UNITED STATES

 SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the quarterly period ended June 30, 2014

 

[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

For the transition period from __________ to ___________

 

Commission File Number 000-54035

 

 

NOGAL ENERGY, INC.

(Exact name of small business issuer in its charter)

Nevada		20-4952339
(State or other jurisdiction of		(IRS Employer Identification No.)
incorporation or organization)

 

1610 Woodstead Court, Suite 330, The Woodlands, TX 77380

(Address of principal executive offices)

 

(844) 266-8263

(Telephone Number) 

 

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  [X]

No  [_]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§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  [X]

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.  

 

	Large accelerated filer [_]	Accelerated Filer [_]
	Non-accelerated filer   [_]	Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes  [_]

No  [X]

 

There were 16,834,415 shares of Common Stock outstanding as of October 15, 2014.

 

PART I – FINANCIAL INFORMATION

 

Item 1.	Financial Statements
				Page
	Balance Sheets – June 30, 2014 (Unaudited) and December 31, 2013			1
	Statements of Operations -
		Three and Six months ended June 30, 2014 and 2013 (Unaudited)		2
	Statements of Shareholders’ Deficit -
		Six months ended June 30, 2014 (Unaudited) and year ended December 31, 2013		3
	Statements of Cash Flows –
		Six months ended June 30, 2014 and 2013 (Unaudited)		4
	Condensed Notes to the Financial Statements			5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			8
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
	– Not Applicable			9
Item 4.	Controls and Procedures			9
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings			10
Item 1A.	Risk Factors			10
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds			10
Item 3.	Defaults Upon Senior Securities			10
Item 4.	Mine Safety Disclosures			10
Item 5.	Other Information			10
Item 6.	Exhibits			10
SIGNATURES				11

 

Item 1.  Financial Statements

 

NOGAL ENERGY, INC.
BALANCE SHEETS
			June 30, 2014				December 31, 2013
			(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	—			$	—
Total current assets			—				—
Total assets		$	—			$	—
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities		$	396,990			$	380,790
Accounts payable and accrued liabilities - related party			146,898				116,857
Notes payable			20,000				20,000
Notes payable - related party			179,352				179,352
Line of credit			97,500				97,500
Convertible notes payable			100,000				100,000
Accrued interest			188,472				158,260
Accrued interest - related party			16,406				11,025
Total current liabilities			1,145,618				1,063,784
Total liabilities			1,145,618				1,063,784
Commitments and Contingencies
Shareholders' deficit:
Common stock par value $0.001, 1,000,000,000 shares authorized,
16,834,415 issued and outstanding			16,834				16,834
Additional paid-in-capital			3,738,969				3,738,969
Accumulated deficit			(4,901,421	)			(4,819,587	)
Total shareholders' deficit			(1,145,618	)			(1,063,784	)
Total liabilities and shareholders' deficit		$	—			$	—
(See accompanying notes to the financial statements)

 

NOGAL ENERGY, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
		Three Months Ended				Three Months Ended				Six Months Ended				Six Months Ended
		June 30, 2014				June 30, 2013				June 30, 2014				June 30, 2013
Operating expenses:
Professional fees		$	20,000			$	59,007			$	46,241			$	91,547
General and administrative expenses			—				4,464				—				9,227
Total operating expenses			20,000				63,471				46,241				100,774
Other income / (expense):
Interest expense			(15,408	)			(15,822	)			(30,212	)			(24,964	)
Interest expense - related party			(2,690	)			—				(5,381	)			—
Total other income / (expense)			(18,098	)			(15,822	)			(35,593	)			(24,964	)
Net loss		$	(38,098	)		$	(79,293	)		$	(81,834	)		$	(125,738	)
Per share information:
Basic and diluted loss per common share		$	(0.00	)		$	(0.04	)		$	(0.00	)		$	(0.07	)
Weighted average shares outstanding			16,834,415				1,834,415				16,834,415				1,834,415
(See accompanying notes to the financial statements)

 

