Attached files
| file | filename |
|---|---|
| EX-31.2 - EFACTOR GROUP CORP. | ex31-2.htm |
| EX-32.1 - EFACTOR GROUP CORP. | ex32-1.htm |
| EX-31.1 - EFACTOR GROUP CORP. | ex31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
Form 10-Q
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[√]
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the Quarterly Period Ended March 31, 2011
or
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[ ]
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from __________________ to __________________________
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Commission file number: 000-51569
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STANDARD DRILLING, INC.
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(Name of registrant as specified in its charter)
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Nevada
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84-1598154
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification
No.)
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1640 Terrace Way, Walnut Creek, CA
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94597
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(Address of principal executive offices)
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(Zip Code)
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(925) 938-0406
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(Registrant's telephone number, including area code)
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not applicable
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(Former name, former address and former fiscal year, if changed since last report)
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Indicate by check mark whether the registrant (1) has 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 [√ ] 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 (§ 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 [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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[ ]
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Accelerated filer
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[ ]
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Non-accelerated filer
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[ ]
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Smaller reporting company
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[√]
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)
Yes [√] No[ ]
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 33,458,880 shares of common stock are issued and outstanding as of May 16, 2011.
TABLE OF CONTENTS
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Page No.
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PART I. - FINANCIAL INFORMATION
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Item 1.
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Financial Statements
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F-1
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Item 2.
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Management's Discussion and Analysis of Financial Condition and Results of Operations.
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3
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Item 3.
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Quantative and Qualitative Disclosures About Market Risk.
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6
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Item 4.
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Controls and Procedures.
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6
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PART II - OTHER INFORMATION
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Item 1.
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Legal Proceedings.
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7
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Item 1A.
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Risk Factors.
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7
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds.
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7
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Item 3.
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Defaults Upon Senior Securities.
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7
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Item 4.
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Removed and Reserved
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7
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Item 5.
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Other Information.
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7
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Item 6.
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Exhibits.
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7
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This report contains forward-looking statements. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to consummate the acquisition of an operating entity and/or assets, our ability to generate revenues and pay our operating expenses, our ability to raise capital as necessary, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements and readers should carefully review this report in its entirety, together with the risks described in "Item 1A. - Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2010. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.
OTHER PERTINENT INFORMATION
Unless specifically set forth to the contrary, when used in this report the terms “Standard Drilling", "we"", "our", the "Company" and similar terms refer to Standard Drilling, Inc., a Nevada corporation. In addition, when used herein and unless specifically set forth to the contrary, “2011” refers to the year ending December 31, 2011 and “2010” refers to the year ended December 31, 2010.
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
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STANDARD DRILLING, INC.
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(A Development Stage Company)
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Balance Sheets
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March 31,
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December 31,
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|||||||
| 2011 | 2010 | |||||||
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ASSETS
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(unaudited)
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|||||||
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CURRENT ASSETS
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||||||||
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Cash
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$ | 43,390 | $ | 62,818 | ||||
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Total Current Assets
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43,390 | 62,818 | ||||||
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TOTAL ASSETS
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$ | 43,390 | $ | 62,818 | ||||
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
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||||||||
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CURRENT LIABILITIES
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||||||||
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Accounts payable
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$ | 3,385 | $ | 4,208 | ||||
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Accrued expenses
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251,633 | 248,465 | ||||||
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Total Current Liabilities
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255,018 | 252,673 | ||||||
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TOTAL LIABILITIES
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255,018 | 252,673 | ||||||
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STOCKHOLDERS' EQUITY (DEFICIT)
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||||||||
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Preferred stock, 10,000,000 shares authorized
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at par value of $0.001, none
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shares issued and outstanding
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- | - | ||||||
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Common stock, 100,000,000 shares authorized
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at par value of $0.001, 33,458,880 shares
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issued and outstanding
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33,459 | 33,459 | ||||||
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Additional paid-in capital
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18,473,461 | 18,473,461 | ||||||
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Deficit accumulated during the development stage
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(18,718,548 | ) | (18,696,775 | ) | ||||
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Total Stockholders' Equity (Deficit)
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(211,628 | ) | (189,855 | ) | ||||
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TOTAL LIABILITIES AND STOCKHOLDERS'
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||||||||
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EQUITY (DEFICIT)
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$ | 43,390 | $ | 62,818 | ||||
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The accompanying notes are an integral part of these financial statements.
