ITEM 1. BUSINESS
We were incorporated in the State of Nevada on August 27, 1998 under the name “Pacific Cart Services Ltd.” Following our incorporation, we pursued opportunities in the business of franchising fast food distributor systems.
We were not successful in implementing our business plan as a fast food distributor systems business. As management of our company investigated opportunities and challenges in the business of being a fast food distributor systems company, management realized that the business did not present the best opportunity for our company to realize value for our shareholders. Accordingly, we abandoned our previous business plan.
On March 22, 2002, we changed our name to Maverick Minerals Corporation to reflect our change in focus to holding and developing mineral and resource projects. We are an exploration stage company that has not yet generated or realized any revenues from our business operations. Our company does not currently own any property interests.
Corporate History
From November 2001 until February 2003, we held a 100% interest in the Silver, Lead, Zinc, Keno Hill mining camp in Yukon, Canada through our then subsidiary, Gretna Capital Corporation. Despite a tenure marked by historic maintenance cost reductions and extensive research into a new hydrometallurgical approach to production and environmental remediation at the mine site, the project endured through a period of low commodity prices. On January 1, 2003 we defaulted on a payment of Cdn$1,050,000 required under an agreement of purchase and sale for the acquisition of an interest in the project. Due to the default, the Company was divested of its claims by its creditors by way of court action which culminated on February 14, 2003.
On April 21, 2003 we closed a transaction, as set out in the Purchase Agreement with UCO Energy Corporation (“UCO”) to purchase the outstanding equity of UCO. To facilitate the transaction, we issued 37,580,400 common shares in exchange for all the issued and outstanding common shares of UCO. As a result of the transaction, the former shareholders of UCO held approximately 90% of the issued and outstanding common shares of Maverick. A net distribution of $944,889 was recoded in connection with the common stock of Maverick for the acquisition of UCO in respect of the Company’s net liabilities at the acquisition date. UCO was in the business of pursuing opportunities in the coal mining industry. From July 7, 2003 until March 5, 2004, we were engaged in the waste coal recovery business by way of a lease agreement at the Old Ben Mine near Sesser, Illinois. We extracted coal fines from holding ponds with a leased dredge and subsequently dried them in a fines plant and sold the dried product to an electrical utility. The operation was conducted in our wholly owned subsidiary UCO.
Effective March 5, 2004, we were in default of our lease agreement that granted access to the waste coal. Default was a function of equipment malfunction and equipment lease default. Extensive efforts to refinance our coal recovery activities were undertaken post default in an effort to return to production. These efforts proved unsuccessful. In April, 2004 Maverick instituted new management at the annual meeting of its wholly-owned subsidiary, UCO Energy Corp. Subsequent to these events, our subsidiary reached a settlement agreement with the lessor of the coal lands and the lessor of our dredging equipment. The settlement provided for a mutual release between our subsidiary and each lessor independently.
Maverick incorporated a wholly-owned subsidiary, Eskota Energy Corporation, Inc. (“Eskota”) a Texas company, in August, 2005. Eskota entered into an Assignment Agreement with Veneto Exploration LLC of Plano, Texas (“Veneto”) on August 18, 2005 pursuant to which we acquired certain petroleum and natural gas rights and leases, know as the S. Neill Unitized lease (the “Eskota Leases”) comprising a 75%+/- NRI and 100% working interest in approximately 6,000 acres in central Texas approximately 9 miles east of the town of Sweetwater, in exchange for a $1,400,000 note payable. An additional $375,000 cash was paid by the Company for the acquisition of the Eskota Leases.
Eskota was to receive all revenue rightfully owed under the above noted leases. Eskota agreed to contribute not less than $400,000 towards capital improvements on the said lease and equipment during the first twelve months after closing. The parties agreed to negotiate a reasonable covenant to ensure these expenditures were made. A note payable was signed on August 31, 2005 between Eskota and Veneto whereby Eskota promised to pay Veneto $700,000 before August 31, 2006, and $700,000 by May 31, 2007. In light of the above deadlines and the fact that the purchase price was predicated partially on down hole success from the initial re-works, management determined that it was not prudent to proceed with further investment on the property and that settlement discussions should begin with the Veneto for a mutual release and return of the property and retirement of the promissory note of $1,400,000 issued by the Company. The effect of the initial failure to increase production from the first two attempts to restore the existing wells was reflected in an asset impairment charge taken by the Company of $419,959 on its fiscal year end financial statement dated December 31, 2005.
In June 2005, the Company cancelled 54,379,318 common shares, under an agreement with certain stockholders, which included the former stockholders of UCO, and two other stockholders including the CEO of the Company. The former stockholders of UCO surrendered the majority of the shares which was approximately 95% of the total common shares that they held at the time. As a result of the share cancellation, one single common stockholder emerged as the majority stockholder with approximately 76% of the total issued and outstanding common shares.
In December 2005, Veneto gave notice to Eskota and Eskota’s customers, to direct any cash payments relating to the Eskota Leases to Veneto directly as a result of non-payment of various payables by Eskota in relation to the Eskota Leases. As a result of this action, all revenues generated from the Eskota Leases were recognized by Veneto, and any expenses and obligations arising from the Eskota Leases after the notice was given, were assumed by Veneto. As a result, Eskota did not recognize revenue or operating expenses from the Eskota Leases during the year ended December 31, 2006.
Recent Corporate Developments
Since the commencement of our fiscal year ended December 31, 2008, we experienced the following significant corporate developments:
1.
On February 29, 2008, the Board of Directors of the Company amended and restated the Company’s bylaws. The amendment to the bylaws was for the purpose of, among other things, removing certain outdated and redundant provisions that existed in the Company’s prior bylaws with respect to corporate governance, and shareholder and director meeting procedures.
2.
On November 21, 2008, Pride of Aspen LLC executed a Deed of Release pursuant to which it released the Company from any obligation to repay the sum of $311,400 (including all interest and other charges) owed to Pride of Aspen LLC.
3.
On February 13, 2009, we entered into a loan agreement with Senergy Partners LLC (“Senergy”) pursuant to which we received a revolving loan of up to US$1,000,000 (the “Credit Facility”). The outstanding principal amount of the Credit Facility together with all accrued and unpaid interest and all other amounts outstanding thereunder are due and payable in full on December 31, 2012, the maturity date. Outstanding principal under the Credit Facility bears interest at an annual rate of 8%. In consideration of Senergy entering into the Credit Facility, we entered into a debt settlement and subscription agreement (the “Debt Settlement Agreement”) with Senergy. Pursuant to the terms of the Debt Settlement Agreement, we agreed to issue to Senergy 89,500,000 shares of our common stock at a deemed price of US$0.005 per share in settlement of a US$447,500 debt owed
to Senergy.
