Attached files
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) Securities
Exchange Act of 1934 for Quarterly Period Ended March 31, 2010
-OR-
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities And Exchange Act of 1934 for the transaction period from
_________ to________
Commission File Number 000-51489
Earth Energy Reserves, Inc.
(formerly Asian American Business Development Company)
(Exact name of Small Business Issuer in its charter)
Nevada 75-3000774
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
621 17th Street, #1640
Denver, CO 80293
(Address of principal executive offices) (Zip Code)
(303) 297-0500
Registrant's Telephone number, including area code:
Indicate by check mark whether the issuer (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [x] No [ ]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (section 232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files).
Yes [ ] No [x]
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerate filer, or a small
reporting company as defined by Rule 12b-2 of the Exchange Act):
Large accelerated filer [ ] Non-accelerated filer [ ]
Accelerated filer [ ] Smaller reporting company [x]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [x]
2
The number of outstanding shares of the registrant's common stock,
September 23, 2010:
Common Stock - 11,059,982
3
Earth Energy Reserves, Inc.
FORM 10-Q
For the quarterly period ended March 31, 2010
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosure About
Market Risk 8
Item 4T. Controls and Procedures 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 1A. Risk Factors 11
Item 2. Unregistered Sales of Equity Securities and Use
of Proceeds 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security
Holders 11
Item 5. Other Information 11
Item 6. Exhibits 11
SIGNATURES
4
PART I
Item I - FINANCIAL STATEMENTS
EARTH ENERGY RESERVES, INC.
BALANCE SHEETS
ASSETS
March 31, December 31,
2010 2009
-------- -----------
(Unaudited) (Audited)
CURRENT ASSETS
Cash $ 25,373 $ 940
--------- ---------
TOTAL CURRENT ASSETS 25,373 940
--------- ---------
TOTAL ASSETS $ 25,373 $ 940
========= =========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES
Compensation Payable $ -- $ 75,000
Notes Payable, Related Party -- 96,960
Advances from Majority Shareholder -- 32,450
Accrued Expenses 112,971 62,134
Accrued Interest -- 24,732
Accrued Interest, Majority Shareholder -- 5,192
--------- ---------
TOTAL CURRENT LIABILITIES 112,971 296,468
--------- ---------
STOCKHOLDERS' (DEFICIT)
Series A Preferred Stock $.0001 par value,
authorized 10,000,000 Shares, Issued and
outstanding in 2010 138,191, and in 2009
none 14 --
Common Stock, $.0001 Par Value,
authorized, 90,000,000 shares, issued and
outstanding in 2010 9,703,982, and in 2009
9,572,000 964 947
Additional paid-in capital 5,847,495 5,547,353
Accumulated (Deficit) (5,946,071) (5,843,828)
--------- ---------
TOTAL STOCKHOLDERS' (DEFICIT) (87,598) (295,528)
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' (DEFICIT) $ 25,373 $ 940
========= =========
The accompanying notes are an integral
part of these financial statements.
5
EARTH ENERGY RESERVES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31
------------------
2010 2009
---- ----
EXPENSES
General and Administrative Expenses $ 96,404 $ 19,225
--------- ---------
Total Operating Expenses 96,404 19,225
--------- ---------
NET OPERATING LOSS (96,404) (19,225)
--------- ---------
OTHER INCOME (EXPENSE)
Interest Expense (5,839) (4,484)
--------- ---------
TOTAL OTHER INCOME (EXPENSE) (5,839) (4,484)
--------- ---------
LOSS BEFORE INCOME TAXES (102,243) (23,709)
--------- ---------
INCOME TAXES -- --
--------- ---------
NET LOSS $(102,243) $ (23,709)
========= =========
BASIC AND DILUTED LOSS
PER SHARE $ (0.01) $ (0.00)
========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
BASIC AND DILUTED 9,536,000 9,432,000
========= =========
The accompanying notes are an integral
part of these financial statements.
