Attached files
| file | filename |
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| EXCEL - IDEA: XBRL DOCUMENT - Texas South Energy, Inc. | Financial_Report.xls |
| EX-32.1 - Texas South Energy, Inc. | ex32-1.htm |
| EX-31.1 - Texas South Energy, Inc. | ex31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 4
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: October 31, 2013
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File No. 333-171064
TEXAS SOUTH ENERGY, INC.
(Exact name of the issuer as specified in its charter)
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Nevada
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99-0362471
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(State or Other Jurisdiction of incorporation or organization)
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(I.R.S. Employer I.D. No.)
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3 Riverway, Suite 1800
Houston, Texas 77056
(Address of Principal Executive Offices)
(713) 209-2950
(Issuer’s Telephone Number)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes [ ] No [X]
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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.
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 [X]
Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company:
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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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[X]
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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 [X]
State the aggregate market value of the voting and non-voting common stock held by non-affiliates computed by reference to the price at which the common stock was last sold, or the average bid and asked price of such common stock, as of the last business day of the Registrant’s most recently completed second fiscal quarter.
The market value of the voting stock held by non-affiliates was $14,424,301 based on 46,530,004 shares held by non-affiliates. These computations are based upon the closing bid price of $0.31 for the common stock of the Company on the OTC Bulletin Board of the Financial Industry Regulatory Authority, Inc. (“FINRA”) on January 31, 2014.
Indicate the number of shares outstanding of each of the Registrant’s classes of common equity, as of the latest practicable date:
|
Outstanding as of January 31, 2014
|
||
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Common Capital Voting Stock, $0.001 par value per share
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295,530,004
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EXPLANATORY NOTE
Texas South Energy, Inc. (the “Company,” “we,” or “our” unless the context indicates otherwise) is filing this Amendment No. 4 on Form 10-K (this “Amendment”) to our Annual Report on Form 10-K for the twelve months ended October 31, 2013, as filed on February 13, 2014 (the “Original Filing”), as amended by Amendment No. 1 thereto filed on March 24, 2014 (“First Amendment”), and as amended by Amendment No. 2 thereto filed on April 8, 2014 (“Second Amendment”), and as amended by Amendment No. 3 thereto filed on April 17, 2014 (“Third Amendment,” collectively with the First Amendment and Second Amendment, the “Amendments”), to correct the following:
The report of independent auditors has been revised to clarify that M&K CPAS, PLLC audited the Company’s balance sheets as of October 31, 2012 and 2011 and the related statements of operations, changes in stockholders' deficit, and cash flows for the years ended October 31, 2012 and 2011 and for the period from March 15, 2010 (inception) through October 31, 2012.
This Amendment No. 4 on Form 10-K/A only amends the Original Filing and the Amendments as noted above. This Amendment No. 4 does not affect any other parts of or exhibits to the Original Filing or the Amendments. Except for the amendments described above, this Amendment No. 4 on Form 10-K/A continues to describe conditions as of the date of the Original Filing, and the disclosures contained herein have not been updated to reflect events, results or developments that occurred after the Original Filing, or to modify or update those disclosures affected by subsequent events. Among other things, forward-looking statements made in the Original Filing or Amendments have not been revised to reflect events, results or developments that occurred or facts that became known to us after the date of the Original Filing or Amendments, and such forward-looking statements should be read in their historical context.
1
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Texas South Energy, Inc.
[Formerly Known as Inka Productions Corp.]