4.
Also on February 13, 2009, in connection with our entry into the Credit Facility and Debt Settlement Agreement with Senergy, we entered into an Assignment and Assumption Agreement with Senergy and Art Brokerage, Inc. (“ABI”) pursuant to which ABI assigned to Senergy all its right, title and interest to a debt (the “Assigned Debt”) of US$447,500 owed by the Company to ABI. In February, 2009, prior to the entry into the Credit Facility and the Debt Settlement Agreement, and in connection with the negotiation of these agreements, a majority shareholder of Maverick agreed to return to treasury 20,000,000 shares of Maverick’s issued and outstanding common stock held by him. As a result of these transactions Senergy acquired 89,500,000 shares or 92.3% of Maverick’s issued and outstanding common stock as at the date of this annual report.
Our Current Business
We are an exploration stage company. We plan to continue to evaluate joint venture opportunities and oil and gas development and production prospects in West Texas, North West Texas and Saskatchewan. Our development work in Texas had been focused exclusively on optimizing existing non-producing wells on our previously owned 6,000 acre oil and gas lease in Nolan and Fisher counties outside of Sweetwater, Texas. While we no longer own this lease we have through our efforts found a significant store of original core and drilling information unavailable for review since the 1970’s at the time of the original drilling. These records, including logs and zone maps, are now in our possession.
We are in discussion with an experienced local geologist with the intention of re-modeling and analyzing the lease with the benefit of this new data. We believe a reasonable joint venture opportunity exists on this lease with the provision of advanced analysis using our proprietary data. While previous workings by our company were exclusively on pre-existing wells, new modeling may identify one or several drill sites identified as “proven, non-developed” by an independent geologist working for our company in 2005. That work resulted in an SX-10 reserve report we previously disclosed. New modeling may also enhance recovery prospects “up pipe” in previously discovered but non-produced zones which could benefit from modern completion techniques.
We expect to continue our evaluation of joint venture production and development opportunities in North West Texas. Our company has engaged an independent geologist in Wichita Falls, Texas and has evaluated two prospects to date. One in Throckmorton County and one in Wilbarger County. Our company has acquired a good working knowledge of land value and recovery techniques over the past three years working in Texas and has developed working relationships we believe will be valuable in identifying appropriate ventures for our company going forward.
Increased expansion of the oil and gas sector in Saskatchewan, Canada may lead to joint venture opportunities in this region. The management of our company has been based in Saskatchewan in the recent past and has existing relationships with individuals and companies financing and producing oil in this jurisdiction. We contemplate evaluating joint venture opportunities in Saskatchewan in the next 12 months. As an exploration stage company, we are not able to fund our cash requirements through our current operations. Historically, we have been able to raise a limited amount of capital through private placements of our equity stock, but we are uncertain about our continued ability to raise funds privately. Further, we believe that our company may have difficulties raising capital until we locate a prospective property through which we can pursue our plan of operation. If we are unable to secure adequate capital to continue our acquisition efforts, our shareholders may lose some or all of their investment and our business may fail.
Competition
We are an exploration stage company engaged in the acquisition of a prospective mineral or oil and gas property. As we currently do not own an interest in a mineral or oil and gas property, we compete with other companies for both the acquisition of prospective properties and the financing necessary to develop such properties.
We conduct our business in an environment that is highly competitive and unpredictable. In seeking out prospective properties, we have encountered intense competition in all aspects of our proposed business as we compete directly with other development stage companies as well as established international companies. Many of our competitors are national or international companies with far greater resources, capital and access to information than us. Accordingly, these competitors may be able to spend greater amounts on the acquisition of prospective properties and on the exploration and development of such properties. In addition, they may be able to afford greater geological expertise in the exploration and exploitation of mineral and oil and gas properties. This competition could result in our competitors having resource properties of greater quality and attracting prospective investors to finance the development of such properties on more favorable terms. As a result of this competition, we may become involved in an acquisition with more risk or obtain financing on less favorable terms.
Compliance with Government Regulation
We will not know the government regulations and the cost of compliance with such regulations with which we must comply until such time as we acquire an interest in a particular mineral or oil and gas property. If we are successful in acquiring a property interest, we will be required to comply with the regulations of governmental authorities and agencies applicable to the federal, state or provincial and local jurisdictions where the property is located. Exploitation and development of mineral and oil and gas properties may require prior approval from applicable governmental regulatory agencies. There can be no assurance that such approvals will be obtained.
If our activities should advance to the point where we engage in mining or oil and gas operations, we could become subject to environmental regulations promulgated by federal, state or provincial, and local government agencies as applicable. Environmental legislation provides for restrictions and prohibitions on spills, releases or emissions of various substances produced in association with the mining and oil and gas industries which could result in environmental liability. A breach or violation of such legislation may result in the imposition of fines and penalties. In addition, certain types of operations require the submission and approval of environmental impact assessments. Environmental assessments are increasingly imposing higher standards, greater enforcement, fines and penalties for non-compliance. Environmental assessments of proposed projects carry a heightened degree of responsibility for companies, directors, officers and employees. The cost of compliance in respect of environmental regulation has the potential to reduce the profitability of any future revenues that our company may generate.
Employees
We have no employees other than Robert Kinloch, our president, chief executive officer, chief financial officer and our sole director and Donald Kinloch, our secretary and treasurer. We anticipate that we will be conducting most of our business through agreements with consultants and third parties. We do not have an employment agreement with any of our officers or our sole director.
ITEM 1A.
ITEM 1A. RISK FACTORS
Our common shares are considered speculative. Prospective investors should consider carefully the risk factors set out below.
We have had negative cash flows from operations and if we are not able to obtain further financing, our business operations may fail.
We had bank overdraft in the amount of $669 and a working capital deficit of $790,634 as of December 31, 2008. We do not expect to generate any revenues for the foreseeable future. Accordingly, we will require additional funds, either from equity or debt financing, to maintain our daily operations and to continue to evaluate joint venture opportunities and oil and gas development and production prospects in West Texas and North West Texas and Saskatchewan. Obtaining additional financing is subject to a number of factors, including market prices for minerals and oil and gas, investor acceptance of any property we may acquire in the future, and investor sentiment. Financing, therefore, may not be available on acceptable terms, if at all. The most likely source of future funds presently available to us is through the sale of equity capital. Any sale of share capital, however, will result in
dilution to existing shareholders. If we are unable to raise additional funds when required, we may be forced to delay our plan of operation and our entire business may fail.
We currently do not generate revenues, and as a result, we face a high risk of business failure.
