and earlier adoption is not permitted. The adoption of this statement is not
expected to have a material effect on the Company’s financial
statements.
Note 2 - Related Party
Transactions
The
President of the Company provided the Company with working capital advances,
from time to time, during the years ended December 31, 2008 and
2007. During the year ended December 31, 2008, the President of the
Company advanced the Company $0. During the same period, the Company
repaid the President of the Company $30,263. The President of the
Company was indebted to the Company in the amount of $10,664 at December 31,
2008.
During
the year ended December 31, 2007, the President of the Company advanced the
Company $74,679. During the same period, the Company repaid the
President of the Company $55,080. The Company was indebted to the
President in the amount of $19,599 at December 31, 2007.
F-9
ASHERXINO
CORPORATION
(Formerly
CITA Biomedical, Inc.)
Notes
to Financial Statements
On July
17, 2002, the Board of Directors of the Company authorized the payment of 15
percent of all shares received from Hythiam to the President as compensation for
his services. During the years ended December 31, 2008 and 2007, the
President of the Company received 6,500 and 30,000 shares of Hythiam common
stock. The shares were valued at $19,045 and $277,200 at the time of
receipt, based on the quoted market price of the Hythiam stock.
Note
3 - Going Concern
As
reflected in the accompanying financial statements, the Company had an
accumulated deficit of approximately $9,420,600 at December 31, 2008, which
raises substantial doubt about the Company's ability to continue as a going
concern.
Management
plans to continue to raise funds through the sale of Hythiam common stock until
such time as all shares are sold. In addition, certain officers
and directors plan to fund the Company’s operations until a successful merger or
acquisition is consummated.
The
ability of the Company to continue as a going concern is dependent on the
Company’s ability to generate profits through a merger or
acquisition. The financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going
concern. Management believes that the actions presently being taken
to implement its new business plan and generate profits provide the opportunity
for the Company to continue as a going concern.
Note
4 - Investments
The
Company acquired a total of 310,000 shares of Hythiam common stock during 2005
through 2008 in connection with a financing arrangment entered into in
2002. Hythiam is a public company whose shares are quoted on the
OTCBB. The Company acquired the shares of Hythiam common stock to
sell in the near term to generate income to fund its corporate reorganization
and for legal costs with respect to the aforementioned shareholder
suit. Management did not intend to hold the shares of Hythiam common
stock for investment purposes, and accordingly, classified the shares as
“trading securities” for all periods presented. Because of such
classification, unrealized gains and losses were recorded in operations.
The Company reflected the receipt of the shares as a contingent asset in the
acccompanying financial statements.
Investment
Account
The
investment in Hythiam common stock is summarized at December 31, 2008 and 2007,
as follows:
|
Gross
Unrealized*
|
Fair
Value at
December
31, 2008
|
|||||||
|
2008
|
||||||||
|
Gain
|
Loss
|
Net
|
||||||
|
Hythiam
Common Stock
|
$ 42,406
|
$ 96,508
|
$ (54,102)
|
17,394
|
||||
|
Gross
Realized*
|
||||||||
|
Gain
|
Loss
|
Net
|
||||||
|
Hythiam
Common Stock
|
$ 186
|
$ 51,490
|
$ (51,304)
|
|||||
|
Gross
Unrealized*
|
Fair
Value at
December
31, 2007
|
|||||||
|
2007
|
||||||||
|
Gain
|
Loss
|
Net
|
||||||
|
Hythiam
Common Stock
|
$ 24,905
|
$ 499,685
|
$ (474,780)
|
281,895
|
||||
|
Gross
Realized*
|
||||||||
|
Gain
|
Loss
|
Net
|
||||||
|
Hythiam
Common Stock
|
$ -
|
$ 1,024,023
|
$ (1,024,023)
|
|||||
*Gains
and losses (realized and unrealized) are determined on the basis of the quoted
market price on the balance sheet date.
F-10
ASHERXINO
CORPORATION
(Formerly
CITA Biomedical, Inc.)
