UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K10-K/A
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20092010
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 000-09047
AMERIGO ENERGY, INC.
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(Exact name of small business issuerSmaller Reporting Company as specified in its charter)
Delaware 20-3454263
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2580 Anthem Village Drive
Henderson, NV 89052
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(Address of principal executive offices)
(Zip Code)
(702) 399-9777
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(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act: None.
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, $0.001 PAR VALUE
(Title if Class)
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 Section 15(d) of the 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.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate website, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T ({section}
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ({section} 229.405 of this chapter) 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.10-K.. [ ]
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.
Large accelerated filer [ ]
Accelerated filer [ ]
Non-accelerated filer [ ]
(Do not check if a smaller reporting company)
Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act)
[ ] Yes [X] No
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable
date. 22,780,05828,955,547 shares of common stock outstanding as of March 31, 2010April 18, 2011
TABLE OF CONTENTS
Part I ................................................................... 2
ITEM 1. DESCRIPTION OF BUSINESS............................................ 3BUSINESS................................................
ITEM 1A. RISK FACTORS...................................................... 4FACTORS..........................................................
ITEM 2. DESCRIPTION OF PROPERTY............................................ 10PROPERTY................................................
ITEM 3. LEGAL PROCEEDINGS.................................................. 14PROCEEDINGS......................................................
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................ 14HOLDERS....................
PART II.................................................................... 15II........................................................................
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS........... 15MATTERS...............
ITEM 6. SELECTED FINANCIAL DATA............................................ 17DATA................................................
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS................................ 17OPERATIONS
ITEM 8. FINANCIAL STATEMENTS............................................... F-2STATEMENTS...................................................
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE................................ 20DISCLOSURE
ITEM 9A(T). CONTROLS AND PROCEDURES........................................ 20PROCEDURES............................................
ITEM 9B. OTHER INFORMATION................................................. 21INFORMATION.....................................................
PART III................................................................... 22III.......................................................................
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE........... 22GOVERNANCE...............
ITEM 11. EXECUTIVE COMPENSATION............................................ 24COMPENSATION................................................
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS....................................... 26MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................... 27TRANSACTIONS........................
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES............................ 28SERVICES................................
PART IV.................................................................... 28IV........................................................................
ITEM 15. EXHIBITS.......................................................... 28
EXHIBITS..............................................................
PART I
Forward-Looking Statements
References in this annual report to "the Company," "we," "us" or "our" are
intended to refer to the Company. This report contains numerous "forward-
looking statements" that involve substantial risks and uncertainties. These
include, without limitation, statements relating to future drilling and
completion of wells, well operations, production, prices, costs and expenses,
cash flow, investments, business strategies and other plans and objectives of
our management for future operations and activities and other such matters
including, but not limited to:
- Failure to obtain, or a decline in, oil or gas production, or a decline
in oil or gas prices,
- Incorporate estimates of required capital expenditures,
- Increase in the cost of drilling, completion and oil production or other
costs of production and operations,
- An inability to meet growth projections, and
- Other risk factors set forth under "Risk Factors" in this annual report.
In addition, the words "believe", "may", "could", "when", "estimate",
"continue", "anticipate", "intend", "expect", and similar expressions,
as they relate to the Company, our business or our management, are
intended to identify forward-looking statements.
These statements are based on our beliefs and the assurances we made using
information currently available to us. Because these statements reflect our
current views concerning future events, these statements involve risks,
uncertainties and assumptions. Our actual results could differ materially from
the results discussed in the forward-looking statements. Some, but not all, of
the factors that may cause these differences include those discussed below
under the section entitled "Risk Factors" in this annual report. You should not
place undue reliance on these forward-looking statements. You should also
remember that these statements are made only as of the date of this report and
future events may cause them to be less likely to prove to be true.
Glossary of Terms
DEPLETION is the reduction in petroleum reserves due to production.
FORMATION is a reference to a group of rocks of the same age extending over
a substantial area of a basin.
HYDROCARBONS refer to oil, gas, condensate and other petroleum products.
PARTICIPATION INTEREST or WORKING INTEREST is an equity interest
(compared with a royalty interest) in an oil and gas property whereby the
participating interest holder pays its proportionate percentage share of
development and operating costs and receives a corresponding net revenue
interest share of the proceeds of hydrocarbon sales after deduction of
royalties due on the gross income.
PROSPECT is a potential hydrocarbon trap which has been confirmed by
geological and geophysical studies to the degree that drilling of an
exploration well is warranted.
2
PROVEDDEVELOPMENT RESERVES of crude oil, natural gas, or natural gas liquids are
estimated quantities that geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions, i.e., prices and costs as of
the date the estimate is made. Prices include consideration of changes in
existing prices provided only by contractual arrangements, but not on
escalations based upon future conditions.
Reservoirs are considered provedDevelopment if economic producibility is supported
by either actual production or conclusive formation tests or if core analysis
and/or log interpretation demonstrates economic producibility with reasonable
certainty. The area of a reservoir considered proveddevelopment includes (1) that
portion delineated by drilling and defined by fluid contacts, if any, and
(2) the immediately adjoining portions not yet drilled that can be reasonably
judged as economically productive on the basis of available geological and
engineering data. In the absence of data on fluid contacts, the lowest
known structural occurrence of hydrocarbons controls the lower proveddevelopment
limit of the reservoir.
ProvedDevelopment reserves are estimates of hydrocarbons to be recovered from a given
data forward. They are expected to be revised as hydrocarbons are produced
and additional data become available.
Reserves that can produced economically through the application of
established improved recovery techniques are included in the
proveddevelopment classification when these qualifications are met: (1) successful
testing by a pilot project, or the operation of an installed program in
that reservoir, provides support for the engineering analysis on which the
project or program was based, and (2) it is reasonably certain the project will
proceed. Estimates of proveddevelopment reserves do not include the following: (1)
oil that may become available from known reservoirs but is classified
separately as indicated additional reserves; (2) crude oil, natural gas, and
natural gas liquids, the recovery of which is subject to reasonable doubt
because of uncertainty as to geology, reservoir characteristics, or economic
factors; (3) crude oil, natural gas, and natural gas liquids, that may occur
in undrilled prospects; and (4) crude oil, natural gas, and natural gas
liquids, that may be recovered from oil shales, coal, gilsonite and other
such sources.
PROVED DEVELOPEDDEVELOPMENT RESERVES A subcategory of proveddevelopment reserves. They are those
reserves that can be expected to be recovered through existing wells with
existing equipment and operating methods. Additional oil and gas expected
to be obtained through application of fluid injection or other improved
recovery techniques for supplementing the natural forces and mechanisms of
primary recovery are considered developed only after testing by a pilot project
or after the operation of an installed program has confirmed through
production response that increased recovery will be achieved.
PROVED UNDEVELOPED RESERVES is a subcategory of proved reserves. They are
reserves that are expected to be recovered from new wells on undrilled acreage,
or from existing wells where a relatively major expenditure is required for
recompletion. Reserves on undrilled acreage are limited to those drilling units
offsetting productive units that are reasonably certain of production when
drilled. Proved reserves for other undrilled units are claimed only where it
can be demonstrated with certainty that there is continuity of production from
the existing productive formation. Estimates for proved undeveloped reserves
are not attributable to any acreage for which an application of fluid injection
or other improved recovery technique is contemplated, unless such techniques
have been proved effective by actual tests in the area and in the same
reservoir.
RESERVOIR is a porous and permeable sedimentary rock formation containing
adequate pore space in the rock to provide storage space for oil, gas or water.
TRAP is a geological structure in which hydrocarbons aggregate to form an oil
or gas field.
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS OVERVIEW
Amerigo Energy, Inc., a Delaware corporation ("AGOE" or the "Company"),
formerly named Strategic Gaming Invesmtents,Investments, Inc., was incorporated in 1973.
Prior to 2008, the Company was involved in various businesses, none of which
were successful.
In August of 2008, our Board of Directors voted to get approval from the
shareholders of the Company for a name change from Strategic Gaming
Investments, Inc. to Amerigo Energy, Inc. The company received the approval
from a majority of its stockholders and filed the amendment to its Articles of
Incorporation with the State of Delaware. The name change became effective by
the State of Delaware on August 26, 2008. The Company also requested a new
stock symbol as a result of the name change. Our new trading symbol is "AGOE".
On October 31, 2008, The Company entered into a Reorganization pursuant to
Reorganization Agreement dated as of October 31, 2008. In the Reorganization,
Granite Energy, Inc. transferredsold to the Company substantially all of its assets
and operations, including its subsidiary, Amerigo, Inc., and its
controlling interest in GreenStart, Inc. in exchange for 10,000,000
restricted shares of Common Stock of the Company.
The Amerigo Energy's business plan includesincluded developing oil and gas reserves
while increasing the production rate base and cash flow. It plansThe plan was to
continue acquiring oil and gas leases for drilling and to take advantage of
other opportunities and strategic alliances. AsDue to declines in production on
the oil leases the company had an independent energyinterest in, the company headquarteredhas been forced to
reconsider its position in Henderson, Nevada, Amerigo
Energy, through its wholly owned subsidiary, Amerigo, is focused on obtainingthe oil and gas reserves through acquisition of proved developed producing wells,
developing economical and viable exploitation and exploration drilling
prospects, optimizingindustry. In 2011, the production from Amerigo Energy's current base oil and
gas properties, and optimizing the processing of marketable oil and gas sold at
the optimum oil and gas prices for Amerigo Energy's area of operations. Through
analysis and research, Amerigo Energy seekscompany began an
aggressive approach to reduce risk by followingthe debt on the company's books as well as
looking to diversify the investment criteria which identify low to medium risk drilling opportunities
within existing oil and gas fields, while selecting optimal drilling sites with
the optimal potential of developing the maximum amount of oil and gas reserves.
Amerigo Energy believes that this increases the probability of developing
economic oil and gas reserves and cash flows that will benefit both Amerigo
Energy and shareholders.holdings.
Our wholly-owned subsidiary, Amerigo, Inc., incorporated in Nevada on January
11, 2008, holds certain assets, including oil lease interests, computers,
software, telephone system, small office equipment, machinery, and furniture.
3
GENERAL DISCUSSION OF OPERATIONS
EMPLOYEES AND CONSULTANTS
The Company currently has no employees. We contract the services of consultants
in the various areas of expertise, as required. S. Matthew Schultz,Jason F. Griffith, Chief
Executive Officer of the Company, and Jason Griffith, Chief Financial Officer of the Company,
currently devotedevotes no more than 50% of theirhis time to the operations of the
Company.
The amount of time devoted to the Company currently by officers and consultants
is due to the limited operations and resources of the Company. However, the
Company feels the time devoted to operations is enough to cover the current
operational requirements.
Expected Significant Changes In The Number Of Employees
The Company does not expect any significant change in the number of employees
over the next 12 months of operations. As noted previously, the Company
currently coordinates all operations, using its Officers and various
consultants as necessary.
The Company's website address is http://www.amerigoenergy.comwww.amerigoenergy.com; however, the
site has recently come down and is being revamped to account for the updates to
the company's business plan.
ITEM 1A. RISK FACTORS
Risks Related to Amerigo Energy's Business
Amerigo Energy is subject to a high degree of risk as Amerigo Energy is
considered to be in unsound financial condition. The following risks, if any
one or more occurs, could materially harm our business, financial condition or
future results of operations. If that occurs, the trading price of the Amerigo
Energy's Common Stock could further decline.
We Have a History
Since Amerigo Energy's inception (formerly known as Strategic Gaming
Investments, Inc.) we have not been profitable and have reported net losses.
For the years ended December 31, 20092010 and December 31, 20082009 we incurred net
losses of $12,883,736$923,481 and $735,597,$1,306,880, respectively. Our accumulated deficit as of
December 31, 20092010 was $25,897,632.$15,304,401. No assurance can be given that Amerigo
Energy will be successful in reaching or maintaining profitable operations,
particularly given Amerigo Energy's lack of current business operations.
Accordingly, we will likely continue to experience liquidity and cash flow
problems. 4
Lack of Liquidity
Amerigo Energy's Common Stock is currently quoted for public trading on the
Over-the-Counter Bulletin Board under the ticker symbol "AGOE". The trading
price of the Amerigo Energy's common stock has been subject to wide
fluctuations. Trading prices of Amerigo common stock may fluctuate in response
to a number of factors, many of which will be beyond Amerigo Energy's control.
The stock market has generally experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate to the
operating performance of companies with limited or no business operations.
These broad market and industry factors may adversely affect the market price
of Amerigo Energy's Common Stock, regardless of our operating performance.
Further, until such time as Amerigo Energy is an operating company, it is
unlikely that a measurable trading market will exist for Amerigo Energy's
Common Stock.
Amerigo Energy's Common Stock is a "Penny Stock" and should be Considered "High
Risk" and Subject to Marketability Restrictions.
Since Amerigo Energy's Common Stock is a "penny stock", as defined in Rule
3a51-1 under the Securities Exchange Act, it will be more difficult for
investors to liquidate their investment. Until the trading price of the Common
Stock rises above $5.00 per share, if ever, trading in the Common Stock is
subject to the "penny stock" rules of the Securities Exchange Act specified in
rules 15g-1 through 15g-10. Those rules require broker-dealers, before
effecting transactions in any penny stock, to:
- Deliver to the customer, and obtain a written receipt for, a
disclosure document;
- Disclose certain price information about the stock;
- Disclose the amount of compensation received by the broker-dealer or
any associated person of the broker-dealer;
- Send monthly statements to customers with market and price
information about the penny stock; and
- In some circumstances, approve the purchaser's account under certain
standards and deliver written statements to the customer with information
specified in the rules.
Consequently, the "penny stock" rules may restrict the ability or willingness
of broker-dealers to sell the Common Stock and may affect the ability of
holders to sell their Common Stock in the secondary market and the price at
which such holders can sell any such securities. These additional procedures
could also limit our ability to raise additional capital in the future.
5
Funding Difficulties
Given Amerigo Energy's historical operating results, obtaining financing will
be extremely difficult. This is further compounded by the extremely limited
liquidity in Amerigo Energy's Common Stock and the lack of business operations.
Financing, if available, will likely be significantly dilutive to our common
stockholders and will not necessarily improve the liquidity of Amerigo Energy's
common stock without a vast improvement in our operating results. In the event
we are unsuccessful in procuring adequate financing, our financial condition
and results of operations will be further materially adversely affected.
"Going Concern" Qualification
As a result of Amerigo Energy's deficiency in working capital at December 31,
20092010 and other factors, Amerigo Energy's auditors have stated in their report
that there is substantial doubt about Amerigo Energy's ability to
continue as a going concern. In addition, Amerigo Energy's cash position is
inadequate to pay the costs associated with its operations. No assurance can
be given that any debt or equity financing, if and when required, will be
available. The financial statements do not include any adjustments relating to
the recoverability and classification of recorded assets and classification of
liabilities that might be necessary should Amerigo Energy be unable to continue
existence.
Risks Applicable to Amerigo Energy's Oil and Gas Business
Speculative Nature of Oil and Gas Development Activities ("Project"); Natural
and Other Hazards. Exploration, drilling and development of oil and gas
properties is not an exact science and involves a high degree of risk. There is
no assurance that oil or gas will be found within any prospects or that, if
found, sufficient oil or gas production will be obtained to enable Amerigo
Energy to recoup its investment in the Project. During any drilling or
completion of any prospect, Amerigo Energy could encounter hazards including
unusual or unexpected formations, high formation, pressures or other
conditions, blow-outs, fires, failure of equipment, and downhole collapses.
There can be no assurance that in the event of such problems Amerigo Energy
will have sufficient funds to solve such problems. Furthermore, the Project may
be subject to liability for pollution and other damages and will be subject to
statutes and regulations relating to environmental matters. Although Amerigo
Energy and/or the operator drilling the prospects will obtain and maintain the
insurance coverage, Amerigo Energy may suffer losses due to hazards against
which it cannot insure or against which it may elect not to insure.
Drilling and Production Risks. Exploration for oil and gas is speculative by
its very nature, and involves a high risk of loss. A large number of prospects
result in dry holes, and others do not produce oil or gas in sufficient
quantities to make them commercially profitable to complete or place in
production. Many risks are involved that experience, knowledge, scientific
information and careful evaluation cannot avoid. An investor must be prepared
to lose all of an investment as there can be no assurance that any prospect
will result in or continue to have oil or gas production or that production, if
obtained, will be profitable. Oil and gas prospects sometimes experience
production decline that is rapid and unexpected. Initial production from a
prospect (if any) does not accurately indicate any consistent level of
production to be derived from it.
Importance of Future Prices, Supply and Demand for Oil and Gas. The revenues
which might be generated from the activities of Amerigo Energy will be highly
dependent upon the future prices and demand for oil and gas. Factors which may
affect prices and demand include worldwide supply; the price of oil produced in
the United States or imported from foreign countries; consumer demand; price
and availability of alternative fuels; federal and state regulation; and
general, national and worldwide economic and political conditions. 6
In addition to the widely-recognized volatility of the oil market, the gas
market is also unsettled due to a number of factors. In the past, production
from gas prospects in many geographic areas of the United States has been
curtailed for considerable periods of time due to a lack of market demand, and
such curtailments may exist in the future. Further, there may be an excess
supply of gas in the area of the prospects. In that event, it is possible that
prospects will be shut in or that gas in those areas will be sold on terms less
favorable than might otherwise be obtained. The combination of these factors,
among others, makes it particularly difficult to estimate accurately future
prices of oil and gas, and any assumptions concerning future prices may prove
incorrect.