We do not hold an interest in any business or revenue generating property. From the date of our incorporation, we have primarily focused on the location and acquisition of mineral and oil and gas properties. We have not generated any revenues to date. In order to generate revenues, we will incur substantial expenses in the evaluation of joint venture opportunities and oil and gas development and production prospects in West Texas and North West Texas and Saskatchewan. We therefore expect to incur significant losses into the foreseeable future. We recognize that if we are unable to generate significant revenues from our activities, our entire business may fail. There is no history upon which to base any assumption as to the likelihood that we will be successful in our plan of operation, and we can provide no assurance to investors that we will generate any operating revenues or achieve profitable operations.
Our independent auditors have expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.
We incurred net income of $109,951 (primarily due to a gain on settlement of debt) and a loss of $192,410 for the years ended December 31, 2008 and 2007, respectively. At December 31, 2008, we had an accumulated deficit of $1,802,618 and a working capital deficit of $790,634.
These circumstances raise substantial doubt about our ability to continue as a going concern, as described in the explanatory paragraph to our independent auditors’ report on our consolidated financial statements for the year ended December 31, 2008. Although our consolidated financial statements raise substantial doubt about our ability to continue as a going concern, they do not reflect any adjustments that might result if we are unable to continue our business.
Due to the speculative nature of the exploration of mineral and oil and gas properties, there is substantial risk that our business will fail.
The business of oil and gas exploration and development is highly speculative involving substantial risk. There is generally no way to recover any funds expended on a particular property unless reserves are established and unless we can exploit such reserves in an economic manner. We can provide investors with no assurance that any property interest that we may acquire will provide commercially exploitable reserves. Any expenditures by our company in connection with the evaluation of joint venture opportunities and oil and gas development and production prospects in West Texas and North West Texas and Saskatchewan may not provide or contain commercial quantities of reserves.
Even if we discover commercial reserves, we may not be able to successfully obtain commercial production.
Even if we are successful in acquiring an interest in a property that has proven commercial reserves of minerals or oil and gas, we will require significant additional funds in order to place the property into commercial production. We can provide no assurance to investors that we will be able to obtain the financing necessary to extract such reserves.
The potential profitability of oil and gas ventures depends upon factors beyond the control of our company.
The potential profitability of oil and gas properties is dependent upon many factors beyond our control. For instance, world prices and markets for oil and gas are unpredictable, highly volatile, potentially subject to governmental fixing, pegging, controls, or any combination of these and other factors, and respond to changes in domestic, international, political, social, and economic environments. Additionally, due to worldwide economic uncertainty, the availability and cost of funds for production and other expenses have become increasingly difficult, if not impossible, to project. These changes and events may materially affect our financial performance.
Adverse weather conditions can also hinder drilling operations. A productive well may become uneconomic in the event water or other deleterious substances are encountered which impair or prevent the production of oil and/or gas from the well. In addition, production from any well may be unmarketable if it is impregnated with water or other deleterious substances. The marketability of oil and gas, which may be acquired or discovered, will be affected by numerous factors beyond our control. These factors include the proximity and capacity of oil and gas pipelines and processing equipment, market fluctuations of prices, taxes, royalties, land tenure, allowable production and environmental protection. These factors cannot be accurately predicted and the combination of these factors may result in our company not receiving an adequate return on invested capital.
The marketability of natural resources will be affected by numerous factors beyond our control, which may result in us not receiving an adequate return on invested capital to be profitable or viable.
The marketability of natural resources, which may be acquired or discovered by us, is affected by numerous factors beyond our control. These factors include market fluctuations in oil and gas pricing and demand, the proximity and capacity of natural resource markets and processing equipment, governmental regulations, land tenure, land use, regulation concerning the importing and exporting of oil and gas and environmental protection regulations. The exact effect of these factors cannot be accurately predicted, but the combination of these factors may result in us not receiving an adequate return on invested capital to be profitable or viable.
Oil and gas operations are subject to comprehensive regulation, which may cause substantial delays or require capital outlays in excess of those anticipated causing an adverse effect on our company.
Oil and gas operations are subject to federal, state, and local laws relating to the protection of the environment, including laws regulating removal of natural resources from the ground and the discharge of materials into the environment. Oil and gas operations are also subject to federal, state, and local laws and regulations, which seek to maintain health and safety standards by regulating the design and use of drilling methods and equipment. Various permits from government bodies are required for drilling operations to be conducted; no assurance can be given that such permits will be received. Environmental standards imposed by federal, provincial, or local authorities may be changed and any such changes may have material adverse effects on our activities. Moreover, compliance with such laws may cause substantial delays or require capital outlays in excess of those anticipated, thus causing an adverse effect on us. Additionally, we may be subject to liability for pollution or other environmental damages, which it may elect not to insure against due to prohibitive premium costs and other reasons. To date we have not been required to spend any material amount on compliance with environmental regulations. However, we may be required to do so in future and this may affect our ability to expand or maintain our operations.
Exploration and production activities are subject to certain environmental regulations, which may prevent or delay the commencement or continuance of our operations.
In general, our exploration and production activities are subject to certain federal, state and local laws and regulations relating to environmental quality and pollution control. Such laws and regulations increase the costs of these activities and may prevent or delay the commencement or continuance of a given operation. Compliance with these laws and regulations has not had a material effect on our operations or financial condition to date. Specifically, we are subject to legislation regarding emissions into the environment, water discharges and storage and disposition of hazardous wastes. In addition, legislation has been enacted which requires well and facility sites to be abandoned and reclaimed to the satisfaction of state authorities. However, such laws and regulations are frequently changed and we are unable to predict the ultimate cost of compliance. Generally, environmental requirements do not appear to affect us any differently or to any greater or lesser extent than other companies in the industry.
Exploratory drilling involves many risks and we may become liable for pollution or other liabilities, which may have an adverse effect on our financial position.
Drilling operations generally involve a high degree of risk. Hazards such as unusual or unexpected geological formations, power outages, labor disruptions, blow-outs, sour gas leakage, fire, inability to obtain suitable or adequate machinery, equipment or labour, and other risks are involved. We may become subject to liability for pollution or hazards against which we cannot adequately insure or which we may elect not to insure. Incurring any such liability may have a material adverse effect on our financial position and operations.
Any change to government regulation/administrative practices may have a negative impact on our ability to operate and our profitability.
The laws, regulations, policies or current administrative practices of any government body, organization or regulatory agency in the United States, Canada, or any other jurisdiction, may be changed, applied or interpreted in a manner which will fundamentally alter the ability of our company to carry on our business. The actions, policies or regulations, or changes thereto, of any government body or regulatory agency, or other special interest groups, may have a detrimental effect on us. Any or all of these situations may have a negative impact on our ability to operate and/or our profitability.