NOGAL ENERGY, INC.
STATEMENT OF SHAREHOLDERS' DEFICIT
																		Total
			Common Stock								Additional				Accumulated				Stockholders' Equity
			Shares				Amount				Paid-in-Capital				Deficit				(Deficit)
Balances at December 31, 2012			1,834,415			$	1,834			$	3,145,040			$	(4,125,275	)		$	(978,401	)
Stock compensation expense			—				—				8,929				—				8,929
Common stock issued for services			15,000,000				15,000				585,000								600,000
Net loss			—				—				—				(694,312	)			(694,312	)
Balances at December 31, 2013			16,834,415				16,834				3,738,969				(4,819,587	)			(1,063,784	)
Net loss			—				—				—				(81,834	)			(81,834	)
Balances at June 30, 2014 (Unaudited)			16,834,415			$	16,834			$	3,738,969			$	(4,901,421	)		$	(1,145,618	)
(See accompanying notes to the financial statements)

 

NOGAL ENERGY, INC.
STATEMENTS OF CASHFLOWS
			Six Months Ended				Six Months Ended
			June 30, 2014				June 30, 2013
Cash flows used in operating activities:
Net loss		$	(81,834	)		$	(125,738	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Stock compensation			—				8,929
Changes in assets and liabilities:
Accounts payable and accrued liabilities			16,200				39,531
Accounts payable and accrued liabilities- related party			30,041				—
Accrued interest			30,212				24,964
Accrued interest - related party			5,381				—
Net cash used in operating activities			—				(52,314	)
Cash flows from financing activities:
Proceeds from issuance of short term notes - related party			—				52,137
Net cash provided by financing activities			—				52,137
Net decrease in cash and cash equivalents			—				(177	)
Cash and cash equivalents at the beginning of the period			—				177
Cash and cash equivalents at the end of the period		$	—			$	—
Supplemental disclosures of cash flow information:
Cash paid for interest expense		$	—			$	—
Cash paid for income taxes		$	—			$	—
(See accompanying notes to the financial statements)

 

 

NOGAL ENERGY, INC.

CONDENSED NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2014

 

Organization – Nature of Operations

 

Nogal Energy, Inc. (the “Company” or “Nogal”) was incorporated under the laws of the State of Nevada on May 19, 2006, as Coastal Media Inc.  The Company was originally formed to engage in the business of manufacturing, marketing, distributing and selling its marine DVDs.  

 

On September 11, 2008, the Company amended its Articles of Incorporation to change its name from "Coastal Media Inc." to "Blugrass Energy, Inc.", to reflect the change in direction of the Company’s business to the Oil and Gas Industry. As a result of the name change, the Company’s trading symbol was changed to “BLUG”.

 

On February 23, 2011, Petro Grande, LLC (“Petro Grande”) consummated a transaction with Blugrass whereby Petro Grande acquired a controlling interest in Blugrass.  This transaction effected a change of control and Blugrass’ management team was replaced with Petro Grande’s management team.  Upon the reverse merger on February 23, 2011 the inception date of the Company changed to December 11, 2007, the date of the acquisition of the lease by Petro Grande, LLC.

 

On July 17, 2013, the Company amended its Articles of Incorporation to change its name from “Blugrass Energy, Inc.” to “Nogal Energy, Inc.”.

 

On July 17, 2013, the Company filed a Certificate of Change regarding a 1 for 200 shares reverse stock split. The split was effective August 12, 2013, and in September the stock symbol changed to “NGLE”. The accompanying financial statements reflect retroactive application of the split.

 

On August 9, 2013 the Company issued 15,000,000 shares of common stock as compensation for services. The issuance resulted in change of control of the Company.

 

On June 12, 2014, the Company filed a Certificate of Amendment to change its name from “Nogal Energy, Inc. to “Novamex Energy, Inc.” This action will become effective once processed by FINRA. On July 7, 2014, the Company filed an Amendment to its Articles of Incorporation to change the structure of authorized capital. This action will become effective 20 days after the Definitive Information Statement is mailed to shareholders.

 

Basis of Presentation

 

The Financial Statements are unaudited. As permitted under the Securities and Exchange Commission (“SEC”) requirements for interim reporting, 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 omitted. We believe that these financial statements include all necessary and recurring adjustments for the fair presentation of the interim period results. These financial statements should be read in conjunction with the Financial Statements and related notes included in our annual report on Form 10-K for the fiscal year ended December 31, 2013. The results of operations for the three and six months ended June 30, 2014, are not necessarily indicative of the results to be expected for the year ending December 31, 2014.

