UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A #4
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: June 30, 2010
Amended on May 11, 2011
GULFSTAR ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 333-151398 02-0511381
------------------------------------- ---------------------- ---------------------------------
(State or other jurisdiction of (Commission File (IRS Employer Identification
incorporation) Number) Number)
3410 Embassy Drive, West Palm Beach, FL, 33401
----------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(800) 820-1632
--------------
Registrant's telephone number, including area code
Bedrock Energy, Inc. 8950 Scenic Pine Drive, Ste 100, Parker, CO 80134 (Former
name or former address, if changed since last report)
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:
[ ] 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)
Explanatory Note
Gulfstar Energy Corporation is filing this Amendment No. 4 to its Current Report
on Form 8-K/A that was filed with the Securities and Exchange Commission on
August 5, 2010. This Amendment is filed for the purpose of amending Section 9,
Item 9.01(a) to include signed audit reports and to provide our Unaudited Pro
Forma Condensed Consolidated Balance Sheet at March 31, 2010 and Statement of
Operations for the Three Months Ended March 31, 2010.
This Amendment does not reflect events occurring after the Original Filing
except as noted above. Except for the foregoing amended information, this Form
8-K/A#4 continues to speak as of the date of the Original Filing and the Company
has not otherwise updated disclosures contained therein or herein to reflect
events that occurred at a later date.
SECTION 9 FINANCIAL STATEMENTS AND EXHIBITS
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Business Acquired. The following is a complete list
of financial statements filed as part of this Report.
Talon Energy Corporation
Audited Financial Statements for the Year Ended December 31,
2009 and the for the Period July 14, 2008 (Inception) to
December 31, 2008.
Gulfstar Energy Group, LLC
Audited Financial Statements for the Years Ended December 31,
2009 and 2008.
(b) Pro Forma Financial Information. The following is a complete list of the
pro forma financial statements filed as a part of this Report.
Unaudited Pro Forma Condensed Consolidated Balance Sheet at March 31, 2010.
Unaudited Pro Form Condensed Consolidated Statement of Operations for the
Three Months Ended March 31, 2010.
TALON ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
AUDITED FINANCIAL STATEMENTS
For the period July 14, 2008 (date of inception) to December 31,
2008 and for the year ended December 31, 2009
TALON ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS
Page
Report of Independent Auditors 1
Financial Statements
Balance Sheets 2
Statements of Stockholders' Equity 3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Financial Statements 6
UHY LLP
CERTIFIED PUBLIC ACCOUNTANTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders
Talon Energy Corporation
We have audited the accompanying balances sheets and statements of
stockholders' equity of Talon Energy Corporation as of December 31, 2009 and
2008, and the related statements of operations and cash flows for the period
July 14, 2008 (date of inception) to December 31, 2008, for the year ended
December 31, 2009 and for the period July 14, 2008 (date of inception) to
December 31, 2009. 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 auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Talon Energy
Corporation as of December 31, 2009 and 2008, and the results of its operations
and its cash flows for the period July 14, 2008 (date of inception) to December
31, 2008, for the year ended December 31, 2009 and for the period July 14, 2008
(date of inception) to December 31, 2009, in conformity with accounting
principles generally accepted in the United States of America.