Notes to Financial
Statements
Results
of operations for the years ended December 31, 2008 and 2007
follow:
|
2008
|
2007
|
|||
|
Sale
proceeds
|
$ 141,567
|
$ 674,196
|
||
|
Gross
realized losses
|
$ 51,490
|
$ 1,024,023
|
||
|
Gross
realized gains
|
$ 186
|
$ —
|
Margin
Account
The
Company borrowed $30,018 on margin from its broker-dealer and repaid $113,796 to
its broker-dealer during 2008. The Company was indebted to the
broker-dealer in the amount of $-0- as of December 31, 2008.
The
Company borrowed $147,859 on margin and repaid $744,196 during
2007. The Company was indebted to the broker-dealer in the amount of
$83,778 as of December 31, 2007.
Interest
expense paid to the broker-dealer totaled $871 and $55,129 in 2008 and 2007,
respectively.
Average
interest rates for 2008 and 2007 were 10.5 percent and 9.0 percent,
respectively. The interest rate was 9.75 percent and 9.3 percent at
December 31, 2008 and 2007, respectively.
Note
5 - Property and Equipment
Property
and equipment consisted of the following at December 31, 2008 and
2007:
|
2008
|
2007
|
||
|
Equipment
|
$ 7,348
|
$ 7,348
|
|
|
Less
accumulated depreciation
|
(5,042)
|
(3,572)
|
|
|
$ 2,306
|
$ 3,776
|
Depreciation
expense was $1,470 and $1,470 for the years ended December 31, 2008 and 2007,
respectively.
Note 6
- Income Taxes
As of
December 31, 2008, the Company had approximately $9,421,000 of U.S. federal and
state net operating loss carryforwards available to offset future taxable
income, which begin expiring in 2026, if not utilized. Deferred
income taxes reflect the net tax effects of operating loss and tax credit carry
forwards and temporary differences between carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax
purposes. In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which temporary differences representing net future deductible
amounts become deductible. Due to the uncertainty of the Company’s ability to
realize the benefit of the deferred tax assets, the deferred tax assets are
fully offset by a valuation allowance at December 31, 2008.
The
reconciliation of income tax provision at the statutory rate to the reported
income tax expense is as follows:
|
December
31,
|
||||
|
2008
|
2007
|
|||
|
US
statutory federal rate
|
34.00%
|
30.49%
|
||
|
State
income tax rate
|
3.06%
|
3.22%
|
||
|
Net
operating loss for which no tax benefit is currently
available
|
-37.06%
|
-33.71%
|
||
|
0.00%
|
0.00%
|
|||
F-11
ASHERXINO CORPORATION
(Formerly
CITA Biomedical, Inc.)
Notes to Financial
Statements
The
valuation allowance is evaluated at the end of each year, considering positive
and negative evidence about whether the deferred tax asset will be
realized. At that time, the allowance will either be increased or
reduced; reduction could result in the complete elimination of the allowance if
positive evidence indicates that the value of the deferred tax assets is no
longer impaired and the allowance is no longer required.
The
Company has no positions for which it is reasonable that the total amounts of
unrecognized tax benefits at December 31, 2008 will significantly increase or
decrease within 12 months.
Note
7 - Commitments and Contingencies
Unasserted
Claim
In
November 2001, the Company and Alternative Products, Inc. (“ATP”) entered into
preliminary discussions regarding a purchase by the Company of all of the
outstanding shares of ATP. No agreement was ever finalized and the
Company received a letter of notification from ATP terminating any agreement
between them. Management believes that no such agreement ever
existed. From time to time thereafter, John Bancroft (either individually or as
President of ATP) has claimed that the Company owes either him or ATP various
amounts including Five Million Dollars ($5,000,000) in Class B Preferred Stock,
One Million Dollars ($1,000,000) in Common Stock and payments of Three Hundred
Fifty-Six Thousand Dollars ($356,000) under purported employment and employment
related agreements. Management believes that no such agreements exist
or ever existed and that the claims by Bancroft and/or ATP are wholly without
merit. Counsel has advised management, in the event litigation should
be brought on this claim, that the Company would have a number of meritorious
defenses, including but not limited to statute of limitations, the absence of
any agreement binding upon the Company and the aforementioned termination of any
such agreement.
