Item
1. Financial Statements
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INDEX TO FINANCIAL STATEMENTS
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PAGE
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Balance
Sheets
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F-1
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Condensed Statements
of Operations
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F-2
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Condensed Statements
of Cash Flows
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F-3
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Notes
to Financial Statements
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F-4
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SUPERNOVA ENERGY, INC.
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(Formely Northumberland Resources, Inc.)
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Balance Sheets
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March 31,
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December 31,
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2014
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2013
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(Unaudited)
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ASSETS
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CURRENT ASSETS
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Cash and cash equivalents
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$
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25,826
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$
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2,035
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Prepaid expenses
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1,761
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3,314
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Deposits
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1,400
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1,400
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Total Current Assets
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28,987
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6,749
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PROPERTY AND EQUIPMENT
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Oil and gas properties (full cost method)
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Proved
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606,549
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1,058,517
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Unproved
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395,148
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264,717
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Support equipment
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180,219
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229,864
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Total property, plant and equipment
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1,181,916
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1,553,098
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Accumulated depletion and depreciation
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(621,454
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)
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(834,336
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)
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Total Property, Plant and Equipment, net
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560,462
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718,762
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TOTAL ASSETS
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$
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589,449
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$
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725,511
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES
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Accounts payable and accrued expenses
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$
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156,737
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$
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118,461
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Accounts payable and accrued expenses, related parties
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19,000
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67,500
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Notes payable
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5,000
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5,000
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Notes payable, related parties
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123
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123
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Total Current Liabilities
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180,860
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191,084
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LONG TERM LIABILITIES
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Asset retirement obligations, net
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145,421
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151,353
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TOTAL LIABILITIES
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326,281
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342,437
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STOCKHOLDERS' EQUITY
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Preferred stock, 2,000,000 shares authorized at par
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value of $0.10; 859,400 and 809,400 shares issued
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and outstanding, respectively
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85,940
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80,940
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Common stock, 100,000,000 shares authorized at
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par value of $0.001; 31,726,585 shares issued
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and outstanding
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31,727
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31,727
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Additional paid-in capital
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2,514,227
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2,469,227
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Accumulated deficit
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(2,368,726
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)
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(2,198,820
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Total Stockholders' Equity
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263,168
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383,074
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
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$
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589,449
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$
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725,511
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The accompanying notes are an integral part of these financial statements
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SUPERNOVA ENERGY, INC.
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(Formerly Northumberland Resources, Inc.)
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Condensed Statements of Operations
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(Unaudited)
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For the Three Months Ended
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March 31,
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2014
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2013
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REVENUES
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$
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23,079
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$
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39,318
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OPERATING EXPENSES
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Depletion, depreciation, amortization
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and accretion expense
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47,140
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63,839
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Lease operating expenses
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54,234
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53,911
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Professional fees
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80,541
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68,732
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General and administrative expenses
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10,947
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14,431
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Total Operating Expenses
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192,862
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200,913
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NET LOSS FROM OPERATIONS
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(169,783
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(161,595
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OTHER INCOME (EXPENSE)
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Gain on derivative liability
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—
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11,136
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Interest expense
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(123
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(2,232
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Total Other Income (Expense)
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(123
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8,904
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LOSS BEFORE INCOME TAXES
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(169,906
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(152,691
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PROVISION FOR INCOME TAXES
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—
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—
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NET LOSS
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$
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(169,906
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$
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(152,691
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BASIC AND DILUTED LOSS
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PER COMMON SHARE
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$
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(0.01
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$
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(0.00
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BASIC AND DILUTED WEIGHTED
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AVERAGE NUMBER OF COMMON
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SHARES OUTSTANDING
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31,504,836
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31,244,474
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SUPERNOVA ENERGY, INC.
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(Formerly Northumberland Resources, Inc.)
