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EX-10.17 - LETTER AGREEMENT DATED OCTOBER 27, 2010 - WEST CANYON ENERGY CORP.exhibit10-17.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities and Exchange Act of 1934

Date of Report (Date of earliest event reported): December 1, 2010

West Canyon Energy Corp.
(Exact name of registrant as specified in charter)

Nevada 333-130673 20-8756823
(State or other jurisdiction of (Commission File Number) (IRS Employer Identification No.)
incorporation)    

20333 State Highway 249
Suite 200 - 113
Houston, TX 77070-26133
Registrant's telephone number, including area code: (281) 378-1563

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a -12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d -2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e -4(c))


Item 1.01    Entry into a Material Definitive Agreement.

     On October 27, 2010, the Company entered into a letter agreement with Petrodorado Energy Ltd. (“Petrodorado”) with respect to the sale by the Company of its wholly-owned subsidiary PetroSouth Energy Corp. BVI, including the Company’s interest in the Talora Exploration Block but excluding the Company’s interest in the Buenavista Block, to Petrodorado for $1.5 million. Upon executing the letter agreement, Petrodorado advanced the entire $1.5 million purchase price to the Company. The Company was obligated to pay a finder’s fee related to the sale.

     On December 1, 2010, the Company completed all the conditions stipulated to close the transaction.

Item 2.01    Completion of Acquisition or Disposition of Assets.

     On October 27, 2010, the Company entered into a letter agreement with Petrodorado Energy Ltd. (“Petrodorado”) with respect to the sale by the Company of its wholly-owned subsidiary PetroSouth Energy Corp. BVI, including the Company’s interest in the Talora Exploration Block but excluding the Company’s interest in the Buenavista Block, to Petrodorado for $1.5 million. Upon executing the letter agreement, Petrodorado advanced the entire $1.5 million purchase price to the Company. The Company was obligated to pay a finder’s fee related to the sale.

      On December 1, 2010, the Company completed all the conditions stipulated to close the transaction.

Item 9.01     Financial Statements and Exhibits

(a)    Financial statements of businesses acquired.

            Not applicable

(b)     Pro forma financial information.

     On October 27, 2010, the Company entered into a letter agreement with Petrodorado Energy Ltd. (“Petrodorado”) with respect to the sale by the Company of its wholly-owned subsidiary PetroSouth Energy Corp. BVI, including the Company’s interest in the Talora Exploration Block but excluding the Company’s interest in the Buenavista Block, to Petrodorado for $1.5 million. Upon executing the letter agreement, Petrodorado advanced the entire $1.5 million purchase price to the Company. The Company was obligated to pay a finder’s fee related to the sale.

     On December 1, 2010, the Company completed all the conditions stipulated to close the transaction.

     At June 30, 2009, the Company owned a 6% participation interest in approximately 64,000 acres in the Carbonera Block located Northeast of Bogota, Colombia. The project was near the Venezuelan border in the Catatumbo Basin in Northeastern Colombia. On September 22, 2009, the Company entered into an agreement with Delavco Energy Colombia Inc. Sucursal Colombia pursuant to which the Company agreed to sell 100% of its 6% non-operated participation interest in the Carbonera Block for $750,000. Closing of the agreement took place on October 2, 2009. The Company’s former chief financial officer and director is also a consultant of Delavco Energy Colombia Inc. The $750,000 of proceeds was accounted for as a reduction of Unproved Interest. As this transaction did not represent 25% of the Company’s reserve base in Colombia, the Company did not recognize any gain or loss on this transaction at that time.


     The unaudited pro forma consolidated financial information presented below illustrates the effect of the disposition of the Company’s interests in its wholly-owned subsidiary PetroSouth Energy Corp. BVI, including the Company’s interest in the Talora Exploration Block but excluding the Company’s interest in the Buenavista Block, and the Company’s 6% participation interest in the Carbonera Block (“Sold Assets”). The unaudited pro forma consolidated balance sheet as of September 30, 2010 is based on the historical statements of the Company as of September 30, 2010, after giving effect to the disposition of the Sold Assets as if it had occurred on September 30, 2010. The unaudited pro forma consolidated statements of operations for the three months ended September 30, 2010, and the fiscal year ended June 30, 2010, are based on the historical financial statements of the Company for such periods after giving effect to the disposition of the Sold Assets, as if it had occurred on July 1, 2009. The unaudited pro forma financial information should be read in conjunction with the Company’s historical consolidated financial statements and notes thereto contained in the Company’s 2010 Form 10-K filed with the SEC on November 15, 2010.

     The preparation of the unaudited pro forma consolidated financial information is based on financial statements prepared in accordance with accounting principles generally accepted in the United States of America. These principles require the use of estimates that affect the reported amounts of revenues and expenses. Actual results could differ from those estimates. The unaudited pro forma consolidated financial information is provided for illustrative purposes only and does not purport to represent what the actual results of operations would have been had the transactions occurred on the respective date assumed, nor is it necessarily indicative of the Company’s future operating results. However, the pro forma adjustments reflected in the accompanying unaudited pro forma consolidated financial information reflect estimates and assumptions that the Company’s management believes to be reasonable.