Note 8 – Subsequent Events
Authorization
of Common Stock and Elimination of Authorized Preferred Stock
On March
27, 2009, the Company’s Certificate of Incorporation was amended to increase the
number of authorized shares of common stock from 250,000,000 to 300,000,000,
$0.01 par value, and to eliminate the Company’s authorized preferred
stock.
Common
Stock Split
On June
19, 2009, the Company’s Certificate of Incorporation was amended to authorize a
1.5 for 1 stock split, which has been retroactively applied for all periods
presented.
F-12
ASHERXINO
CORPORATION
(Formerly
CITA Biomedical, Inc.)
(An
Exploration Stage Company)
Consolidated
Balance Sheets
|
June
30, 2009
|
December
31, 2008
|
|||
|
Assets
|
||||
|
Cash
and cash equivalents
|
$ 24
|
$ 3,752
|
||
|
Property
and equipment, net
|
1,781
|
2,306
|
||
|
Due
from related party
|
—
|
10,664
|
||
|
Oil
and gas asset
|
53,750
|
—
|
||
|
Investment
in trading securities, marked-to-market
|
—
|
17,394
|
||
|
Total
assets
|
$ 55,555
|
$ 34,116
|
||
|
Liabilities
and Shareholders’ Equity (Deficit)
|
||||
|
Current
liabilities:
|
||||
|
Accrued
liabilities
|
$ 114,175
|
$ 9,087
|
||
|
Indebtedness
to related party
|
16,323
|
—
|
||
|
Total
current liabilities
|
130,498
|
9,087
|
||
|
Shareholders’
equity (deficit):
|
||||
|
Common
stock, $0.01 par value. Authorized 300,000,000 shares, issued
and outstanding 120,000,000 and 9,876,750 shares,
respectively
|
1,200,000
|
98,768
|
||
|
Additional
paid-in capital
|
8,312,013
|
9,346,848
|
||
|
Accumulated
deficit
|
(9,586,956)
|
(9,420,587)
|
||
|
Total
shareholders' equity (deficit)
|
(74,943)
|
25,029
|
||
|
Total
liabilities and shareholders' equity
|
$ 55,555
|
$ 34,116
|
See
accompanying notes to financial statements.
F-13
ASHERXINO
CORPORATION
(Formerly
CITA Biomedical, Inc.)
(An
Exploration Stage Company)
Consolidated
Statements of Operations
|
Six
months ended June 30,
|
Cumulative
Period from January 1, 2009 through June 30, 2009
|
|||||
|
2009
|
2008
|
|||||
|
General
and administrative expenses:
|
||||||
|
Telephone
|
$ 918
|
$ 976
|
$ 918
|
|||
|
License
permits
|
1,141
|
937
|
1,141
|
|||
|
Legal
|
104,851
|
—
|
104,851
|
|||
|
Other
|
57,468
|
6,756
|
57,468
|
|||
|
Total
general and administrative expenses
|
164,378
|
8,669
|
164,378
|
|||
|
Loss
from operation
|
(164,378)
|
(8,669)
|
(164,378)
|
|||
|
Net
realized loss from sale of trading securities
|
(1,958)
|
(185,792)
|
(1,958)
|
|||
|
Net
unrealized holding loss on trading securities
|
—
|
(19,380)
|
—
|
|||
|
Interest
expense
|
(33)
|
(935)
|
(33)
|
|||
|
Loss
before income taxes
|
$ (166,369)
|
$
(214,776)
|
$ (166,369)
|
|||
|
Income
tax provision
|
—
|
—
|
—
|
|||
|
Net
loss
|
$ (166,369)
|
$
(214,776)
|
$ (166,369)
|
|||
|
Basic
and diluted loss per share
|
$ 0.00
|
$ (0.02)
|
||||
|
Weighted
average common shares outstanding:
|
||||||
|
Basic
and diluted
|
117,989,528
|
9,876,750
|
||||
See
accompanying notes to financial statements.