Competition. There are large numbers of companies and individuals engaged in
exploration for oil and gas and the development of oil and gas properties.
Accordingly, Amerigo Energy will encounter strong competition from independent
operators and major oil companies. Many of the companies so encountered have
financial resources and staffs considerably larger than those available to
Amerigo Energy. There are numerous companies and individuals engaged in the
organization and conduct of oil and gas programs and there is a high degree of
competition among such companies in the offering of their programs.
Markets for Sale of Production. The ability of Amerigo Energy to market oil and
gas found and produced, if any, will depend on numerous factors beyond the
control of Amerigo Energy, the effect of which cannot be accurately predicted
or anticipated. Some of these factors include, without limitation, lifting and
transportation costs, the availability of a ready market, the effect of federal
and state regulation of production, refining, transportation and sales, and
general national and worldwide economic conditions. There is no assurance that
Amerigo Energy will be able to market oil or gas produced by the prospects at
prices that will prove to be economic after costs.
Price Control and Possible Energy Legislation. There are currently no federal
price controls on oil or gas production so that sales of oil or gas by Amerigo
Energy can be made at uncontrolled market prices. However, there can be no
assurance that Congress will not enact controls at any time. No prediction can
be made as to what additional energy legislation may be proposed, if any, nor
which bills may be enacted nor when any such bills, if enacted, would become
effective.
Environmental Regulations. The exploration, development and production of oil
and gas is subject to various federal and state laws and regulations to protect
the environment. Various states and governmental agencies are considering, and
some have adopted, laws and regulations regarding environmental control which
could adversely affect the business of Amerigo Energy. Compliance with such
legislation and regulations, together with any penalties resulting from
noncompliance therewith, will increase the cost of oil and gas development and
production. Some of these costs may ultimately be borne by Amerigo Energy.
Government Regulation. The oil and gas business is subject to extensive
governmental regulation under which, among other things, rates of production
from wells may be fixed. Governmental regulation also may limit or otherwise
affect the market for production and the price which may be paid for that
production. Governmental regulations relating to environmental matters could
also affect Amerigo Energy's operations. The nature and extent of various
regulations, the nature of other political developments and their overall
effect upon Amerigo Energy are not predictable. The availability of a ready
market for oil and gas, if any, discovered by Amerigo Energy or from existing
production and the price obtained for the oil and gas will depend upon numerous
factors, including the extent of domestic production and foreign imports of gas
and/or oil, the proximity and capacity of pipelines, intrastate and interstate
market demand, the extent and effect of federal regulations on the sale of oil
and/or natural gas in interstate and intrastate commerce, and other government
regulation affecting the production and transportation of oil and/or gas. In
addition, certain daily allowable production constraints may change from time
to time, the effect of which cannot be predicted by management. There is no
assurance that Amerigo Energy will be able to market any oil or gas found or
acquired by it at favorable prices, if at all.
7
Uninsured Risks and Other Potential Liabilities. Amerigo Energy's operations
will be subject to all of the operating risks normally connected with drilling
for and producing oil and gas, such as blow-outs, pollution, premises
liability, workplace injury and other risks and events which could result in
the Program incurring substantial losses or liabilities. Amerigo Energy
anticipates securing insurance as it deems prudent, affordable, necessary and
appropriate. Certain risks of Amerigo Energy, the Project, the Operator and
Non-Operating interest holders are uninsurable and others may be either
uninsured or only partially insured or limited because of high premium costs,
the unavailability of such insurance and/or for other reasons. In the event
Amerigo Energy and/or the Project incurs uninsured losses or liabilities, all
parties may be at risk and the Project's funds available for exploration and
development, as well as funds available for Amerigo Energy's other and ongoing
operations, may be reduced or lost completely.
Decline Curve. Production from all oil and gas wells declines over time. The
actual rate of decline is subject to numerous factors and cannot, in normal
circumstances, be calculated in advance. Production also fluctuates for many
reasons. Prospective investors should understand that production from any well
may fluctuate and will ultimately decline, rendering the well non-commercial.
Dependence upon Amerigo and the Operators. The operations and financial success
of Amerigo Energy depends significantly on its management and of the drilling
guarantor. In the event that management of any of these companies becomes
unable or unwilling to continue to direct the operations of Amerigo Energy,
Amerigo Energy could be adversely affected.
Unpredictability of Oil and Gas Investment. Numerous factors, including
fluctuations in oil and gas prices and operating costs and the productive life
of the wells make it difficult to predict returns with any accuracy.
Marketing and Pricing. The market for oil and gas produced from the wells is
difficult to predict, as well as the costs incurred in connection with such
production. Particularly in the case of natural gas, a market may not
immediately be available for the gas from a well because of its distance from a
pipeline. The gas may therefore remain unsold for an indefinite period of
time. Nevertheless, Amerigo Energy will exercise its best efforts to obtain a
market for any natural gas produced from the well as soon as possible if
production is achieved.
Costs of Treating Natural Gas. Companies that own natural gas production often
require that natural gas have certain characteristics before they will purchase
it. Gas from an Amerigo Energy well may have to be treated so that the
purchasers will take delivery. This treatment might include increasing the
pressure, dehydrating it, removing CO2 or other impurities and other items of a
similar nature. These treatments may require that additional facilities be
built or services be performed. Because these costs concern the operation of a
gas well they are treated as lease operating expenses and are generally
recouped out of production. The costs of any additional facilities are often
paid initially by the first purchasers or gatherers of production, who then
reimburse themselves by recouping these capital costs through a minimal
reduction of the price paid for the gas. If any gas produced by a well
requires special treatment as described above, Amerigo Energy will attempt to
minimize the costs associated with treatment and maximize the Project's profits
from the sale of the gas.
Delays in Receipt of Cash. Amerigo Energy is involved in the exploration for
and development of oil and gas reserves. The unavailability of, or delay in
obtaining, necessary materials for drilling and completion activities, or in
securing title opinions dated to the first production, may delay, for
significant periods after the discovery and production of hydrocarbons, the
distribution of any cash to Amerigo Energy. Because each prospect will be
drilled and completed in succession and not concurrently, revenue, if any, from
each prospect will also be distributed in succession with the completion of the
prospect.
8
The loss of executive officers or key employees could have a material adverse
effect on our business.
The Company depends greatly on the efforts of our executive officers and other
key personnel to manage our operations. The loss or unavailability of any of
our executive officers or other key personnel could have a material adverse
effect on our business.
The company has no plans to pay dividends on its common stock, and you may not
receive funds without selling your common stock.
The Board of Directors of the Company does not intend to declare or pay
dividends on the Company's Common Stock in the foreseeable future. Instead, the
Board of Directors generally intends to invest any future earnings in the
business. Subject to Nevada law, the Company's Board of Directors will
determine the payment of future dividends on the Company's Common Stock, if
any, and the amount of any dividends in light of any applicable contractual
restrictions limiting the Company's ability to pay dividends, the Company's
earnings and cash flow, the Company's capital requirements, the Company's
financial condition, and other factors the Company's Board of Directors deems
relevant. Accordingly, you may have to sell some or all of your Common Stock in
order to generate cash flow from your investment. You may not receive a gain on
your investment when you sell the Company's Common Stock and may lose the
entire amount of your investment.
Dilution could have an adverse affect on the ownership of the stockholder in
the registrant.
The Company may issue more Common Stock at prices determined by the board of
directors in any private placements or offerings of securities, possibly
resulting in dilution of the value of the Common Stock, and, given there is no
preemptive right to purchase Common Stock, if a stockholder does not purchase
additional Common Stock, the percentage share ownership of the stockholder in
the Company will be reduced.
The business of the company may be adversely affected if the company has
material weaknesses or significant deficiencies in its internal control over
financial reporting in the future.
As a public company the Company will incur significant legal, accounting,
insurance and other expenses. The Sarbanes-Oxley Act of 2002, as well as
compliance with other SEC and exchange listing rules, will increase our legal
and financial compliance costs and make some activities more time-consuming and
costly. Furthermore, SEC rules require that our chief executive officer and
chief financial officer periodically certify the existence and effectiveness of
our internal control over financial reporting. Our independent registered
public accounting firm will be required, beginning with our Annual Report on
Form 10-K for our fiscal year ending on December 31, 2010,2011, to attest to our
assessment of our internal control over financial reporting.
During the course of our testing, we may identify deficiencies that would have
to be remediated to satisfy the SEC rules for certification of our internal
controls over financial reporting. As a consequence, we may have to disclose in
periodic reports we file with the SEC significant deficiencies or material
weaknesses in our system of internal controls. The existence of a material
weakness would preclude management from concluding that our internal control
over financial reporting is effective, and would preclude our independent
auditors from issuing an unqualified opinion that our internal control over
financial reporting is effective. In addition, disclosures of this type in our
SEC reports could cause investors to lose confidence in our financial reporting
and may negatively affect the trading price of our Common Stock. Moreover,
effective internal controls are necessary to produce reliable financial reports
and to prevent fraud. If we have deficiencies in our disclosure controls and
procedures or internal control over financial reporting it may negatively
impact our business, results of operations and reputation. 9
Cautionary note regarding forward-looking statements and other information
contained in this prospectus
This Prospectus contains some forward-looking statements. Forward-looking
statements give our current expectations or forecasts of future events. You can
identify these statements by the fact that they do not relate strictly to
historical or current facts. Forward-looking statements involve risks and
uncertainties. Forward-looking statements include statements regarding, among
other things, (a) our projected sales, profitability, and cash flows, (b) our
growth strategies, (c) anticipated trends in our industries, (d) our future
financing plans and (e) our anticipated needs for working capital. They are
generally identifiable by use of the words "may," "will," "should,"
"anticipate," "estimate," "plans," "potential," "projects," "continuing,"
"ongoing," "expects," "management believes," "we believe," "we intend" or the
negative of these words or other variations on these words or comparable
terminology. These statements may be found under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business," as
well as in this Prospectus generally. In particular, these include statements
relating to future actions, prospective products or product approvals, future
performance or results of current and anticipated products, sales efforts,
expenses, the outcome of contingencies such as legal proceedings, and financial
results.
Any or all of our forward-looking statements in this report may turn out to be
inaccurate. They can be affected by inaccurate assumptions we might make or by
known or unknown risks or uncertainties. Consequently, no forward-looking
statement can be guaranteed. Actual future results may vary materially as a
result of various factors, including, without limitation, the risks outlined
under "Risk Factors" and matters described in this Prospectus generally. In
light of these risks and uncertainties, there can be no assurance that the
forward-looking statements contained in this filing will in fact occur. You
should not place undue reliance on these forward-looking statements.
The forward-looking statements speak only as of the date on which they are
made, and, except to the extent required by federal securities laws, we
undertake no obligation to publicly update any forward-looking statements,
whether as the result of new information, future events, or otherwise.
ITEM 2. DESCRIPTION OF PROPERTY
The corporate offices of the Company are located in Henderson, Nevada, at 2580
Anthem Village Drive, Henderson, NV 89052. The Company rents this space on a
month-to-month basis for $998 per month.
We also lease on a month-to-month
basis a small office in Bountiful, Utah at a rate of $1,200 per month.
10
CURRENT OIL AND GAS PROPERTIES
The Company, in October 2008, acquired its first oil and gas interests and
properties as a part of the reorganization that it entered into with Granite
Energy, Inc. The Company acquired substantially all of Granite Energy's assets
for 10,000,000 shares of our common stock. The following descriptions of our
oil interests include the amounts acquired in the reorganization as well as
interests that were purchased with shares of our Common Stock in 2008 and 2009.
Please see the Note 2 to the Financial Statements for accounting policies
related to these oil and gas properties.
On December 31, 2009, the Company performed an impairment analysis for all
proved and unproved oil and gas assets and has determined that the assets have
significantly decreased in their holding value and has made adjustments
accordingly. The Company has recognized a loss on impairment of these assets in
the amount of $11,458,542.
All information related to the oil and gas interests held by the Company that
can be reasonably obtained has been disclosed in this filing. There have not
been any reserve studies performed on the interests we hold as of the date of
this filing due to the fact that it would be cost ineffective due to the
materiality of the production on the interests.interests as well as our lack of majority
interest in the leases.
OIL PRODUCING PROPERTIES
WEST BURKE
The West Burke lease consists of 115.27 acres of land. The lease has a total of
7 wells, with 5 pumping wells and 2 injection wells. The lease is located in
WitchitaWichita County, Texas
The Company acquired a 18.49% working interest and 13.78% net revenue interest
as part of the reorganization with Granite Energy on October 31, 2008.
Additionally, in December of 2008 and 1st quarter of 2009, the Company acquired
an additional 13.93% and 9.11% working interest and 10.38% and 6.79% net
revenue interest, respectfully,respectively, with the issuance of our Common Stock.
As of December 31, 2009, the Company holds a 41.54% total working interest and
30.95% net revenue interest in West Burke.
During the year ended December 2009, the lease produced a total of 1,653
barrels of oil at an average price of $60.65 per barrel for the year ended
December 31, 2009. Net revenues of $0 have been recognized from revenues of
$29,198 net of lease operating expenses in the same amount.
No impairment has
been determined necessary for the West Burke leases asAs of December 31, 2009.2010, the Company holds a 41.54% total working interest and
30.95% net revenue interest in West Burke.
During the year ended December 2010, the lease produced a total of 668 barrels
of oil at an average price of $77.28 per barrel for the year ended December 31,
2010. Net revenues of $0 have been recognized from revenues of $15,257.06 net
of lease operating expenses in the same amount.
PHILLIPS B
The Phillips B leases are located in Cotton County, Oklahoma and are currently
operated by SJ OK Oil Company. We receive any revenues from oil sold to Teppco
Oil (US) Company, net of oil lease expenses for that period.
In December of 2008, the Company acquired an additional 6.53% working interest
and 4.90% net revenue interest with the issuance of our Common Stock.
During the year ended December 2009, the lease produced a total of 2,891
barrels of oil at an average price of $57.27 per barrel for the year ended
December 31, 2009. Net revenues of $2,661 have been recognized from revenues of
$9,590 net of lease operating expenses in the amount of $6,928. No impairment
has been determined necessary for the Phillips B leases as of December 31,
2009.
11
KUNKELDuring the year ended December 2010, the lease produced a total of 2,060
barrels of oil at an average price of $74.94 per barrel for the year ended
December 31, 2010. Net revenues of $2,276 have been recognized from revenues of
$6,998 net of lease operating expenses in the amount of $4,722. No impairment
has been determined necessary for the Phillips B leases as of December 31,
2010.
Kunkel
The Kunkel lease has a total of 13 wells, with 7 pumping wells, 1 injection
well, and 5 wells that were shut in. The leases are located in Archer County,
Texas.
West Burke is currently operated by SWJN Oil Company and we receive any
revenues from oil sold to Conoco Oil Company, net of oil lease expenses for
that period.
The Company acquired a 61.60% working interest and 48.80% net revenue interest
as part of the reorganization with Granite Energy on October 31, 2008.
Additionally, Inin December of 2008, the Company acquired an additional 25.60%
working interest and 20.28% net revenue interest with the issuance of our
Common Stock.
AsThis lease was sold in 2010 and as of December 31, 2009,2010, the Company holds a 87.20%0%
total working interest and 69.08%0% net revenue interest in the Kunkel leases.
During the year ended December 2009, the lease produced a total of 1,919
barrels of oil at an average price of $56.60 per barrel for the year ended
December 31, 2009. Net revenues of $27,357 have been recognized from revenues
of $81,506 net of lease operating expenses in the amount of $54,149. No
impairment has been determined necessary for the Kunkel leases as of December
31, 2009.
JUSTICE HEIRSDuring the year ended December 2010, the lease produced a total of 673.97
barrels of oil at an average price of $75.56 per barrel for the year ended
December 31, 2010. Net revenues of $6,564 have been recognized from revenues of
$33,039 net of lease operating expenses in the amount of $26.475. No impairment
has been determined necessary for the Kunkel leases as of December 31, 2010.
The December 31, 2009 carrying value of the Kunkel lease was $154,402.
As the lease was sold, there is no value on the books at December 31, 2010.
Justice Heirs A, B, ANDand C
On August 14, 2009, the Company entered into a purchase agreement for the
purchase of certain lease oil, gas, and mineral interests in the Justice Heirs
A, B, and C leases. As part of this agreement, the Company issued shares of
restricted common stock to related parties in addition to other forms of
payment for their interests in the said leases. See Note 2 for full information
regarding the purchase.
As of December 31, 2009, the Company holds a 41.67% working interest and 33.42%
net revenue interest in the Justice Heirs A, B, and C leases. The Lease was
sold in September of 2010 and as of December 31, 2010, the company holds 0%
interest in the lease.