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F-1
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STANDARD DRILLING, INC.
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(A Development Stage Company)
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Statements of Operations
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(unaudited)
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||||||||||||
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From Inception
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||||||||||||
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on February 14,
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||||||||||||
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For the Three Months Ended
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2006 Through
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|||||||||||
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March 31,
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March 31,
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|||||||||||
| 2011 | 2010 | 2011 | ||||||||||
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REVENUES
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$ | - | $ | - | $ | - | ||||||
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COST OF SALES
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- | - | - | |||||||||
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GROSS MARGIN
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- | - | - | |||||||||
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OPERATING EXPENSES
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General and administrative
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18,605 | 45,029 | 2,290,550 | |||||||||
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Bad debt expense
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- | - | 600,000 | |||||||||
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Total Operating Expenses
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18,605 | 45,029 | 2,890,550 | |||||||||
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INCOME (LOSS) FROM OPERATIONS
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(18,605 | ) | (45,029 | ) | (2,890,550 | ) | ||||||
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OTHER INCOME (EXPENSES)
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Interest income
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- | 257 | 4,842 | |||||||||
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Interest expense
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(3,168 | ) | (3,665 | ) | (40,435 | ) | ||||||
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Total Other Income (Expenses)
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(3,168 | ) | (3,408 | ) | (35,593 | ) | ||||||
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LOSS BEFORE DISCONTINUED OPERATIONS
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(21,773 | ) | (48,437 | ) | (2,926,143 | ) | ||||||
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DISCONTINUED OPERATIONS
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- | - | (15,792,405 | ) | ||||||||
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LOSS BEFORE INCOME TAXES
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(21,773 | ) | (48,437 | ) | (18,718,548 | ) | ||||||
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PROVISION FOR INCOME TAXES
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- | - | - | |||||||||
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NET LOSS
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$ | (21,773 | ) | $ | (48,437 | ) | $ | (18,718,548 | ) | |||
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LOSS PER SHARE - BASIC
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||||||||||||
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AND FULLY DILUTED
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$ | (0.00 | ) | $ | (0.00 | ) | ||||||
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WEIGHTED AVERAGE NUMBER
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||||||||||||
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OF SHARES OUTSTANDING
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33,458,880 | 33,458,880 | ||||||||||
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The accompanying notes are an integral part of these financial statements.
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F-2
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STANDARD DRILLING, INC.