[A Development Stage Company]
TABLE OF CONTENTS
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Page
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Report of Independent Registered Public Accounting Firm
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3
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Report of Independent Registered Public Accounting Firm
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4
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Balance Sheets - October 31, 2013 and 2012
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5
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Statements of Operations for the Years Ended October 31, 2013 and 2012 and for the period from inception [March 15, 2010] through October 31, 2013
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6
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Statements of Stockholders’ Equity for the period from inception [March 15, 2010] through October 31, 2013
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7
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Statements of Cash Flows for the Years Ended October 31, 2013 and 2012 and for the period from inception [March 15, 2010] through October 31, 2013
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8
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Notes to the Financial Statements
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9 - 12
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2
10260 Westheimer Road, Suite 310
Houston, TX 77042
Phone: (713) 800-4343 Fax: (713) 456-2408
Report of Independent Registered Public Accounting Firm
To the Board of Directors of
Texas South Energy, Inc.
(formerly Inka Productions Corp.)
(A Development Stage Company)
Houston, Texas
We have audited the accompanying balance sheet of Texas South Energy, Inc (formerly Inka Productions Corp.) (the “Company”) as of October 31, 2013, and the related statements of operations, stockholders' deficit, and cash flows for the year ended October 31, 2013 and for the period from March 15, 2010 (inception) through October 31, 2013. 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 audit. We did not audit the balance sheet as of October 31, 2012, or the statements of operations, stockholders’ deficit and cash flows for the year then ended and for the period from March 15, 2010 (inception) to October 31, 2012, which totals reflected a deficit of $55,895 accumulated during the development stage. Those financial statements and cumulative totals were audited by other auditors whose report dated February 12, 2013, expressed an unqualified opinion on those statements and cumulative totals, and included an explanatory paragraph regarding the Company’s ability to continue as a going concern. Our opinion, insofar as it relates to amounts included for that period is based on the report of other independent auditors, mentioned above.
We conducted our audit 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 audit provides 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 Texas South Energy, Inc (formerly Inka Productions Corp.) as of October 31, 2013, and the results of its operations and its cash flows for the year ended October 31, 2013 and for the period from March 15, 2010 (inception) through October 31, 2013 in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 3 to the financial statements, the Company's absence of significant revenues, recurring losses from operations, and its need for additional financing in order to fund its projected loss in 2014 raise substantial doubt about its ability to continue as a going concern. The 2013 financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ LBB & Associates Ltd., LLP
LBB & Associates Ltd., LLP
Houston, Texas
February 10, 2014
3
To the Board of Directors
Inka Productions Corp.
(A Development Stage Company)
We have audited the accompanying balance sheets of Inka Productions Corp. (a development stage company) as of October 31, 2012 and 2011 and the related statements of operations, changes in stockholders' deficit, and cash flows for the years ended October 31, 2012 and 2011 and for the period from March 15, 2010 (inception) through October 31, 2012. 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 Inka Productions Corp. as of October 31, 2012 and 2011, and the results of its operations and cash flows for the periods described above in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has insufficient working capital, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ M&K CPAS, PLLC
www.mkacpas.com
Houston, Texas
February 12, 2013
4
Texas South Energy, Inc.
[Formerly Known as Inka Productions Corp.]
[A Development Stage Company]
BALANCE SHEETS
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October 31, 2013
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October 31, 2012
|
|||||||
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ASSETS
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||||||||
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CURRENT ASSETS
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||||||||
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Cash
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$
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374,086
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$
|
540
|
||||
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Prepaid expenses
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10,838
|
-
|
||||||
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TOTAL CURRENT ASSETS
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$
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384,924
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$
|
540
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||||
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CURRENT LIABILITIES
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||||||||
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Accounts payable and accrued liabilities
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$
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27,677
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$
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21,481
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||||
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Accrued expenses
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3,030,244
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-
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||||||
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Due to related party (Note 5)
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52,152
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31,954
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||||||
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TOTAL CURRENT LIABILITIES
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3,110,073
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$
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53,435
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|||||
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Commitments
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||||||||
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STOCKHOLDERS’ DEFICIT
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||||||||
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Preferred stock
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||||||||
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50,000,000 shares preferred stock authorized, none issued and outstanding
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||||||||
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Common stock (Note 4)
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||||||||
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950,000,000 shares common stock authorized, $0.001 par value, 198,000,000 and 24,000,000 shares of common stock issued and outstanding, for October 31, 2013 and 2012, respectively
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198,000
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24,000
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||||||
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Additional paid in capital
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(134,278
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)
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(21,000
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)
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||||
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Additional paid in capital – shares to be issued
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1,174,000
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-
|
||||||
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Deficit accumulated during the development stage
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(3,962,871
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)
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(55,895
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)
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||||
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Total Stockholders’ Deficit
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(2,725,149
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)
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(52,895
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)
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||||
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TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
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$
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384,924
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$
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540
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||||
The accompanying notes are an integral part of these financial statements
5
[Formerly Known as Inka Productions Corp.]