F-14
ASHERXINO
CORPORATION
(Formerly
CITA Biomedical, Inc.)
(An
Exploration Stage Company)
Consolidated
Statements of Cash Flows
|
Six
months ended June 30,
|
Cumulative
Period from
January
1, 2009
through
June 30, 2009
|
|||||
|
2009
|
2008
|
|||||
|
Cash
flows from operating activities:
|
||||||
|
Net
income (loss)
|
$ (166,369)
|
$ (214,776)
|
$ (166,369)
|
|||
|
Adjustments
to reconcile net income (loss) to net cash used by operating
activities:
|
||||||
|
Depreciation
and amortization
|
525
|
—
|
525
|
|||
|
Proceeds
from sale of investments
|
15,436
|
—
|
15,436
|
|||
|
Unrealized
loss on trading securities
|
—
|
19,380
|
—
|
|||
|
Realized
loss on sale of securities
|
1,958
|
—
|
1,958
|
|||
|
Common
stock issued for services
|
12,647
|
—
|
12,647
|
|||
|
Increase/decrease
in:
|
||||||
|
Investment
in trading securities
|
—
|
281,895
|
—
|
|||
|
Accounts
payable
|
114,175
|
(38,268)
|
114,175
|
|||
|
Indebtedness
to related party
|
17,900
|
(43,987)
|
17,900
|
|||
|
Net
cash used in operating activities
|
(3,728)
|
4,244
|
(3,728)
|
|||
|
Cash
and cash equivalents:
|
||||||
|
Beginning
of year
|
3,752
|
134
|
3,752
|
|||
|
End
of year
|
$ 24
|
$ 4,378
|
$ 24
|
|||
|
Cash
paid during the year for:
|
||||||
|
Income
taxes
|
$ —
|
$ —
|
—
|
|||
|
Interest
|
$ 935
|
$ —
|
$ 935
|
|||
|
Supplemental
disclosure of cash flow information:
|
||||||
|
Shares
issued for oil and gas asset
|
$ 53,750
|
$ —
|
||||
See
accompanying notes to financial statements.
F-15
ASHERXINO
CORPORATION
(Formerly
CITA Biomedical, Inc.)
(An
Exploration Stage Company)
Notes
to Consolidated Financial Statements
Note
1 - Historical Business Operations and Significant Accounting
Policies
Basis
of Presentation
The
accompanying unaudited interim financial statements of AsherXino Corporation
(the “Company”) have been prepared in accordance with accounting principles
generally accepted in the United States of America and the rules of the
Securities and Exchange Commission ("SEC"), and should be read in conjunction
with the audited financial statements and notes thereto contained in the
Company’s Annual Financial Statements found elsewhere in this Form 10. In the
opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of financial position and the
results of operations for the interim periods presented have been reflected
herein. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year. Notes to the
financial statements which would substantially duplicate the disclosure
contained in the audited financial statements for the most recent fiscal year
ended December 31, 2008, as reported elsewhere in this Form 10, have been
omitted.
Exploration
Stage
During
the first quarter of 2009 the Company engaged in serious discussions with owners
of certain oil and gas assets, and preliminary discussions with various entities
regarding potential debt and equity financing to support the exploitation of any
assets to be acquired. These discussions ultimately led to the
Company’s acquisition of a 40% leasehold interest in and operatorship of an
offshore oil exploration and development block in Nigeria, Oil Prospecting
License (OPL) 2012, which acquisition was effective June 30,
2009. Management has determined, therefore, that in early 2009 when
such discussions began in earnest, the Company entered the exploration
stage and, for this reason, the accompanying interim financial statements set
forth cumulative financial information for the period elapsed since the
inception of this new exploration stage, which we deem to have occurred on or
about January 1, 2009.