If we are unable to hire and retain key personnel, we may not be able to implement our plan of operation and our business may fail.
Our success will be largely dependent on our ability to hire and retain highly qualified personnel. This is particularly true in the highly technical businesses of mineral and oil and gas exploration. These individuals may be in high demand and we may not be able to attract the staff we need. In addition, we may not be able to afford the high salaries and fees demanded by qualified personnel, or we may fail to retain such employees after they are hired. At present, we have not hired any key personnel. Our failure to hire key personnel when needed will have a significant negative effect on our business.
Because our executive officers do not have formal training specific to oil and gas exploration, there is a higher risk our business will fail.
While Robert Kinloch, our director and one of our executive officer, has experience managing a mineral exploration company, he does not have formal training as a geologist. Donald Kinloch does not have formal training specific to mineral and gas exploration. Accordingly, our management may not fully appreciate many of the specific requirements related to working within the mining and oil and gas industry. Our management decisions may not take into account standard engineering or managerial approaches commonly used by such companies. Consequently, our operations, earnings, and ultimate financial success could be negatively affected due to our management’s lack of experience in the industry.
Our executive officers have other business interests, and as a result, they may not be willing or able to devote a sufficient amount of time to our business operations, thereby limiting the success of our company.
Robert Kinloch presently spends approximately 60% of his business time and Donald Kinloch presently spends approximately 20% of his business time on business management services for our company. At present, both Robert and Donald Kinloch spend a reasonable amount of time in pursuit of our company’s interests. Due to the time commitments from Robert and Donald Kinloch’s other business interests, however, they may not be able to provide sufficient time to the management of our business in the future and our business may be periodically interrupted or delayed as a result of their other business interests.
Our common stock is illiquid and shareholders may be unable to sell their shares.
There is currently a limited market for our common stock and we can provide no assurance to investors that a market will develop. If a market for our common stock does not develop, our shareholders may not be able to re-sell the shares of our common stock that they have purchased and they may lose all of their investment. Public announcements regarding our company, changes in government regulations, conditions in our market segment or changes in earnings estimates by analysts may cause the price of our common shares to fluctuate substantially. In addition, stock prices for junior oil and gas companies fluctuate widely for reasons that may be unrelated to their operating results. These fluctuations may adversely affect the trading price of our common shares.
Penny stock rules will limit the ability of our stockholders to sell their stock.
The Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00
per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the Securities and Exchange Commission which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.
The Financial Industry Regulatory Authority, or FINRA, has adopted sales practice requirements which may also limit a shareholder’s ability to buy and sell our stock.
In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for its shares.
ITEM 2.
ITEM 2. PROPERTIES.
Executive Offices
We do not own any real property. Our principal business offices are located at 2501 Lansdowne Ave., Saskatoon, Saskatchewan, Canada S7J 1H3. These premises are provided to us without cost by our president, Robert Kinloch. Our offices consist of approximately 200 square feet. We believe that our current lease arrangements provide adequate space for our foreseeable future needs.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
We know of no material, active, or pending legal proceeding against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation where such claim or action involves damages for more than 10% of our current assets. There are no proceedings in which any of our company’s directors, officers, or affiliates, or any registered or beneficial shareholders, is an adverse party or has a material interest adverse to our company’s interest.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to the vote of the holders of our company’s securities during the year ended December 31, 2008.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market for Securities
Our common shares were quoted for trading on the OTCBB on June 21, 1999 under the symbol “PFCS”. On February 15, 2002 our symbol changed to “MAVM” and on May 22, 2003 our symbol changed to “MVRM”. On August 29, 2006, our stock was delisted from the OTC Bulletin Board and on August 31, 2006. it commenced trading on the Pink Sheets LLC under the symbol “MVRM”. The following quotations obtained from the Pink Sheets LLC reflect the high and low bids for our common stock based on inter-dealer prices, without retail mark-up or mark-down or commission and may not represent actual transactions.
The high and low bid prices of our common stock for the periods indicated below are as follows:
Our common shares are issued in registered form. Pacific Stock Transfer Company, of 500 E. Warm Springs Road, Ste. 240, Las Vegas, NV 89119 (telephone: 702.361.3033; facsimile 702.433.1979) is the registrar and transfer agent for our common shares.
Holders of our Common Stock
As of March 25, 2009, we have 134 registered stockholders and 96,907,208 shares issued and outstanding.
Dividend Policy
We have not paid any cash dividends on our common stock and have no present intention of paying any dividends on the shares of our common stock. Our future dividend policy will be determined from time to time by our board of directors.
Recent Sales of Unregistered Securities
Pursuant to the terms of the Debt Settlement Agreement, the Company issued to one accredited investor 89,500,000 shares of its common stock at a deemed price of US$0.005 per share in settlement of a US$447,500 debt owed to the accredited investor. The shares were issued pursuant to Rule 506 of Regulation D.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
In September, 2002, our board of directors adopted a non-qualifying stock option plan, the purpose of which is to attract and retain the best available personnel and to provide incentives to employees, officers, directors and consultants, all in an effort to promote the success of our company. The plan authorized up to 3,000,000 shares of our common stock to be granted as incentive options. In June 2005, options to purchase 1,000,000 common shares were granted to the Company’s Chief Executive Officer and vested immediately upon grant. One half of the options were granted at an exercise price of $0.01 expiring September 30, 2006. The remaining half was granted at an exercise price of $0.03 expiring December 31, 2006. All options under this grant expired unexercised during the year ended December 31, 2006.
The following table provides a summary of the number of stock options granted under the qualifying and non-qualifying stock option plans, the weighted average exercise price and the number of stock options remaining available for issuance under the qualifying and non-qualifying stock option plans, all as at December 31, 2008:
Purchase of Equity Securities by the Issuer and Affiliated Purchasers
We did not purchase any of our shares of common stock or other securities during the year ended December 31, 2008.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
Not Applicable.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this annual report.
Our audited consolidated financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.
Plan of Operation
For the next twelve months we plan to continue to evaluate joint venture opportunities and oil and gas development and production prospects in West Texas and North West Texas and Saskatchewan. Our development work in Texas had been focused exclusively on optimizing existing non-producing wells on our previously owned 6,000 acre oil and gas lease in Nolan and Fisher counties outside of Sweetwater, Texas (the “Nolan Lease”).
While we no longer own the Nolan lease, we have through our efforts found a significant store of original core and drilling information unavailable for review since the 1970’s at the time of the original drilling. These records including logs and zone maps and are now in the Company’s possession.