/s/ UHY LLP
Sterling Heights, Michigan
April 27, 2010
1
TALON ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
December 31,
---------------------------------------
2009 2008
------------------ -------------------
ASSETS
CURRENT ASSETS
Cash $ 102,422 $ 313,918
Deferred tax benefit 203,600 22,100
------------------ -------------------
Total current assets 306,022 336,018
================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued expenses 65,081 -
Accrued payroll 213,623 61,653
------------------ -------------------
Total current liabilities 278,704 61,653
STOCKHOLDERS' EQUITY 27,318 274,365
------------------ -------------------
$ 306,022 $ 336,018
================== ===================
2
TALON ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
Period Period
July 14, 2008 July 14, 2008
(date of inception) (date of inception)
Year ended to to
December 31, 2009 December 31, 2008 December 31, 2009
------------------------- ------------------------- -------------------------
Operating revenue $ - $ - $ -
General and
administrative expenses 556,949 64,935 621,884
------------------------- ------------------------- -------------------------
(556,949) (64,935) (621,884)
------------------------- ------------------------- -------------------------
Other income
Interest income 185 - 185
Dividend income 225 - 225
------------------------- ------------------------- -------------------------
Total other income 410 - 410
------------------------- ------------------------- -------------------------
Income before
income taxes (556,539) (64,935) (621,474)
Deferred income taxes (181,500) (22,100) (203,600)
------------------------- ------------------------- -------------------------
Net loss $ (375,039) $ (42,835) $ (417,874)
========================= ========================= =========================
3
TALON ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
Period
July 14, 2008
(date of inception)
Year ended to
December 31, 2009 December 31, 2008
-------------------------- -------------------------
COMMON STOCK
Balance, beginning $ 41 $ -
Issuance of common stock 1,239 41
-------------------------- -------------------------
Balance, ending 1,280 41
-------------------------- -------------------------
ADDITIONAL PAID-IN CAPITAL
Balance, beginning 317,159 -
Issuance of common stock 126,753 317,159
-------------------------- -------------------------
Balance, ending 443,912 317,159
-------------------------- -------------------------
DEFICIT ACCUMULATED DURING
DEVELOPMENT STAGE
Balance, beginning (42,835) -
Net loss (375,039) (42,835)
-------------------------- -------------------------
Balance, ending (417,874) (42,835)
-------------------------- -------------------------
$ 27,318 $ 274,365
========================== =========================
4
TALON ENERGY CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Period Period
July 14, 2008 July 14, 2008
(date of inception) (date of inception)
Year ended to to
December 31, 2009 December 31, 2008 December 31, 2009
-------------------------- ------------------------- -------------------------
OPERATING ACTIVITIES
Net loss $ (375,039) $ (42,835) $ (417,874)
Adjustments to reconcile
net loss to net cash
from operating activities:
Deferred income taxes (181,500) (22,100) (203,600)
Web design services
exchanged for stock 16,000 - 16,000
Changes in:
Accrued expenses 65,081 - 65,081
Accrued payroll 151,970 61,653 213,623
-------------------------- ------------------------- -------------------------
Net cash used
in operating activities (323,488) (3,282) (326,770)
FINANCING ACTIVITIES
Net proceeds from the
issuance of common stock 111,992 317,200 429,192
-------------------------- ------------------------- -------------------------
NET CHANGE IN CASH (211,496) 313,918 102,422
CASH, Beginning 313,918 - -
-------------------------- ------------------------- -------------------------
CASH, Ending $ 102,422 $ 313,918 102,422
========================== ========================= =========================
5
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of certain accounting policies followed in the
preparation of these financial statements. The policies conform to accounting
principles generally accepted in the United States of America and have been
consistently applied in the preparation of the financial statements.
Company Operations
Talon Energy Corporation is a C-corporation, which was incorporated on July 14,
2008, in the state of Florida. The Company is engaged in oil and gas
exploration, development drilling, and oil and gas production. The Company's
operations are focused in western Kentucky.
Development Stage Company
As of December 31, 2009, the Company has yet to generate operating revenue.
Current operations are devoted to attracting new investors and incurring
expenses for gas exploration and general business administration. The Company
therefore is considered a development stage company under generally accepted
accounting principles. Accordingly, cumulative amounts from the Company's
inception through December 31, 2009, are shown on the statements of operations
and cash flows.
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 and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash Equivalents
For purposes of the statements of cash flows, the Company considers all highly
liquid debt instruments with a maturity of three months or less to be cash
equivalents.
6
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
Income tax expense includes federal deferred taxes arising from temporary
differences between income for financial reporting and income tax purposes.
Income taxes are provided at the applicable rates on the basis of items included
in the determination of income for income tax purposes. The Company's effective
income tax rate may be different than what would be expected if the Federal
statutory rate was applied to income from continuing operations primarily
because of expenses included in financial reporting income that are not
deductible for income tax purposes. The significant permanent difference is
meals and entertainment expense.
Deferred income taxes are provided for timing differences between financial
statement income and tax return income under the provisions of Accounting for
Income Taxes, which requires deferred income taxes be computed on the liability
method and deferred tax assets are recognized only when realization is certain.