[A Development Stage Company]
STATEMENTS OF OPERATIONS
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Year ended
October 31, 2013
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Year ended
October 31, 2012
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March 15, 2010 (date of Inception)
to October 31, 2013
|
||||||||||
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EXPENSES
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||||||||||||
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General & administrative expenses
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$
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3,906,976
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$
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33,079
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$
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(3,962,871
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)
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|||||
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NET LOSS
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$
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(3,906,976
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)
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$
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(33,079
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)
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$
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(3,962,871
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)
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|||
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BASIC AND DILUTED NET LOSS PER COMMON SHARE
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$
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(0.10
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)
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$
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(0.00
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)
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||||||
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Weighted average number of common shares outstanding – basic and diluted
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38,194,521
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24,000,000
|
||||||||||
The accompanying notes are an integral part of these financial statements
6
[Formerly Known as Inka Productions Corp.]
[A Development Stage Company]
STATEMENTS OF STOCKHOLDERS’ DEFICIT
FROM INCEPTION (March 15, 2010) TO OCTOBER 31, 2013
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Common Stock
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||||||||||||||||||||||||
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Number of shares
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Amount
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Additional Paid-in Capital
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Additional
Paid-in
Capital
Shares to be Issued
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Deficit Accumulated During the Development Stage
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Total
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|||||||||||||||||||
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Founder’s shares
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15,000,000
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$
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15,000
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$
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(15,000
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)
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$
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-
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$
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-
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$
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-
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||||||||||||
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Stock issued for cash at $0.003 per share
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9,000,000
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9,000
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(6,000
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)
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-
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-
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3,000
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|||||||||||||||||
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Net Loss for the year ended October 31, 2010
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-
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-
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-
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-
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(13,189
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)
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(13,189
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)
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||||||||||||||||
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Balance, October 31, 2010
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24,000,000
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24,000
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(21,000
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)
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-
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(13,189
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)
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(10,189
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)
|
|||||||||||||||
|
Net Loss for the year ended October 31, 2011
|
-
|
-
|
-
|
-
|
(9,627
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)
|
(9,627
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)
|
||||||||||||||||
|
Balance, October 31, 2011
|
24,000,000
|
24,000
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(21,000
|
)
|
-
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(22,816
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)
|
(19,816
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)
|
|||||||||||||||
|
Net Loss for the year ended October 31, 2012
|
-
|
-
|
-
|
-
|
(33,079
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)
|
(33,079
|
|||||||||||||||||
|
Balance, October 31, 2012
|
24,000,000
|
24,000
|
(21,000
|
)
|
-
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(55,895
|
)
|
(52,895
|
)
|
|||||||||||||||
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Imputed interest
|
-
|
-
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2,722
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-
|
-
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2,722
|
||||||||||||||||||
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Stock issued for services rendered
|
69,000,000
|
69,000
|
(46,000
|
)
|
-
|
-
|
23,000
|
|||||||||||||||||
|
Stock issued for cash at $0.003 per share
|
105,000,000
|
105,000
|
(70,000
|
)
|
-
|
-
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35,000
|
|||||||||||||||||
|
Stock sold for cash – to be issued
|
-
|
-
|
-
|
1,174,000
|
-
|
1,174,000
|
||||||||||||||||||
|
Net Loss for the year ended October 31, 2013
|
-
|
-
|
-
|
-
|
(3,906,976
|
)
|
(3,906,976
|
)
|
||||||||||||||||
|
Balance, October 31, 2013
|
198,000,000
|
$
|
198,000
|
$
|
(134,278
|
)
|
$
|
1,174,000
|
$
|
(3,962,871
|
)
|
$
|
(2,725,149
|
)
|
||||||||||
The accompanying notes are an integral part of these financial statements
7
[Formerly Known as Inka Productions Corp.]