We are in discussion with an experienced local geologist with the intention of re-modeling and analyzing the Nolan Lease with the benefit of this new data. We believe a reasonable joint venture opportunity exists on this lease with the provision of advanced analysis using our proprietary data. While previous workings by the Company were exclusively on pre-existing wells, new modeling may identify one or several drill sites identified as “proven, non-developed” by an independent geologist working for the Company in 2005. That work resulted in an SX-10 reserve report. Previously drilled wells on the property have averaged 200,000 accumulated barrels of oil production over the life of the wells. New modeling may also enhance recovery prospects “up pipe” in previously discovered but non-produced zones which could benefit from modern completion techniques.
The company is evaluating new ventures in South Texas with the goal of acquiring lease rights to deep zone natural gas. The south coast of Texas has historically produced large volumes of natural gas from depths below 10,000 feet. A prospective productive deep zone in the area is known as the “Meek Sand” found in the Wilcox section. We have been working with a certified petroleum geologist with extensive experience in the area analyzing prospective prospects for this type of exploration. In addition, we have consulted with independent consulting geologists to review data we have received on target leases. At the time of this report no decisions have been made on selecting a specific project and no agreements have been entered into however the company remains actively involved in this endeavor.
Increased expansion of the oil and gas sector in Saskatchewan, Canada may lead to joint venture opportunities in this region. The management of the company has been based in Saskatchewan in the recent past and has existing relationships with individuals and companies financing and producing oil in this jurisdiction. We expect to evaluate a number of joint venture opportunities in Saskatchewan in the next twelve months.
Our estimated expenses over the next twelve months are as follows:
Cash Requirements during the Next Twelve Months
To date we have funded our operations primarily with loans from shareholders. In addition to funding our general, administrative and corporate expenses we are obligated to address certain current liabilities. We will need to raise additional funds to meet these current liabilities. To raise these funds we may be required to increase shareholder loans, incur new borrowings or issue new equity which may be dilutive to existing shareholders. We currently have no agreement in place to raise funds for current liabilities and no guarantee can be given that we will be able to raise funds for this purpose on terms acceptable to our company. Failure to raise funds for general, administrative and corporate expenses and current liabilities could result in a severe curtailment of our operations.
Any advance in the oil and gas development strategy set-out herein will require additional funds. These funds may be raised through equity financing, debt financing or other sources which may result in further dilution of the shareholders percentage ownership in the company. See “Future Financing”, below.
On November 21, 2008, Pride of Aspen LLC executed a Deed of Release pursuant to which Pride of Aspen LLC has released the Company from any obligation to repay the sum of $311,400 (including all interest and other charges) owed to Pride of Aspen LLC.
On February 13, 2009, we entered into a loan agreement with Senergy Partners LLC (“Senergy”), a private Nevada limited liability corporation, pursuant to which the Company received a revolving loan of up to US$1,000,000 (the “Credit Facility”). The outstanding principal amount of the Credit Facility together with all accrued and unpaid interest and all other amounts outstanding thereunder are due and payable in full on December 31, 2012, the maturity date. Outstanding principal under the Credit Facility bears interest at an annual rate of 8%. As a condition of the Credit Facility, the Company agreed to use funds received under the Credit Facility solely for the purpose of funding ongoing general and administrative expenses, consulting and due diligence expenses, or professional fees and joint venture programs.
In consideration of Senergy entering into the Credit Facility, the Company agreed to enter into a debt settlement and subscription agreement (the “Debt Settlement Agreement”) with Senergy dated as of February 13, 2009. Pursuant to the terms of the Debt Settlement Agreement, the Company agreed to issue to Senergy 89,500,000 shares of its common stock at a deemed price of US$0.005 per share in settlement of a US$447,500 debt owed to Senergy.
In connection with our entry into the Credit Facility and Debt Settlement Agreement with Senergy, the Company entered into an Assignment and Assumption Agreement (the “Assignment Agreement”) with Senergy and Art Brokerage, Inc. (“ABI”) pursuant to which ABI assigned to Senergy all its right, title and interest to a debt (the “Assigned Debt”) of US$447,500 owed by the Company to ABI. Maverick executed the Assignment Agreement solely to consent to and acknowledge the assignment of the Assigned Debt as contemplated by the agreement.
RESULTS OF OPERATIONS
Our operating results for the years ended December 31, 2007 and 2008 are summarized as follows:
Revenues
We have had no operating revenues for the years ended December 31, 2008 and 2007. We anticipate that we will not generate any revenues for so long as we are an exploration stage company.
Expenses
The major components of our expenses for the year are outlined in the table below:
General and Administrative
The increase in our general and administrative expenses for the year ended December 31, 2008 was primarily due to: (i) the increase in legal fees from 2007 to 2008 due to filings of previous years and quarterly statements per Securities Exchange Act of 1934 in 2008; and (ii) the increase in filings has consistently increased transfer agent fees associated to the number of filings made in 2008 compared to that in 2007 for the periodic reports under the Securities Exchange Act of 1934.
Working Capital
Cash Flows
As the Company’s activity has declined over the period from 2007 to 2008, so have its cash expenditures. Funding for operating and investing activities was provided by non-interest bearing advances from a lender.
We had bank overdraft of $669 and negative working capital of $790,634 as of December 31, 2008 compared to cash on hand of $96 and negative working capital of $1,348,685 for the year ended December 31, 2007. We anticipate that we will incur approximately $1,290,000 for operating expenses, including professional, legal and accounting expenses associated with our reporting requirements under the Exchange Act during the next twelve months. Accordingly, we will need to obtain additional financing in order to complete our full business plan.
Discontinued Operations
In March 2006, management determined to not proceed further with the Eskota Leases and entered into negotiations with Veneto to relieve the Company of their obligation under the note payable to Veneto. As a result, revenues, cost of goods sold, and gains and losses associated with the property have been reflected as income (loss) from discontinued operations on the accompanying financial statements.
In July, 2006, Veneto and Eskota entered into a Mutual Release agreement releasing Eskota of its note payable in the amount of $1,400,000, and in return Eskota assigned and transferred back to Veneto all its right, title and interest in the unitized lease, as well as the rights to the Knox Lease. In addition, Veneto assumed responsibility of all payables owing in relation to the properties, and any future obligations related to the properties. As a result, Eskota
recorded a net gain of $138,764 on the assumption of payables by Veneto, and has been reflected as income from discontinued operations on the accompanying financial statements.
Loans Payable
The Company has the following loans payable. These amounts are unsecured, bear no interest, with no specific terms of repayment.
(1)
The Company entered into an Assignment and Assumption Agreement (the “Assignment Agreement”) with Senergy and Art Brokerage, Inc. (“ABI”) pursuant to which ABI assigned to Senergy all its right, title and interest to a debt (the “Assigned Debt”) of US$447,500 owed by the Company to ABI.