The primary temporary differences arise from accrued expenses and net operating
loss carryforwards. The tax effect of such differences is included annually on
the statements of operations and balance sheets as an adjustment to deferred
income taxes.
Deferred income taxes were as follows at December 31, 2009 and 2008:
2009 2008
--------------------------------------------------------------------------------
Short Term Long Term Short Term Long Term
---------- --------- ---------- ---------
Assets
Federal $203,600 $ - $22,100 $ -
======== ========== ======== ==========
Effective January 1, 2009, the Company adopted ASC guidance regarding accounting
for uncertainty in income taxes. This guidance clarifies the accounting for
income taxes by prescribing the minimum recognition threshold an income tax
position is required to meet before being recognized in the financial statements
and applies to all income tax positions. Each income tax position is assessed
using a two step process. A determination is first made as to whether it is more
likely than not that the income tax position will be sustained, based upon
technical merits, upon examination by the taxing authorities. If the income tax
position is expected to meet the more likely than not criteria, the benefit
recorded in the financial statements equals the largest amount that is greater
than 50% likely to be realized upon its ultimate settlement. At December 31,
2009, there were no uncertain tax positions that require accrual.
7
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock Issuance Costs
During the year ended December 31, 2009, the Company incurred $4,233 of costs
associated with the issuance of common stock. Additional paid-in capital from
the issuance of common stock and proceeds from the issuance of common stock are
shown net of these costs on the statements of stockholders' equity and cash
flows, respectively.
Unused Net Operating Loss
The Company has available at December 31, 2009, unused net operating losses,
which may provide future tax benefits in the amount of $4,935 expiring 2028 and
$380,296 expiring 2029.
Subsequent Events
The Company has performed a review of events subsequent to the balance sheet
date through April 27, 2010, the date the financial statements were available to
be issued.
NOTE 2 - RELATED PARTY TRANSACTIONS
Accrued Expenses
At December 31, 2009, the Company owed $65,081 of accrued expenses to officers
of the Company. These expenses are related to unreimbursed general business
expenditures.
Accrued Payroll
At December 31, 2009 and 2008, the Company owed $213,623 and $61,653,
respectively, of accrued payroll to officers of the Company.
8
NOTE 3 - CAPITAL STOCK
At December 31, 2009, the capital stock authorized, issued and outstanding was
as follows:
Type Par Shares Shares Amount
---- Value Authorized Issued and ------
----- ---------- Outstanding
-----------
Common $0.0001 200,000,000 12,798,200 $1,280
Preferred $ - 5,000,000 - $ -
At December 31, 2008, the capital stock authorized, issued and outstanding was
as follows:
Type Par Shares Shares Amount
---- Value Authorized Issued and ------
----- ---------- Outstanding
-----------
Common $0.0001 200,000,000 407,200 $41
Preferred $ - 5,000,000 - $ -
NOTE 4 - CASH FLOWS
During the year ended, the Company issued $16,000 of common stock in exchange
for services provided related to general business expenses.