Recent
Accounting Pronouncements
We do not
expect the adoption of recently issued accounting pronouncements to have a
significant impact on our results of operations, financial position or cash
flow.
Note 2 - Related Party
Transactions
During
the six months ended June 30, 2009, the President of the Company advanced the
Company a total of $17,900. The Company did not repay the President any
amount during this period and the amount owed by the Company to the President at
June 30, 2009 totaled $16,323. On July 1, 2009, the President
released the Company for $9,087 of this obligation.
Note
3 - Going Concern
As
reflected in the accompanying consolidated financial statements, we had a
working capital deficit of $130,474 and an accumulated deficit of approximately
$9,586,956 at June 30, 2009, which raise substantial doubt about the Company's
ability to continue as a going concern. Management plans to raise
funds through the issuance of debt or the sale of common stock.
Our
ability to continue as a going concern is dependent on our ability to raise
capital through the issuance of debt or the sale of common stock. The
consolidated financial statements do not include any adjustments that might be
necessary if we were unable to continue as a going
concern.
Note
4 - Investments
During
the six months ended June 30, 2009, we sold the remaining 44,600 shares of
Hythiam Inc. (“Hythiam”) common stock for total proceeds of $15,436. For the six
months ended June 30, 2009 and 2008, we recognized unrealized losses of $0 and
$19,380 respectively. In addition, we recognized realized losses of $1,958 and
$185,792 with net proceeds of $15,436 and $121,365, respectively. As of June 30,
2009, we did not own any shares of Hythiam’s common stock. Management
did not intend to hold the shares of Hythiam common stock for investment
purposes, and accordingly, classified the shares as “trading securities” for all
periods presented. Because of such classification, unrealized gains
and losses were recorded in operations.
Note 7 - Common Stock
On March
27, 2009, the Company’s Certificate of Incorporation was amended to increase the
number of authorized shares of common stock from 250,000,000 to 300,000,000,
$0.01 par value, and to eliminate the Company’s authorized preferred
stock. In addition, on June 19, 2009, the Company authorized a 1.5
for 1 stock split, which has been retroactively applied for all periods
presented.
F-16
ASHERXINO
CORPORATION
(Formerly
CITA Biomedical, Inc.)
(An
Exploration Stage Company)
Notes to Consolidated Financial
Statements
During
the six months ended June 30, 2009, we issued 4,991,250 shares of split adjusted
common stock for services for total expense of $12,647. The common stock was
valued using the liquidation value of net assets immediately prior to the grant
date.
Note
8 - Change of Control
Pursuant
to an Asset Purchase Agreement dated June 30, 2009, in consideration for the
issuance of 105,000,000 shares of the Company’s common stock (87.5% of the
Company’s post-transaction total outstanding common stock) to Bayo Odunuga,
Patrick Okorodudu and Asher MHG Foundation, the Company acquired from such
individuals a 40% leasehold interest in and operatorship of Oil Prospecting
License (OPL) 2012 through an assignment of all of such individuals’ right,
title and interest in and to a Memorandum of Agreement dated March 14, 2009
(“MOA”), a Farm In Agreement dated March 14, 2009 (“Farm In Agreement”) and a
proposed Production Sharing Contract (“PSC”). This transaction was
accounted for as an asset purchase. In connection with such
transaction, Bayo Odunuga became Chief Executive Officer and director of the
Company and Patrick Okorodudu became Secretary, General Counsel and director of
the Company. The value of the oil and gas property was $53,750 on the
date of acquisition, which was the cumulative cost incurred by Messrs. Odunuga
and Okorodudu in acquiring the asset.