(2)
On November 21, 2008, Pride of Aspen LLC executed a Deed of Release pursuant to which Pride of Aspen LLC has released the Company from any obligation to repay the sum of $311,400 (including all interest and other charges) owed to Pride of Aspen LLC.
Going Concern
The audited financial statements accompanying this report have been prepared on a going concern basis, which implies that our company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business. Our company has not generated revenues since inception and has never paid any dividends and is unlikely to pay dividends or generate earnings in the immediate or foreseeable future. The continuation of our company as a going concern is dependent upon the continued financial support from our shareholders, the ability of our company to obtain necessary equity financing to achieve our operating objectives, and the attainment of profitable operations. As of March 25, 2009, we had cash of $316 and we estimate that we will require approximately $1,290,000 to fund our business operations over the next twelve months. Accordingly, we do not have sufficient funds for planned operations and we will be required to raise additional funds for operations after that date.
These circumstances raise substantial doubt about our ability to continue as a going concern, as described in the explanatory paragraph to our independent auditors’ report on the December 31, 2008 and 2007 consolidated financial statements which are included with this annual report. The consolidated financial statements do not include any adjustments that might result from the outcome of that uncertainty.
The continuation of our business is dependent upon us raising additional financial support. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
There are no assurances that we will be able to obtain further funds required for our continued operations. We are pursuing various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be forced to scale down or perhaps even cease the operation of our business.
Future Financings
As of March 25, 2009, we had cash of $316 and we estimate that we will require approximately $1,290,000 to fund our business operations over the next twelve months. Accordingly, we do not have sufficient funds for planned
operations and we will be required to raise additional funds for operations after that date. We anticipate continuing to rely on equity sales of our common shares or shareholder loans in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned activities.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Employees
We currently have no employees, other than our executive officers, Robert J. Kinloch and Donald Kinloch, and we do not expect to hire any employees in the foreseeable future. We presently conduct our business through agreements with consultants and arms-length third parties.
New Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”. Thestandard requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. The Corporation is currently reviewing the guidance, which is effective for fiscal years beginning after December 15, 2008, to determine the potential impact, if any, on its consolidated financial statements.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements”. The standard requires all entities to report noncontrolling (minority) interests as equity in consolidated financial statements. SFAS No. 160 eliminates the diversity that currently exists in accounting for transactions between an entity and noncontrolling interests by requiring they be treated as equity transactions. The Corporation is currently reviewing the guidance, which is effective for fiscal years beginning after December 15, 2008, to determine the potential impact, if any, on its consolidated financial statements.
In March 2008, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 161, “Disclosures about Derivative Instruments and Hedging Activities”, an amendment of FASB Statement No. 133, which requires additional disclosures about the objectives of the derivative instruments and hedging activities, the method of accounting for such instruments under SFAS No. 133 and its related interpretations, and a tabular disclosure of the effects of such instruments and related hedged items on our financial position, financial performance, and cash flows. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The adoption of this statement is not expected to have a material effect on the Company’s future reported financial position or results of operations.
In May 2008, the FASB issued SFAS 162 “The Hierarchy of Generally Accepted Accounting Principles” This Statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). This Statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The adoption of this statement is not expected to have a material effect on the Company’s future reported financial position or results of operations.
Application of Critical Accounting Estimates
The financial statements of our company have been prepared in accordance with generally accepted accounting principles in the United States. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgment. The financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below:
The preparation of our consolidated financial statements requires management to make estimates and assumptions regarding future events. These estimates and assumptions affect the reported amounts of certain assets and liabilities, and disclosure of contingent liabilities.
Management makes significant assumptions and estimates determining the fair market value of stock-based compensation granted to employees and non-employees. These estimates have an effect on the stock-based compensation expense recognized and the contributed surplus and share capital balances on the Company’s Balance Sheet. The value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. For non-employees, such amount is revalued on a quarterly basis. To date, substantially all of our stock option grants have been to non-employees. The Black-Scholes option-pricing model requires the input of subjective assumptions, including the expected term of the option award and stock price volatility. The expected term of options granted for the purposes of the Black-Scholes calculation is the term of the award. These estimates involve inherent uncertainties and the application of management judgment.
These accounting policies are applied consistently for all years presented. Our operating results would be affected if other alternatives were used. Information about the impact on our operating results is included in the notes to our financial statements.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
BDO Dunwoody LLP 600 Cathedral Place
Chartered Accountants 925 West Georgia Street
Vancouver, BC, Canada V6C 3L2
Telephone: (604) 688-5421
Telefax: (604) 688-5132
E-mail: vancouver@bdo.ca
www.bdo.ca
Report of Independent Registered Public Accounting Firm
To the Directors and Stockholders of
Maverick Minerals Corporation
(An Exploration Stage Company)
We have audited the accompanying consolidated balance sheets of Maverick Minerals Corporation (an Exploration Stage Company) as of December 31, 2008 and 2007 and the consolidated statements of operations and comprehensive income (loss), cash flows and changes in capital deficit for the years then ended and the period from inception (April 21, 2003) to December 31, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects the financial position of Maverick Minerals Corporation as of December 31, 2008 and 2007 and the results of its operations and its cash flows for the years then ended and for the period from inception (April 21, 2003) to December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company had an accumulated deficit of $1,802,618 and negative working capital of $790,634 at December 31, 2008. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ BDO Dunwoody LLP
Chartered Accountants
Vancouver, Canada
April 9, 2008
BDO Dunwoody LLP is a Limited Liability Partnership registered in Ontario
MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Consolidated Balance Sheets
(Expressed in U.S. Dollars)
The accompanying notes are an intergral part of these financial statements
MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Consolidated Statements of Operations and Comprehensive Income (Loss)
(Expressed in U.S. Dollars)
The accompanying notes are an intergral part of these financial statements
MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Consolidated Statements of Cash Flows
(Expressed in U.S. Dollars)
The accompanying notes are an intergral part of these financial statements
MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Statement of Changes in Capital Deficit
For the Period From date of inception on April 21, 2003 to December 31, 2008
(Expressed in U.S. Dollars)
The accompanying notes are an integral part of these financial statements
MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 2008 and 2007
(Expressed in U.S. Dollars)
Note 1. NATURE OF OPERATIONS AND ABILITY TO CONTINUE AS A GOING CONCERN
Maverick Minerals Corporation (“the Company”) was incorporated on August 27, 1998 under the Company Act of the State of Nevada, U.S.A. to pursue opportunities in the business of franchising fast food distributor systems. On May 23, 2001, the Company changed its direction to the energy and mineral resource fields, as an exploration stage company, and still is an exploration stage company.