9
GULFSTAR ENERGY GROUP, LLC
(A DEVELOPMENT STAGE COMPANY)
AUDITED FINANCIAL STATEMENTS
Years ended December 31, 2009 and 2008
GULFSTAR ENERGY GROUP, LLC
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS
Page
Report of Independent Registered Public Accounting Firm 1
Financial Statements
Balance Sheets 2
Statements of Operations and Members' Equity 3
Statements of Cash Flows 4
Notes to Financial Statements 5
UHY LLP
CERTIFIED PUBLIC ACCOUNTANTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Members
Gulfstar Energy Group, LLC
We have audited the accompanying balance sheets of Gulfstar Energy Group, LLC as
of December 31, 2009 and 2008, and the related statements of operations and
members' equity and cash flows for the years then ended and for the period May
19, 2006 (date of inception) to December 31, 2009. 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 audit 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 Gulfstar Energy Group, LLC as
of December 31, 2009 and 2008, and the results of its operations and members'
equity and its cash flows for the years ended December 31, 2009 and 2008, and
for the period May 19, 2006 (date of inception) to December 31, 2009, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ UHY, LLP
Sterling Heights, Michigan
April 27, 2010
1
GULFSTAR ENERGY GROUP, LLC
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
December 31,
---------------------------------------
2009 2008
------------------ -------------------
ASSETS
CURRENT ASSETS
Cash $ 705,622 $ 582,749
Note receivable 10,000 -
------------------ -------------------
Total current assets 715,622 582,749
PROPERTY AND EQUIPMENT 3,610,092 659,245
OFFICER NOTE RECEIVABLE 82,325 82,325
INTANGIBLE ASSETS 169,374 55,032
------------------ -------------------
4,577,413 1,379,351
================== ===================
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES
Accounts payable 842,149 55,684
Litigation settlement payable 70,000 -
Deposits 503,224 239,536
Accrued expenses 30,655 20,000
------------------ -------------------
Total current liabilities 1,446,028 315,220
MEMBERS' EQUITY, including deficit accumulated
during the development stage of $3,045,901 3,131,385 1,064,131
------------------ -------------------
$ 4,577,413 $ 1,379,351
================== ===================
2
GULFSTAR ENERGY GROUP, LLC
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS AND MEMBERS' EQUITY
For the period
May 19, 2006,
Years ended December 31, (date of inception) to
---------------------------------------
2009 2008 December 31, 2009
------------------ ------------------- --------------------------
Operating revenue $ - $ - $ -
General and administrative
expenses 596,198 488,662 2,835,972
------------------ ------------------- --------------------------
(596,198) (488,662) (2,835,972)
------------------ ------------------- --------------------------
Other income (expense)
Interest income 764 11 1,421
Investment income 9,784 3,344 13,128
Drilling expense - (68,978) (68,978)
Litigation settlement (170,000) - (170,000)
------------------ ------------------- --------------------------
Total other income (expense) (159,452) (65,623) (224,429)
------------------ ------------------- --------------------------
Net loss (755,650) (554,285) (3,060,401)
Members' equity, beginning 1,064,131 433,916 -
Contributions 2,914,540 1,184,500 6,333,422
Member redemptions (91,636) - (141,636)
------------------ ------------------- --------------------------
Members' equity, ending $ 3,131,385 $ 1,064,131 $ 3,131,385
================== =================== ==========================
3
GULFSTAR ENERGY GROUP, LLC
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
For the period
May 19, 2006,
Years ended December 31, (date of inception) to
---------------------------------------
2009 2008 December 31, 2009
------------------- ------------------ ---------------------------
OPERATING ACTIVITIES
Net loss $ (755,650) $ (554,285) $ (3,060,401)
Adjustments to reconcile net loss to net
cash flows from operating activities:
Depreciation 15,295 8,895 28,773
Changes in:
Litigation settlement payable 70,000 - 70,000
Other receivables - 2,000 -
Accounts payable and accrued
expenses 797,120 22,107 872,804
Deposits 263,688 239,536 503,224
------------------- ------------------ ---------------------------
Net cash provided by (used in)
operating activities 390,453 (281,747) (1,585,600)
------------------- ------------------ ---------------------------
INVESTING ACTIVITIES
Expenditures for property and equipment (49,774) (38,604) (106,904)
Expenditures for construction in progress (2,916,368) (503,893) (3,531,961)
Issuance of note receivable (10,000) - (10,000)
Net activity under officer note receivable - (32,325) (82,325)
Expenditures for intangible assets (114,342) (12,544) (169,374)
------------------- ------------------ ---------------------------
Net cash used in investing
activities (3,090,484) (587,366) (3,900,564)
------------------- ------------------ ---------------------------
FINANCING ACTIVITIES
Member redemptions (91,636) - (141,636)
Member contributions 2,914,540 1,184,500 6,333,422
------------------- ------------------ ---------------------------
Net cash provided by financing
activities 2,822,904 1,184,500 6,191,786
------------------- ------------------ ---------------------------
NET CHANGE IN CASH 122,873 315,387 705,622
CASH, Beginning 582,749 267,362 -
------------------- ------------------ ---------------------------
CASH, Ending $ 705,622 $ 582,749 $ 705,622
=================== ================== ===========================
4
GULFSTAR ENERGY GROUP, LLC
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
December 31, 2009 and 2008
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist in
understanding the Company's financial statements. The policies conform to
accounting principles generally accepted in the United States of America and
have been consistently applied in the preparation of these financial statements.