 

Summary of Significant Accounting Policies

 

Use of Estimates – The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the reporting periods. 

 

NOGAL ENERGY, INC.

CONDENSED NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2014

 

Cash and Cash Equivalents – The Company considers all highly-liquid investments with a maturity of three months or less, when purchased, to be cash equivalents.

 

Loss Per Share - Loss per share requires dual presentation of basic and diluted earnings or loss per share (“EPS”) with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.

 

Fair Value of Financial Instruments - The Company calculates the fair value of its assets and liabilities which qualify as financial instruments and includes this information in the notes to financial statements when the fair value is different than the carrying value of those financial instruments.  The estimated fair value of accounts receivable and accounts payable approximate the carrying amounts due to the relatively short maturity of these instruments.  The carrying value of short and long-term debt also approximates fair value since these instruments bear market rates of interest.  None of these instruments are held for trading purposes.

 

Going Concern

 

The Company’s financial statements for the three and six months ended June 30, 2014, have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company reported a net loss of $81,834 for the six months ended June 30, 2014, and an accumulated deficit of $4,901,421 as of June 30, 2014.  At June 30, 2014, the Company had a working capital deficit of $1,145,618, and the Company had no revenues from its activities during the six months ended June 30, 2014.

 

The Company’s ability to continue as a going concern may be dependent on the success of management’s plan. The financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

During the 2014 fiscal year, the Company intends to continue its efforts to acquire, merge, or purchase oil field services companies. The Company intends to continue to raise funds to support the efforts through the sale of equity and/or debt securities.

 

To the extent the Company’s operations are not sufficient to fund the Company’s capital requirements, the Company may attempt to enter into a revolving loan agreement with financial institutions or attempt to raise capital through the sale of additional capital stock or through the issuance of debt. At the present time, the Company does not have a revolving loan agreement with any financial institution nor can the Company provide any assurance that it will be able to enter into any such agreement in the future or be able to raise funds through the further issuance of debt or equity in the Company.

 

Notes Payable

 

On May 12, 2011 the Company issued an unsecured note payable in the amount of $20,000 (the “Ladner Note”).  The Ladner Note matured on August 31, 2011, and is considered to be in default.  The note includes a “bonus payment” of $2,500 due at maturity. As of June 30, 2014 and December 31, 2013, balances of accrued interest were $12,589 and $9,797, respectively.

 

NOGAL ENERGY, INC.

CONDENSED NOTES TO THE FINANCIAL STATEMENTS

JUNE 30, 2014

 

Line of Credit

 

On October 7, 2011, the Company entered into an unsecured Line of Credit with a third party for up to $100,000.  The Line of Credit carries an interest rate of 12% per annum on amounts outstanding and matured on October 7, 2012.  The Line of Credit is in default, the interest rate on the Line of Credit is the lower of 14% per annum or the maximum amount allowed by law.  As of June 30, 2014 and December 31, 2013, the Company had $97,500 outstanding under the Line of Credit, which is considered to be in default. As of June 30, 2014 and December 31, 2013, balances of accrued interest were $32,867 and $21,700, respectively.

 

Convertible Promissory Notes

 

As of June 30, 2014 Convertible Promissory Notes totaling $100,000 were in default and, accordingly, accrued interest at a rate of 18%.  As of June 30, 2014 and December 31, 2013, balances of accrued interest were $143,016 and $122,248, respectively.

 

Related Party Transactions

 

On November 19, 2012, the Company issued an unsecured promissory note to Excellere Capital Group LLC in the amount of $25,000 (the “$25K Excellere Note”). The $25,000 Excellere Note accrues interest at the rate of 6% per annum. The maturity of the $25,000 Excellere Note has been extended to December 31, 2014.

 

On November 19, 2012, the Company issued an unsecured promissory note to Excellere Capital Group LLC in the amount of $102,215 (the “$102,215 Excellere Note”). The $102,215 Excellere Note accrues interest at the rate of 6% per annum. The maturity of the $102,215 Excellere Note has been extended to December 31, 2014.