During the year ended December 2009, the lease produced a total of 2,692
barrels of oil at an average price of $54.04 per barrel, consisting of 1,317,
1,090, and 286 barrels on Justice Heirs lease A, B, and C, respectively. For
the year ended December 31, 2009, net revenues of $3,980 have been recognized
from revenues of $23,858 net of lease operating expenses in the amount of
$19,878. No impairment has been determined necessary for the Justice Heirs
leases as of December 31, 2009.
RAY
The Ray lease consists of 100 acres of land in Archer County, Texas and is
operated by SWJN Oil Company. The lease has a total of 4 wells, with 2 pumping
wells, 1 injection well, and 1 well that was shut in. The Company acquired a
100% working interest and 87.50% net revenue interest as part of the
reorganization with Granite Energy on October 31, 2008.
During the year ended December 2010, the lease produced a total of 871.71
barrels of oil at an average price of $73.00 per barrel, consisting of 529,
343, and 0 barrels on Justice Heirs lease A, B, and C, respectively. For the
year ended December 31, 2009,2010, net revenues of $2,069 have been recognized from
revenues of $20,681 net of lease operating expenses in the Company sold its entire lease
interest for $15,000 and recognized a lossamount of $231,388 on the sale.
As of$18,612.
The December 31, 2009 carrying value of the Company holds 0% working and revenue interest inJustice lease was $107,508.
As the Ray lease.lease was sold, there is no value on the books at December 31, 2010.
OIL AND GAS PRODUCING PROPERTIES
MELISSA HENSLEY (GOLDFINCH 1)
The Melissa Hensley well is located in Kingfisher County, Oklahoma and is
operated by H Petro R, Inc. Revenues from this interest are received net of any
lease expenses.
The Company acquired a 27.96% working interest and 20.97% net revenue interest
as part of the reorganization with Granite Energy on October 31, 2008. In
December of 2008, the Company acquired an additional 26.14% working interest
and 19.61% net revenue interest with the issuance of our Common Stock. In the
year ended December 31, 2009, the Company acquired an additional 6.47%5.48% working
interest and 4.88%4.11% net revenue interest with the issuance of our Common Stock.
As of December 31, 2008,2010, the Company holds a 60.58%59.33% total working interest and
45.46%44.49% net revenue interest in the Melissa Hensley lease.
During the year ended December 2009, the Company's interest in the lease
produced approximately 10,936 MCF's of gas at an average price of $3.57 per
MCF, and 266 barrels of oil at an average price of $57.10 per barrel. This
resulted in estimated revenue of $51,519$44,847 and estimated lease operating
expenses of $23,643$31,916 for a net estimated revenue to the Company of $27,876.$12,931.
During the year ended December 2010, the lease produced a total of 22,059 MCF's
of gas at an average price of $4.54 per MCF, and 732 barrels of oil at an
average price of $73.08 per barrel. This money is
being heldresulted in estimated revenue of
$63,905 and estimated lease operating expenses of $34,316 for a receivable suspense account until allnet estimated
revenue to the Company of the paperwork for the
exchanges is finalized.
On December 31, 2009, the Melissa Hensley interest book value was determined to
be in need of impairment and the asset was written down to five percent of its
prior book value, with an impairment loss in the amount of $1,308,946 being
recognized.$29,589.
The carrying value of the interests at December 31, 2010 and 2009, net of
depletion, was $68,892.
12$51,676 and $54,595, respectively.
DJ HANKS (GOLDFINCH 4)
The DJ Hanks well is located in Kingfisher County, Oklahoma and is operated by
H Petro R, Inc. Revenues from this interest are received net of any lease
expenses.
The Company acquired a 5.27% working interest and 3.95% net revenue interest as
part of the reorganization with Granite Energy on October 31, 2008.
Additionally, In December of 2008, the Company acquired an additional 43.62%43.08%
working interest and 32.71%32.31% net revenue interest with the issuance of our
Common Stock. In 2010, the company purchased 3.20% working interest in the
Kunkel Lease from an investor by giving the investor 15% working interest in
the DJ Hanks Lease.
As of December 31, 2008,2010, the Company holds a 52.54%37.21% total working interest and
39.97%27.91% net revenue interest in the DJ Hanks lease.
During the year ended December 2009, the Company's interest in the lease
produced approximately 2,456 MCF's of gas at an average price of $5.39 per MCF,
and 527 barrels of oil at an average price of $55.54 per barrel. This resulted
in estimated revenue of $38,917$22,558 and estimated lease operating expenses of
$6,572$7,538 for a net estimated revenue to the Company of $32,345.$15,020.
During the year ended December 2010, the lease produced a total of 4,576 MCF's
of gas at an average price of $7.56 per MCF, and 1,071 barrels of oil at an
average price of $74.14 per barrel. This money is
being heldresulted in revenue of $24,822 and
lease operating expenses of $7,543 for a receivable suspense account until allnet revenue to the Company of the paperwork for the
exchanges is finalized.
On December 31, 2009, the DJ Hanks interest book value was determined to be in
need of impairment and the asset was written down to five percent of its prior
book value, with an impairment loss in the amount of $1,076,507 being
recognized.$17,279.
The carrying value of the interests at December 31, 2010 and 2009, net of
depletion, was $56,658.$52,410 and $55,378, respectively.
RICHARD HENSLEY (GOLDFINCH 2)
The Richard Hensley well is located in Kingfisher County, Oklahoma and is
operated by H Petro R, Inc. Revenues from this interest are received net of any
lease expenses.
The Company acquired a 19.55% working interest and 14.66% net revenue interest
as part of the reorganization with Granite Energy on October 31, 2008.
Additionally, In December of 2008, the Company acquired an additional 35.77%32.52%
working interest and 26.83%24.39% net revenue interest with the issuance of our
Common Stock.
As of December 31, 2008,2010, the Company holds a 55.33%52.45% total working interest and
41.49%39.05% net revenue interest in the Richard Hensley lease.
During the year ended December 2009, the Company's interest in the lease
produced approximately 150 MCF's of gas at an average price of $3.58 per MCF.
This resulted in estimated revenue of $450$418 and estimated lease operating
expenses of $6,028$7,816 for a net estimated expense to the Company of $5,578.$7,398.
During the year ended December 2010, the lease produced a total of 55.28 MCF's
of gas at an average price of $4.68 per MCF, This money is being heldresulted in estimated revenue
of $84 and estimated lease operating expenses of $7,539 for a net loss to net against a receivable suspense account until allthe
Company of the paperwork for the exchanges is finalized.
On December 31, 2009, the Richard Hensley interest book value was determined to
be in need of impairment and the asset was written down to five percent of its
prior book value, with an impairment loss in the amount of $1,265,417 being
recognized.$7,455.
The carrying value of the interests at December 31, 2010 and 2009, net of
depletion, was $66,601.$0 and $0, respectively.
BROOKS HENSLEY (GOLDFINCH 3)
The Brooks Hensley well is located in Kingfisher County, Oklahoma and is
operated by H Petro R, Inc. Revenues from this interest are received net of any
lease expenses.
The Company acquired a 49.58% working interest and 37.23% net revenue interest
as part of the reorganization with Granite Energy on October 31, 2008.
Additionally, In December of 2008, the Company acquired an additional 15.17%12.31%
working interest and 11.32%9.23% net revenue interest with the issuance of our Common
Stock.
As of December 31, 2009, the Company holds a 64.75%63.19% total working interest and
48.55%47.39% net revenue interest in the Brooks Hensley lease.
During the year ended December 2009, the Company's interest in the lease
produced approximately 3,034 MCF's of gas at an average price of $3.88 per MCF,
and 266 barrels of oil at an average price of $54.10 per barrel. This resulted
in estimated revenue of $24,862$14,167 and estimated lease operating expenses of
$8,963$12,140 for a net estimated revenue to the Company of $15,899.$2,027.
During the year ended December 2010, the lease produced a total of 5,695 MCF's
of gas at an average price of $5.10 per MCF, and 176 barrels of oil at an
average price of $68.96 per barrel. This money is
being heldresulted in revenue of $14,018 and
lease operating expenses of $17,938 for a receivable suspense account until allnet loss to the Company of the paperwork for the
exchanges is finalized.
On December 31, 2009, the Brooks Hensley interest book value was determined to
be in need of impairment and the asset was written down to five percent of its
prior book value, with an impairment loss in the amount of $1,354,227 being
recognized.$3,919.
The carrying value of the interests at December 31, 2010 and 2009, net of
depletion, was $71,275.
13
UNPROVED$47,833 and $50,558, respectively.
EXPLORATORY LEASES AND PROPERTY
OnAs of December 31, 2009 and 2010, due to lack of production, reserve studies,
or potential in the near term of development, all unprovedexploratory lease interests
listed below were impaired to zero percent of their book value, and a loss on the impairment was
recognized in the amount of $6,453,445.value.
JJ YOUNG
The Company acquired a 100% working interest and 76.25% net revenue interest as
part of the reorganization with Granite Energy on October 31, 2008. The JJ
Young lease currently does not have any wells on the lease. The Company is
currently evaluating the costs and requirements to drill on this lease.
In October 2009, the Company's agreement for the JJ Young lease expired because
the length of time outlined in the agreement had passed in which the Company
has to drill on the lease.
The asset has been written off the Company's books
and an impairment loss of $60,000 has been recognized.
TIGERSHARK
The Company acquired a 27.96% working interest and 20.97% net revenue interest
as part of the reorganization with Granite Energy on October 31, 2008. In
December of 2008, the Company acquired an additional 26.14% working interest
and 19.61% net revenue interest with the issuance of our Common Stock. In the
year ended December 31, 2009, the Company acquired an additional 6.47% working
interest and 4.88% net revenue interest with the issuance of our Common Stock.
As of December 31, 2009 and 2010, the Company holds a 60.58% total working
interest and 45.46% net revenue interest in the Tigershark lease.
OTHER UNPROVEDEXPLORATORY LEASES
In December of 2008 and 2009, the Company acquired a working interest and net
revenue interest with the issuance of our Common Stock. The unprovedExploratory leases
that were acquired as part of these conversions were Evergreen 1, Roadrunner,
Southgold 1 (Tony), Southgold 2, Southgold 3, and name pending - Escavada.
ITEM 3. LEGAL PROCEEDINGS
The company had been in discussions with an individual who was in a lawsuit
with Granite Energy regarding leases purchased by the individual as well as
other matters.
Amerigo has signed an agreement with the individual to acquire his interest in
certain oil and gas leases for $120,000, payable at $10,000 per month starting
April 1, 2010, with subsequent payments due on the 1st of each month. The term
of the note iswas One (1) year. The Company is offered a prepayment discount if
the Company pays $100,000 on or before Tuesday, June 1, 2010. Upon final
payment and settlement of the note, the individual will return all shares of
stock (with properly executed stock power) that he individualindividually holds of
Granite Energy and / or Amerigo Energy, along with his entire interest in the Kunkel
lease, which is 3.20% working interest (2.54% net revenue interest), as well as
his ownership in what is know as the 4 Well Program (0.325% working interest,
0.2438% net revenue interest). During 2010, the individual sold his interest
in the Kunkel lease. The company has not kept current with the agreement and
the individuals promissory note has now been escalated to a judgment against
the company. As of the date of this filing, terms of settling the judgment
have not been resolved.
As of December 31, 2009,2010, other than discussed above that occurred subsequent to
year end, the Company is not a party to any pending material legal proceeding.
To the knowledge of management, no federal, state or local governmental agency
is presently contemplating any proceeding against the Company. To the knowledge
of management, no director, executive officer or affiliate of the Company, any
owner of record or beneficially of more than five percent of the Company's
Common Stock is a party adverse to the Company or has a material interest
adverse to the Company in any proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There have been no matters submitted to the Company's security holders during
the fourth quarter of 2009.
142010.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Amerigo Energy (formerly known as Strategic Gaming Investments, Inc.) shares of
Common Stock are not traded on an established market. Amerigo Energy Stock is
traded through broker/dealers and in private transactions, and quotations are
reported on the OTC Bulletin Board under the symbol "AGOE". OTC Bulletin Board
quotations reflect interdealer prices, without mark-up, mark-down or commission
and may not represent actual transactions. The table below sets forth the range
of high and low prices paid for transactions in Amerigo Energy shares of Common
Stock as reported on the OTC Bulletin Board for the periods indicated. No
dividends have been declared or paid on Amerigo Energy Common Stock and none
are likely to be declared or paid in the near future.
The following table sets forth the quarterly high and low bid prices for our
Common Stock during our last two fiscal years, adjusted for the recent stock
split. The quotations reflect inter-dealer prices, without retail mark-up,
markdown or commission, and do not necessarily represent actual buy and sell
transactions.
COMMON STOCK
High Low
FISCAL YEAR ENDED DECEMBER 31, 2008:
Fiscal Quarter Ended March 31, 2008 30.00 12.00
Fiscal Quarter Ended June 30, 2008 15.00 12.00
Fiscal Quarter Ended September 30, 2008 18.00 4.00
Fiscal Quarter Ended December 31, 2008 10.01 3.75
FISCAL YEAR ENDED DECEMBER 31, 2009:
Fiscal Quarter Ended March 31, 2009 10.01 10.01
Fiscal Quarter Ended June 30, 2009 10.01 10.01
Fiscal Quarter Ended September 30, 2009 10.01 10.01
Fiscal Quarter Ended December 31, 2009 10.01 10.01
FISCAL YEAR ENDED DECEMBER 31, 2010:
Fiscal Quarter Ended March 31, 2010 1.00 1.00
Fiscal Quarter Ended June 30, 2010 3.25 0.05
Fiscal Quarter Ended September 30, 2010 0.25 0.04
Fiscal Quarter Ended December 31, 2010 0.25 0.04
SHAREHOLDERS OF RECORD AND OUTSTANDING SHARES
The authorized capital stock of the Company consists of 100,000,000 shares of
common stock with a par value of $.001 and 25,000,000 shares of preferred
stock at a par value of $.001.
Common Stock. The holders of the common stock are entitled to one vote per
share on each matter submitted to a vote at any meeting of the shareholders.
Shares of common stock do not carry cumulative voting rights, and therefore a
majority of the shares of outstanding common stock will be able to elect the
entire Board of Directors, and if they do so, minority stockholders would not
be able to elect any persons to the Board of Directors. Our Amended
By-laws provide that a majority of the issued and outstanding shares of the
Company shall constitute a quorum for shareholders' meeting except with respect
to certain matters for which a greater percentage quorum is required by statute
or our Articles of Incorporation or By-laws.
15
Shareholders of The Company have no pre-emptive rights to acquire
additional shares of common stock or other securities. The common stock is not
subject to redemption and carries no subscription or conversion rights.
Preferred Stock. As of December 31, 2008,2010, there were no500,000 preferred shares
issued orand outstanding. Preferred stockholders are entitled to 250 votes per 1
share of preferred stock. The Board of Directors is authorized by the Articles
of Incorporation to prescribe by resolution the voting powers,
designations, preferences, limitations, restrictions, reactive rights and
distinguishing designations of the preferred shares if issued.
The stock transfer agent for the Company is AmericanEmpire Stock, Transfer and
Trust Company, located at 59 Maiden Lane, Plaza Level, New York, NY 10038.1859
Whitney Mesa Dr., Henderson, NV 89014. Their telephone number is (800) 937-5449.(702) 818-
5898.
HOLDERS
On December 31, 2009,2010, there were approximately 328334 holders of Amerigo Energy,
Inc. Common Stock. Due to the prior name change and reverse stock split there
are additional beneficial holders which have not converted their stock.
DIVIDENDS AND OTHER DISTRIBUTIONS
Amerigo Energy has never paid cash dividends on our common stock or preferred
stock. We currently intend to retain earnings, if any, for use in our business
and do not anticipate paying any cash dividends in the foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES
During the year ended December 31, 2009, the Company issued 1,567,2441,517,511 shares of
our Company Common Stock at $1.00$0.002 per share in exchange for the purchase of
various oil interests.
In addition, on August 14, 2009, the Company entered into a purchase agreement
for the purchase of certain lease oil, gas, and mineral interests in the
Justice Heirs A, B, and C leases. As part of this agreement, the Company issued
133,344 shares of restricted common stock at $0.10 per share to related parties
in addition to other forms of payment for their interests in the said leases.
See Note 2 for full information regarding the purchase.
On December 31, 2009 the Company issued 1,008,235 shares of our Company Common
Stock as part of the exercise of warrants that were issuedexercised in 2008.
16During 2010, the company issued 25,000 shares of stock for the purchase of an
interest in an oil lease at $0.25 per share. An additional 5,465 shares were
issued for oil interest at $0.001.
During 2010, the company also issued 500,000 shares of preferred stock in order
to settle $250,000 worth of debts on the company books.
During 2011, the company has issued (or agreements to issue) 6,140,553 shares
of stock to settle $446,795 in debts on the company books and for services
rendered.