Company Operations
Gulfstar Energy Company, LLC (the "Company") is in the process of constructing a
pipeline and filtration system to gather natural gas from various gas wells
located throughout Kentucky, and deliver that gas to a local customer.
Development Stage Company
The Company was formed on May 19, 2006, in Mississippi. As of December 31, 2009,
principal operations have not yet commenced, and the Company has not generated
operating revenues. Current operations are devoted to the raising of capital to
construct and complete a gas pipeline supply system designed to gather natural
gas from surrounding gas wells located in the state of Kentucky and deliver this
gas to a single manufacturing customer. The Company is therefore considered a
development stage company under generally accepted accounting principles.
Accordingly, cumulative amounts from the Company's inception through December
31, 2009, are shown on the statements of operations and members' equity and cash
flows.
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 and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Concentration of Credit Risk
The Company, from time to time during the periods covered by these financial
statements, may have bank balances in excess of its insured limits. Management
has deemed this a normal business risk.
Cash Equivalents
For purposes of the statements of cash flows, the Company considers all highly
liquid debt instruments with a maturity of three months or less to be cash
equivalents.
5
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Construction in Progress
Construction in progress consists of costs incurred by the Company to construct
its natural gas pipeline. Amounts are being capitalized as incurred and will
begin depreciating once the pipeline is operational.
Property and Equipment
Management capitalizes additions to property and equipment. Expenditures for
repairs and maintenance are charged to expense. Property and equipment are
carried at cost. Adjustment of the asset and the related accumulated
depreciation accounts are made for property and equipment retirements and
disposals, with the resulting gain or loss included in the statements of
operations and members' equity.
Intangible Assets
Intangible assets consist of right of way deposits, which are contracts allowing
the Company to install pipeline on private land. The rights exist indefinitely;
accordingly, no amortization has been recorded. Management has evaluated these
assets for impairment as of December 31, 2009 and 2008, and determined that no
impairment existed.
Advertising
Advertising costs are expensed as incurred. Advertising expense for the year
ended December 31, 2009, was $1,722. There was no advertising expense for the
year ended December 31, 2008.
Investment Income
The Company recognizes investment income from drilling partnerships upon the
partnerships' receipt of payment from customers.
Significant Customer
The Company's pipeline in process is currently designed to deliver natural gas
to one manufacturing customer located in Kentucky.
Depreciation
For financial reporting purposes, depreciation of property and equipment is
computed using the straight-line method over the estimated useful lives of
assets at acquisition. For tax reporting purposes, depreciation of property and
equipment is computed using the straight-line and accelerated methods over the
estimated useful lives of assets at acquisition.
6
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
The Company is a limited liability company and is not a tax paying entity for
federal tax purposes. It's pro rata shares of income, losses, and tax credits
are reported by its partners on their individual income tax returns. Therefore,
no provision for federal income taxes is made in the accompanying financial
statements.
Effective January 1, 2009, the Limited Liability Company adopted ASC guidance
regarding accounting for uncertainty in income taxes. This guidance clarifies
the accounting for income taxes by prescribing the minimum recognition threshold
an income tax position is required to meet before being recognized in the
financial statements and applies to all income tax positions. Each income tax
position is assessed using a two step process. A determination is first made as
to whether it is more likely than not that the income tax position will be
sustained, based upon technical merits, upon examination by the taxing
authorities. If the income tax position is expected to meet the more likely than
not criteria, the benefit recorded in the financial statements equals the
largest amount that is greater than 50% likely to be realized upon its ultimate
settlement. At December 31, 2009, there were no uncertain tax positions that
require accrual.
None of the or Limited Liability Company's federal or state income tax returns
are currently under examination by the Internal Revenue Service ("IRS") or state
authorities. However fiscal years 2006 and later remain subject to examination
by the IRS and respective states.
Subsequent Events
The Company has performed a review of events subsequent to the balance sheet
date through April 27, 2010, the date the financial statements were available to
be issued.