 

On March 10, 2013, the Company issued an unsecured promissory note to Excellere Capital Group LLC in the amount of $52,137 (the “$52,137 Excellere Note”). The $52,137 Excellere Note accrues interest at the rate of 6% per annum. The maturity of the $52,137 Excellere Note has been extended to December 31, 2014.

 

As of June 30, 2014 and December 31, 2013, principal balance of the Excellere Notes was $179,352; balances of accrued interest were $16,406 and $11,025, respectively.

 

On August 9, 2013, the Company issued 15,000,000 shares of Common Stock, as compensation for consulting services, to Excellere Capital Group, LLC. Transaction was valued at $600,000, based on the closing price of the stock on the date of issue. The issuance resulted in change of control of the Company, with Excellere Capital Group, LLC being an 89.1% owner of the Company’s Common Stock on the date of issue.

 

In accordance with agreements, upon the change in control, certain debt to previous owners, officers and directors was forgiven. $127,867 of Accounts payable – related party, $17,851 of Accounts payable and accrued liabilities, and $4,707 of accrued interest, were written off on August 9, 2013. $8,420 of Other receivable were offset against the write-off.

 

During the six months ended June 30, 2014 and 2013, the Company borrowed $30,041 and $21,450, respectively, from related party in order to pay current expenses. As of June 30, 2014 and December 31, 2013, balances of accounts payable – related party were $146,898 and $116,857, respectively.

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains forward-looking statements. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements within the meaning of Section 21E of the Securities Exchange Act. The words “believes”, “anticipates”, “plans”, “seeks”, “expects”, “intends” and similar expressions identify some of the forward-looking statements. Forward-looking statements are not guarantees of performance or future results and involve risks, uncertainties and assumptions. The factors discussed elsewhere in this Form 10-Q could also cause actual results to differ materially from those indicated by the Company’s forward-looking statements.  The Company undertakes no obligation to publicly update or revise any forward-looking statements.

 

Business and Plan of Operations

 

General

 

Nogal Energy, Inc. is a publicly held Nevada corporation listed on the OTC under the symbol BLUG.PK.   The Company was incorporated under the laws of the State of Nevada on May 19, 2006 as Coastal Media, Inc.  On September 11, 2008, the Company amended its Articles of Incorporation to change its name to Blugrass Energy, Inc. Upon the reverse merger recapitalization the new inception date is December 11, 2007. On July 17, 2013, the Company amended its Articles of Incorporation to change its name to Nogal Energy, Inc.

 

On July 17, 2013, the Company filed a Certificate of Change regarding a 1 for 200 shares reverse stock split. The split was effective August 12, 2013, and in September the stock symbol changed to “NGLE”.

 

On August 9, 2013, the Company issued 15,000,000 shares of Common Stock, as compensation for consulting services, to Excellere Capital Group, LLC. The issuance resulted in change of control of the Company, with Excellere Capital Group, LLC being an 89.1% owner of the Company’s Common Stock on the date of issue.

 

On June 12, 2014, the Company filed a Certificate of Amendment to change its name from “Nogal Energy, Inc. to “Novamex Energy, Inc.” This action will become effective once processed by FINRA. On July 7, 2014, the Company filed an Amendment to its Articles of Incorporation to change the structure of authorized capital. This action will become effective 20 days after the Definitive Information Statement Pursuant to Section 14c of the Securities Exchange Act of 1934 is mailed to shareholders. We are expecting both actions to become effective by the end of 2014.

 

Business Strategy

 

We continue to seek out opportunities to acquire oil field services companies. However, the ability to consummate these transactions will likely be contingent on our ability to obtain financing.  Our goal is to acquire companies in the oil field services industry through purchase or merger.  To date, we have no revenues and limited capital resources.  Our ability to continue as a going concern will depend on our ability to raise additional debt or equity capital in the near-term. Management continues to attempt to raise additional debt and equity capital and is engaged in discussions with numerous potential capital sources.