ITEM 6. SELECTED FINANCIAL DATA
This section is not required for smaller reporting entities.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This discussion contains forward-looking statements. The reader should
understand that several factors govern whether any forward-looking statement
contained herein will be or can be achieved. Any one of those factors could
cause actual results to differ materially from those projected herein. These
forward-looking statements include plans and objectives of management for
future operations, including plans and objectives relating to the products and
the future economic performance of the Company. Assumptions relating to the
foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions, future business decisions, and the
time and money required to successfully complete development projects, all of
which are difficult or impossible to predict accurately and many of which are
beyond the control of the Company. Although the Company believes that the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of those assumptions could prove inaccurate and, therefore,
there can be no assurance that the results contemplated in any of the forward-
looking statements contained herein will be realized. Based on actual
experience and business development, the Company may alter its marketing,
capital expenditure plans or other budgets, which may in turn affect the
Company's results of operations. In light of the significant uncertainties
inherent in the forward-looking statements included therein, the inclusion of
any such statement should not be regarded as a representation by the Company or
any other person that the objectives or plans of the Company will be achieved.
INTRODUCTION
The Company derives its revenues from its producing oil and gas
properties, of which the substantial majority are predominantly oil properties.
These properties consist of working interests in producing oil wells having
proved reserves. Our capital for investment in producing oil properties has
been provided by the sale of common stock to its shareholders.
The following is a discussion of the Company's financial condition, results of
operations, financial resources and working capital. This discussion and
analysis should be read in conjunction with the Company's financial statements
contained in this Form 10-K.
17
OVERVIEW
RESULTS OF OPERATIONS
REVENUES
For the year ended December 31, 2009,2010, the Company generated $13,560$3,390 in revenues
from the rental income in addition to royalties on producing oil and gas
properties in the amount of $261,864.$178,805. For the period ended December 31, 2008,2009,
the Company recognized $50,743$235,334 in revenues from royalties on producing oil and
gas properties.properties and had $13,560 in revenue from rental income. During 2010 the
company sold one of its leases which is why there is a decrease in revenue.
OPERATING EXPENSES
Lease Operating - Lease operating expense for the year ended December 31, 20092010
totaled $153,230$136,648 as compared to $16,184$171,684 for the prior year. The Company
acquired a majorityDuring 2010 the
company sold one of its oil and gas interest duringleases which is why there was a decrease in expenses
for the quarteryear.
Consulting- Consulting expenses were $42,000 for the year ended December 31,
2008 therefore we did not have significant lease operating
expenses prior2010 as compared to that acquisition.
Consulting- Consulting expenses were $70,000 for the year ended December 31, 2009 as compared to $586,498 for the year ended December 31, 2008.2009. The decrease
of $516,498$28,000 was primarily related to the issuancerenegotiation of 800,000 warrants in March
of 2008 to consultants that were valued with the Black-Scholes valuation model
at $476,418 and expensed accordingly.consulting fees for
accounting work.
General and Administrative - General and administrative expenses were $18,938
for the year ended December 31, 2010, compared to $71,885 for the year ended
December 31, 2009, compared to $81,710 for the year ended
December 31, 2008, representing a decrease of $9,863.$52,947. The decrease in general
and administrative expense reflects the focus on leaning certain expenses since
the reorganization on October 31, 2008.
Professional Fees - Professional fees for the year ended December 31, 20082010 were
$498,541$406,816 as compared to $119,700$498,451 for the period ended December 31, 2008.2009. The
increasedecrease was related to the increasedecrease in operations andconsulting fees that are part of the
useconsulting agreement with the Chief Executive Officer of consultants
in addition to filing fees and stock transfer agent fees for the reverse split,
reorganization, and associated filings that took place during the year.Company.
Depreciation, Amortization, and Depletion - Depreciation and amortization
expenses on the fixed assets was $32,394$29,143 for the year ended December 31, 2009.2010.
The depletion expense for the year ended December 31, 20092010 was $361,270$19,378 and was
calculated based on an estimate using the straight line method over the
estimated lives of the proveddevelopment interests until production studies have been
completed on the recently acquired oil and gas properties. There was $5,518$32,394 in
depreciation and amortization, and $38,357$20,865 in depletion for the year ended
December 31, 2008 because2009. The decrease is related to writing down the Company had no depreciable assets until the end
of 2008.leases to their
true values at December 31, 2009.
OTHER INCOME AND EXPENSES
During the twelve months ended December 31, 2010 and 2009 the company had no
interest income was $41,503,
compared to $18,527 during year ended December 31, 2008, representing an
increase of $23,213. The increase relates to the accrued interest on the
$384,951 note receivable from a related party. See Note 6 for further
information on the related party note payable.income.
A loss was recognized on the impairment and sale of the Ray oil and gas leaseassets during the year
ended December 31, 2009. The asset was sold for $15,000. Additionally, in
January2010. In June of 2009, an automobile2010, a building with a book value
of $12,883$49,251 was soldauctioned for $11,000$27,168 and a loss on the saleauction of the asset
was recognized in the amount of $1,883.$22,083. This building had been previously
impaired for $45,000 during the year 2009. In December of 2009, the Company
wrote off $60,000down $337,134 in assets acquired from Granite Energy in the purchase
contract dated in 2008 and then an additional $73,131 in 2010 related to these
assets. The company also booked a bad debt expense of $56,572 related to monies
due to Amerigo from Granite Energy that were deemed uncollectible for
accounting purposes. Additionally the company had received stock in Granite
Energy which was deemed worthless so the company wrote off$98,053 in 2009 value
as well as a write down of $26,069 in 2010 of funds advanced for the
JJ Young oilimprovements on the West Burke lease.
Concurrent with the sale of the Justice and gas interests dueKunkel leases, the company booked a
loss in 2010 of $101,839 related to these leases while in 2009 there was a
$15,000 gain booked related to the expirationsale of the Ray lease. In 2009 the company
recorded an loss of $1,883 related to the sale of an agreementautomobile and a $14,606
loss from settlement of amounts owed on an oil lease.
The company accrued $27,929 and $10,107 in interest expense for years ended
December 31, 2010 and 2009 respectively. The increase is related to the leaserelated
party note payables that were part of the Justice Lease purchase.
The company recognized a loss in 2010 of $42,236 on their investment in
Greenstart. The company determined that the investment was not recorded
at it's fair value.
During the year ended December 31, 2010 the company entered into a
legal/settlement expense with an individual that was suing and took an expense
of $120,000. See note 5.
The company generated interest income of $19,221 in 2009 and $0 in 2010 amounts
outstanding.
The company recognized a loss in 2009 of $192,000 related to pursue
drilling.
A gain on the extinguishmentstock received
from South Texas Oil as settlement of debt in the amountmonies owed.
NET LOSS ATTRIBUTABLE TO COMMON STOCK
We realized a net loss of $62,852$940,593 for the year ended December 31, 2008, as2010,
compared to $0 for the current year is directly
related to the write off of debts as part of the reorganization on October 31,
2008.
18
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
We realized a net loss of $12,883,736$1,306,880 for the year ended December 31, 2009, compared to a
net lossdecrease of $735,597 for the year ended December 31, 2008, a
increase of $392,597.$366,287. The increasedecrease in net loss is attributable to $231,369the
writedown of assets (impairments) which took place in 2009, a loss related to
the sale of an oil and gas asset anand increase in operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 2009,2010, we had cash in the amount of $372, and a working capital
deficit of $537,796, as compared to cash in the amount of $570 and a working
capital deficit of $327,286, as compared to cash in the amount of $1,300 and a working
capital deficit of $300,308$346,663 as of December 31, 2008.2009. In addition, our
stockholders' equitydeficit was $1,688,787$787,751 at December 31, 2009,2010, compared to
stockholders' equitydeficit of $12,331,894$103,414 at December 31, 2008.2009.
Our accumulated deficit increased from $13,013,897$14,489,119 at December 31, 20082009 to
$25,897,632$15,429,712 at December 31, 2009.2010.
Our operations used net cash of $262,478$442,337 during the year ended December 31,
2010, compared to $743,998 during the year ended December 31, 2009, compared to $73,724 during the year ended December 31, 2008, a increasean
decrease of $709,728.$301,661.
Our cash used forfrom investing activities was $111,841$382,328 for the year ended December
31, 20092010 and $0 for$21,335 used in the year ended December 31, 2008.2009.
Our financing activities provided net cash of $373,588$59,813 during the year ended
December 31, 2009,2010, compared to net cash of $75,024$764,602 during the year ended
December 31, 2008.2009.
INFLATION
The Company's results of operations have not been affected by inflation and
management does not expect inflation to have a material impact on its
operations in the future.
OFF- BALANCE SHEET ARRANGEMENTS
The Company currently does not have any off-balance sheet arrangements.
19
ITEM 8. FINANCIAL STATEMENTS
Larry O'Donnell, CPA, P.C.
2228 South Fraser Street Telephone (303) 745-4545
Aurora, Colorado 80014 Fax (303) 369-9384
Unit I Email larryodonnellcpa@comcast.net
www.larryodonnellcpa.comSEALE AND BEERS, CPAS
PCAOB & CPAB REGISTERED AUDITORS
www.sealebeers.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Amerigo Energy, Inc.
ITO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
AMERIGO ENERGY, INC.
HENDERSON, NEVADA
We have audited the accompanying consolidated balance sheetsheets of Amerigo Energy,
Inc. as of December 31, 20082010 and 2009 (restated) and the related consolidated
statements of operations, stockholders'shareholders' equity, and cash flows for the years
then ended.ended December 31, 2010 and 2009 (restated). These consolidated financial
statements are the responsibility of the Company's management. MyOur
responsibility is to express an opinion on these consolidated financial
statements based on my audits.
Iour audit.
We conducted my auditsour audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that Iwe
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.misstatements. The Company is not
required to have, nor was Iwere we engaged to perform, an audit of its internal
control over financial reporting. My auditsOur 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, Iwe express no such opinion. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. IWe believe that myour
audits provide a reasonable basis for myour opinion.
In myour opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Amerigo Energy,
IncInc. as of December 31, 2010 and 2009 and 2008,(restated) and the consolidated results
of its operations, shareholders' equity, and cash flows for the years then ended
December 31, 2010 and 2009 (restated) in conformity with U.S. generally
accepted accounting principles
generally accepted in the United States of America.
The accompanying consolidated financial statements have been presented onprepared assuming that the
basis that it isCompany will continue as a going concern, which contemplatesconcern. As discussed in Note 2 to the
realization of assets
andfinancial statements, the satisfaction of liabilities in the normal course of business. The Company has an accumulated deficit of $25,897,632 at December 31, 2009.
Additionally, for the year ended December 31, 2009, the Company a net loss of
$12,883,736. These matters raisesuffered recurring losses from
operations. This factor raises substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regardswith regard to these matters
are also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ LARRY O'DONNELL, CPA, P.C.
March 26, 2010
F-2As discussed in Note 3 to the financial statements, the Company restated its
financial statements for the year ended December 31, 2009.
Seale and Beers, CPAs
Las Vegas, Nevada
April 28, 2011
50 S. Jones Blvd. Suite 202 Las Vegas, NV 89107
Phone: (888) 727-8251 Fax: (888) 782-2351
AMERIGO ENERGY, INC.
CONSOLIDATED BALANCE SHEETSHEETS
AS OF
DECEMBER 31, 2010 AND 2009 (RESTATED)
AUDITED
As of As of
December 31, 2010 December 31, 2009
2008
----------- -----------
ASSETSRESTATED
Current assets
Cash $ 570372 $ 1,300570
Accounts receivable 79,456 22,187
----------- -----------
Total current assets 80,026 23,487
Other current assets12,416 17,688
Advances to related party 22,107 30,559
Notes receivable - related party 384,951 358,949
Accrued interest receivable - related party 40,569 18,287
----------- -----------5,455 38,891
--------- ---------
Total other current assets 447,627 407,79518,244 57,149
Property, plant and equipment
Leasehold improvements - 63,266 76,460
Office equipment, net of depreciation 13,298 20,648
Vehicles, net of depreciation - 12,88313,298
Property and Equipment, net - 73,742
129,372
Proved reserves,Development wells, net of depletion 1,651,961 6,032,016
Unproved reserves, net of depletion - 5,512,163151,749 424,815
Software, net 4,284 5,504
6,724
----------- -------------------- ---------
Total property, plant and equipment 1,807,770 11,790,265156,033 580,625
Other Assets - -
Investment in GreenStart 42,236 42,236
Investment in Granite Energy 98,053 - Investment in South Texas Oil - -
Note receivable - 386,59042,236
Deposits 950 950
----------- -------------------- ---------
Total other assets 141,238 429,776
----------- -----------950 43,186
Total assets $ 2,476,661 $12,651,323
=========== ===========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)175,227 $ 680,960
========= =========
Current liabilities
Accounts payable and accrued liabilities $ 171,182139,936 $ 164,186147,177
Accounts payable - related party 99,664 46,216201,250 120,169
Advances from related parties 38,873 39,736 38,361
Payroll liabilities 55,980 96,730
70,666
----------- -----------Judgement payable 120,000 -
--------- ---------
Total current liabilities 407,312 319,429556,039 403,812
Long-term liabilities
Notes payable - related parties 368,904 370,456 -
Accrued interest - related parties 10,107 -
----------- -----------38,036 10,106
--------- ---------
Total liabilities 787,874 319,429962,979 787,374
Stockholders' (deficit)
Preferred stock (25,000,000 shares authorized
& 0500,000 shares outstanding at DecemberDec 31, 2010 and 0 shares Dec 31, 2009) -500 -
Common stock; $.001 par value; 100,000,000 shares authorized; 22,780,05822,814,331 shares outstanding
at December 31, 2010 and 22,783,866 at December 31, 2009 33,321 30,61333,356 33,325
Additional paid-in capital 28,218,698 25,968,778
Stock receivable (665,600) (665,600)
Common stock payable - 12,00014,608,105 14,352,381
Accumulated deficit (25,897,632) (13,013,897)
----------- -----------(15,429,711) (14,489,119)
--------- ---------
Total stockholders' (deficit) 1,688,787 12,331,894
----------- -----------(787,750) (103,412)
--------- ---------
Total liabilities and stockholders' (deficit) $ 2,476,661 $12,651,323
=========== ===========
See Accompanying Notes175,227 $ 680,960
========= =========
The accompanying notes to Financial Statements
F-3
AMERIGO ENERGY, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
Yearthe financials should be read in conjunction with these financial statements.
INCOME STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2010 AND 2009 (RESTATED)
AUDITED
Years Ended
Year Ended
December 31, December 31,
2009 2008
------------ ------------12-31-2010 12-31-2009
(RESTATED)
Revenue
Oil revenues $ 205,515 $ 14,312116,078 191,149
Gas revenues 56,349 10,43162,727 44,185
Rental income 3,390 13,560
-
Sale on oil packages - 26,000
------------ --------------------- --------
Total Revenue 275,424 50,743
Cost of Sales
Cost of oil packages - 19,173
------------ ------------
Total cost of goods sold - 19,173
Gross Profit - 31,570182,195 248,894
Operating expenses
Lease operating expenses 153,230 16,184136,648 171,684
Consulting expense 42,000 70,000 586,498
Selling, general and administrative 18,938 71,885 81,748
Professional fees 406,817 498,451 119,700
Depreciation and amortization expense 29,143 32,394 5,818
Depletion expense 361,270 38,357
------------ ------------19,378 20,865
--------- --------
Total operating expenses 1,187,230 848,306
------------ ------------652,924 865,279
--------- --------
Loss from operations (911,806) (816,736)(470,729) (616,385)
Other income (expenses):
Loss on sale of oil and gas interest (231,369)automobile - (1,883)
Loss of oil and gas asset (60,000)from settlement - (14,606)
Loss on sale of automobile (1,883)building (22,083) -
Loss from rescinded merger (14,606)on disposal of oil lease (101,839) -
Gain on Sale of Ray Lease - 15,000
Interest expense (27,929) (10,107)
Loss on investment in GreenStart, Inc. (42,236) -
Loss on investment in South Texas Oil - (192,000)
-Bad Debt Expense (56,572)
Impairment of building - (45,000) -
Impairment of oil and gas assets (11,458,542)from Granite Energy, Inc. (73,131) (337,134)
Write off of assets/Loss on sale of assets (26,069) (98,053)
Other income - 72
Other expense (120,005) (26,005)
Interest income 41,503 18,287
Other income 72 -
Interest income 18,287
Gain on extinguishment of debt - 62,852
------------ ------------_ 19,221
--------- --------
Total other income (expenses) (11,971,930) 81,139
------------ ------------(469,864) (690,495)
--------- --------
Loss before provision for income taxes (12,883,736) (735,597)(940,593) (1,306,880)
Provision for income taxes - -
--------- --------
Net loss $(12,883,736) $ (735,597)
============ ============$(940,593) $(1,306,880)
Basic and diluted (loss) per common share (0.57) (0.04)
============ ============(0.05) (0.06)
Basic and diluted weighted average common shares
outstanding 22,780,058 20,071,235
============ ============
See Accompanying Notes22,823,151 21,541,517
The accompanying notes to Financial Statements
F-4
AMERIGO ENERGY, INC.the financials should be read in conjunction with these financial statements.