6
EARTH ENERGY RESERVES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
------------------
2010 2009
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss for the Period $(102,243) $ (23,709)
Adjustments to Reconcile Net Loss
To Net Cash used by Operating Activities
Interest Expense - Related Party 1,940 1,595
Interest Expense - Compensation Payable 2,250 2,250
Interest Expense - Majority Shareholder 1,649 640
Change in Operating Assets and Liabilities
Advances from Related Party - 3,000
Accrued Expenses 50,837 --
--------- ---------
NET CASH USED BY OPERATING ACTIVITIES (45,567) (16,224)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of Common Stock 70,000 15,000
--------- ---------
NET CASH FROM FINANCING ACTIVITIES 70,000 15,000
--------- ---------
NET INCREASE (DECREASE) IN CASH 24,433 (1,224)
CASH AT BEGINNING OF PERIOD 940 8,394
--------- ---------
CASH AT END PERIOD $ 25,373 $ 7,170
========= =========
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash Paid During the Period for:
Interest $ - $ -
========= =========
Income Taxes $ - $ -
========= =========
Non-Cash Investing and Financing Activities:
Common Stock Par Value $ 10 $ --
Preferred Stock Par Value 14 --
Additional Paid in Capital 240,149 --
Notes Payable Related Party (129,410) --
Compensation Payable (75,000) --
Accrued Interest, Related Party 8,780 --
Accrued Interest (26,983) --
--------- ---------
$ -- $ --
========= =========
The accompanying notes are an integral
part of these financial statements.
7
EARTH ENERGY RESERVES, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2010
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Earth Energy Reserves, Inc. (formerly Asian American Business
Development Company) ("Company") was incorporated in the State of
Nevada on February 12, 2002 as Wiltex First, Inc. On March 10, 2005,
the Company filed a certificate of amendment with the State of Nevada
changing its name to Asian American Business Development Company and,
on March 13, 2006, the Company's name was changed to Earth Energy
Reserves, Inc.
Galaxy Partners, LTD. (a company owned by the majority shareholder of
the Company) and the majority shareholder have managed and partially
financed the Company since inception.
Basis of Presentation
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair
presentation have been included. All such adjustments are of a normal
and recurring nature. These financial statements should be read in
conjunction with the audited financial statements at December 31, 2009.
Operating results for the three months ended March 31, 2010 are not
necessarily indicative of the results that may be expected for the six
month transitional period ending June 30, 2010.
NOTE 2: EQUITY TRANSACTIONS
During the three month period ended March 31, 2010, the Company had the
following stock transactions:
- Sold 75,000 of its Series 1 units for $1.00 per unit.
- Issued 101,982 shares of the Company's common stock in settlement
of accrued compensation of $75,000 plus accrued interest of $26,983.
- Issued 138,191 shares of the Company's Series A Preferred Stock
in settlement of outstanding related party debt of $129,411 plus
accrued interest of $8,780. The shares were issued to the Company's
majority shareholder and an entity which is one hundred percent owned
by the majority shareholder. The Series A preferred shares are
redeemable at the option of the Company at $1.00 per share.
Note 3: SUBSEQUENT EVENTS
The Company has evaluated subsequent events through September 23, 2010,
the date which the financial statements were available to be issued.
8
The following is a summary of significant events affecting the Company
subsequent to March 31, 2010.
- The Company repurchased and retired 15,000 shares of its Series A
Preferred Stock from its majority shareholder. The preferred shares
were purchased at $1.00 per share.
- The Company issued 25,000 of its Series 1 units for office rent
valued at $1.00 per unit or $25,000. Each unit consists of one common
share and one warrant to purchase one common share at an exercise price
of $1.50 per common share.
- In order to raise additional capital in 2010, the Company also
sold 1,391,000 Series 1 units at $1 per unit to accredited investors.
Each unit consisted of one common share and one warrant to purchase one
common share at an exercise price of $1.50 per common share. The
warrants were immediately exercisable for a term of three years. As of
June 30, 2010, the Company had recorded proceeds of $426,000 from stock
sales and recorded another $965,000 in common stock subscriptions.
Cash proceeds from the common stock subscriptions were received by the
Company subsequent to year end.
- In June 2010, the Company changed its year end to June 30, 2010.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Trends and Uncertainties. We are a development stage, independent
natural gas and oil company engaged in the acquisition, drilling and
production of natural gas and oil in the United States. Our future
operations may be adversely affected by our competitors, fluctuating
oil prices, changing foreign political environments and any prolonged
recessionary periods as well as our ability to raise sufficient capital
to conduct our operations.
Capital and Source of Liquidity. We are currently in the process of
raising additional equity capital to finance our working capital
requirements and future capital expenditures. During the six month
period ended June 30, 2010, we sold securities in the amount of
$1,466,000.
Investing Activities. For the three months ended March 31, 2010 and
2009, we did not pursue any investing activities.