 

Plans for 2014

 

During the 2014 fiscal year, the Company intends to acquire, merge, or purchase, oil field services companies. The Company intends to continue to raise funds to support the efforts through the sale of equity, debt securities and other forms of financing.

 

Results of Operations

 

For the Three months Ended June 30, 2014 compared to the Three months Ended June 30, 2013

 

We have no revenues to date.  We incurred operating expenses of $20,000 and $63,471 for the three-month periods ended June 30, 2014 and 2013, respectively.

 

During the three months ended June 30, 2014, we recognized a net loss of $38,098 compared to a net loss of $79,293 for the three months ended June 30, 2013.

 

For the Six months Ended June 30, 2014 compared to the Six months Ended June 30, 2013

 

We incurred operating expenses of $46,241 and $100,774 for the six-month periods ended June 30, 2014 and 2013, respectively.

 

During the six months ended June 30, 2014, we recognized a net loss of $81,834 compared to a net loss of $125,738 for the six months ended June 30, 2013.

 

Liquidity and Capital Resources

 

At June 30, 2014, we had no assets. At June 30, 2014, we had total current liabilities of $1,145,618 consisting of accounts payable totaling $396,990, accrued interest totaling $188,472, notes payable totaling $20,000, line of credit totaling $97,500, $100,000 of convertible promissory notes outstanding, and $342,656 owed to related party.

 

At December 31, 2013, we had no assets. At December 31, 2013, we had total current liabilities of $1,063,784 consisting of accounts payable totaling $380,790, accrued interest totaling $158,260, notes payable totaling $20,000, line of credit totaling $97,500, $100,000 of convertible promissory notes outstanding, and $307,234 owed to related party.

 

During the reporting period, all the operating expenses of the Company were covered by advances from related party. This will continue for the foreseeable future.

 

Our auditors have expressed their doubt about our ability to continue as a going concern unless we are able to generate profitable operations.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not Applicable

 

Item 4.  Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

We conducted an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (Disclosure Controls) as of the end of the period covered by this Form 10-Q. The Disclosure Controls evaluation was conducted under the supervision and with the participation of management, including our Chief Executive Officer. Disclosure Controls are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Exchange Act, such as this Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s (SEC’s) rules and forms. Disclosure Controls are also designed to provide reasonable assurance that such information is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosure.

 

The evaluation of our Disclosure Controls included a review of the controls’ objectives and design, our implementation of the controls and the effect of the controls on the information generated for use in this Form 10-Q. During the course of our evaluation of our internal control over financial reporting, we advised our Board of Directors that we had identified a material weakness as defined under standards established by the Public Company Accounting Oversight Board (United States). A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

 

Our Chief Executive Officer has concluded that as a result of the material weakness, as of the end of the period covered by this Quarterly Report on Form 10-Q, our Disclosure Controls were not effective.

 

Changes in Internal Control Over Financial Reporting

 

There was no change in our internal control over financial reporting that occurred during the three months ended June 30, 2014, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

PART II – OTHER INFORMATION

 

Item 1.  Legal Proceedings.

 

The Company is not currently involved in any legal proceedings and we are not aware of any pending or potential legal actions.

 

Item 1A.  Risk Factors.

 

We are subject to various risks and uncertainties in the course of our business. In addition to the factors discussed elsewhere in this report, you should carefully consider the risks and uncertainties described under Item 1A. Risk Factors filed in our Report on Form 10-K for the period year ended December 31, 2013. There have been no material changes from the risk factors previously disclosed in that Form 10-K.

 

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

 

None

 

Item 3.  Defaults Upon Senior Securities.

 

There were no defaults upon senior securities during the period covered by this report.

 

Item 4.  Mine Safety Disclosures.

 

N/A

 

Item 5.  Other Information.

 

N/A

 

Item 6.  Exhibits.

 

The following documents are filed as part of this report:

 

Exhibit 31.1

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act

 

Exhibit 32.1

Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act

 

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.

 

November 6, 2014

Nogal Energy, Inc. (Registrant)

	By:	/s/ Stephen Bargo
		Stephen Bargo, Chief Executive Officer
	By:	/s/ Stephen Bargo
		Stephen Bargo, Chief Accounting Officer

 

 

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