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Condensed Statements of Cash Flows
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(Unaudited)
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For the Three Months Ended
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March 31,
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2014
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2013
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OPERATING ACTIVITIES
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Net loss
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$
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(169,906
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$
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(152,691
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Adjustments to reconcile net loss to
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net cash used in operating activities:
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Depreciation, depletion, amortization
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and accretion
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47,140
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63,839
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Change in derivative liability
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—
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(11,136
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Changes in operating assets and liabilities:
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Prepaid expenses
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1,553
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—
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Accounts payable and accrued expenses
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103,275
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65,369
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Net Cash Used in Operating Activities
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(17,938
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(34,619
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INVESTING ACTIVITIES
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Capitalized exploration and development costs
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(361
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(31,341
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Purchase of well operating equipment
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(7,910
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(11,643
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Net Cash Used in Investing Activities
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(8,271
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(42,984
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FINANCING ACTIVITIES
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Common stock issued for cash
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—
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100,000
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Preferred stock issued for cash
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50,000
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—
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Repayment of notes payable
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—
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(18,000
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Net Cash Provided by Financing Activities
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50,000
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82,000
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NET DECREASE IN CASH
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23,791
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4,397
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CASH AT BEGINNING OF PERIOD
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2,035
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1,026
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CASH AT END OF PERIOD
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$
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25,826
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$
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5,423
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SUPPLEMENTAL DISCLOSURES OF
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CASH FLOW INFORMATION
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CASH PAID FOR:
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Interest
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$
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—
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$
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—
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Income Taxes
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$
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—
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$
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—
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NON-CASH FINANCING AND INVESTING ACTIVITES
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$
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—
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$
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—
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Common stock issued for debt
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$
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—
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$
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170,996
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Sale of oil & gas properties for other receivables
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$
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—
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$
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173,831
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Sale of oil & gas properties for debt
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$
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312,482
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$
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—
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The accompanying notes are an integral part of these condensed financial statements.
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SUPERNOVA
ENERGY, INC.
(Formerly
Northumberland Resources, Inc.)
Notes
to Condensed Financial Statements
March
31, 2014 and December 31, 2013
(Unaudited)
NOTE
1 - CONDENSED FINANCIAL STATEMENTS
The
accompanying financial statements have been prepared by the Company without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations,
and cash flows at March 31, 2014, and for all periods presented herein, have been made.
Certain
information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed
financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December
31, 2013 audited financial statements. The results of operations for the period ended March 31, 2014 and 2013 are not
necessarily indicative of the operating results for the full year.
NOTE
2 - GOING CONCERN
The
Company's financial statements are prepared using generally accepted accounting principles in the United States of America applicable
to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business.
The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue
as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital
to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced
to cease operations.
In
order to continue as a going concern, the Company will need, among other things, additional capital resources. Management's plan
is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet
its minimal operating expenses and seeking equity and/or debt financing. However management cannot provide any assurances that
the Company will be successful in accomplishing any of its plans.
The
ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described
in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying
financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE
3 - SIGNIFICANT ACCOUNTING POLICIES
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Recent
Accounting Pronouncements
The
Company has evaluated recent accounting pronouncements and their adoption has not had or is not expected to have a material impact
on the Company’s financial position or statements.
SUPERNOVA
ENERGY, INC.
(Formerly
Northumberland Resources, Inc.)
Notes
to Condensed Financial Statements
March
31, 2014 and December 31, 2013
(Unaudited)
NOTE 3 -
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Oil
and Gas Properties
The
Company uses the full cost method of accounting for oil and natural gas properties. Under this method, all acquisition, exploration
and development costs, including certain payroll, asset retirement costs, other internal costs, and interest incurred for the
purpose of finding oil and natural gas reserves, are capitalized. Internal costs that are capitalized are directly attributable
to acquisition, exploration and development activities and do not include costs related to production, general corporate overhead
or similar activities. Costs associated with production and general corporate activities are expensed in the period incurred.
Proceeds from the sale of oil and natural gas properties are applied to reduce the capitalized costs of oil and natural gas properties
unless the sale would significantly alter the relationship between capitalized costs and proved reserves, in which case a gain
or loss is recognized.