STATEMENT OF STOCKHOLDER'SSTOCKHOLDERS EQUITY
FOR THE YEARS ENDED
DECEMBER 31, 2010 AND 2009 (RESTATED)
AUDITED
Additional Stock Total
Common Stock TotalPref Stock Paid-in Subscriptions Subscriptions Accumulated Stockholders'
Shares Amount Shares Amount Capital Receivable Payable Deficit Deficit
Balance, December 31, 2008 20,071,235 $30,613 $25,968,776 $(665,600) $ 12,000 $(13,013,896) $12,331,893
========== ======= =========== ========= ======== ============ ===========20,124,776 $30,666 $13,920,018 $12,000 $(13,182,239) $780,445
------------ ------- --- --- ------------ -------- ------------- --------------
Shares issued for purchase of oil 1,513,703 1,514 1,471 2,985
interests 1,567,244 1,567 1,565,677 - - - 1,567,244 (see Note 4)
Adjustment to beginning balance of 32,148 32,148
assets purchased - - 32,147 - - - 32,147
Shares issued for purchase of oil interests - 133,344 133 266,55513,201 13,335
interests - - - 266,688 Justice Heirs
Shares issued for warrants 1,008,235 1,008 385,543 - (12,000) - -$- 374,551
Adjustment from issuances for oil 3,808 4 _ _ 4
interest
Net loss - - - - (1,306,880) (1,306,880)
------------ ------- --- --- ------------ -------- ------------- --------------
Balance, December 31, 2009 22,783,866 $33,325 $14,352,381 $- $(14,489,119) $ (103,412)
Shares issued for purchase of Kunkel 25,000 25 6,225 6,250
interest
Preferred Stock issued to settle 500,000 500 249,500 250,000
accrued salary
Adjustment from issuance for oil 5,465 5 5
interest
Rounding error 1
Net loss - (12,883,736) (12,171,049)
----------- - - (940,593) (940,593)
------------ ------- ----------- ------------ --- ------------ -------- ------------- --------------
Balance, December 31, 2010 22,814,331 $33,356 500,000 500 $14,608,106 - $(15,429,711) $(787,750)
------------ -----------
Balance,
September 30,
2009 22,780,058 $33,321 $28,218,697 $(665,600) $ (0) $(25,897,632) $ 1,688,787
========== ======= =========== ========= ======== ============ ===========
See Accompanying Notes------- --- --- ------------ -------- ------------- --------------
The accompanying notes to Financial Statements
F-4
AMERIGO ENERGY, INC.
CONSOLIDATEDthe financials should be read in conjunction with these financial statements.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED
DECEMBER 31, 2010 AND 2009 (RESTATED)
AUDITED
Year Endedended Year Ended
December 31,ended
December 31, 2009 2008
------------ -----------December 31, 2010
RESTATED
Cash flows from operating activities:
Net loss $(12,883,736) $ (719,413)$(1,306,880) $(940,593)
Adjustments to reconcile net loss to
net cash used by operating activities:
Sale of oil and gas interests 246,369Stock issued for services / settle debt - 250,000
Stock issued to purchase assets 48,471 -
Impairment of building 45,000assets - Impairment of oil and gas assets 11,518,54242,236
Judgment payable - Write down of investment in south texas oil 406,606 -120,000
Changes in operating assets and liabilities:
Increase in accounts receivable (57,269) (43,233)
Stocks and options issued for services / to settle debt (2,169)
Forgiveness of related party payable 61,881(13,321) 5,272
Increase in note receivable and interest due from GreenStart (28,414)
Increase in note receivable and interest (20,016)
Stock options issued 476,418386,590 -
Depletion, depreciation and amortization 393,664
(Increase) / decrease in advances and bank receivables 32,150 11,99053,259 48,521
Increase / (decrease) in accounts payable 6,996 220,31746,083 (7,242)
Increase / (decrease) in accounts payable - related party 51,565 (133,317)14,361 81,082
Increase / (decrease) in advances from related parties 1,375 (862)
Increase / (decrease) in accrued payroll 26,064 53,801(40,750)
------------- ------------ -----------
Net cash used by operating activities $ (262,477) $ (73,725)$(743,998) $(442,337)
Cash flows from investing activities:
Investment in Granite Energy (98,053) -
Purchase of oil and gas interests (13,788) -(21,335) 382,328
------------- ------------ -----------
Net cash used by investing activities $ 111,841 $ -$(21,335) $382,328
Cash flows from financing activities:
Increase in bank overdraft - (7,116)
Loan to (from) related party (964) 70,140
shares390,051 59,813
Shares issued for warrantsWarrants 386,551 -
Proceeds from stock receivable - 12,000
DecreaseIncrease in stock payable (11,999)(12,000) -
------------- ------------ -----------
Net cash provided by financing activities $ 373,588 $ 75,024
------------ -----------$764,602 $59,813
Net increase in cash (730) 1,300(198)
------------- ------------
Cash, beginning of period 1,300 -570
------------- ------------ -----------
Cash, end of period $570 $372
============= ============
Supplementary cash flow information:
Cash payments for income taxes $ 570- $-
Cash payments for interest $ 1,300
============ ===========
See Accompanying Notes- $ 4,250
Supplementary cash flow information:
Preferred stock issued to Financial Statementssettle salary $ - $250,000
Stock issued to buy oil leases $ 48,467 $ 6,255
The accompanying notes to the financials should be read in conjunction with these financial statements.
F-6
AMERIGO ENERGY, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
Description of Business and History - Amerigo Energy, Inc., a Delaware corporation ("AGOE" or the "Company"),
formerly named Strategic Gaming Invesmtents,Investments, Inc., was incorporated in 1973.
Prior to 2008, the Company was involved in various businesses, none of which
were successful.
In August of 2008, our Board of Directors voted to get approval from the
shareholders of the Company for a name change from Strategic Gaming
Investments, Inc. to Amerigo Energy, Inc. The company received the approval
from a majority of its stockholders and filed the amendment to its Articles of
Incorporation with the State of Delaware. The name change became effective by
the State of Delaware on August 26, 2008. The Company also requested a new
stock symbol as a result of the name change. Our new trading symbol is "AGOE".
On October 31, 2008, The Company entered into a Reorganization pursuant to
Reorganization Agreement dated as of October 31, 2008. In the Reorganization,
Granite Energy, Inc. sold to the Company substantially all of its assets
and operations, including its subsidiary, Amerigo, Inc., and its
controlling interest in GreenStart, Inc. in exchange for 10,000,000
restricted shares of Common Stock of the Company.
The Amerigo Energy's business plan included developing oil and gas reserves
while increasing the production rate base and cash flow. The plan was to
continue acquiring oil and gas leases for drilling and to take advantage of
other opportunities and strategic alliances. Due to declines in production on
the oil leases the company had an interest in, the company has been forced to
reconsider its position in the oil industry. In 2011, the company began an
aggressive approach to reduce the debt on the company's books as well as
looking to diversify the investment holdings.
Our wholly-owned subsidiary, Amerigo, Inc., incorporated in Nevada on January
11, 2008, holds certain assets, including oil lease interests, computers,
software, telephone system, small office equipment, machinery, and furniture.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the combined accounts of Amerigo,
Inc., a Nevada Corporation. All material intercompany transactions and accounts
have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of highly liquid investments with maturities
of three months or less when purchased.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles 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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
COMPREHENSIVE INCOME
FASB Accounting Standard Codification Topic 220-10, "Comprehensive Income"
("ASC 220-10"), requires that total comprehensive income be reported in the
financial statements. ASC 220-10 establishes standards for reporting and
display of comprehensive income and its components (revenues, expenses, gains
and losses) in a full set of general-purpose financial statements. It requires
(a) classification of the components of other comprehensive income by their
nature in a financial statement and (b) the display of the accumulated balance
of the other comprehensive income separate from retained earnings and
additional paid-in capital in the equity section of a statement of financial
position. The Company's financial statements do not include any of the
components of other comprehensive income during the year ended December 31,
20082010 and the year ended December 31, 2009.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company includes fair value information in the notes to financial
statements when the fair value of its financial instruments is different from
the book value. When the book value approximates fair value, no additional
disclosure is made.
F-7
PROPERTY AND EQUIPMENT
On October 31, 2008, as part of the reorganization agreement, the Company
acquired substantially all of the assets from Granite Energy, Inc., including
an office building, equipment, furniture and fixtures, an automobile, and oil
interests. The Company transferred these assets at their depreciated historical
cost and has continued depreciating them using their historical cost and
remaining estimate lives.
The current and long term portions were of the asset retirement obligation was
estimated based on historical experience.
Depreciation is computed primarily on the straight-line method for financial
statements purposes over the following estimated useful lives:
CATEGORY Estimated LIFE
--------------- --------------
Office building 20 years
Vehicles 7 years
Equipment 7 years
Leasehold Improvements 7 years
Furniture and Fixtures 5 years
All assets are booked at historical cost. Management reviews on an annual basis
the book value, along with the prospective dismantlement, restoration, and
abandonment costs and estimate residual value for the assets, in comparison to
the carrying values on the financial statements.
On December 31, 2009, the Company recognized an impairment loss on the book
value of the building it owns in the amount of $45,000. The carrying value
subsequent to impairment is $56,100,$51,600, net of accumulated depreciation. The
building will now be depreciated using the straight-line method using the new
carrying value. F-8The building was sold during the nine months ended September
30, 2010.
2010 2009
Total Fixed Assets
Oil and Gas Assets $175,218 $ 449,395
Accumulated Depletion (23,469) (24,579)
--------- ----------
Oil and Gas Assets, net $151,749 424,816
Other Prop, Plant, Equip 6,927 193,602
Accumulated Depletion (2,642) (37,793)
--------- ----------
Total Other Prop, Plant, Equip 4,285 155,809
--------- ----------
Total Fixed Assets $156,034 $580,625
Total depreciation expense for 2010 was $29,143 and for 2009 it was $32,394.
Total depletion expense for 2010 was $19,378, and for 2009 it was $20,865.
OIL AND GAS PRODUCING ACTIVITIES
The Company uses the successful efforts method of accounting for its oil and
natural gas properties. Exploration costs such as exploratory geological and
geophysical costs and delay rentals are charged against earnings as
incurred The costs to acquire, drill and equip exploratory wells are
capitalized pending determinations of whether proveddevelopment reserves can be
attributed to the Company's interests as a result of drilling the well. If
management determines that commercial quantities of oil and natural gas have
not been discovered, costs associated with exploratory wells are charged to
exploration expense. Costs to acquire mineral interests, to drill and equip
development wells, to drill and equip exploratory wells that find proveddevelopment
reserves, and related costs to plug and abandon wells and costs of site
restoration are capitalized.
Depreciation, depletion and amortization ("DD&A") of oil and gas properties is
computed using the unit-of-production method based on recoverable reserves as
estimated by the Company's independent reservoir engineers. Capitalized
acquisition costs are depleted based on total estimated proved developed and
proved undeveloped reserve quantities. Capitalized costs to drill and equip
wells are depreciated and amortized based on total estimated proved developed
reserve quantities. Investments in unprovedExploratory properties are not amortized
until proved reserves associated with the prospects can be determined or until
impairment occurs. Oil and natural gas properties are periodically assessed
for impairment. If the unamortized capitalized costs of proved properties are
in excess of estimated undiscounted future cash flows before income taxes, the
property is impaired. Estimated future cash flows are determined using
management's best estimates and may be calculated using prices consistent with
management expectations for the Company's future oil and natural gas
sales. UnprovedExploratory oil and natural gas properties are also periodically
assessed for impairment, and a valuation allowance is provided if impairment is
indicated. Impairment costs are included in exploration expense. Costs of
expired or abandoned leases are charged against the valuation allowance. Costs
of properties that become productive are transferred to proved oil and natural
gas properties.
UnprovedExploratory oil and gas properties that are individually significant are
periodically assessed for impairment of value and a loss is recognized at the
time of impairment by providing an impairment allowance. Other unprovedExploratory
properties are amortized based on the Company's experience of successful
drilling and average holding period.
Capitalized costs of producing oil and gas properties, after considering
estimated residual salvage values, are depreciated and depleted by the unit-of-
production method. Support equipment and other property and equipment are
depreciated over their estimated useful lives.
On the sale or retirement of a complete unit of a proved property, the cost and
related accumulated depreciation, depletion, and amortization are eliminated
from the property accounts, and the resultant gain or loss is recognized. On
the retirement or sale of a partial unit of proved property, the cost is
charged to accumulated depreciation, depletion, and amortization with a
resulting gain or loss recognized in income.
On the sale of an entire interest in an unprovedExploratory property for cash or cash
equivalent, gain or loss on the sale is recognized, taking into consideration
the amount of any recorded impairment if the property has been assessed
individually. If a partial interest in an unprovedExploratory property is sold, the
amount received is treated as a reduction of the cost of the interest retained.
Pursuant to ASC 932-235-50-1, the following disclosures for exploratory
activity are made.
a. The amount of capitalized exploratory well costs that is pending the
determination of proved reserves. An entity also shall separately disclose
for each annual period that an income statement is presented changes in
those capitalized exploratory well costs resulting from all of the
following:
1. Additions to capitalized exploratory well costs that are pending the
determination of proved reserves -
2. Capitalized exploratory well costs that were reclassified to wells,
equipment, and facilities based on the determination of proved reserves
3. Capitalized exploratory well costs that were charged to expense.
Management has assessed this for the company and it is not relevant or
applicable to our operations.
b. The amount of exploratory well costs that have been capitalized for a period
of greater than one year after the completion of drilling at the most recent
balance sheet date and the number of projects for which those costs relate.
Additionally, for exploratory well costs that have been capitalized for
periods greater than one year at the most recent balance sheet date, an
entity shall provide an aging of those amounts by year, or by using a range
of years, and the number of projects to which those costs relate.
Management has assessed this for the company and it is not relevant or
applicable to our operations.
c. For exploratory well costs that continue to be capitalized for more than one
year after the completion of drilling at the most recent balance sheet date,
a description of the projects and the activities that the entity has
undertaken to date in order to evaluate the reserves and the projects, and
the remaining activities required to classify the associated reserves as
proved. Management has assessed this for the company and it is not relevant
or applicable to our operations.
ASSET RETIREMENT OBLIGATIONS
In accordance with accounting standards for asset retirement obligations (ASC
410), the Company records the fair value of a liability for an asset retirement
obligation (ARO) when there is a legal obligation associated with the
retirement of a tangible long-lived asset and the liability can be reasonably
estimated. No ARO's associated with legal obligations to retire oil and gas
properties have been recognized, as indeterminate settlement dates for the
asset retirements prevent estimation of the fair value of the associated ARO.
The Company performs periodic reviews of its oil and gas properties long-lived
assets for any changes in facts and circumstances that might require
recognition of a retirement obligation.
REVENUE RECOGNITION
Oil, gas and natural gas liquids revenues are recognized when the products are
sold to a purchaser at a fixed or determinable price, delivery has occurred and
title has transferred, and collection of the revenue is reasonably assured.
CONCENTRATIONS OF CREDIT RISK
Credit risk represents the accounting loss that would be recognized at the
reporting date if counter parties failed completely to perform as contracted.
Concentrations of credit risk (whether on or off balance sheet) that arise from
financial instruments exist for groups of customers or counter parties when
they have similar economic characteristics that would cause their ability to
meet contractual obligations to be similarly affected by changes in economic or
other conditions described below.
The Company operates in one primary segment, the oil and gas industry. The
Company's customers are located within the United States of America. Financial
instruments that subject the Company to credit risk consist principally of oil
and gas sales which are based on a short-term purchase contracts from Teppco
Oil (US) Company and various other gatherers in the area, with related accounts
receivable subject to credit risk.
F-9
ACCOUNTS RECEIVABLE
Accounts receivable are stated at the amount management expects to collect from
outstanding balances. Management provides for probable uncollectible amounts
through a charge to earnings and a credit to a valuation allowance based on its
assessment of the current status of individual accounts. Balances outstanding
after management has used reasonable collection efforts are written off through
a charge to the valuation allowance and a credit to trade accounts receivable.
Changes in the valuation allowance have not been material to the financial
statements and at December 31, 20082009 and December 31, 2009;2010; the Company's
financial statements do not include an allowance for doubtful accounts because
management believes that no allowance is required at those dates.
Fair value of financial instruments
-----------------------------------
Fair value estimates discussed herein are based upon certain market assumptions
and pertinent information available to management as of December 31, 2010 and
2009. The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair values. These financial instruments include
cash and accounts payable. Fair values were assumed to approximate carrying
values for cash and payables because they are short term in nature and their
carrying amounts approximate fair values or they are payable on demand.
Level 1: The preferred inputs to valuation efforts are "quoted prices in active
markets for identical assets or liabilities," with the caveat that the
reporting entity must have access to that market. Information at this level is
based on direct observations of transactions involving the same assets and
liabilities, not assumptions, and thus offers superior reliability. However,
relatively few items, especially physical assets, actually trade in active
markets.
Level 2: FASB acknowledged that active markets for identical assets and
liabilities are relatively uncommon and, even when they do exist, they may be
too thin to provide reliable information. To deal with this shortage of direct
data, the board provided a second level of inputs that can be applied in three
situations.