NOTE 2 - RELATED PARTY TRANSACTIONS
Note Receivable
At December 31, 2009 and 2008, the Company was owed $82,325 from an officer of
the Company. The note is non-interest bearing, unsecured, and due no later than
two years after the completion of the pipeline, which was still under
construction as of December 31, 2009. The note is shown as long-term on the
balance sheets, as management does not anticipate repayment within one year.
7
NOTE 2 - RELATED PARTY TRANSACTIONS (Continued)
Deposits
At December 31, 2009 and 2008, the Company had deposits of $503,224 and
$239,536, respectively, due to the drilling partnerships described in Note 5.
NOTE 3 - NOTE RECEIVABLE
At December 31, 2009, the Company was owed $10,000 from an unrelated third
party. The note bears interest at 10%, is unsecured, and is due November 2010.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31:
2009 2008
---- ----
Furniture and Fixtures $ 12,964 $ 1,990
Vehicles 93,940 55,140
Construction in progress 3,531,961 615,593
----------- ---------
3,638,961 672,723
Less: Accumulated Depreciation 28,773 13,478
----------- ---------
$3,610,092 $ 659,245
Construction in progress represents the Company's natural gas pipeline supply
system, which is not yet operational at December 31, 2009. Depreciation expense
was $15,272 and $8,895 for the years ended December 31, 2009 and 2008,
respectively.
NOTE 5 - DRILLING PARTNERSHIPS
As of December 31, 2009 and 2008, the Company holds net revenue interests in
various drilling partnerships. The Company holds no ownership interest in these
drilling partnerships. Under the agreements, the Company helps organize the
formation of these wells, provides management services, and oversees well
operation. In return for these services, the Company receives a revenue only
interest in the partnerships, typically 12.5%. This income is shown as
investment income on the statements of operations and members' equity.
8
NOTE 5 - DRILLING PARTNERSHIPS (Continued)
As part of its services provided to the drilling partnerships, the Company
collects the contributions of the drilling partnerships' investors. Using these
funds, the Company pays for the expenses incurred by the partnerships. The
Company records no expenses of the partnerships on its own statements of
operations and members' equity. The excess of contributions collected over
partnership expenses paid are shown as deposits on the balance sheets. As of
December 31, 2009 and 2008, the Company had deposits due to the drilling
partnerships in the amounts of $503,224 and $239,536, respectively.
NOTE 6 - OPERATING LEASES
The Company leased a building from an unrelated third party under a
month-to-month lease agreement, with monthly payments of $300. Total rent
expense under this lease was $790 and $3,600 for the years ended December 31,
2009 and 2008, respectively. This building is no longer being leased as of
December 31, 2009.
During April 2009, the Company entered into a lease agreement with an unrelated
third party for a second building. The lease agreement requires monthly payments
of $750 and expires April 2012. Total rent expense under this lease was $6,750
for the year ended December 31, 2009.
The following is a schedule of minimum future rental payments under the
operating leases described above:
Year ending December 31, Amount
------------------------ ------
2010 $ 9,000
2011 9,000
2012 3,000
------
$21,000
NOTE 7 - SUBSEQUENT EVENT
During March 2010, the Company settled certain environmental litigation which
was in process as of December 31, 2009. As a result of the settlement, the
Company is required to pay $70,000 during the year ended December 31, 2010 in
addition to the $100,000 paid during the year ended December 31, 2009.
Additionally, the Company is expected to receive $230,000 from a consultant
contracted by the Company for services provided which lead to the environmental
litigation. In accordance with ASC 450 Contingencies, the liability has been
recorded on the balance sheets, while the gain and related receivable has not.
The income from the settlement will be recognized in the year received.