[A Development Stage Company]
STATEMENTS OF CASH FLOWS
|
Year ended October 31, 2013
|
Year ended October 31, 2012
|
March 15,
2010 (date of Inception) through
October 31, 2013
|
||||||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||||||
|
Net loss
|
$
|
(3,906,976
|
)
|
$
|
(33,079
|
)
|
$
|
(3,962,871
|
)
|
|||
|
Adjustment to reconcile net loss to net cash provided by (used in) operating activities
|
||||||||||||
|
Non-cash interest
|
2,722
|
-
|
2,722
|
|||||||||
|
Stock compensation expense
|
23,000
|
-
|
23,000
|
|||||||||
|
Changes in operating assets and liabilities:
|
||||||||||||
|
Increase in prepaid expenses
|
(10,838
|
)
|
-
|
(10,838
|
)
|
|||||||
|
Increase in accounts payable and accrued liabilities
|
3,036,440
|
5,355
|
3,057,921
|
|||||||||
|
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
(855,652
|
)
|
(27,724
|
)
|
(890,066
|
)
|
||||||
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||||||
|
Proceeds from sale of common stock (issued)
|
35,000
|
-
|
35,000
|
|||||||||
|
Proceeds from sale of common stock (to be issued)
|
1,174,000
|
-
|
1,177,000
|
|||||||||
|
Increase in due to related party
|
20,198
|
20,361
|
52,152
|
|||||||||
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
1,229,198
|
20,361
|
1,264,152
|
|||||||||
|
NET INCREASE (DECREASE) IN CASH
|
373,546
|
(7,363
|
)
|
374,086
|
||||||||
|
CASH, BEGINNING OF PERIOD
|
540
|
7,903
|
-
|
|||||||||
|
CASH, END OF PERIOD
|
$
|
374,086
|
$
|
540
|
$
|
374,086
|
||||||
|
Supplemental cash flow information and noncash financing activities:
|
||||||||||||
|
Cash paid for:
|
||||||||||||
|
Interest
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
|
Income taxes
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
The accompanying notes are an integral part of these financial statements
8
Texas South Energy, Inc.
[Formerly Known as Inka Productions Corp.]
[A Development Stage Company]
October 31, 2013
NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Texas South Energy, Inc., formerly known as “Inka Productions Corp.”, (the “Company”) was incorporated pursuant to the laws of the State of Nevada on March 15, 2010. The Company had initially intended to commence business operations by producing and performing traditional Peruvian dances both in Peru and the United States. On September 24, 2013, there was a change in control of the Company. On October 7, 2013, the board of directors and majority shareholders of the Company approved an amendment changing the name of the Company to “Texas South Energy, Inc.”. The Company intends to pursue business activities related to the oil and gas industry.
The Company is a development stage company that has limited operating history and has earned no revenues. Since the inception, the company has devoted its activities to the following: developing a business plan, determining the market for the company business activities, developing a business marketing plan and capital formation. Texas South Energy, Inc. (the “Company”), is in the initial development stage and has incurred losses since inception totalling $3,962,871.
The Company has established a fiscal year end of October 31.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.
Use of Estimates and Assumptions
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.
Financial Instruments
The carrying value of the Company's financial instruments approximates their fair value because of the short maturity of these instruments.