WEST CANYON ENERGY CORP. AND SUBSIDIARY
(An Exploration Stage Company)
 
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(Stated in U.S. Dollars)

    September 30, 2010  
    Historical     Adjustments       Pro Forma  
ASSETS                    
CURRENT ASSETS:                    
 Cash and Cash Equivalents $  20,938   $  1,410,000     (1) $ 1,430,938  
 Advances to Operators   146,043     -       146,043  
 Accounts Receivable   27,065     -       27,065  
 Prepaid Expenses and Other Current Assets   44,914     -       44,914  
 Total Current Assets   238,960     1,410,000       1,648,960  
Unproved Interest   3,640,533     (1,396,853 ) (2)   2,243,680  
Furniture & Equipment, net   1,827     -       1,827  
Total Assets $ 3,881,320   $  13,147     $ 3,894,467  
                     
LIABILITIES AND STOCKHOLDERS' EQUITY                
CURRENT LIABILITIES:                    
 Accounts Payable - Trade $  263,357   $  -     $  263,357  
 Accrued Interest Payable   56,626     -       56,626  
 Accrued Liabilities   9,260     -       9,260  
 Advances   1,190,000     -       1,190,000  
 Note Payable   600,000     -       600,000  
 Other Liabilities   87,218     -       87,218  
 Total Current Liabilities   2,206,461     -       2,206,461  
                     
STOCKHOLDERS’ EQUITY:                    
Common Stock:
  Authorized: 150,000,000 shares, par value $0.001
  Issued and outstanding: 21,206,667 shares at September 30, 2010
 

21,207
   

-
 

 

21,207
 
Additional Paid-In Capital   6,421,969     -       6,421,969  
Deficit Accumulated During the Exploration Stage   (4,759,368 )   13,147   (2)   (4,746,221 )
Accumulated Other Comprehensive Loss   (8,949 )   -       (8,949 )
Total Stockholders' Equity   1,674,859     13,147       1,688,006  
Total Liabilities and Stockholders' Equity $ 3,881,320   $  13,147     $ 3,894,467  

Pro Forma Adjustments:

The unaudited pro forma consolidated balance sheet at September 30, 2010, reflects the following adjustments:

(1)

Adjustment to reflect the net cash proceeds from the sale by the Company of its wholly-owned subsidiary, PetroSouth Energy Corp. BVI, including the Company’s interest in the Talora Exploration Block.

(2)

Adjustment to eliminate the net carrying value of the Unproved Interest associated with the Sold Assets and recognition of the net gain on the sale as if the disposition had occurred June 30, 2010.




WEST CANYON ENERGY CORP AND SUBSIDIARY
(An Exploration Stage Company)
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Stated in U.S. Dollars)

    For the Three Months Ended September 30, 2010  
    Historical     Adjustments       Pro Forma  
                     
REVENUE $  -   $  -      $ -  
                     
OPERATING EXPENSES:                    
       General & Administrative   61,017     (4,370 ) (1)   56,647  
    61,017     (4,370 )     56,647  
OPERATING LOSS   (61,017 )   4,370       (56,647 )
Gain on Sale of Assets   -     13,147   (2)   13,147  
Interest Expense, net   (15,638 )   -       (15,638 )
Income (Loss) Before Income Taxes   (76,655 )   17,517       (59,138 )
Income Taxes   -     -       -  
Net Income (Loss)   (76,655 )   17,517       (59,138 )
Foreign Currency Translation   (3,043 )   -       (3,043 )
Comprehensive Income (Loss) $  (79,698 ) $  17,517      $ (62,181 )

Pro Forma Adjustments:

The unaudited pro forma statement of consolidated operations for the three months ended September 30, 2010, reflects the following adjustments:

(1)

Adjustment to eliminate General and Administrative expenses associated with the Sold Assets.

(2)

Adjustment to record gain on disposition of the Sold Assets as if the disposition has occurred on July 1, 2009.




WEST CANYON ENERGY CORP AND SUBSIDIARY
(An Exploration Stage Company)
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Stated in U.S. Dollars)

    For the Year Ended June 30, 2010  
    Historical     Adjustments       Pro Forma  
                     
REVENUE $  -   $  -     $  -  
                     
OPERATING EXPENSES:                    
       General & Administrative   487,845     (78,543 ) (1)   409,302  
    487,845     (78,543 )     409,302  
OPERATING LOSS   (487,845 )   78,543       (409,302 )
Interest Expense, net   (63,780 )   -       (63,780 )
Gain on Forgiveness of Debt   906,250     -       906,250  
Gain on Sale of Assets   -     13,147   (2)   13,147  
Other Income, net   2,193     -       2,193  
Income Before Income Taxes   356,818     91,690       448,508  
Income Taxes   -     -       -  
Net Income   356,818     91,690       448,508  
Foreign Currency Translation   (1,009 )   -       (1,009 )
Comprehensive Income $  355,809   $  91,690     $  447,499  

Pro Forma Adjustments:

The unaudited pro forma statement of consolidated operations for the year ended June 30, 2010, reflects the following adjustments:

(1)

Adjustment to eliminate General and Administrative expenses associated with the Sold Assets.

(2)

Adjustment to record gain on disposition of the Sold Assets as if the disposition has occurred on July 1, 2009.

(c)    Shell company transactions.

Not applicable

(d)    Exhibits

Exhibit No. Description of Exhibit
  
10.17 Letter Agreement dated October 27, 2010, by and between West Canyon Energy Corp. and Petrodorado Energy Ltd.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

  WEST CANYON ENERGY CORP.
     
     
Dated: December 6, 2010 By: /s/ Shane Reeves
  Name: Shane Reeves
  Title: President