Pursuant
to the MOA and Farm In Agreement, the Company shall pay to the Nigerian
government the sum of $12,500,000 as a signature bonus and the Company shall pay
its local partner Sigmund Oilfield Limited $10,000,000 as a farm-in
fee. Payment
of the signature bonus and farm-in fee was due 30 days after the conclusion of
the audit engineering report by Bayphase Limited, which occurred on or around
April 14, 2009. However, the Company has suffered no negative
consequences from being technically delinquent in paying these amounts as it has
regularly updated Sigmund Oilfield Limited on the status of when payments would
be made and Sigmund Oilfield Limited has granted informal extensions of time for
the Company to make such payments.
The Farm
In Agreement requires the Company to pay for the purchase of relevant seismic
data for a sum to be negotiated. The timing of this payment is to be
decided by the parties. Some 2D
seismic data has already been prepared and is held by the Company, but the
Company may acquire additional 2D seismic data because it is less expensive to
acquire than 3D seismic data and the existing 2D seismic data does not have full
coverage of OPL 2012. 3D seismic data has not yet been prepared or
interpreted. The Company may engage the services of either
Schlumberger or CGGVeritas for the 3D seismic program, depending on vessel
availability and cost.
2D
seismic data is normally prepared as a preliminary exploration tool to define
structures. 3D seismic data is then prepared to further explore,
confirm and define structures prior to drilling. Due to the higher
cost of 3D seismic data, it is normally prepared only for selected areas where
drilling is anticipated. 3D seismic data is important for drilling
offshore oil wells because of the closely spaced nature of seismic line
acquisition, which provides much higher resolution of targets than when using
2D. The original 2D seismic data merely indicates what structures are
present. 3D seismic data identifies structures with better resolution
and provides other significant subsurface parameters such as direct hydrocarbon
indicators (DHI), acoustic analysis to determine fluid (oil) elevations, flat
spots to determine oil, gas and water contacts, and amplitude analysis to
further determine oil reservoirs’ thickness and elevation. 3D seismic
data also confirms earlier 2D structural configurations and
geometries. Acquisition of 3D seismic data generally increases the
likelihood of successful development of an oil block.
As
management continues to evaluate the 2D seismic data, it may feel comfortable
with using the vintage data as is, without using any 3D confirmation
data. This generally depends on the size of the structure, and any
seismic anomalies encountered. There are new processing techniques
that the Company will use on the 2D data to determine some of the
anomalies. If management feels comfortable with the quality of
reprocessing, it might proceed without acquiring 3D data, although generally
this is unlikely since 3D data provides a much better picture of the oil
block. This decision will be made by the Company as it proceeds with
the development of OPL 2012.
Pursuant
to the Farm In Agreement’s definition of discovery and drilling schedule, a
discovery bonus will be payable to Sigmund Oilfield Limited after execution of
the PSC and when drilling operations result in the discovery of an accumulation
of hydrocarbons and this discovery of a commercially viable field of
hydrocarbons is announced. The
discovery bonus will consist of the first $10,000,000 of revenue generated from
the sale of hydrocarbons produced from OPL 2012 once hydrocarbons are
discovered.
Government
royalties and other national petroleum taxes and payments will be included in a
yet to be signed PSC between the Nigerian government and the oil block license
holders and technical partners. The PSC will contain a detailed
regimen of when government royalties will be due, for example, “upon the
discovery and production of 10 mmboe (million barrels of oil equivalent), the
oil block operators shall deduct oil revenue of 1.2 mmboe to the NNPC
account.”
If
Sigmund Oilfield Limited refuses to continue agreeing to extensions of time for
the Company’s payment obligations, it would notify the Company of its
non-performance and formally request that the Company perform its agreed
obligations. The Company would be given the opportunity to rectify or
cure such fundamental non-performance issues if they are within the Company’s
control. In case of further default, Sigmund Oilfield Limited would
have the option to seek to terminate its agreements with the Company and
potentially terminate the Company’s interest in OPL 2012. However,
these agreements were not drafted in such a manner that allows for immediate
repercussions or sanctions imposed on the Company in the event the Company is
unable to fund any of the development costs. Rather, the agreements
provide for a dispute resolution process and contemplate discussion and
negotiation among the parties in the event of the Company’s inability to
perform.