9
GULFSTAR ENERGY, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2010
(Unaudited)
Historical
--------------------------------------------------
ASSETS Gulfstar Talon Gulfstar Pro forma Pro forma
Energy Energy Energy adjustments consolidated
Corporation Corporation Group, LLC
-------------- ------------- -------------- ------------- ---------------
Cash and cash equivalents $ 470 $144,784 $616,386 $ - $ 761,640
Note receivable - - 10,000 - 10,000
Deferred tax benefit - 203,600 - - 203,600
-------------- ------------- -------------- ------------- ---------------
Total current assets 470 348,384 626,386 - 975,240
-------------- ------------- -------------- ------------- ---------------
Net property and equipment 1,122 - 4,064,493 - 4,065,615
-------------- ------------- -------------- ------------- ---------------
Note receivable, related party - - 82,325 - 82,325
Intangible assets - - 169,374 - 169,374
Goodwill - - - a 368,369 368,369
-------------- ------------- -------------- ------------- ---------------
Total other assets - - 251,699 368,369 620,068
-------------- ------------- -------------- ------------- ---------------
Total assets $1,592 $ 348,384 $ 4,942,578 $ 368,369 $ 5,660,923
============== ============= ============== ============= ===============
LIABILITIES AND STOCKHOLDERS'
(DEFICIT) EQUITY
Accounts payable $6,162 $ - $ 727,035 $ - $ 733,197
Litigation settlement payment - - 70,000 - 70,000
Deposits - - 441,465 - 441,465
Accrued expenses and liabilities - 320,058 - - 320,058
-------------- ------------- -------------- ------------- ---------------
Total current liabilities 6,162 320,058 1,238,500 - 1,564,720
-------------- ------------- -------------- ------------- ---------------
Non-controlling interest - - - b 1,544,601 1,544,601
Common stock 4,255 1,298 - c 10,148 15,701
Additional paid in capital 476,818 546,394 - c 4,524,688 5,547,900
Equity membership - 6,716,077 c (6,716,077) 0
Accumulated deficit (485,643) (519,366) (3,011,999) c 1,005,009 (3,011,999)
-------------- ------------- -------------- ------------- ---------------
Total stockholders' (deficit) equity (4,570) 28,326 3,704,078 368,369 4,096,203
-------------- ------------- -------------- ------------- ---------------
Total liabilities and stockholders'
(deficit) equi$y $ 1,592 $ 348,384 $ 4,942,578 $ 368,369 $ 5,660,923
============== ============= ============== ============= ===============
1
GULFSTAR ENERGY, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2010
(Unaudited)
Historical
---------------------------------------------------
Gulfstar Energy Talon Energy Gulfstar Energy Pro forma Pro forma
Corporation Corporation Group, LLC adjustments consolidated
--------------- --------------- --------------- ------------- ------------
Revenues $ - $ - $ 4,169 $ - $ 4,169
Cost of sales - - - - -
--------------- --------------- --------------- --------------- --------
Gross profit - - 4,169 - 4,169
--------------- --------------- --------------- --------------- --------
Operating expenses:
General and Administrative expense 17,685 101,529 201,632 d (119,214) 201,632
--------------- --------------- --------------- --------------- --------
Total operating expenses 17,685 101,529 201,632 (119,214) 201,632
--------------- --------------- --------------- --------------- --------
Loss from operations (17,685) (101,529) (197,463) (119,214) (197,463)
--------------- --------------- --------------- --------------- --------
Other income (expense):
Other income - 37 231,365 d (37) 231,365
Other expense - - - - -
--------------- --------------- --------------- --------------- --------
Total other income (expense) - 37 231,365 (37) 231,365
--------------- --------------- --------------- --------------- --------
Income (loss) before income taxes (17,685) (101,492) 33,902 (119,251) 33,902
Income taxes - - - - -
--------------- --------------- --------------- --------------- --------
Net income (loss) (17,685) (101,492) 33,902 (119,251) 33,902
Less: income attributable to
non-controlling interest - - - b (14,137) (14,137)
--------------- --------------- --------------- --------------- --------
Net income (loss) attributable to
Common Stockholders $ (17,685) $ (101,492) $ 33,902 $ 133,388 $19,765
=============== =============== =============== =============== ========
Basic and diluted net income per common share $ * $ *
=============== ========
Weighted average number of common
shares outstanding 11,421,348 d 238,311 11,659,659
=============== ========
* Less than $.01 per common share
2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION UNDER RULE
8-03(b)(4) OF REGULATION S-X AS TO A BUSINESS COMBINATION -
The accompanying Unaudited Pro Forma Condensed Consolidated Balance Sheet gives
effect to the acquisition as if it had been consummated on March 31, 2010.