On April 21, 2003 the Company closed a transaction, as set out in the Purchase Agreement (the “Agreement) with UCO Energy Corporation (“UCO”) to purchase the outstanding equity of UCO. To facilitate the transaction, the Company consolidated its share capital at a ratio of one for five. Subsequent to the share consolidation, the Company issued 37,580,400 common shares in exchange for all the issued and outstanding common shares of UCO. As a result of the transaction, the former shareholders of UCO held approximately 90% of the issued and outstanding common shares of the Company. The acquisition of UCO was recorded as a reverse acquisition for accounting purposes as a recapitalization of UCO. A net distribution of $944,889 was recoded in connection with the common stock of the Company for the acquisition of UCO in respect of the Company’s net liabilities at the acquisition date. The Company had minimal assets and had liabilities owing to suppliers as well as amounts owing under agreements with third parties as well as related parties and as there were no other business interests, the Company was acting as a public shell company. The financial statements are now presented as a continuation of UCO. UCO was in the business of pursuing opportunities in the coal mining industry. The Company has since disposed of its mining and oil and gas interests and is seeking new projects in these industries.
These accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As at December 31, 2008, the Company has negative working capital of $790,934 (2007 - $1,348,685), and has an accumulated deficit of $1,802,618 at December 31, 2008. The continuation of the Company is dependent upon obtaining a successful new exploration project, the continuing support of creditors and stockholders as well as achieving and maintaining a profitable level of operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management anticipates that it requires approximately $1,290,000 over the twelve months ending December 31, 2009 to continue operations. The majority of this anticipated requirement will be funded by the $1,000,000 revolving loan the Company obtained subsequent to December 31, 2009. In addition to funding the Company’s general, administrative and corporate expenses the Company is obligated to address its current obligations totaling $790,634. To the extent that cash needs are not achieved from operating cash flow and existing cash on hand, the Company plans to raise necessary cash through equity issuances and/or debt financing. Amounts raised will be used to continue the development of the Company's explorations activities, and for other working capital purposes.
Management cannot provide any assurances that the Company will be successful in any of its plans. Although there are no assurances that management's plans will be realized, management believes that the Company will be able to continue operations in the future. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 2008 and 2007
(Expressed in U.S. Dollars)
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
These financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, and include the accounts of the Company and its wholly- owned subsidiary, Eskota Energy Corporation. All intercompany transactions and balances have been eliminated on consolidation.
(b) Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires the Company’s management to make estimates and assumptions which affect the amounts reported in these consolidated financial statements, the notes thereto, and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
(c) Foreign Currency Translation
The Company’s functional currency is the United States dollar. Transactions undertaken in currencies other than the functional currency are translated using the exchange rate in effect on the transaction date. At the end of the period, monetary assets and liabilities are translated to the respective functional currency using the exchange rate in effect at the period end date. Transaction gains and losses are included in the Consolidated Statements of Operations.
(d) Fair Value of Financial Instruments
The fair value of the Company’s financial instruments, which consist of cash, accounts payable, accrued liabilities and loans payable approximate their carrying values due to their short term or demand nature.
(e) Revenue Recognition
Revenues on sales of oil and natural gas are recognized when the products are delivered, title has transferred to the customer, and is deemed collectible.
(f) Property and Equipment
The Company depreciates its property and equipment at 20% per annum on a straight-line basis. The Company has disposed of all property and equipment as of December 31, 2006.
(g) Impairment of Long-Lived Assets
Long-lived assets are evaluated for impairment when events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of these assets and their eventual disposition is less than their carrying amount. Impairment, if any, is assessed using discounted cash flows.
Estimates of undiscounted future cash flows used for conducting impairment tests are subject to significant judgment decisions based on assumptions of highly uncertain future factors such as, crude oil prices, production quantities, estimates of recoverable reserves, and production and transportation costs. No impairment write-downs were determined necessary at December 31, 2008 or 2007.
MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 2008 and 2007
(Expressed in U.S. Dollars)
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
(h) Stock-Based Compensation
Beginning January 1, 2006, the Company adopted the recommendations of the Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Accounting for Stock-based Compensation”, and has applied the recommendations of this standard using the modified prospective method. Under this application, the Company is required to record compensation expense, based on the fair value of the awards, for all awards granted after the date of adoption and for the unvested portion of previously granted awards that remain outstanding as at the date of adoption.
Prior to the adoption of SFAS 123R, the Company elected to apply the intrinsic value method of Accounting Principles Board (“APB”) No. 25, “ Accounting for Stock Issued to Employees ” and related interpretations in accounting for stock options granted to employees and directors. Under APB No. 25, compensation expense is only recorded to the extent that the exercise price is less than the market value of the underlying stock on the measurement date, which is usually the date of grant.
Stock options granted to non-employees were previously accounted for under SFAS No. 123 “Accounting for Stock-Based Compensation” and were measured at the fair value of the options as determined by an option pricing model on the measurement date and recognized as the related services are provided and the options earned. Compensation expense for unvested options to non- employees is revalued at each period end and is being amortized over the vesting period of the options.
There were no stock options granted or outstanding during 2008 or 2007.
(i) Earnings (Loss) Per Share
The Company uses the “Treasury Stock Method” to calculate earnings (loss) per common share. Under this method basic earnings (loss) per share is based on the weighted average aggregate number of common shares outstanding during each period. The diluted earnings per share assumes that the outstanding stock options had been exercised at the beginning of the period.
For the years ended December 31, 2008 and 2007, there were no common equivalent shares.
(j) Oil and Gas Properties
The Company adopted full-cost accounting for oil and gas production which is contained in Rule 4-10 of Regulation S-X of the SEC. Full-cost accounting considers all costs of unsuccessful and successful property acquisition and exploration activities as a cost of discovering reserves. Thus, all costs are considered an integral part of the acquisition, discovery, and development of oil and / or gas reserves; and costs that cannot be directly related to the discovery of specific reserves are capitalized.
In full costing, a country usually is selected as a cost center, and all costs incurred within the cost center are capitalized and subsequently amortized against the proved oil and /or gas reserves produced within the cost center by either the units of production or gross revenue methods. There is a limitation that capitalized costs of a cost center should not exceed the present value of the oil and / or gas reserves of the same cost center.
(k) Comprehensive Income
SFAS No. 130, "Reporting Comprehensive Income", establishes standards for reporting and presentation of comprehensive income (loss). This standard defines comprehensive income as the changes in equity of an enterprise except those resulting from stockholder transactions.
MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 2008 and 2007
(Expressed in U.S. Dollars)
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
(l) Income Taxes
Income taxes are accounted for using the asset and liability method which requires the recognition of income taxes payable or refundable for the current year and deferred tax liabilities and assets for the future consequences of events that have been recognized in the Company’s financial statements or tax returns. Under this method, tax liabilities and assets are determined based on the temporary differences between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. A valuation allowance is recorded to reduce deferred income tax assets recognized by the amount of any deferred income tax benefits that, based on available evidence, are not more-likely-than-not to be realized.