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(A Development Stage Company)
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Statements of Stockholders' Equity (Deficit)
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Deficit
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Accumulated
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Additional
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Stock
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Prepaid
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During the
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Common Stock
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Paid-in
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Subscriptions
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Stock
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Development
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||||||||||||||||||||||||
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Shares
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Amount
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Capital
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Receivable
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Awards
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Stage
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Total
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||||||||||||||||||||||
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Balance at inception on
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||||||||||||||||||||||||||||
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February 14, 2006
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- | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||
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Contributed capital for services
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23,000,000 | 23,000 | - | - | - | - | 23,000 | |||||||||||||||||||||
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Common stock issued for
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||||||||||||||||||||||||||||
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cash, prepaid services and
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||||||||||||||||||||||||||||
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subscriptions receivable
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22,073,000 | 22,073 | 18,026,709 | (370,000 | ) | (722,755 | ) | - | 16,956,027 | |||||||||||||||||||
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Net loss for the period ended
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December 31, 2006
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- | - | - | - | - | (3,624,041 | ) | (3,624,041 | ) | |||||||||||||||||||
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Balance, December 31, 2006
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45,073,000 | 45,073 | 18,026,709 | (370,000 | ) | (722,755 | ) | (3,624,041 | ) | 13,354,986 | ||||||||||||||||||
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Cash received on subscriptions
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||||||||||||||||||||||||||||
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receivable
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- | - | - | 317,600 | - | - | 317,600 | |||||||||||||||||||||
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Amortization of prepaid services
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||||||||||||||||||||||||||||
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to paid-in capital
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- | - | (742,472 | ) | - | 722,755 | - | (19,717 | ) | |||||||||||||||||||
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Write-off of stock subscriptions
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||||||||||||||||||||||||||||
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receivable
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- | - | - | 52,400 | - | - | 52,400 | |||||||||||||||||||||
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Common shares cancelled
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(10,866,000 | ) | (10,866 | ) | (55,754 | ) | - | - | - | (66,620 | ) | |||||||||||||||||
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Net loss for the year ended
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December 31, 2007
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- | - | - | - | - | (12,451,110 | ) | (12,451,110 | ) | |||||||||||||||||||
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Balance December 31, 2007
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34,207,000 | 34,207 | 17,228,483 | - | - | (16,075,151 | ) | 1,187,539 | ||||||||||||||||||||
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Common shares cancelled
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(748,120 | ) | (748 | ) | 748 | - | - | - | - | |||||||||||||||||||
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Fair value of options granted
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||||||||||||||||||||||||||||
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and revalued
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- | - | 112,441 | - | - | - | 112,441 | |||||||||||||||||||||
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Deemed dividend
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- | - | 1,131,789 | - | - | (1,131,789 | ) | - | ||||||||||||||||||||
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Net loss for the year ended
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||||||||||||||||||||||||||||
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December 31, 2008
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- | - | - | - | - | (1,034,826 | ) | (1,034,826 | ) | |||||||||||||||||||
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Balance, December 31, 2008
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33,458,880 | 33,459 | 18,473,461 | - | - | (18,241,766 | ) | 265,154 | ||||||||||||||||||||
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Net loss for the year ended
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||||||||||||||||||||||||||||
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December 31, 2009
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- | - | - | - | - | (272,855 | ) | (272,855 | ) | |||||||||||||||||||
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Balance, December 31, 2009
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33,458,880 | 33,459 | 18,473,461 | - | - | (18,514,621 | ) | (7,701 | ) | |||||||||||||||||||
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Net loss for the year ended
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||||||||||||||||||||||||||||
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December 31, 2010
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- | - | - | - | - | (182,154 | ) | (182,154 | ) | |||||||||||||||||||
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Balance, December 31, 2010
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33,458,880 | 33,459 | 18,473,461 | - | - | (18,696,775 | ) | (189,855 | ) | |||||||||||||||||||
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Net loss for the three months ended
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||||||||||||||||||||||||||||
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March 31, 2011 (unaudited)
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- | - | - | - | - | (21,773 | ) | (21,773 | ) | |||||||||||||||||||
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Balance, March 31, 2011 (unaudited)
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33,458,880 | $ | 33,459 | $ | 18,473,461 | $ | - | $ | - | $ | (18,718,548 | ) | $ | (211,628 | ) | |||||||||||||
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The accompanying notes are an integral part of these financial statements.
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F-3
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STANDARD DRILLING, INC.