Basic and Diluted Net Loss per Share
The Company computes loss per share in accordance with ASC 260, “Earnings per Share” which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. The Company has no potential dilutive instruments and accordingly basic loss and diluted loss per share are the same.
Fair Value
In accordance with the requirements of ASC 825 and ASC 820, the Company has determined the estimated fair value of financial instruments using available market information and appropriate valuation methodologies. The fair value of financial instruments classified as current assets or liabilities approximate their carrying value due to the short-term maturity of the instruments.
Income Taxes
The Company has adopted ASC 740 for reporting purposes. As of October 31, 2013 the Company had net operating loss carry forwards of approximately $940,000 that may be available to reduce future years’ taxable income and will expire beginning in 2028. Availability of loss usage is subject to change of ownership limitations under Internal Revenue Code 382. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the future tax loss carryforwards.
9
Net Loss per Share
Basic loss per share includes no dilution and is computed by dividing loss available to common stockholders by the weighted average number of common shares outstanding for the period. Dilutive loss per share reflects the potential dilution of securities that could share in the losses of the Company. Because the Company does not have any potentially dilutive securities, the accompanying presentation is only of basic loss per share.
Stock-based Compensation
The Company has not adopted a stock option plan and has not granted any stock options. Common stock has been granted to numerous third parties for services (see Note 4).
Share Based Expenses
In December 2004, the Financial Accounting Standards Board (“FASB”) issued ASC 718 "Compensation - Stock Compensation" and 505-50 “Equity-Based Payments to Non-Employees.” This statement requires a public entity to expense the cost of employee services received in exchange for an award of equity instruments. This statement also provides guidance on valuing and expensing these awards, as well as disclosure requirements of these equity arrangements. The Company adopted ASC 718 and 505-50 upon creation of the company and expenses share based costs in the period incurred.
Recent Accounting Pronouncements
In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income , to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to:
|
- Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and
|
|
|
- Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.
|
The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Early adoption is permitted. The adoption of ASU No. 2013-02 is not expected to have a material impact on our financial position or results of operations.
In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013-01 is not expected to have a material impact on our financial position or results of operations.
In October 2012, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2012-04, ''Technical Corrections and Improvements" in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations.
In August 2012, the FASB issued ASU 2012-03, "Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)" in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a material impact on our financial position or results of operations.
In July 2012, the FASB issued ASU 2012-02, "Intangibles -Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment" in Accounting Standards Update No. 2012-02. This update amends ASU 2011-08, Intangibles -Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment and permits an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles -Goodwill and Other -General Intangibles Other than Goodwill. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity's financial statements for the most recent annual or interim period have not yet been issued or, for non-public entities, have not yet been made available for issuance. The adoption of ASU 2012-02 is not expected to have a material impact on our financial position or results of operations.
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NOTE 3 – GOING CONCERN
The Company’s financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Currently, the Company does not have sufficient cash nor material assets, nor does it have operations or a source of revenue sufficient to cover its operation costs and allow it to continue as a going concern. The Company has accumulated losses since Inception (March 15, 2010) through October 31, 2013, of $3,962,871. The Company will be dependent upon the raising of additional capital through placement of our common and/or preferred stock in order to implement its business plan, or merge with an operating company. There can be no assurance that the Company will be successful in either situation in order to continue as a going concern. The Company is funding its initial operations by way of issuing common shares. As of October 31, 2013, the Company had issued 137,480,004 at $0.003 per share, for net funds to the Company of $1,212,000. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
NOTE 4 – CAPITAL STOCK
On March 15, 2010, a director of the Company was issued 15,000,000 Founder’s shares of the common stock in the Company at $0.0003 per share in exchange for services rendered. No cash was paid for the founder’s shares.
During March 2010, the Company sold 9,000,000 shares of common stock at $0.0003 per share for $3,000 cash.
On September 24, 2013, the Company issued 69,000,000 shares of common stock to James Askew, the Company’s Chief Executive Officer and sole Director, for services rendered. The stock was valued at $23,000.