Level 3: If inputs from levels 1 and 2 are not available, FASB acknowledges
that fair value measures of many assets and liabilities are less precise. The
board describes Level 3 inputs as "unobservable," and limits their use by
saying they "shall be used to measure fair value to the extent that observable
inputs are not available." This category allows "for situations in which there
is little, if any, market activity for the asset or liability at the
measurement date". Earlier in the standard, FASB explains that "observable
inputs" are gathered from sources other than the reporting company and that
they are expected to reflect assumptions made by market participants.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current
year presentation. These reclassifications had no effect on the results of
operations or stockholders' equity.
NET LOSS PER COMMON SHARE
FASB Accounting Standards Codification Topic 260-10, "Earnings per Share",
requires presentation of "basic" and "diluted" earnings per share on the face
of the statements of operations for all entities with complex capital
structures. Basic earnings per share is computed by dividing net income by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share reflect the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
during the period. Dilutive securities having an anti- dilutive effect on
diluted earnings per share are excluded from the calculation.
INCOME TAXES
The Company accounts for its income taxes in accordance with FASB Codification
Topic 740-10 ("ASC 740-10"), which requires recognition of deferred tax assets
and liabilities for future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and tax credit carry forwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in operations in the period that
includes the enactment date.
Management feels the Company will have a net operating loss carryover to be
used for future years. Such losses may not be fully deductible due to the
significant amounts of non-cash service costs. The Company has established a
valuation allowance for the full tax benefit of the operating loss carryovers
due to the uncertainty regarding realization. F-10
STOCK-BASED COMPENSATION
The Company has adopted FASB Accounting Standards Codification Topic 718-10,
"Compensation- Stock Compensation" ("ASC 718-10") which requires the
measurement and recognition of compensation expense for all stock-based payment
awards made to employees and directors. Under the fair value recognition
provisions of ASC 718-10, stock-based compensation cost is measured at the
grant date based on the value of the award and is recognized as expense over
the vesting period.
Determining the fair value of stock-based awards at the grant date requires
considerable judgment, including estimating the expected future volatility of
our stock price, estimating the expected length of term of granted options and
selecting the appropriate risk-free rate. There is no established trading
market for our stock.
DIVIDENDS
The Company has not yet adopted any policy regarding payment of dividends.
GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. As shown in the accompanying
financial statements, the Company has incurred recurring losses, has used
significant cash in support of its operating activities and, based upon current
operating levels, requires additional capital or significant reconfiguration of
its operations to sustain its operations for the foreseeable future. These
factors, among others, may indicate that the Company will be unable to continue
as a going concern.
The financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. The Company's ability to
continue as a going concern is dependent upon its ability to generate
sufficient cash flow to meet obligations on a timely basis and ultimately to
attain profitability. The Company has obtained working capital through equity
offerings and management plans to obtain additional funding through equity or
debt financings in the future. There is no assurance that the Company will be
successful in its efforts to raise additional working capital or achieve
profitable operations. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
F-11
RECENT ACCOUNTING PRONOUNCEMENTS -
In January 2010, the FASB (Financial Accounting Standards Board) issued
Accounting Standards Update 2010-03 (ASU 2010-03), Extractive Activities-Oil
and Gas (Topic 932): Oil and Gas Reserve Estimation and Disclosures. This
amendment to Topic 932 has improved the reserve estimation and disclosure
requirements by (1) updating the reserve estimation requirements for changes in
practice and technology that have occurred over the last several decades and
(2) expanding the disclosure requirements for equity method investments. This
is effective for annual reporting periods ending on or after December 31,
2009. However, an entity that becomes subject to the disclosures because of
the change to the definition oil- and gas- producing activities may elect to
provide those disclosures in annual periods beginning after December 31,
2009. Early adoption is not permitted. The Company does not expect the
provisions of ASU 2010-03 to have a material effect on the financial position,
results of operations or cash flows of the Company.
F-12In January 2010, the FASB (Financial Accounting Standards Board) issued
Accounting Standards Update 2010-06 (ASU 2010-06), Fair Value Measurements and
Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements.
This amendment to Topic 820 has improved disclosures about fair value
measurements on the basis of input received from the users of financial
statements. This is effective for interim and annual reporting periods
beginning after December 15, 2009, except for the disclosures about purchases,
sales, issuances, and settlements in the roll forward of activity in Level 3
fair value measurements. Those disclosures are effective for fiscal years
beginning after December 15, 2010, and for interim periods within those fiscal
years. Early adoption is permitted. The Company does not expect the provisions
of ASU 2010-06 to have a material effect on the financial position, results of
operations or cash flows of the Company.
In February 2010, the FASB issued Accounting Standards Update 2010-09 (ASU
2010-09), Subsequent Events (Topic 855), amending guidance on subsequent events
to alleviate potential conflicts between FASB guidance and SEC requirements.
Under this amended guidance, SEC filers are no longer required to disclose the
date through which subsequent events have been evaluated in originally issued
and revised financial statements. This guidance was effective immediately and
we adopted these new requirements for the period ended March 31, 2010. The
adoption of this guidance did not have a material impact on our financial
statements.
In December 2010, the FASB (Financial Accounting Standards Board) issued
Accounting Standards Update 2010-28 (ASU 2010-28), Intangibles, Goodwill and
Other. The amendments in this Update are effective for fiscal years, and
interim periods within those years, beginning after December 15, 2010. The
Company does not expect the provisions of ASU 2010-28 to have a material effect
on the Company's financial position, results of operations or cash flows.
In December 2010, the FASB (Financial Accounting Standards Board) issued
Accounting Standards Update 2010-29 (ASU 2010-29), Business Combinations. The
amendments in this Update are effective for fiscal years, and interim periods
within those years, beginning after December 15, 2010. The Company does not
expect the provisions of ASU 2010-29 to have a material effect on the Company's
financial position, results of operations or cash flows.
NOTE 23 - RESTATEMENT OF FINANCIALS
In March 2011, the Company determined, as well as hindsight lends to confirm,
that the assets purchased during 2008 should have been impaired and/or recorded
at a lesser amount. Previously, the assets were recorded in 2008 and then
subsequently written down in 2009 and 2010. The assets were originally recorded
at the historical cost of the seller; however,the production and collectability
from the operator in Oklahoma have all proven to be less than expected.
The following is a summary of the restatements for 2009:
Increase (Decrease)
in Account / Amount
-------------------
Total Assets $(1,795,701)
Total Stockholders Equity (1,792,201)
Net Income (Loss) (11,576,856)
Net Income (Loss) per share $(0.51)
The effect on the Company's previously issued 2009 financial statements is summarized as follows:
Balance Sheet as of December 31, 2009
Previously Increase
Reported (Decrease) Restated
Current Assets $ 527,653 $ (470,504) $ 57,149
Other Assets 1,949,008 (1,325,197) 623,811
---------- ----------- -----------
Total Assets 2,476,661 (1,795,701) 680,960
Current Liabilities 407,312 (3,500) 403,812
Other liabilities 380,563 - 380,562
---------- ----------- -----------
Total Liabilities 787,874 (3,500) 784,374
Stockholders' Equity: 1,688,787 (1,792,201) (103,414)
---------- ----------- -----------
Total Liabilities and Stockholders' Deficit $ 2,476,661 (1,795,701) 680,960
Statement of Operations for the Year Ended December 31, 2009
Previously Increase
Reported (Decrease) Restated
Net Sales $ 275,424 $ (26,530) $ 248,894
Operating Expenses 1,187,230 (321,951) 865,279
---------- ----------- -----------
Income (Loss) from Operations (911,806) (295,421) (616,385)
Other income (expenses) (11,971,930) (11,281,435) (690,495)
---------- ----------- -----------
Net Income (Loss) (12,883,736) (11,576,856) (1,306,880)
NOTE 4 - ACQUISITION AND DISPOSAL OF ASSETS
DURING THE YEAR ENDED DECEMBER 31, 2008
On October 31, 2008, The Company entered into a Reorganization pursuant to
Reorganization Agreement dated as of October 31, 2008. In the Reorganization,
Granite Energy, Inc. sold to the Company substantially all of its oil
and gas assets and operations, including its subsidiary, Amerigo, Inc.,
and its controlling interest in GreenStart, Inc. in exchange for 10,000,000
restricted shares of Common Stock of the Company.
The following is an analysis
of the consideration given and assets received in connection with the
reorganization:
F-13
Assets acquired:
Proved reserves $ 2,001,368
Unproved reserves 345,912
Software 6,927
Building 103,133
Leasehold improvements 78,659
Furniture & fixtures 21,873
Vehicle 13,301
Equipment 28,010
Receivables 48,056
Deposit 950
Notes receivable 775,816
Total assets acquired 3,424,006
Consideration given:
Common stock
(10,000,000 shares) 3,424,006
Total consideration given $ 3,424,006
On December 1, 2008, the Company started the process to issue 9,307,970 shares
of our Company Common Stock in exchange for the purchase of various oil
interests.
During 2008, these values were impaired to the fair value at year end and
confirmed with subsequent years / transactions.
DURING THE YEAR ENDED DECEMBER 31, 2009:
During the year ended December 31, 2009, the Company issued 1,567,2441,517,511 shares of
our Company Common Stock in exchange for the purchase of various oil interests.
On August 14, 2009, the Company completed the purchase of certain lease oil,
gas, and mineral interests in the Justice Heirs A, B, and C leases operated by
SWJN Oil Company.Company (a related party). The Justice leases are located in Archer
County, Texas. The Company acquired thirty three and 43/100 percent (33.43%)net
revenue interests (NRI) and forty one and 67/100 percent (41.67%) working
interests (WI)interests(WI) in the Justice Heirs leases from various entities or individuals:individuals.
The total purchase price for the leases was six hundred sixty six thousand,
seven hundred and twenty dollars ($666,720). The purchase agreements call for
the following methods of payment for the purchase of the leases: The issuance
of one hundred thirty four thousand, three hundred and forty four (133,344)
shares of Amerigo Energy, Inc. restricted common stock at $2.00 per share,
representing forty (40%) of the purchase price. An additional immediate cash
payment will be made in the amount of twenty six thousand, six hundred and
sixty seven dollars ($26,667). The remaining amount of three hundred seventy
three thousand, three hundred and sixty five dollars ($373,365) will be paid
monthly for a period of five years with interest of seven percent (7%) accruing
on the outstanding balance. The monthly payment amount is not to exceed seventy
five percent (75%) of the minimum net revenue interest (NRI) from the prior
month's production. These liabilities were settled in 2011 with stock and with
assets of the company being used to settle the amounts owed.
The purchase price of the leases were based of current market conditions as
well as the historical purchase prices made by the Company for acreage.
A material relationship exists between Bullfrog Management, LLC and the Company
in that Bullfrog Management, LLC is managed by the wife of S. Matthew Schultz,
the former CEO of Amerigo Energy. A material relationship also exists between
Peachtree Consultants, LCCLLC and the Company in that it is managed by a firm
owned by the CFOCEO of Amerigo Energy, Jason F. Griffith. Jacque Lybbert is the
wife of Bruce Lybbert, a former Director of the Company. The Justice Heirs leases were
purchased consistfrom these related parties.
DURING THE YEAR ENDED DECEMBER 31, 2010:
During the year ended December 31, 2010, the Company issued 25,000 shares of
the above mentioned net revenue and working
interestsour Company Common Stock in approximately 600 acres. The three leases have produced an average
of 263 barrels of oil each monthexchange for the last 12 months.purchase of a minor interest in an
oil lease. The purchased
interests had gross revenuescompany needed to have a larger percentage of approximately $62,600this lease in
order to sell it.
During the year ended December 31, 2010, the company sold its interest in the
past twelve
months, an average of $5,217 per monthJustice lease for all three leases.
In$62,700 as well as its interest in the Kunkel lease for
$100,000.
During the year ended December 2009,31, 2010, the Company's agreement as part ofbuilding in Texas was
sold due to back taxes and a lien that was recorded on the JJ Young oil and gas
lease interest expired andbuilding that had
not been disclosed to the Company recognized an impairment loss in the
amount of $60,000 on the asset and removed it from the books.by Granite Energy.
NOTE 35 - NOTES PAYABLE - RELATED PARTIES
As of December 31, 2009 and 2010, there are no$370,456 and $368,904 notes payable
outstanding related to the purchase of the Justice lease. See Note 3 for full
details on these transactions. The interest rate on these loans was 7% on the
outstanding balance. Payment was to be made from production of the leases.
Subsequent to year end, these notes payable.were settled.
NOTE 46 - STOCKHOLDERS' EQUITY
PREFERRED STOCK
As of December 31, 2009,2010, there were 22,780,05825,000,000 preferred shares authorized
and 500,000 preferred shares outstanding. The board of directors had previously
set the voting rights for the preferred stock at 1 share of preferred to
250 common shares.
There are 500,000 shares of preferred stock issued and outstanding at December
31, 2010, which were issued to the former CEO and current CEO in satisfaction of
salaries payable, totaling $250,000.
COMMON STOCK
As of December 31, 2010, there were 100,000,000 shares authorized and there
were 22,814,331 shares of common stock
outstanding and no preferred shares outstanding.
During the year ended December 31, 2009, the Company issued common stock and
warrants as follows:
COMMON STOCK
During the year ended December 31, 2009, the Company issued 1,567,2441,517,511 shares of
our Company Common Stock at $1.00$0.002 per share in exchange for the purchase of
various oil interests.
In addition, on August 14, 2009, the Company entered into a purchase agreement
for the purchase of certain lease oil, gas, and mineral interests in the
Justice Heirs A, B, and C leases. As part of this agreement, the Company issued
133,344 shares of restricted common stock,at $0.10 per share to related parties
in addition to other forms of payment for their interests in the said leases.
See Note 3 for full information regarding the purchase.
During 2010, the company issued 25,000 shares of stock for the purchase of an
interest in an oil lease at $0.25 per share. An additional 5,465 shares were
issued for oil interest at $0.001.
On December 31, 2009 the Company issued 1,008,235 shares of our Common Stock
for warrants purchased. See Warrants below.
F-14Subsequent to December 31, 2010, the company has issued (or agreements to
issue) 6,140,553 shares of stock to settle $446,795 in debts on the company
books.
WARRANTS
The Company issued warrants for the purchase of our Company's Common Stock at
$0.35, $0.40 and $1.00 per share on December 31, 2008. A total of 2,335,945
shares of common stock were subscribed to through the warrants. The shares
would have been issued if all payments from warrant holders are received no
later than December 31, 2009.
As per the warrant exercise documentation, thedocumentation,1,008,235 shares of common stock were
issued on December 31, 2009, for the prorated amount of payments received,
since the payments were not made in their entirety.
The remaining shares payable were removed from the records, and the transaction
has been finalized.
NOTE 5 - LITIGATION
As of December 31, 2009 and 2010, there were no warrants outstanding for the
Company.
Warrants Outstanding Average Price
December 31, 2008 2,335,945 $0.37
Granted -
Excercised 1,008,235 $0.37
Cancelled (1,327,710)
December 31, 2009 -
Granted -
Excercised -
December 31, 2010 -
NOTE 7 - LITIGATION
In 2010, Amerigo signed an agreement with the individual to acquire his
interest in certain oil and gas leases for $120,000, payable at $10,000 per
month starting April 1, 2010, with subsequent payments due on the 1st of each
month. The term of the note was One (1) year. The Company is offered a
prepayment discount if the Company pays $100,000 on or before Tuesday, June 1,
2010. Upon final payment and settlement of the note, the individual will
return all shares of stock (with properly executed stock power) that he
individually holds of Granite Energy and Amerigo Energy, along with his entire
interest in the Kunkel lease, which is 3.20% working interest (2.54% net
revenue interest), as well as his ownership in what is know as the 4 Well
Program (0.325% working interest, 0.2438% net revenue interest). During 2010,
the individual sold his interest in the Kunkel lease. The company has not kept
current with the agreement and the individuals promissory note has now been
escalated to a judgment against the company. As of the date of this filing,
terms of settling the judgment have not been resolved.
As of December 31, 2010, other than discussed above that occurred subsequent to
year end, the Company is not a party to any pending material legal proceeding.
To the knowledge of management, no federal, state or local governmental agency
is presently contemplating any proceeding against the Company. To the knowledge
of management, no director, executive officer or affiliate of the Company, any
owner of record or beneficially of more than five percent of the Company's
Common Stock is a party adverse to the Company or has a material interest
adverse to the Company in any proceeding.
NOTE 68 - RELATED PARTY TRANSACTIONS
As of December 31, 2009, the Company holds $384,951 in notes receivable from
GreenStart, Inc., in which the Company is the majority shareholder. $356,820 of
the note was transferred to the Company from Granite Energy as part of the
reorganization on October 31, 2008. This asset is due on demand and accrues
interest at 6% annually. The accrued interest receivable on this loan totaled
$40,569 at December 31, 2008. The amounts are considered short term due to the
demand status of the note.
As of December 31, 2009, the Company had $96,730 in accrued payroll payable to
the Company's current and former officers.