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(A Development Stage Company)
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Statements of Cash Flows
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||||||||||||
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(unaudited)
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||||||||||||
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From Inception
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||||||||||||
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on February 14,
|
||||||||||||
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For the Three Months Ended
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2006 Through
|
|||||||||||
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March 31,
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March 31,
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|||||||||||
| 2011 | 2010 | 2011 | ||||||||||
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OPERATING ACTIVITIES
|
||||||||||||
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Net loss
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$ | (21,773 | ) | $ | (48,437 | ) | $ | (2,926,143 | ) | |||
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Adjustments to reconcile net loss to
|
||||||||||||
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net cash used by operating activities:
|
||||||||||||
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Loss from discontinued operations
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- | - | (15,792,405 | ) | ||||||||
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Fair value of options granted
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- | - | 112,441 | |||||||||
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Write off of notes receivable
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- | - | 600,000 | |||||||||
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Changes to operating assets and liabilities:
|
||||||||||||
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Increase in accounts payable
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(823 | ) | (24,716 | ) | 3,385 | |||||||
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Increase in contingent liabilities
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3,168 | 3,665 | 251,633 | |||||||||
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Net Cash Used in
|
||||||||||||
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Operating Activities
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(19,428 | ) | (69,488 | ) | (17,751,089 | ) | ||||||
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INVESTING ACTIVITIES
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- | - | - | |||||||||
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FINANCING ACTIVITIES
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- | - | - | |||||||||
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DISCONTINUED OPERATIONS
|
||||||||||||
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Net Cash Provided by
|
||||||||||||
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Discontinued Operations
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- | - | 17,794,479 | |||||||||
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NET INCREASE (DECREASE) IN CASH
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(19,428 | ) | (69,488 | ) | 43,390 | |||||||
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CASH AT BEGINNING OF PERIOD
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62,818 | 267,760 | - | |||||||||
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CASH AT END OF PERIOD
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$ | 43,390 | $ | 198,272 | $ | 43,390 | ||||||
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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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Income Taxes
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$ | - | $ | - | $ | - | ||||||
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SCHEDULE OF NON-CASH FINANCING
|
||||||||||||
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ACTIVITIES:
|
||||||||||||
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Deemed dividend
|
$ | - | $ | - | $ | 1,131,789 | ||||||
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The accompanying notes are an integral part of these financial statements.
|
||||||||||||
F-4
STANDARD DRILLING, INC.
(A Development Stage Company)
Notes to Financial Statements
March 31, 2011 and December 31, 2010
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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, 2011, 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, 2010 audited financial statements. The results of operations for the period ended March 31, 2011 and March 31, 2010 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 – SUMMARY OF 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.
F-5
STANDARD DRILLING, INC.
(A Development Stage Company)
Notes to Financial Statements
March 31, 2011 and December 31, 2010
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
NOTE 4 – SUBSEQUENT EVENTS
In accordance with ASC 855-10, Company management reviewed all material events through the date of this report and there are no material subsequent events to report.
F-6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operation for the three months ended March 31, 2011 and 2010 should be read in conjunction with the financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Item 1A. Risk Factors, Cautionary Notice Regarding Forward-Looking Statements and Business sections appearing in our Form 10-K for the year ended December 31, 2010 as filed with the Securities and Exchange Commission. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.
Overview
We are a shell company as that term is defined under federal securities laws. Our business plan is to seek to acquire assets or shares of an entity actively engaged in business which generates revenues in exchange for our securities. We will not restrict our search to any specific business, industry, or geographical location and we may participate in a business venture of virtually any kind or nature. This discussion of the proposed business is purposefully general and is not meant to be restrictive of our virtually unlimited discretion to search for and enter into potential business opportunities. Management anticipates that it may be able to participate in only one potential business venture because we have nominal assets and limited financial resources. This lack of diversification should be considered a substantial risk to our stockholders because it will not permit us to offset potential losses from one venture against gains from another.
Plan of Operations
We currently plan to investigate and, if such investigation warrants, acquire a target company or business seeking the perceived advantages of being a publicly held corporation and, to a lesser extent that desires to employ our funds in its business. Our principal business objective for the next 12 months and beyond will be to achieve long-term growth potential through a combination with a business rather than immediate, short-term earnings. We will not restrict our potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.