On October 4, 2013, the Company sold 105,000,000 shares of common stock at $0.0003 for $35,000 cash.
On October 7, 2013, the Company’s board of directors and majority shareholders approved increasing the number of the Company’s authorized common shares from 75,000,000 to 950,000,000, the issuance of 50,000,000 shares of blank check preferred stock, and effecting a 3-for-1 forward stock split of the Company’s common stock. Pursuant to the 3-for-1 common stock split, the Company issued two additional shares of common stock for each issued share of the Company’s common stock outstanding prior to the forward split. The 3-for-1 forward split became effective November 12, 2013. The forward split has been shown retroactively. No preferred shares have been issued.
During October 2013, the Company received cash and subscriptions to purchase 23,480,004 shares of common stock at $0.05 per share for $1,174,000 cash. The shares were unissued as of October 31, 2013, and are reflected in the financial statements as “Additional Paid in Capital – Shares to be issued”. The shares were subsequently issued in November 2013.
As of October 31, 2013, the Company has not granted any stock options.
NOTE 5 – RELATED PARTY TRANSACTIONS
As of October 31, 2013 the Company had received advances from a prior Director in the amount of $52,152 ($31,954 at October 31, 2012). The amounts due to the related party remain existing, unsecured due on demand and non-interest bearing with no set terms of repayment. Imputed interest of $2,722 was recorded as donated capital during the twelve months ended October 31, 2013.
On September 27, 2013, the Company entered into a one-year employment agreement with its Director and Chief Executive Officer James Askew. The agreement provides for a one-time issuance of 69,000,000 shares of common stock, a $75,000 cash signing bonus, and $35,000 cash compensation per month.
On October 30, 2013 the board authorized a bonus to the Chief Executive Officer of $600,000.
NOTE 6 - INCOME TAXES
The Company follows ASC 740. Deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carry-forwards. No net provision for refundable Federal income tax has been made in the accompanying statement of loss because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carry-forward has been recognized, as it is not deemed likely to be realized.
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The provision for refundable federal income tax consists of the following for the periods ending:
|
October 31, 2013
|
October 31, 2012
|
|||||||
|
Federal income tax benefit attributed to:
|
||||||||
|
Net operating loss
|
$
|
300,000
|
$
|
11,000
|
||||
|
Valuation allowance
|
(300,000
|
)
|
(11,000
|
)
|
||||
|
Net benefit
|
$
|
-
|
$
|
-
|
||||
|
October 31, 2013
|
October 31, 2012
|
|||||||
|
Deferred tax attributed:
|
||||||||
|
Net operating loss carryover
|
$
|
319,000
|
$
|
19,000
|
||||
|
Less: change in valuation allowance
|
(319,000
|
)
|
(19,000
|
)
|
||||
|
Net deferred tax asset
|
$
|
-
|
$
|
-
|
||||
At October 31, 2013, the Company had an unused net operating loss carry-forward approximating $940,000 that is available to offset future taxable income; the loss carry-forward will start to expire in 2028.
NOTE 7 – FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company adopted the FASB standard related to fair value measurement at inception. The standard defines fair value, establishes a framework for measuring fair value and expands disclosure of fair value measurements. The standard applies under other accounting pronouncements that require or permit fair value measurements and, accordingly, does not require any new fair value measurements. The standard clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The recorded values of long-term debt approximate their fair values, as interest approximates market rates. As a basis for considering such assumptions, the standard established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows.
Level 1. Observable inputs such as quoted prices in active markets;
Level 2. Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3. Unobservable inputs in which there is little or no market data, which require the entity to develop its own assumptions.
The Company’s financial instruments are cash, accounts receivable, and accounts payable. The recorded values of cash, accounts receivable, and accounts payable approximate their fair values based on their short-term nature.