As of December 31, 2009, the Company has $20,505 in liabilities due to a firm
controlled by the Company's Chief FinancialExecutive Officer. This loan is non-interest
bearing and has no due date assigned to it.
On August 14, 2009, the Company completed the purchase of certain lease oil,
gas, and mineral interests in the Justice Heirs A, B, and C leases operated by
SWJN Oil Company. The Justice leases are located in Archer County, Texas. The
Company acquired thirty three and 43/100 percent (33.43%) net revenue interests
(NRI) and forty one and 67/100 percent (41.67%) working interests (WI) in the
Justice Heirs leases from various entities or individuals:
The total purchase price for the leases was six hundred sixty six thousand,
seven hundred and twenty dollars ($666,720). The purchase agreements call for
the following methods of payment for the purchase of the leases: The issuance
of one hundred thirty four thousand, three hundred and forty four (133,344)
shares of Amerigo Energy, Inc. restricted common stock at $0.10 per share,
representing forty (40%) of the purchase price. An additional immediate cash
payment will be made in the amount of twenty six thousand, six hundred and
sixty seven dollars ($26,667). The remaining amount of three hundred seventy
three thousand, three hundred and sixty five dollars ($373,365) will be paid
monthly for a period of five years with interest of seven percent (7%) accruing
on the outstanding balance. The monthly payment amount is not to exceed seventy
five percent (75%) of the minimum net revenue interest (NRI) from the prior
month's production. These liabilities were settled in 2011 with stock and with
assets of the company being used to settle the amounts owed.
The purchase price of the leases were based of current market conditions as
well as the historical purchase prices made by the Company for acreage.
A material relationship exists between Bullfrog Management, LLC and the Company
in that Bullfrog Management, LLC is managed by the wife of S. Matthew Schultz,
the former CEO of Amerigo Energy. A material relationship also exists between
Peachtree Consultants, LLC and the Company in that it is managed by a firm
owned by the CEO of Amerigo Energy, Jason F. Griffith. Jacque Lybbert is the
wife of a former Director of the Company. The Justice Heirs leases were
purchased from these related parties.
The Company has a consulting agreement with a firm controlled by the Company's
Chief Financial Officer for a fee of $3,500 per month. The consulting firm has
been engaged to assist in organizing and completing the process of filings with
the Securities and Exchange Commission and other tasks. The Company owed the
firm $93,716 as of December 31, 2009 which is included as part of Accounts
payable - related party in the accompanying financial statements. As of
December 31, 2010 the company owed the firm $135,716.
As of December 31, 2010, the company has $59,586 in liabilities due to a firm
controlled by the Company's Chief Executive Officer. This loan is non-interest
bearing and has no due date assigned to it. Subsequent to year end, this note
was settled.
As of December 31, 2010, the Company's CEO is owed $28,166 in accrued, but not
paid, salary. Subsequent to year end, this debt was settled.
The Company has an operating agreement with SWJN Oil Company and SJ OK oil
Company to operate the company's oil and gas leases. SWJN and SJ OK are
partially owned by the current Chief Executive Officer. The fee charged by
these companies to operate these leases is the greater of $1,000 per month of
5% of net oil sales. Amerigo's portion of this is pro-rata to its interest in
these wells. The company also has a lease agreement with AVES. The company
rents an office space from AVES for $1,098 per month. AVES and the building are
owned partially by our current CEO Jason F. Griffith.
Other Material Transactions. With the exception of the above mentioned
transactions, there have been no material transactions, series of similar
transactions or currently proposed transactions to which the Company or any
officer, director, their immediate families or other beneficial owner is a
party or has a material interest in which the amount exceeds $50,000.
F-15
NOTE 79 - DEFERRED INCOME TAX
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial statement
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets as of December 31, 20092010
are as follows:
Deferred tax assets: 2009 2010
---------- ----------
Net operating loss carryforwards $ 2,673,0131,306,880 940,593
Stock issued for services 3,500
2.676.513- 250,000
Accrued Salary change (26,064) 40,750
---------- ----------
1,280,816 1,231,343
Deferred tax liabilities
Depreciation and amortization (3,025)
(3,025)- -
- -
Net deferred tax asset 2,673,4881,280,816 1,231,343
Less: valuation allowance (2,673,488)(1,280,816) (1,231,343)
---------- ----------
$ - $ -
Tax Rate 35% 35%
Valuation allowance (35%) (35%)
---------- ----------
- % - %
At December 31, 2008,2010, the Company had federal net operating loss ("NOL") carry
forwards of approximately $2,676,513.$2,512,159. Federal NOLs could, if unused, begin to
expire in 2021.
The valuation allowance for deferred tax assets as of December 31, 20072010 was
$2,673,488.$2,512,159.
NOTE 810 - ENVIRONMENTAL MATTERS
Various federal and state authorities have authority to regulate the
exploration and developments of oil and gas and mineral properties with respect
to environmental matters. Such laws and regulations, presently in effect or as
hereafter promulgated, may significantly affect the cost of its current oil
production and any exploration and development activities undertaken by the
Company and could result in loss or liability to the Company in the event that
any such operations are subsequently deemed inadequate for purposes of any such
law or regulation.
NOTE 911 - INVESTMENTS
On December 31, 2009,Concurrent with the Company agreed to accept 680,921 sharespurchase of Granite
Energy common stock at $0.144 per share in exchange for the settlement of
$98,053 in liabilities due to the Company. We have recorded the stock as
Investmentassets in Granite Energy, on our balance sheet and removed the receivable.Company
received 10 million shares of GreenStart Energy common stock. The company
wrote down the value of those shares as the deteriorating financial situation
of that company, concurrent with lack of information available lead the company
to believe there was no value attributable to that stock.
Also on December 31, 2009, the Company determined that an impairment was
necessary to the stock held in South Texas Oil Company, due to bankruptcy
proceedings and a material drop in stock price. The Company impaired the entire
carrying value of the investment, and recognized a loss on the impairment in
the amount of $192,000. The Company holds less than 5% of Granite Energy'sSouth Texas Oil
Common stock.
In 2009, the company had an investment of $42,236 in Greenstart. During 2010,
it became apparent that this investment had become worthless as the company did
not make any strides towards completing it's public offering and new management
out of Florida become uncommunicative. This amount was written off in 2010.
NOTE 1012 - SUBSEQUENT EVENTS
Subsequent to December 31, 2010, the company has issued (or agreements to
issue) 6,141,216 shares of stock to settle $452,815 in debts on the company
books and for services rendered.
On March 29, 2011, the Company filed a Form 8-K announcing a letter of intent
filed with the Securities and Exchange Commission related to the potential
acquisition of Grazy.com, Inc. The letter of intent indicated approximately 23
million shares of stock would be issued with (13 million at closing and 10
million based upon to be determined milestones). The Company is working
through due diligence, inclusive of the need to review audited financial
statements of Grazy.com, Inc. before a closing can take place.
The Company has evaluated subsequent events through March 31, 2010,April 28, 2011, the date
which the financial statements were available to be issued. The Company has
determined that, other than disclosed below, there were no other events that
warranted disclosure or recognition in the financial statements.
NOTE 13 - ADDITIONAL SUPPLEMENTAL OIL AND GAS PRODUCING ACTIVITIES AND PROPERTY
INFORMATION.
Due the minimal operations, inclusive of capital available, ownership in the
wells and long term plans, the company was never able to complete a reserve
study by a certified engineer. The company had beeninformation was prepared as of December 31,
2010, taking into account the information available. There are many inherent
uncertainties in discussionsestimating proved reserve quantities, projecting future
production rates, and timing of development expenditures. Accordingly, these
estimates are likely to change as future information becomes available. Proved
developed reserves are the estimated quantities of crude oil, condensate,
natural gas and natural gas liquids which geological and engineering data
demonstrate with an individual who wasreasonable certainty to be recoverable in a lawsuit
with Granite Energy regarding leases purchased by the individual as well as
other matters. Amerigo has signed an agreement with the individual to acquire
his interestfuture years from
known reservoirs under existing economic and operating conditions.
Costs Incurred and Capitalized Costs
The Company's investment in certain oil and gas leases for $120,000, payable at $10,000 per
month starting April 1, 2010, with subsequent payments due on the 1st of each
month. The term of the noteproperties is One (1) year. The Company is offered a
prepayment discount if the Company pays $100,000 on or before Tuesday, June 1,
2010. Upon final payment and settlement of the note, the individual will
return all shares of stock (with properly executed stock power) that he
individual holds of Granite Energy and / or Amerigo Energy, along with his
entire interest in the Kunkel lease, which is 3.20% working interest (2.54% net
revenue interest), as well as his ownership in what is know as the 4 Well
Program (0.325% working interest, 0.2438% net revenue interest).follows:
December 31,
2010 2009
----------- -----------
Proved properties $ 175,218 $ 449,395
Less accumulated depreciation,
depletion and amortization (24,469) (24,579)
----------- -----------
Net proved properties 151,749 424,816
----------- -----------
Unproved properties:
Oil and gas leasehold costs - -
Drilling in progress - -
----------- -----------
Total unproved properties -
----------- -----------
Net capitalized costs $ 151,749 $ 424,816
----------- -----------
The costs incurred in oil and gas acquisition, exploration and development
activities are as follows:
Period Ended December 31,
2010 2009
----------- -----------
Property acquisition costs, proved $ 6,225 $ 38,156
Property acquisition costs, unproved - -
Exploration costs - -
Development costs - -
----------- -----------
$ 6,225 $ 38,156
The following costs of unproved properties are capitalized as part of the
Company's oil and gas properties. These costs are excluded from the
calculation of DD&A until such time the related drilling programs are completed
and the costs can be evaluated as proved, or until the costs are determined to
be impaired.
December 31,
2010 2009
------ ------
Unproved properties:
Oil and gas leasehold acreage acquisition costs $ $
Drilling in progress -
$ $
------ ------
Oil and Gas Reserves and Related Financial Data (Unaudited)
Changes in estimated net quantities of conventional oil and gas reserves, all
of which are located within the United States, are as follows:
Oil Gas
(Bbls) (Mcf)
--------- ---------
Proved developed and undeveloped reserves:
Proved reserves, December 31, 2008 - -
Extensions and discoveries - -
Reserves purchased - -
Sales volumes - -
Revisions of previous engineering estimates - -
Reserves transferred - -
--------- ---------
Proved reserves, December 31, 2009 - -
Extensions and discoveries - -
Reserves purchased - -
Sales volumes - -
Revisions of previous engineering estimates - -
Reserves transferred - -
--------- ---------
Proved reserves, December 31, 2010 - -
--------- ---------
Proved developed reserves:
--------------------------
Proved developed reserves, December 31, 2010 - -
========= =========
Proved developed reserves, December 31, 2009 - -
========= =========
Proved developed reserves, December 31, 2008 - -
========= =========
The following table sets forth a standardized measure of the estimated
discounted future net cash flows attributable to the Company's proved developed
and undeveloped oil and gas reserves. The future production and development
costs represent the estimated future expenditures to be incurred in developing
and producing the proved reserves, assuming continuation of existing economic
conditions. Future income tax expense was estimated at 34% for combined federal
and state rate, after giving consideration to the Company's net operating loss
carryforward and other tax attributes.
2010 2009
-------- ---------
Future cash inflows $151,749 $424,815
Future production costs - -
Future development costs - -
Future income tax expense - -
-------- ---------
Future net cash flows 151,749 424,815
10% annual discount to reflect timing of net cash flows - -
-------- ---------
Standardized measure of discounted future net cash flows
relating to proved reserves $151,749 $424,815
-------- ---------
The future cash flow number reflected above was not discounted back at a rate
of 10% annualized as the leases were used to settle debts during the first
quarter ended March 31, 2011 so the amounts shown above are the actual amounts
which were received. Additionally the Company had not completed a reserve
report prior to year end and was unable to do so at a reasonable cost thus the
amounts were not reasonably able to be estimated.
The principal factors comprising the changes in the standardized measure of
discounted future net cash flows are as follows for the years ended December
31:
2010 2009
------- ---------
Standardized measure, beginning of year $ - $ -
Extensions and discoveries - -
Reserves purchased - -
Development costs incurred - -
Sales and transfers, net of production costs - -
Revisions in quantity and price estimates - -
Net change in income taxes - -
Accretion of discount - -
------- ---------
Standardized measure, end of year $ - $ -
======= =========
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission this Form 10-K
registration statement, including exhibits, under the Securities Act. You may
read and copy all or any portion of the registration statement or any reports,
statements or other information in the files at SEC's Public Reference Room
located at 100 F Street, NE., Washington, DC 20549, on official business days
during the hours of 10 a.m. to 3 p.m.
You can request copies of these documents upon payment of a duplicating fee by
writing to the Commission. You may call the Commission at 1-800-SEC-0330 for
further information on the operation of its public reference room. Our filings,
including the registration statement, will also be available to you on the
website maintained by the Commission at http://www.sec.gov.
We intend to furnish our stockholders with annual reports which will be filed
electronically with the SEC containing consolidated financial statements
audited by our independent auditors, and to make available to our stockholders
quarterly reports for the first three quarters of each year containing
unaudited interim consolidated financial statements.
We maintain aThe Company's website at www.amerigoenergy.com.address is http://www.amerigoenergy.com; however, the
site has recently come down and is being revamped to account for the updates to
the company's business plan. Our website and the information contained on that
site, or connected to that site, is not part of or incorporated by reference
into this filing.
F-16
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
We have not changed accountants since its 2007 and there are no disagreementsEffective December 14, 2010, the company's prior auditor, Larry O'Donnell, CPA,
P.C. registration with the findingsPublic Company Accounting Oversight Board ("PCAOB")
was revoked, and that the Company is no longer able to include any audit report
prepared by Larry O'Donnell, CPA, P.C. in its filings with the Commission.
Effective December 29, 2010, the date the company received notice from the
commission, the company dismissed Larry O'Donnell, CPA, P.C. as the auditor of
record.
On or about March 15, 2011, we retained the firm of Seale and Beers, LLC to
review all interim period financial statements going forward and audit our
financial statements for the years ending December 31, 2009 and 2010. Such
change in accountant was approved by the Company's board of directors. At no
time prior to our retention of Seale and Beers, LLC, did we, or anyone on our
behalf, consult with Seale and Beers, LLC regarding the application of
accounting principles to a specific completed or contemplated transaction, or
the type of audit opinion that might be rendered on our financial statements.
The reports of our prior certifying accountant, Larry O'Donnell, PC, on our
financial statements as of and for the years ended December 31, 2009 and 2008
did not contain an adverse opinion or a disclaimer of opinion nor were
qualified or modified as to uncertainty, audit scope, or accounting principles,
however, such opinions expressed concerns that, in connection with the
Company's lack of significant revenues, there existed a substantial doubt that
the Company would be able to continue as a going concern.
Other than discussed above, in connection with the audits of our most recent
two years ended December 31, 2009 and 2008 and the subsequent interim periods
up to their dismissal, there were no other disagreements between Larry
O'Donnell, PC and us on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope and procedures, nor any
advisement of reportable events that, if not resolved to the satisfaction of
Larry O'Donnell, PC would have caused Larry O'Donnell, PC to make reference to
the subject matter of the disagreement or reportable events in connection with
its accountants.reports on our financial statements for such years.
ITEM 9A(T). CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
We maintainEvaluation of disclosure controls and procedures
Management is committed to maintaining disclosure controls and procedures that
are designed to ensure that information required to be disclosed in reports filed under the Securitiesits
Exchange Act of 1934 ("Exchange Act") is recorded, processed, summarized and
reported within the specified time periods. Our Chief Executive Officer and our
Principal Accounting and Financial Officer (collectively, the "Certifying
Officers") are responsible for maintaining our disclosure controls and
procedures. The controls and procedures established by us are designed to
provide reasonable assurance that information required to be disclosed by the
issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within
the time periods specified in the U.S. Securities and Exchange Commission's
rules and forms.
We reviewedforms, and evaluated the effectivenessthat such information is accumulated and communicated to
its management, including its Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required
disclosure.
As required by Rule 13a-15(b) of the design and operationExchange Act, we must carry out an
evaluation of the effectiveness of our disclosure controls and procedures as of
the end of theeach fiscal quarter, covered
by this report, as required by Securities Exchange Act Rule 13a-15, and
concluded that our disclosure controls and procedures are effective to ensure
that information required to be disclosed in our reports filed with the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended, is accumulated and communicated to management on a timely
basis, including our principal executive officer and principal financial and
accounting officer.
INTERNAL CONTROLS OVER FINANCIAL REPORTING
MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.
Section 404 of the Sarbanes-Oxley Act of 2002 requires that management document
and test our internal control over financial reporting and include in this
Annual Report on Form 10-K a report on management's assessment of the
effectiveness of our internal control over financial reporting, and to
delineate any material weakness in our internal control. A material weakness is
a deficiency, or a combination of deficiencies, in internal control over
financial reporting, such that there is a reasonable possibility that a
material misstatement of our annual or interim financial statements will not be
prevented or detected on a timely basis.