Capitalized
costs associated with impaired properties and capitalized costs related to properties having proved reserves, plus the estimated
future development costs, and asset retirement costs under Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) Topic 410 “Asset Retirement and Environmental Obligations” (FASB
ASC 410), are amortized using the unit-of-production method based on proved reserves. Capitalized costs of oil and natural gas
properties, net of accumulated amortization and deferred income taxes, are limited to the total of estimated future net cash flows
from proved oil and natural gas reserves, discounted at ten percent, plus the cost of unevaluated properties.
There
are many factors, including global events that may influence the production, processing, marketing and price of oil and natural
gas. A reduction in the valuation of oil and natural gas properties resulting from declining prices or production could adversely
impact depletion rates and capitalized cost limitations. Capitalized costs associated with properties that have not been evaluated
through drilling or seismic analysis, including exploration wells in progress, are excluded from the unit-of-production amortization.
Exclusions are adjusted annually based on drilling results and interpretative analysis.
Sales
of oil and natural gas properties are accounted for as adjustments to the net full cost pool with no gain or loss recognized,
unless the adjustment would significantly alter the relationship between capitalized costs and proved reserves. If it is determined
that the relationship is significantly altered, the corresponding gain or loss will be recognized in the statements of operations.
Costs
of oil and gas properties are depleted using the unit-of-production method. For the three-month periods ended March 31, 2014 and
2013, the Company recognized $30,501 and $48,143, respectively of depletion expense related to oil and gas production.
Ceiling
Test
Ceiling
Test
- In applying the full cost method and in accordance with ASC 932, the Company
performs an impairment test (ceiling test) at each reporting date, whereby the carrying value of property and equipment is compared
to the value of its proved reserves discounted at a ten percent interest rate of future net revenues, based on current economic
and operating conditions, plus the cost of properties not being amortized, plus the lower of cost or fair market value of unproved
properties included in costs being amortized, less the income tax effects related to book and tax basis differences of the
properties.
The Company has recorded no impairment expense in connection with the full cost ceiling test calculation for the three-month periods
ending March 31, 2014 and 2013, respectively.
SUPERNOVA
ENERGY, INC.
(Formerly
Northumberland Resources, Inc.)
Notes
to Condensed Financial Statements
March
31, 2014 and December 31, 2013
(Unaudited)
NOTE
3 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue
Recognition
Revenues
from the sale of oil and natural gas are recognized according to the sales method, which is when the product is delivered at a
fixed or determinable price, title has transferred, and collectability is reasonably assured. For oil sales, this occurs
when the customer takes delivery of oil from the operators’ storage tanks.
Asset
Retirement Obligations
The
Company records the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding
increase in the carrying amount of the related long-lived asset. The liability is accreted to its present value each period, and
the capitalized cost is depreciated over the useful life of the related asset. If the liability is settled for an amount other
than the recorded amount, a gain or loss is recognized.
NOTE
4 - OIL AND GAS PROPERTIES
On
February 5, 2013 the Company sold a 30 percent gross working interest and a 30 percent net revenue interest in six oil and gas
leases located in Pratt County, Kansas for $100,000. This amount was deducted from funds payable from the Company to the purchasing
entity on July 18, 2013. Pursuant to this transaction the Company transferred a 30 percent interest in all related support equipment
and asset retirement obligations.
On
February 1, 2014 the Company entered into a Purchase and Sale Agreement whereby it agreed to sell 100 percent of its working interest
in two oil and gas leases located in Cowley and Stafford counties, Kansas. As consideration for this transaction, the buyer agreed
to forgive $113,500 in Company debts due to the buyer.
During
the three months ended March 31, 2014 and the year ended December 31, 2013, the Company incurred development costs including certain
work-over costs and other improvements to its wells. The Company paid $361and $119,149, respectively for these improvements, which
have been capitalized to the book value of the wells.