The analysis of new business opportunities will be undertaken by or under the supervision of Mr. David S. Rector, our sole officer and director. Since 2008, we have not had any conversations with potential merger or acquisition targets nor have we entered into any definitive agreement with any party. We believe this is due in part to the lack of clarity in the public shell, which the Company seeks to remedy through the on-going litigation. In our efforts to analyze potential acquisition targets, we may consider the following kinds of factors:
|
•
|
Potential for growth, indicated by new technology, anticipated market expansion or new products;
|
|
|
•
|
Competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry as a whole;
|
|
•
|
Strength and diversity of management, either in place or scheduled for recruitment;
|
|
|
•
|
Capital requirements and anticipated availability of required funds, to be provided by us or from operations, through the sale of additional securities, through joint ventures or similar arrangements or from other sources;
|
|
•
|
The cost of participation by us as compared to the perceived tangible and intangible values and potentials;
|
|
|
•
|
The extent to which the business opportunity can be advanced;
|
|
•
|
The accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required items; and
|
|
|
•
|
Other relevant factors.
|
In applying the foregoing criteria, no one of which will be controlling, our management will attempt to analyze all factors and circumstances and make a determination based upon reasonable investigative measures and available data. Potentially available business opportunities may occur in many different industries, and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. Due to the limited capital we have available for investigation, we may not discover or adequately evaluate adverse facts about the opportunity to be acquired.
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The manner in which we participate in an opportunity will depend upon the nature of the opportunity, our respective needs and desires as well as those of the promoters of the opportunity, and the relative negotiating strength of us and such promoters.
It is likely that we will acquire our participation in a business opportunity through the issuance of common stock or other securities. Although the terms of any such transaction cannot be predicted, it should be noted that in certain circumstances the criteria for determining whether or not an acquisition is a so-called "tax free" reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), depends upon the issuance to the stockholders of the acquired company of at least 80% of the common stock of the combined entities immediately following the reorganization. If a transaction were structured to take advantage of these provisions rather than other "tax free" provisions provided under the Code, all prior stockholders would in such circumstances retain 20% or less of the total issued and outstanding shares. Under other circumstances, depending upon the relative negotiating strength of the parties, prior stockholders may retain substantially less than 20% of the total issued and outstanding shares. This could result in substantial additional dilution to the equity of those who were our stockholders prior to such reorganization.
Our present stockholders will likely not have control of a majority of our voting shares following a reorganization transaction. As part of such a transaction, our current director may resign and new directors may be appointed without any vote by stockholders.
In the case of an acquisition, the transaction may be accomplished upon the sole determination of our management without any vote or approval by stockholders. In the case of a statutory merger or consolidation directly involving our company, it will likely be necessary to call a stockholders' meeting and obtain the approval of the holders of a majority of the outstanding shares. The necessity to obtain such stockholder approval may result in delay and additional expense in the consummation of any proposed transaction and will also give rise to certain appraisal rights to dissenting stockholders. Most likely, management will seek to structure any such transaction so as not to require stockholder approval if possible.
It is anticipated that the investigation of specific business opportunities and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial cost for accountants, attorneys and others. If a decision is made not to participate in a specific business opportunity, the costs theretofore incurred in the related investigation would not be recoverable. Furthermore, even if an agreement is reached for the participation in a specific business opportunity, the failure to consummate that transaction may result in our loss of the related costs incurred.
During the first three months of 2011 we had only minimal expenses, which mainly consisted of filing fees and expenses associated with our ongoing public reporting expenses, compensation to our officer, legal fees and litigation costs, and minimal fees associated with searching out potential merger or acquisition targets. A major focus of management efforts is on clarifying the public shell by pursuit of the lawsuit against PBT Capital Partners and its principal.
We do not currently engage in any business activities that provide us with positive cash flows. As such, the costs of investigating and analyzing business combinations for the next approximately 12 months and beyond will be paid with our current cash and if necessary, with additional funds raised through other sources, which may not be available on favorable terms, if at all.