Note
9 - Commitments and Contingencies
Unasserted
Claim
In
November 2001, the Company and Alternative Products, Inc. (“ATP”) entered into
preliminary discussions regarding a purchase by the Company of all of the
outstanding shares of ATP. No agreement was ever finalized and the
Company received a letter of notification from ATP terminating any agreement
between them. Management believes that no such agreement ever
existed. From time to time thereafter, John Bancroft (either individually or as
President of ATP) has claimed that the Company owes either him or ATP various
amounts including Five Million Dollars ($5,000,000) in Class B Preferred Stock,
One Million Dollars ($1,000,000) in Common Stock and payments of Three Hundred
Fifty-Six Thousand Dollars ($356,000) under purported employment and employment
related agreements. Management believes that no such agreements exist
or ever existed and that the claims by Bancroft and/or ATP are wholly without
merit. Counsel has advised management, in the event litigation should
be brought on this claim, that the Company would have a number of meritorious
defenses, including but not limited to statute of limitations, the absence of
any agreement binding upon the Company and the aforementioned termination of any
such agreement.
F-17
ITEM
14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
The
Company has not had any disagreements, whether or not resolved, with its
accountants on accounting and financial disclosure during its two most recent
fiscal years or any subsequent interim period.
On June
24, 2009 and in connection with the Company’s acquisition of the Asher Assets,
Cordovano & Honeck, LLP resigned as the Company’s independent registered
public accounting firm. On June 25, 2009, the Company engaged Malone
& Bailey, PC as its independent registered public accounting
firm. During the Company’s two most recent fiscal years, and in the
subsequent interim period though July 24, 2009, neither the Company nor anyone
on its behalf consulted with Malone & Bailey, PC regarding (i) the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company’s financial statements, and Malone & Bailey, PC did not provide
either a written report or oral advice to the Company that was an important
factor considered by the Company in reaching a decision as to any accounting,
auditing or financial reporting issue; or (ii) any matter that was either the
subject of a disagreement, as defined in Item 304(a)(1)(iv) of Regulation S-K
and the related instructions, or a reportable event, as defined in Item
304(a)(1)(v) of Regulation S-K.
ITEM
15. FINANCIAL STATEMENTS AND EXHIBITS
(a) See
the Index to Financial Statements on page F-1 hereof.
(b) The
documents listed below are filed as exhibits hereto:
|
Exhibit No.
|
Exhibit
|
|
|
3(i)*
|
Amended
and Restated Certificate of Incorporation of AsherXino
Corporation
|
|
|
3(ii)*
|
Bylaws
of AsherXino Corporation
|
|
|
10.1*
|
Asset
Purchase Agreement dated June 30, 2009 by and among AsherXino Corporation,
Bayo Odunuga, Patrick Okorodudu and Asher MHG Foundation, including as
exhibits the Memorandum of Agreement dated March 14, 2009 and the Farm In
Agreement dated March 14, 2009 (Production Sharing Contract between OPL
2012 block owners and Nigerian National Petroleum Corporation to be filed
by amendment)
|
|
|
10.2**
|
Joint
Venture Agreement dated May 21, 2009 by and among Omega Maritime &
Energy Limited, Superior Well Drilling LLC and ASHER Energy
Corporation
|
|
|
16*
|
Letter
from Cordovano & Honeck, LLP, former Independent Registered Public
Accounting Firm of AsherXino Corporation
|
|
|
21*
|
Subsidiaries
of the Registrant
|
|
|
23**
|
Consent
letter of Bayphase Limited
|
*Previously
filed on Form 10 dated July 31, 2009.
**Previously
filed on Form 10A dated September 29, 2009.
SIGNATURE
Pursuant
to the requirements of Section 12 of the Securities Exchange Act of 1934, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
|
AsherXino
Corporation
|
||
|
Date:
November 9, 2009
|
By:
|
/s/
Bayo O. Odunuga
|
|
Name: Bayo
O. Odunuga
Title: Chief
Executive Officer
|
||