Through
March 31, 2014, the Company established an asset retirement obligation of $106,721 for the wells acquired by the Company, which
was capitalized to the value of the oil and gas properties. The wells have an estimated useful life of 25 years. Total accretion
expense on the asset retirement obligation was $38,701, leaving an ending net balance of $145,422 at March 31, 2014.
NOTE
5 - NOTES PAYABLE
As
of December 31, 2011 the Company owed $123 to a related party. During the year ended December 31, 2012 the Company borrowed
$18,000 from related parties, and in 2013 repaid the entire $18,000 open balances. On August 21, 2013 the Company borrowed an
additional $5,000 from the related party, with principal due in full on August 21, 2014, along with an additional $500 in
accrued interest. As of March 31, 2014 the Company had an aggregate total of $5,000 in notes payable and $123 in payable
to related parties.
SUPERNOVA
ENERGY, INC.
(Formerly
Northumberland Resources, Inc.)
Notes
to Condensed Financial Statements
March
31, 2014 and December 31, 2013
(Unaudited)
NOTE
6 - STOCKHOLDERS’ EQUITY
On
October 21, 2013 the Company elected to reduce its authorized number of common shares from 200,000,000 to 100,000,000. On September
15, 2013 the Company authorized a reverse-split of its common stock on a one-share-for-two-shares basis. All references to common
stock have been restated so as to retroactively incorporate the effects of this transaction.
During
the year ended December 31, 2013 the Company issued 109,950 shares of common stock upon the conversion of a $100,000 convertible
note payable and related accrued interest payable. The Company also issued 502,084 shares of common stock for cash at $1.20 per
share, resulting in total cash proceeds of $465,000.
On
February 26, 2014 the Company issued 50,000 shares of preferred stock for cash at $1.00 per share, resulting in total cash proceeds
of $50,000. The preferred shares have 1:100 conversion and voting rights.
NOTE
7 - SUBSEQUENT EVENTS
In
accordance with ASC 855-10, the Company’s management has reviewed all material events and there are no additional material
subsequent events to report.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward-looking
statements
This
quarterly report on Form 10-Q contains “forward-looking statements” relating to the registrant which represent the
registrant’s current expectations or beliefs, including statements concerning registrant’s operations, performance,
financial condition and growth. For this purpose, any statement contained in this quarterly report on Form 10-Q that are
not statements of historical fact are forward-looking statements. Without limiting the generality of the foregoing, words such
as “may”, “anticipation”, “intend”, “could”, “estimate”, or “continue”
or the negative or other comparable terminology are intended to identify forward-looking statements. These statements by their
nature involve substantial risks and uncertainties, such as credit losses, dependence on management and key personnel and variability
of quarterly results, ability of registrant to continue its growth strategy and competition, certain of which are beyond the registrant’s
control. Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect,
actual outcomes and results could differ materially from those indicated in the forward-looking statements.
The
following discussion and analysis should be read in conjunction with the information set forth in the Company’s audited
financial statements for the period ended December 31, 2013.
Overview
We
are in the business of precious minerals exploration and oil and gas exploration and production. The Company was incorporated
in the State of Nevada on June 22, 2009.
On
March 31st, 2011 Northumberland (NHUR) was a successful bidder at the Evenson Oil Production Auction in Wichita, Kansas. NHUR
acquired the Mason, Thompson, Keyes and Harrell leases inclusive of all production and improvements. The leases were purchased
at auction from Reh Oil & Gas LLC. The leases of 280 acres located in the Sawyer field in Pratt County Kansas and 120 acres
located in the Wildcat field, filed in Pratt County Kansas, were purchased for Two Hundred Sixty Thousand Dollars.
The
Company’s Articles of Incorporation are being amended to reflect a decrease in the number of common shares from Two Billion
(2,000,000,000) to One Hundred Ninety Eight Million (198,000,000) and the creation of a preferred stock in the amount of Two Million
(2,000,000) shares with voting and conversion rights of 1 for 100. The Amendment was adopted pursuant to written consent of stockholders
holding a majority of the voting power of the outstanding capital stock of the Company. On October 15, 2013 the Company reduced
its authorized number of common shares to 100,000,000 common and 2,000,000 preferred.