Financing Activities. For the three months ended March 31, 2010, we
sold securities for cash in the amount of $70,000. As a result, we had
net cash flows from financing activities of $70,000 for the three
months ended March 31, 2010.
Results of Operations. We have had only minimal revenue since
inception. All of our expenses have been paid by James Hogue, Galaxy
Partners Ltd. Corp, a company controlled by James Hogue, an officer,
director and principal shareholder of Earth Energy and through the sale
of our securities.
For the three months ended March 31, 2010 and 2009, Earth Energy
received no revenues. For the three months ended March 31, 2010, Earth
Energy had general and administrative expenses of $96,504 compared to
$19,225 for the same period in 2009. The increase in these expenses
for the three months ended March 31, 2010 primarily resulted from
general operating and administrative relating to our equity capital
raising activities as well as expenses relating to the required reports
with the Securities and Exchange Commission under the Exchange Act of
1934.
Plan of Operation. We have developed an operating strategy that is
based on our participation in drilling and development of coal bed
methane prospects as an operator and a non-operator for the foreseeable
future. We intend to use the services of independent consultants and
contractors to perform various professional services, including
reservoir engineering, land, legal, environmental, accounting and tax
services. We will also pursue alliances with partners in the areas of
geological and geophysical services and prospect generation, evaluation
and prospect leasing. As a working interest owner, we intend to rely
on third party service providers to drill, produce and market our
natural gas and oil. We believe that by limiting our management and
employee costs, we should be able to better control total costs, be a
low cost producer and retain flexibility in our project management.
9
Earth Energy may experience problems; delays, expenses and difficulties
frequently encountered by an enterprise in our development stage, many
of which are beyond our control. These include, but are not limited
to, unanticipated problems relating to additional costs and expenses
that may exceed our current estimates and problems from competition.
Earth Energy is current in the payment of its obligations even though
we have not generated operating revenues. We intend to pursue our
business plan by utilizing cash resources from the sale of our
securities and cash flow anticipated from future operations. Our
management believes that the proceeds of the sales of our securities
and future revenues from operations will be sufficient to pay our
expenses for the next twelve months.
Earth Energy will continue to seek equity financing for its future
operations. Failure to secure such financing may result in our
inability to execute our business plan or pay our obligations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable for smaller reporting companies.
ITEM 4T. CONTROLS AND PROCEDURES
During the three months ended March 31, 2010, there were no changes in
our internal controls over financial reporting (as defined in Rule 13a-
15(f) and 15d-15(f) under the Exchange Act) that have materially
affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
Evaluation of Disclosure Controls and Procedures
James E. Hogue, chairman of the board, who was chief executive officer
and chief financial officer and, therefore, responsible for all
financial and accounting matters during this reporting period has
concluded that the disclosure controls and procedures were not
effective as of March 31, 2010. These controls are meant to ensure
that information required to be disclosed by the issuer in the reports
that it files or submits under the Act is recorded, processed,
summarized and reported, within the time periods specified in the
Commission's rules and forms and to ensure that information required to
be disclosed by an issuer in the reports that it files or submits under
the Act is accumulated and communicated to the issuer's management,
including its principal executive and principal financial officers, or
persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.
Earth Energy has been delinquent in its SEC filings since the third
quarter of 2008. Management has only recently prepared the required
delinquent reports. Management intends to implement internal controls
to ensure that similar situations do not occur in the future and that
required SEC filings will be timely.
10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 1A. RISK FACTORS
Not applicable to smaller reporting companies
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three months ended March 31, 2010, Earth Energy
sold $70,000 of securities at the purchase price of $1.00 per
unit.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
Earth Energy's website, www.earthenergyreserves.com, is
currently under reconstruction. Upon completion, Earth Energy
will post every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T.
Item 6. EXHIBITS
Exhibit 31 - Certifications pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Exhibit 32 - Certifications pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf
by the undersigned thereunto duly authorized.
Earth Energy Reserves, Inc.
/s/James E. Hogue Chairman of the Board 9/23/10
------------------------
James E. Hogue(1)
/s/Steven A. Kranker Chief Executive Officer 9/23/10
------------------------
Steven A. Kranker(2)
/s/W.A. Sikora Chief Financial Officer 9/23/10
------------------------
W.A. Sikora(2)
(1)Mr. Hogue was Chief Executive Officer and Chief Financial Officer
during this reporting period.
(2)Appointed officers of Earth Energy Reserves effective July 1, 2010