The accompanying Unaudited Pro Forma Condensed Consolidated Statement of
Operations for the three months ended March 31, 2010 gives effect to the
acquisition as if it had been consummated for the current interim period as
though the transaction occurred at the beginning of the period.
The Unaudited Pro Forma Consolidated Financial Statements should be read in
conjunction with the historical financial statements Talon and Gulfstar LLC as
well as the Registrant. The Unaudited Pro Forma Consolidated Financial
Statements do not purport to be indicative of the financial position or results
of operations that would have actually been obtained had such transactions been
completed as of the assumed dates and for the period presented, or which may be
obtained in the future. The Pro Forma adjustments are described in the
accompanying notes and are based upon available information and certain
assumptions that the Registrant believes are reasonable.
On May 5, 2010, the Company entered into a Share Exchange Agreement with Talon
Energy Corporation ("Talon"). Talon is a Florida company engaged in management
activities in the oil and gas industry. On June 24, 2010, the Share Exchange
Agreement with Talon was replaced by a similar Revised and Amended Share
Acquisition Agreement between Talon and the Company and in conjunction with a
June 24, 2010 Share Exchange Agreement between the Company and Gulfstar Energy
Group, LLC ("Gulfstar LLC"), a privately held Mississippi Limited Liability
Company, for 58.3% of the outstanding equity interests of Gulfstar LLC, and an
Acquisition Agreement between the Company and Gulfstar LLC to acquire the
remaining 41.7% of the outstanding equity interests of Gulfstar LLC. The Revised
and Amended Share Acquisition Agreement and Share Exchange Agreement were both
effective as of June 30, 2010.
The Revised and Amended Share Acquisition Agreement with Talon provided for the
Company to issue 3,509,530 restricted shares of its common stock to the
shareholders of Talon in exchange for the issued and outstanding shares of
Talon. After the exchange of such shares the Company owned 100% of the issued
and outstanding shares of Talon.
The Share Exchange Agreement between the Company and Gulfstar LLC provided for
Jason Sharp and Timothy Sharp, officers and members of Gulfstar LLC, to exchange
their 58.3% of Gulfstar LLC outstanding equity interests for 11,659,659
restricted shares of common stock of the Company.
The June 24, 2010 Acquisition Agreement between the Company and Gulfstar LLC
provides for the acquisition of the remaining outstanding equity interests of
Gulfstar LLC, but requires the effectiveness of a Registration Statement filed
with the Securities and Exchange Commission to register the remaining shares of
common stock offered by the Company to the individual equity interest holders of
Gulfstar LLC. Therefore, as of December 31, 2010, the remaining 41.6% equity
interests of Gulfstar LLC have not been acquired by the Company.
3
GOODWILL:
(a) This entry is recorded to report the amount of goodwill as a result of
the acquisition of Talon by the Company which is represented by the
combination of: (1) the fair value of consideration paid by the Company
to 100% of Talon outstanding shareholders of the Company's 3,509,350
shares of its restricted common stock at $.03 per share or $105,286 and
(2) the accrued liabilities in excess of cash of Talon in the amount of
$263,083.
NON CONTROLLING INTEREST:
(b) This entry is recorded to represent the 41.7% of Gulfstar LLC not owned
by the Company as of March 31, 2010 in the amount of $1,544,601 and the
net loss attributable to the non-controlling interest for the interim
period.
EQUITY:
(c) These entries are recorded to reflect the recapitalization of the
Company as well as the reporting of goodwill along with the elimination
of accumulated deficit of Gulfstar Energy Corporation.
STATEMENT OF OPERATIONS:
(d) Since the Gulfstar LLC exchange was accounted for as a reverse
recapitalization in which Gulfstar LLC was determined to be the
acquirer for accounting purposes, then only the accounts of Gulfstar
LLC are included in the Unaudited Pro Forma Condensed Consolidated
Statement of Operations for the interim period. The weighted average
number of common shares outstanding is adjusted to reflect for the
three months ended March 31, 2010 the effect as if the acquisition had
been consummated for the current interim period as though the
transaction occurred at the beginning of the period.
4
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.
GULFSTAR ENERGY, CORPORATION
By: /s/Robert McCann
--------------------
Robert McCann, Chief Executive Officer
Date: May 11, 2011