On
March 1, 2011, the Company purchased a 100 percent working interest on a 70 percent net revenue interest in certain oil and
gas leases and related well operating equipment in Pratt County, Kansas for $260,000. Of this total, $149,000 was allocated
to oil and gas leases, and the remaining $111,000 was allocated to the purchased well operating equipment. Subsequent to
acquiring the interests in these leases the Company has incurred $23,310 of exploration costs and $60,702 of development
costs which have been capitalized to the value of oil and gas properties.
On
June 11, 2011, the Company purchased a 30 percent working interest on an 24.45 percent net revenue interest in an unproved oil
and gas well located in Cowley County, KS. The Company paid $17,220 for the lease on 640 acres at $85 per acre. Subsequent to
acquiring the interest in these wells the Company incurred an additional $119,350 of exploration costs and $110,531 of development
costs on the property which have been capitalized to the value of oil and gas properties.
On
July 7, 2011, the Company purchased a 20 percent working interest on an 16.41 percent net revenue interest in a proved and producing
oil and gas well located in Cowley County, KS. The Company paid $45,000 to acquire the leases and incurred an additional $26,881
of development costs which were capitalized to the value of oil and gas properties under.
On
September 27, 2011, the Company purchased two leases and related well operating equipment located in Pratt County for $72,500.
Of this total, $22,500 was allocated to oil and gas leases, and the remaining $50,000 was allocated to the purchased well operating
equipment. The leases carry a 100 percent working interest of 70 percent net revenue interest. Subsequent to purchase the Company
capitalized $990 in exploration costs and $18,363 in development costs relating to these leases.
On
September 27, 2011, the Company also purchased a 23 percent interest in a net revenue interest ranging from 18.66 to 19.65 percent
in three leases in Barton and Stafford Counties, Kansas for $220,800. The three leases combined contain slightly
more than 564 net acres. In total there are seven active wells located in these leases. There
are four oil producing wells, two disposal wells and one injection well. Subsequent to purchase the Company capitalized $2,326
in development costs relating to these leases.
On
December 19, 2011, the company purchased a 15 percent interest in net revenue interests ranging from 12.675 percent to 13.125
percent in four leases in Cowley County, Kansas for $75,600. The four leases combined contain approximately 720 acres. The Company
has incurred no exploration or development costs with respect to these properties as of December 31, 2011.
On
February 9, 2012, the Company purchased a 30 percent gross working interest and a 26.25 percent net revenue interest in six
unproved oil and gas leases in Cowley County, Kansas for $140,400. The six leases combined contain approximately 1,025 acres.
On
May 14, 2012 the Company purchased a 35 percent gross working interest and a 28 percent net revenue interest in 98 acres of unproved
oil and gas leases in Stafford County, Kansas for $12,569. Concurrent with this purchase, the Company paid $19,174 in additional
development costs, and $66,181 for support equipment, for an aggregate purchase price of $97,924.
On
May 14, 2012 the Company purchased a 13 percent gross working interest and a 10 percent net revenue interest in 70 acres of
unproved oil and gas leases in Butler County, Kansas for $17,208. Concurrent with this purchase, the Company paid $27,261 in
additional development costs, and $17,542 for support equipment, for an aggregate purchase price of $62,011.
On
February 5, 2013 the Company sold a 30 percent gross working interest and a 30 percent net revenue interest in six oil and gas
leases located in Pratt County, Kansas for $100,000. Pursuant to this transaction the Company transferred a 30 percent interest
in all related support equipment and asset retirement obligations.
On
February 1, 2014 the Company entered into a Purchase and Sale Agreement whereby it agreed to sell 100 percent of its working interest
in two oil and gas leases located in Cowley and Stafford counties, Kansas. As consideration for this transaction, the buyer agreed
to forgive $113,500 in Company debts due to the buyer.