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Rule 13a-
15(f) of the Exchange Act. Underunder the supervision and with the
participation of ourits management, including ourits Chief Executive Officer we conducted an
evaluationand the
Chief Financial Officer, who is also the sole member of our Board of Directors,
to provide reasonable assurance regarding the reliability of financial
reporting and the reparation of the effectivenessfinancial statements in accordance with U.
S. generally accepted accounting principles.
Management, including the chief executive officer and chief financial officer,
does not expect that the Company's disclosure controls and internal controls
will prevent all error and all fraud. Because of ourits inherent limitations, a
system of internal control over financial reporting can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met and may not prevent or detect misstatements. Further, over time,
control may become inadequate because of changes in conditions or the degree of
compliance with the policies or procedures may deteriorate.
With the participation of the chief executive officer and chief financial
officer, our management evaluated the effectiveness of the Company's internal
control over financial reporting as of December 31, 2010 based upon the
framework in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, ourthe
assessment performed using the criteria established by COSO, management has
concluded that ourthe Company maintained ineffective internal control over
financial reporting is effective,in the following areas:
1) lack of a functioning audit committee due to a lack of a majority of
independent members and a lack of a majority of outside directors on our board
of directors, resulting in ineffective oversight in the establishment and
monitoring of required internal controls and procedures;
2) inadequate segregation of duties consistent with control objectives;
3) insufficient written policies and procedures for accounting and financial
reporting with respect to the requirements and application of US GAAP and SEC
disclosure requirements;
4) inadequate recordkeeping during the year ended December 31, 2010, of which
has been identified and addressed in future periods; and
The aforementioned material weaknesses were identified by our Chief Executive
Officer in connection with the review of our financial statements as of
December 31, 2009.
20
CONCLUSIONS
Based2010.
Management believes that the material weaknesses set forth in items (2) and (3)
above did not have an effect on this evaluation, our principal executive officerfinancial results. However, management
believes that the lack of a functioning audit committee and principal
financialthe lack of a
majority of outside directors on our board of directors results in ineffective
oversight in the establishment and accounting officer concluded that our disclosuremonitoring of required internal controls and
procedures, are effectivewhich could result in a material misstatement in our financial
statements in future periods.
This annual report does not include an attestation report of the Corporation's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to ensure thatattestation by the
information we are required to
disclose in reports that we fileCorporation's registered public accounting firm pursuant to temporary rules of
the Exchange Act are recorded,
processed, summarized,SEC that permit the Corporation to provide only the management's report in
this quarterly report.
(b) Management's Remediation Initiatives
-----------------------------------------
In an effort to remediate the identified material weaknesses and reported in such reportsother
deficiencies and enhance our internal controls, we have initiated, or plan to
initiate, the following series of measures:
We will create a position to segregate duties consistent with control
objectives and will increase our personnel resources and technical accounting
expertise within the time periods
specifiedaccounting function when funds are available to us. We
plan to appoint one or more outside directors to our board of directors who
shall be appointed to an audit committee resulting in a fully functioning audit
committee who will undertake the oversight in the Securitiesestablishment and Exchange Commission's rulesmonitoring
of required internal controls and forms.
CHANGES IN INTERNAL CONTROLSprocedures such as reviewing and approving
estimates and assumptions made by management when funds are available to us.
(c) Changes in internal controls over financial reporting
----------------------------------------------------------
There werewas no changeschange in our internal controls over financial reporting that
occurred during the last fiscal quarter, i.e., the three months ended December
31, 2009,period covered by this report, that havehas materially
affected, or areis reasonably likely to materially affect, our internal controls
over financial reporting.
ITEM 9B. OTHER INFORMATION
We have no information that we would have been required to disclose in a report
on Form 8-K during the fourth quarter of the year covered by this Form 10-K.
21
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
(a) Identification of Directors and Executive Officers.
Name Age Term Served*
S. Matthew Schultz 41--------------------------------------------------
Jason F. Griffith 34 Elected since 2008
CEO/Director
Jason F. Griffith 33 Elected since 2008
CFO/Director
*All directors hold office until the next annual meeting of the stockholders
and the election and qualification of their successors. Officers are elected
annually by the Board of Directors and serve at the discretion of the Board.
The following is a brief description of the business background of the
directors and executive officers of the Company:
S. MATTHEW SCHULTZ - CEO/DIRECTOR
Since the Company completed the reorganization in October 2008, Mr. Schultz has
served as its Chief Executive Officer and on its Board of Directors. Mr.
Schultz is also a founder of Granite Energy, has served on Granite 's Board of
Directors since the Company's December 2005 transformation into an oil and gas
company and has served as its chief executive officer from August 2006 until
December 2008. From April of 2003 to the present, Mr. Schultz has been
president of Wexford Capital Ventures, Inc., a Utah-based strategic financial
consulting firm. Wexford Capital provides boutique investment banking services
for micro-cap and small- cap companies and has been instrumental in assisting
several companies in initial public offerings and strategic planning. Mr.
Schultz has been instrumental in developing investor awareness and
participation for numerous publicly traded companies, and assisted in private
placement offerings in both the United States and abroad. From 1999 to 2003,
Mr. Schultz was the chairman of Pali Financial Group, Inc., an investment
banking firm specializing in small cap securities. He also served as the vice-
president of the Utah Consumer Lending Association during 1998-1999. Mr.
Schultz studied finance and management at the University of Wyoming and Weber
University.
JASON F. GRIFFITH - CEO/CFO/DIRECTOR
Since the Company completed the reorganization in October 2008, Mr. Griffith
has served as its Chief Financial Officer as well as a member of the Board of
Directors. In the third quarter of 2010, Mr. Griffith became the Chief
Executive Officer of the company as well. Mr. Griffith's experience includes
having served as a chief financial officer for Granite Energy since December
2005 until December 2008 and for five other publicly traded companies. Mr.
Griffith has additional experience in public accounting, which includes being a
partner of a CPA firm in Henderson, Nevada since June 2002, as well as being
the accounting manager for another accounting firm in Henderson, Nevada from
August 2001 through June 2002. Mr. Griffith was previously associated with
Arthur Andersen in Memphis, Tennessee from December 1998 until his move to
Nevada in 2001. Prior to joining Arthur Andersen, Mr. Griffith was pursuing and
completed his undergraduate and masters degree in accounting from Rhodes
College in Memphis, Tennessee. He is a licensed certified public accountant in
Nevada, Tennessee, and Georgia. Mr. Griffith is a member of the American
Institute of Certified Public Accountants, the Association of Certified Fraud
Examiners and the Institute of Management Accountants, along with being a
member of the Nevada and Tennessee State Societies of CPAs. 22
BOARD OF DIRECTORS; ELECTION OF OFFICERS
All directors hold their office until the next annual meeting of shareholders
or until their successors are duly elected and qualified. Any vacancy occurring
in the board of directors may be filled by the shareholders, the board of
directors, or if the directors remaining in the office constitute less than a
quorum of the board of directors, they may fill the vacancy by the affirmative
vote of a majority of the directors remaining in office. A director elected to
fill a vacancy is elected for the unexpired term of his predecessor in office.
Any directorship filled by reason of an increase in the number of directors
shall expire at the next shareholders' meeting in which directors are elected,
unless the vacancy is filled by the shareholders, in which case the terms shall
expiree on the later of (i) the next meeting of the shareholders or (ii) the
term designated for the director at the time of creation of the position being
filled.
BOARD COMMITTEES
In light of our small size and the fact that we have only two directors, our
board has not yet designated a nominating committee, an audit committee, a
compensation committee, or committees performing similar functions. The board
intends to designate one or more such committees when practicable.
Our board of directors intends to appoint such persons and form such committees
as are required to meet the corporate governance requirements imposed by
Sarbanes-Oxley and any applicable national securities exchanges. Therefore, we
intend that a majority of our directors will eventually be independent
directors and at least one director will qualify as an "audit committee
financial expert" within the meaning of Item 407(d)(5) of Regulation S-K, as
promulgated by the SEC. Additionally, our board of directors is expected to
appoint an audit committee, nominating committee and compensation committee and
to adopt charters relative to each such committee. Until further determination
by the board of directors, the full board of directors will undertake the
duties of the audit committee, compensation committee and nominating committee.
We do not currently have an "audit committee financial expert" since we
currently do not have an audit committee in place.
CODE OF ETHICS
The Company has adopted a Code of Ethics for its principal executive and
financial officers. In the meantime, the Company's management promotes honest
and ethical conduct, full and fair disclosures in its reports with the SEC, and
compliance with the applicable governmental laws and regulations.
23
ITEM 11. EXECUTIVE COMPENSATION
DIRECTOR AND OFFICER CASH COMPENSATION
The following table sets forth the aggregate cash compensation paid by the
Company for services rendered during the periods indicated to its directors and
executive officers:
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Amerigo Energy
The following sets forth the cash components of Amerigo Energy's executive
officers during the last two fiscal years. The remuneration described in the
table does not include the cost to Amerigo Energy of benefits furnished to the
named executive officers, including premium for health insurance and other
benefits provide to such individuals that are extended in connection with the
conduct of Amerigo Energy's business.
CASH COMPENSATION TABLE
-----------------------
All
Name and Principal Stock Option All Other
Principal Position Year Salary ($) Bonus ($) Awards Awards Compensation Total
--------------------------------------------------------------------------------------------------------------
S. Matthew Schultz 2009 167,500 - - - - 167,500
Former Chief Executive 20082010 53,750 - - - - - -53,750
Officer
Jason F. Griffith 2009 167,500 - - - - 167,500
Chief Financial 2008Officer 2010 25,000 - - - - - -
Officer25,000
Each director of Amerigo Energy also serves as a director of Amerigo, Inc.
Directors do not receive separate compensation for service as directors of
Amerigo Energy or Amerigo, Inc.
DIRECTOR COMPENSATION
---------------------
Fees Earned Non-Equity Nanqualified
or Paid Stock Option Incentive Plan Deferred All Other
Name in Cash ($) Awards Awards Compensation Compensation Compensation Total
-----------------------------------------------------------------------------------------------------------------
S. Matthew
Schultz - - - - - - -
Jason F.
Griffith - - - - - - -
24
EMPLOYMENT CONTRACTS AND OTHER ARRANGEMENTS
Other than as described above or in connection with the Reorganization, there
are no compensatory plans or arrangements, including payments to be received
from Amerigo Energy, with respect to any party named above which could result
in payments to any such person because of his resignation, retirement, or other
termination of such person's employment with Amerigo Energy or its
subsidiaries, or any change in control of Amerigo Energy, or a change in the
person's responsibilities following a change in control of Amerigo Energy.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to Article VI of Amerigo Energy's by-laws, Amerigo Energy may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, except an action by or in the
right of Amerigo Energy, by reason of the fact that he is or was a director,
officer, employee or agent of Amerigo Energy, or is or was serving at the
request of Amerigo Energy as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with the
action, suit or proceeding if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of Amerigo
Energy, and, with respect to any criminal action or proceeding, has no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and that, with respect to any criminal action or proceeding, he
had reasonable cause to believe that his conduct was unlawful.
Amerigo Energy may also indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of Amerigo Energy to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
Amerigo Energy, or is or was serving at the request of Amerigo Energy as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees, actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of Amerigo Energy. Indemnification may not be made for
any claim, issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to Amerigo Energy or for amounts paid in settlement to Amerigo
Energy, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court
deems proper.
Under Delaware law, a director of a Delaware corporation will not be found to
have violated his or her fiduciary duties to the corporation or its
shareholders unless there is proof by clear and convincing evidence that the
director has not acted in good faith, in a manner he or she reasonably believes
to be in or not opposed to the best interests of the corporation, or with the
care that an ordinarily prudent person in a like position would use under
similar circumstances.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The beneficial ownership of each person as described in the table below was
calculated based on 22,780,05822,814,331 of Amerigo Energy Common Stock outstanding as of
December 31, 2009,2010, according to the record ownership listings as of that date
and the verifications Amerigo Energy solicited and received from each director,
executive officer and five percent holder.
Security Ownership of Certain Beneficial Owners as of December 31, 20092010
Title of Name and Address Amount and Nature Percent of
Class of Beneficial Owner of Beneficial Ownership Class
--------------------------------------------------------------------------------
Common Granite Energy, Inc. majority shareholder 43.90%
2580 Anthem Village Dr. 10,000,000
Henderson, NV 89052
Common Kenneth D. Olson 1,846,092 8.10%
8641 Ruette Monte Carlo
La Jolla, Ca 92037
Security Ownership of Management
Title of Name and Address Amount and Nature Percent of
Class of Beneficial Owner of Beneficial Ownership Class
Common S. Matthew Schultz Chief Executive Officer 0.37%
161 N. Main Street 83,511 *
Bountiful, UT 84010--------------------------------------------------------------------------------
Common Jason F. Griffith 226,796 * 1.00%
Preferred Chief Financial Officer 1.00%250,000 50.00%
2580 Anthem Village Dr. 226,796 *(1)(1)
Henderson, NV 89052
(1) all of these shares are indirectly owned by a trust controlled
by Mr. Griffith.
* Total Current Officers and Directors common shares held is 310,307 (1.36%)
Management has no knowledge of the existence of any arrangements or pledges of
the Company's securities which may result in a change in control of the
Company.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS -
As of December 31, 2009, the Company holds $384,951 in notes receivable from
GreenStart, Inc., in which the Company is the majority shareholder. $356,820 of
the note was transferred to the Company from Granite Energy as part of the
reorganization on October 31, 2008. This asset is due on demand and accrues
interest at 6% annually. The accrued interest receivable on this loan totaled
$40,569 at December 31, 2008. The amounts are considered short term due to the
demand status of the note.
As of December 31, 2008,2010, the Company had $96,730$55,980 in accrued payroll payable to
the Company's current and former officers.
As of December 31, 2008,2010, the Company has $20,505$39,082 in liabilities due to a firm
controlled by the Company's Chief Financial Officer. This loan is non-interest
bearing and has no due date assigned to it.
The Company has a consulting agreement with a firm controlled by the Company's
Chief Financial Officer for a fee of $3,500 per month. The consulting firm has
been engaged to assist in organizing and completing the process of filings with
the Securities and Exchange Commission and other tasks. The Company owed the
firm $93,716$135,716 as of December 31, 20082010 which is included as part of Accounts
payable - related party in the accompanying financial statements.
The Company has an operating agreement with SWJN Oil Company and SJ OK oil
Company to operate the company's oil and gas leases. SWJN and SJ OK are
partially owned by the current Chief Executive Officer. The fee charged by
these companies to operate these leases is the greater of $1,000 per month of
5% of net oil sales. Amerigo's portion of this is pro-rata to its interest in
these wells. The company also has a lease agreement with AVES. The company
rents an office space from AVES for $1,098 per month. AVES and the building are
owned partially by our current CEO Jason F. Griffith.
Other Material Transactions. With the exception of the above mentioned
transactions, there have been no material transactions, series of similar
transactions or currently proposed transactions to which the Company or any
officer, director, their immediate families or other beneficial owner is a
party or has a material interest in which the amount exceeds $50,000.
REVIEW AND APPROVAL OF RELATED PARTY TRANSACTIONS
The board of directors reviews and approves transactions with directors,
officers, and holders of more than 5% of our voting securities and their
affiliates, or each, a related party. Prior to board consideration of a
transaction with a related party, the material facts as to the related party's
relationship or interest in the transaction are disclosed to the board, and the
transaction is not considered approved by the board unless a majority of the
directors who are not interested in the transaction approve the transaction.
Further, when stockholders are entitled to vote on a transaction with a related
party, the material facts of the related party's relationship or interest in
the transaction are disclosed to the stockholders, who must approve the
transaction in good faith.
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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
AUDIT AND NON-AUDIT FEES
Fiscal Year Ended
December 31,
2010 2009
2008------------------------------
Audit fees $9,800 $9,800$ 7,500 $ 7,500
Audit related fees - -
Tax fees - -
All other fees - -
PRE APPROVAL OF SERVICES BY THE INDEPENDENT AUDITOR
The Board of Directors has established policies and procedures for the approval
and pre approval of audit services and permitted non-audit services. The Board
has the responsibility to engage and terminate the Company's independent
registered public accountants, to pre-approve their performance of audit
services and permitted non-audit services and to review with the Company's
independent registered public accountants their fees and plans for all auditing
services. All services provided by and fees paid to Larry O'DonnellSeale & Beers, CPAs were
pre-
approvedpre-approved by the Board of Directors.
PART IV
ITEM 15. EXHIBITS
31.1 CERTIFICATION BY CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13A-14(A)/15(D)-
14(A)
31.2 CERTIFICATION BY CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13A-14(A)/15(D)-
14(A)
32.1 CERTIFICATION OF OUR CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350, AS
ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: March 31, 2010
By: /s/ S. Matthew SchultzApril 28, 2011
By: /s/ Jason F. Griffith
--------------------- --------------------------
S. Matthew Schultz
Jason F. Griffith
Chief Executive Officer, Chiefand Financial Officer
and Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: March 31, 2010
By: /s/ S. Matthew SchultzApril 28, 2011
By: /s/ Jason F. Griffith
---------------------
--------------------------
S. Matthew Schultz Jason F. Griffith
Chief Executive Officer, Chiefand Financial Officer
and Principal Accounting Officer
29