Our principal executive office is currently located at the home of Mr. David S. Rector, our sole officer and director, and is provided to us free of charge as well as all related office equipment and communication lines. During the next 12 months we anticipate incurring costs related to:
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filing of our quarterly, annual and other reports under the Securities Exchange Act of 1934, including legal, accounting and filing fees,
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litigation costs relating to an ongoing lawsuit against Mr. Tomlinson and PBT Capital Partners, L.L.C., and
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costs relating to consummating an acquisition.
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We do not believe that we will be able to meet these costs with our current cash on hand and willrequire additional debt or equity funding in order to maintain operations.
Results of Operations
Three Months Ended March 31, 2011 Compared to the Three Months Ended March 31, 2010
Revenues
We had no revenues in either of the three month periods ended March 31, 2011 or 2010.
Total Operating Expenses and Total Other Income (Expenses)
General and administrative expenses in the three month period ended March 31, 2011 totaled $18,605, a decrease of $26,424 or 59% from the $45,029 in general and administrative expenses incurred during the three month period ended March 31, 2010. This decrease resulted primarily from a decrease in legal and accounting feesas the Company is attempting to conserve cash. The Company has significantly decreased operations and, except for anticipated and potential legal fees, management expects operating expenses to continue to decrease as compared to prior periods.
Net Loss
Net loss for the three month period ended March 31, 2011 was $21,773, a decrease of $26,664 or 55% from the $48,437 net loss for the comparable period of 2010. This decreased net loss was primarily the result of decreased general and administrative expenses incurred during the 2011 period, as described in the preceding paragraph.
Liquidity and Capital Resources
Liquidity is the ability of a company to generate sufficient cash to satisfy its needs for cash. At March 31, 2011 we had a working capital deficit of $211,628 as compared to a working capital deficit of $189,855 at December 31, 2010. At March 31, 2011, we had current assets consisting solely of cash of $43,390 compared to $62,818 at December 31, 2010. At March 31, 2011, we had current liabilities of $255,018 as compared to $252,673 at December 31, 2010. At March 31, 2011, we had a total accumulated deficit of $18,718,548.
We expect to have monthly overhead costs of approximately $5,000 per month for the next 12 months, of which approximately $4,000 pertains to legal and accounting fees, and $1,000 pertains to basic general and administrative expenses incurred in the pursuit of various business opportunities. Our present cash reserves are only sufficient to pay our overhead costs for approximately another six months. We not only require cash to pay our operating expenses and the costs we will incur as we seek out a business combination, we may require additional cash to satisfy obligations related to our prior operations.
Our operating expenses associated with maintaining our status as a public company and undertaking efforts to identify a business combination or merger partner are estimated at $60,000 annually, exclusive of costs associated with pursuing the litigation against Mr. Tomlinson and PBT Capital Partners LLC.The amount of legal fees and costs will vary depending upon the course of the litigation, and we may be required to pursue such litigation under a contingency fee arrangement.As described in our Annual Report on Form 10-K for the year ended December 31, 2010, PBT Capital Partners LLC is in default under the terms of the October 2008 agreement with total potential claims of approximately $424,000 to $600,000, plus legal fees, interest and costs, as of March 31, 2011. No requests for payment or other claims have been made against us for these amounts and, while it is possible that future claims may be made against us, in that event we would seek to immediately enforce the terms of the agreement with PBT Capital Partners which relieved us from those liabilities. In July 2010 we filed suit against PBT Capital Partners and its principal seeking damages for breach of contract, negligent misrepresentation, fraud, unjust enrichment, fiduciary misconduct, exemplary damages, and declaratory judgment. The litigation is scheduled for trial on July 18, 2011. We do not believe that there is a more than remote likelihood that a third party claim for any of the amounts sought from PBT Capital Partners or Mr. Tomlinson would be reasonably likely to result in our liquidity increasing or decreasing in any material way.