During
the three months ended March 31, 2014 and the year ended December 31, 2013, the Company incurred development costs including certain
work-over costs and other improvements to its wells. The Company paid $361and $119,149, respectively for these improvements, which
have been capitalized to the book value of the wells.
Through
March 31, 2014, the Company established an asset retirement obligation of $106,721 for the wells acquired by the Company, which
was capitalized to the value of the oil and gas properties. The wells have an estimated useful life of 25 years. Total accretion
expense on the asset retirement obligation was $38,701, leaving an ending net balance of $145,422 at March 31, 2014.
Effective
April 1, 2012, Chris Knowles was elected as an additional director
of the Company, bringing the total number of directors to three. On January 1, 2013 Mr. Knowles resigned as Director of the Company.
On
January 7, 2013, Ryan Kerr was appointed to serve as a replacement director in the stead of Chris Knowles. Mr. Kerr resigned his
position as a director on August 9, 2013.
Plan
of Operation
Our plan
of operations is to further develop our recent oil and gas acquisitions in Kansas and carry out further exploration and acquisition
in the oil and gas sectors. NHUR has upgraded the facilities on its acquired Mason, Thompson, Keyes and Harrell Sanders, Asmussen
and Carver leases with the objective to improve current oil and gas production.
Results
of Operations for the Three Months Ended March 31, 2014 and 2013
Revenues
We had
revenues of $23,079 during the three months ended March 31, 2014, compared to $39,318 in revenues during the corresponding
period in 2013. Our revenues decreased from 2014 to 2013 due primarily to our sale of two producing leases during the period.
Revenues were from oil and gas production occurring at previously purchased property sites.
Expenses
We incurred
operating expenses in the amount of $192,862 during the three months ended March 31, 2014, compared to $200,913 for the corresponding
period in 2013. The 2014 operating expenses consisted primarily of $10,947 in general and administrative expenses such as office
expenses, $80,541 in professional fees, $54,234 in lease operating expenses and $47,140 in depletion, depreciation, amortization,
and accretion expenses. This compares to lease operating costs of $53,911, professional fees of $68,732, and general and administrative
expenses of $14,431, and $63,839 in depletion, depreciation, amortization and accretion expense during the corresponding period
in 2013. We expect our operating costs to continue to increase in the next 12 months.
Other
Expenses
We incurred
interest expense in the amount of $123 during the three months ended March 31, 2014. This compares to interest expense of $2,232
and a $11,136 gain on derivative liability during the corresponding period of 2013.
Net Loss
We incurred
a net loss of $169,906 during the three months ended March 31, 2014, compared to a net loss of $152,691 during the corresponding
period in 2013. This translates to a loss per share of $0.01 and $0.00 for the three months ended March 31, 2014 and 2013, respectively.
LIQUIDITY
AND CAPITAL RESOURCES
Since its
inception, the Company has financed its cash requirements from the sale of common stock. Uses of funds have included activities
to establish our business, professional fees and other general and administrative expenses.
The Company’s
principal sources of liquidity as of March 31, 2014 consisted of $25,826 in cash.
We believe
the Company will have adequate resources to implement its strategic objectives in upcoming quarters. Due to our lack of operating
history and present inability to generate revenues, however, our auditors have stated their opinion that there currently exists
substantial doubt about our ability to continue as a going concern.
Material
Events and Uncertainties
Our operating
results are difficult to forecast. Our prospects should be evaluated in light of the risks, expenses and difficulties commonly
encountered by comparable exploration stage companies.
There can
be no assurance that we will successfully address such risks, expenses and difficulties.
On
March 1, 2011, the Company purchased a 100 percent working interest on a 70 percent net revenue interest in certain oil and gas
leases and related well operating equipment in Pratt County, Kansas for $260,000. Of this total, $149,000 was allocated to oil
and gas leases, and the remaining $111,000 was allocated to the purchased well operating equipment. Subsequent to acquiring the
interests in these leases the Company has incurred $23,310 of exploration costs and $60,702 of development costs which have been
capitalized to the value of oil and gas properties.