NOTE 8 – COMMITMENTS AND CONTINGENCIES
In September 2013, the Company entered into a one-year employment arrangement with Mr. Askew, providing for a monthly salary of $35,000 and a sign-on bonus of $75,000. Mr. Askew was also issued 69,000,000 share of our common stock (after giving effect to the 3-for-1 forward split effected in November 2013) for services rendered. In October 2013, the Company awarded a $600,000 bonus to James M. Askew, Chief Executive Officer of the Company for his success in raising capital for the Company prior to October 31, 2013 (this bonus is in addition to the compensation set forth in section 4 of Mr. Askew’s employment agreement).
On October 11, 2013, the Company entered into a one-year consulting agreement with John B. Connally, III. The agreement provides for a one-time issuance of 60,000,000 shares of common stock, a $25,000 cash signing bonus, and $10,000 cash compensation per month. As of October 31, 2013, the stock had not been issued and the associated expense was accrued for $3,000,000.
On November 12, 2013, the Company issued 3,000,000 shares of common stock to a third party for services rendered. The stock was valued at $150,000.
On November 12, 2013, the Company issued 60,000,000 shares of common stock to John B. Connally III, pursuant to the aforementioned consulting agreement (see Note 8 above).
On November 26, 2013, the Company issued 23,480,004 shares of common stock related to cash and subscriptions received during October 2013 (see Note 4 above).
During November 2013 through January 2014, the Company sold 9,050,000 shares of common stock at $0.05 per share for $452,500.
On January 22, 2014, the Company entered into a Contract for Sale with the owner of mineral interests in 86.69 acres in Lavaca County, Texas pursuant to which the Company acquired a 37.5% interest in the Acreage’s mineral rights, including the oil and gas rights. The Company paid the seller $270,000 in cash and issued the seller 2,000,000 shares of the Company’s common stock, valued at $100,000. Management valued the shares at $0.05 per share based on its recent sales of common stock.
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PART IV
ITEM 15: EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Exhibits. The following exhibits are filed as part of this Annual Report:
|
Exhibit No.
|
Description
|
|
Amended and Restated Articles of Incorporation of Texas South Energy, Inc. incorporated by reference to Exhibit 3.1 of the Company’s Form 8-K filed November 27, 2013.
|
|
|
3.2
|
Amended and Restated Bylaws of Texas South Energy, Inc. incorporated by reference to Exhibit 3.2 of the Company’s Form 8-K filed November 12, 2013.
|
|
4.1
|
Common Stock Specimen.
|
|
10.1* (1)
|
Employment Agreement, by and between the Company and James M. Askew.
|
|
10.2 (1)
|
Consulting Agreement by and between the Company and John Connally.
|
|
10.3
|
Contract For Sale, dated effective January 22, 2014, incorporated by reference to Exhibit 10.1 of Form 8-K filed January 27, 2014.
|
|
10.4 (1)
|
Form of Subscription Agreement.
|
|
14.1 (1)
|
Code of Ethics.
|
|
16.1
|
Letter of M&K CPAS, PLLC to the SEC dated January 30, 2014, incorporated by reference to Exhibit 16.1 of Form 8-K filed January 30, 2014.
|
|
31.1 (1)
|
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)
|
|
32.1 (1)
|
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 18 U.S.C. Section 1350, adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101
|
The following financial information from our Annual Report on Form 10-K for the year ended September 30, 2013 formatted in Extensible Business Reporting language (XBRL); (i) Condensed Balance Sheets, (ii) Condensed Statements of Operations, (iii) Condensed Statements of Cash Flows and (iv) Notes to the Condensed Financial Statements (2)
|
* Management contract or compensatory plan or arrangement.
|
(1)
|
Filed herewith.
|
|
(2)
|
Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
|
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Texas South Energy, Inc.
|
Date:
|
April 24, 2014
|
By:
|
/s/ James M. Askew
|
|
|
James M. Askew
|
||||
|
Chief Executive Officer,
Principal Financial Officer, and Sole Director
|
14