In addition, on September 15, 2009 we received via certified mail a copy of a Final Judgment entered against our company on June 30, 2009 in the District Court in Johnson County, Texas in the matter of Johnson County vs. Standard Drilling, Inc., cause number T200800519. The court awarded the taxing unit plaintiffs therein, Johnson County, Texas, Joshua Independent School District, Hill County Junior College and City of Cleburne, Texas, a judgment against our company in the aggregate amount of $202,873.70 for taxes, penalties, interest and attorney’s fees, including continuing interest, related to four tracts of land. The court also awarded Romfor West Africa, Ltd. judgment against our company in the amount of $8,325, plus additional attorneys’ fees in the conditional event of appeal. Our balance sheet at March 31, 2011 reflects contingent liabilities of approximately $251,633, inclusive of accrued interest and penalties, related to this judgment.
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Our ability to continue as a going concern in the next 12 months depends on our ability to obtain sources of capital to fund our continuing operations and to seek out potential merger and acquisition partner. As of March 31, 2011, our remaining cash balance is not sufficient to cover our current liabilities, obligations and working capital needs for the balance of 2011. We will need to raise additional capital through an interim financing, to meet our general cash flow requirements until such time as we are able to complete the acquisition of an operating company. There are no assurances, however, that we will be able raise the necessary additional capital, in which event we may be required to consider a premature reverse merger or business combination upon terms which may not be as favorable to our stockholders as a transaction in the future, or a sale of an interest in the pending litigation with Mr. Tomlinson and PBT to a third party, to provide capital to fund our company. If we are not able to raise capital as necessary, the likelihood that we can continue as a going concern is doubtful and investors could lose their entire investment in our company.
Cash Flows
For the three months ended March 31, 2011, net cash used by operating activities was $19,428, attributable primarily to a net loss of $21,773 offset by an increase in accounts payable of $3,168. We did not report any cash used in investing or financing activities during the three months ended March 31, 2011.
Off-Balance Sheet Arrangements
As of March 31, 2011, we had no off-balance sheet arrangements.
Critical Accounting Policies
Refer to Note 3 in our footnotes to the financial for a comprehensive list of the critical accounting policies affecting our Company.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable for a smaller reporting company.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures. We maintain "disclosure controls and procedures" as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Based upon the evaluation of our sole officer and director of our disclosure controls and procedures as of March 31, 2011, the end of the period covered by this Quarterly Report on Form 10-Q (the "Evaluation Date"), our Chief Executive Officer who also serves as our Chief Financial Officer has concluded that as of the Evaluation Date that our disclosure controls and procedures were not effective such that the information relating to our company, required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure. Our management concluded that our disclosure controls and procedures were not effective as a result of material weaknesses in our internal control over financial reporting. We are a small organization with only one employee. Under these circumstances it is impossible to segregate duties. We do not expect our internal controls to be effective until such time as we complete an acquisition of an operating company and even then there are no assurances that our disclosure controls will be adequate in future periods.
Changes in Internal Control over Financial Reporting. There have been no changes in our internal control over financial reporting during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is pursuing a lawsuit against PBT Capital Partners and Prentis Tomlinson in order to effect the benefits of the Asset Purchase Agreement and subsequent agreements, while also remedying any damages and recouping legal costs. The Company believes any award may include the value under the APA, related note and guaranty plus reimbursement for the litigation costs. Trial is set for July 18, 2011. The Company cannot forecast the outcome of the lawsuit.
Item 1A. Risk Factors.
Not applicable for a smaller reporting company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Removed and Reserved
None.
Item 5. Other Information.
None.
Item 6. Exhibits.
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No.
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Description
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31.1
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Rule 13a-14(a)/ 15d-14(a) Certification of Chief Executive Officer
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31.2
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Rule 13a-14(a)/ 15d-14(a) Certification of Chief Financial Officer
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32.1
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Section 1350 Certification of Chief Executive Officer and Chief Financial Officer
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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.
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STANDARD DRILLING, INC.
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May 16, 2011
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By: /s/ David S. Rector
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David S. Rector, Chief Executive Officer, Chief Financial Officer
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