On
June 11, 2011, the Company purchased a 30 percent working interest on a 24.45 percent net revenue interest in an unproved oil
and gas well located in Cowley County, KS. The Company paid $17,220 for the lease on 640 acres at $85 per acre. Subsequent to
acquiring the interest in these wells the Company incurred an additional $119,350 of exploration costs and $110,531 of development
costs on the property which have been capitalized to the value of oil and gas properties.
On
July 7, 2011, the Company purchased a 20 percent working interest on a 16.41 percent net revenue interest in a proved and producing
oil and gas well located in Cowley County, KS. The Company paid $45,000 to acquire the leases and incurred an additional $26,881
of development costs which were capitalized to the value of oil and gas properties under.
On
September 27, 2011 we purchased at auction two leases with the multiple acquisition of an additional 1040 acres of productive
oil and gas leases. The two leases located in Pratt County, KS consist of six wells with a 100% Working Interest of 82% Net Revenue
Interest. These six wells leases are directly adjacent to our existing leases and will integrate the 6 fields and maximize efficiency
and production. Included in the purchase is a gas compression station which will enhance flows from current operations. The
purchase price associated with the Pratt County acquisition was $72,500.
On
September 27, 2011, the Company also purchased a 23 percent interest in a net revenue interest ranging from 18.66 to 19.65 percent
in three leases in Barton and Stafford Counties, Kansas for $220,800. The three leases combined contain slightly more than 564
net acres. In total there are seven active wells located in these leases. There are four oil producing wells, two disposal wells
and one injection well. Subsequent to purchase the Company capitalized $2,326 in development costs relating to these leases.”
On
December 19, 2011, the company purchased a 15 percent interest in net revenue interests ranging from 12.675 percent to 13.125
percent in four leases in Cowley County, Kansas for $75,600. The four leases combined contain approximately 720 acres. Subsequent
to purchase the Company capitalized $65,741 in development costs relating to these leases.
On
February 9, 2012, the Company purchased a 30 percent gross working interest and a 26.25 percent net revenue interest in six unproved
oil and gas leases in Cowley County, Kansas for $140,400. The six leases combined contain approximately 1,025 acres. Subsequent
to purchase the company capitalized $1,488 in support equipment and $26,351 in development costs.
On
May 14, 2012 the Company purchased a 35 percent gross working interest and a 28 percent net revenue interest in 98 acres of unproved
oil and gas leases in Stafford County, Kansas for $12,569. Concurrent with this purchase, the Company paid $22,673 in additional
development costs, and $66,181 for support equipment, for an aggregate purchase price of $101,387. As of December 31, 2012, pursuant
to a ceiling test analysis, the Company recognized an impairment expense on these leases in the amount of $6,484.
On
May 14, 2012 the Company purchased a 13 percent gross working interest and a 10 percent net revenue interest in 70 acres of unproved
oil and gas leases in Butler County, Kansas for $17,208. Concurrent with this purchase, the Company paid $27,401 in additional
development costs, and $18,021 for support equipment, for an aggregate purchase price of $62,630. Subsequent to purchase the Company
capitalized $479 in support equipment. As of December 31, 2012, pursuant to a ceiling test analysis, the Company recognized an
impairment expense on these leases in the amount of $7,464.
On
February 5, 2013 the Company sold a 30 percent gross working interest and a 30 percent net revenue interest in six oil and gas
leases located in Pratt County, Kansas for $100,000. This amount is classified as a note receivable at March 31, 2013. Pursuant
to this transaction the Company transferred a 30 percent interest in all related support equipment and asset retirement obligations.
On July
2, 2013 we plugged the Asmussen 16-2 and on July 13, 2013 drilled the Asmussen 16-3 well.
On
February 1, 2014 the Company entered into a Purchase and Sale Agreement whereby it agreed to sell 100 percent of its working interest
in two oil and gas leases located in Cowley and Stafford counties, Kansas. As consideration for this transaction, the buyer agreed
to forgive $113,500 in Company debts due to the buyer.