(m) New Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”. The standard requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. The Corporation is currently reviewing the guidance, which is effective for fiscal years beginning after December 15, 2008, to determine the potential impact, if any, on its consolidated financial statements.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements”. The standard requires all entities to report noncontrolling (minority) interests as equity in consolidated financial statements. SFAS No. 160 eliminates the diversity that currently exists in accounting for transactions between an entity and noncontrolling interests by requiring they be treated as equity transactions. The Corporation is currently reviewing the guidance, which is effective for fiscal years beginning after December 15, 2008, to determine the potential impact, if any, on its consolidated financial statements.
In March 2008, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 161, “Disclosures about Derivative Instruments and Hedging Activities”, an amendment of FASB Statement No. 133, which requires additional disclosures about the objectives of the derivative instruments and hedging activities, the method of accounting for such instruments under SFAS No. 133 and its related interpretations, and a tabular disclosure of the effects of such instruments and related hedged items on our financial position, financial performance, and cash flows. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The adoption of this statement is not expected to have a material effect on the Company’s future reported financial position or results of operations.
In May 2008, the FASB issued SFAS 162 “The Hierarchy of Generally Accepted Accounting Principles” This Statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). This Statement is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The adoption of this statement is not expected to have a material effect on the Company’s future reported financial position or results of operations.
MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 2008 and 2007
(Expressed in U.S. Dollars)
Note 3. LOANS PAYABLE
The Company has the following loans payable. These amounts are unsecured, bear no interest, with no specific terms of repayment.
On November 21, 2008, Pride of Aspen Associates LLC (“Pride of Aspen”) executed a Deed of Release pursuant to which Pride of Aspen released the Company from any obligation to repay the sum of $311,400 owed to Pride of Aspen LLC for Nil consideration.
A portion of the Art Brokerage loan has been classified as long-term debt as at December 31, 2008 in accordance with FAS 6, Classification of Short-Term Obligations Expected to be Refinanced, since the Company had entered into the Debt Settlement Agreement (Note 9 (d)) on February 13, 2009, with Synergy Partners LLC (“Synergy”), before the financial statements were issued.
Note 4. RELATED PARTY TRANSACTIONS
On June 5, 2005, the Company entered into a management agreement with its chief executive officer (“CEO”). The agreement was for a term of two years with an annual fee of $90,000 and expired on May 31, 2007. A new management agreement has not been signed and it has been assumed that the previous management agreement is still in effect until a new agreement has been entered into.
Management fees of $90,000 are charged to expense in these financial statements for the year ended December 31, 2008 (2007 - $90,000) There are management fees payable of $75,941 at December 31, 2008 (2007 - $70,813) that have been included in accounts payable.
Note 5. SHARE CAPITAL
As explained in Note 1, on April 21, 2003 the Company issued 37,580,400 common shares in exchange for all the issued and outstanding common shares of UCO.
In July 2003, the Company issued 1,500,000 common shares to the Company’s CEO in exchange for management services. The transaction was recorded at the quoted market price of $0.07 per common share and resulted in compensation expense of $105,000. No consideration was received by the Company in the exchange of shares for management services.
In June 2004, the Company issued 10,000,000 common shares at a price of $0.025 for proceeds of $25,000.
In January 2005, the Company issued 27,500,000 common shares at a price of $0.001 for proceeds of $27,500.
In June 2005, the Company cancelled 54,379,318 common shares, under an agreement with certain stockholders, which included the former stockholders of UCO, and two other stockholders including the CEO of the Company. The former stockholders of UCO surrendered the majority of the shares
MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 2008 and 2007
(Expressed in U.S. Dollars)
Note 5. SHARE CAPITAL - continued
which was approximately 95% of the total common shares that they held at the time. As a result of the share cancellation, one single common stockholder emerged as the majority stockholder with approximately 76% of the total issued and outstanding common shares. In addition, the CEO’s percentage common share holding increased and resulted in compensation expense of $44,720.
In July 2005, the Company issued 895,000 common shares at a price of $0.06 to settle an amount owing with respect to a loan payable. The transaction was recorded at the quoted market price of $0.14 and resulted in a loss on settlement of loan payable of $71,600.
In September 2005, the Company issued 75,000 common shares at a price of $0.01 for cash proceeds of $750 in relation to the exercise of stock options.
In April 2006, the Company issued 60,000 common shares at a price of $0.01 for $600 in relation to the exercise of stock options. As of December 31, 2007, the Company was still owed this amount which has been recorded as a share subscription receivable.
In 2007 and 2008, there were no share capital transactions.
Note 6. STOCK OPTION PLAN
Stock options
The stock option plan of the Company provides for the granting of up to 3,000,000 stock options to key employees, directors and consultants, of common shares of the Company. Under the stock option plan, the granting of incentive and non-qualified stock options, exercise prices and terms are determined by the Board of Directors.
There were no stock options granted or outstanding during 2008 or 2007.
Note 7. INCOME TAXES
The tax effects of temporary differences that give rise to deferred tax assets at December 31, 2008 and 2007 are presented below:
The Company evaluates its valuation allowance requirements based on projected future operations. When circumstances change and this causes a change in management’s judgment about the recoverability of deferred tax assets, the impact of the change on the valuation allowance is reflected in current income.
MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 2008 and 2007
(Expressed in U.S. Dollars)
Note 7. INCOME TAXES - continued
The provision for income taxes differs from the amount estimated using the United States federal statutory income tax rate as follows:
At December 31, 2008, the Company had estimated losses carried forward of approximately $698,097 (2007- $804,926) that may be available to offset future income tax purposes. The potential tax benefits have been fully allowed for in the valuation allowance in these financial statements. These Federal and state net operating loss carryforwards begin to expire on various dates from 2025 through 2028. A portion of these net operating losses are subject to the limitations of Internal Revenue Code Section 382. This section provides limitations on the availability of net operating losses to offset current taxable income if significant ownership changes have occurred for Federal tax purposes (Note 9).
On January 1, 2007, the Company adopted FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"). The Company files income tax returns in the United States. All of the Company’s tax returns are subject to tax examinations until respective statue of limitation. The Company currently has no tax years under examination.
Based on management’s assessment of FIN 48, the Company concluded that the adoption of FIN 48, as of January 1, 2007, had no significant impact on our results of operations or financial position, and required no adjustment to the opening balance sheet accounts. The year-end analysis supports the same conclusion, and the Company does not have an accrual for uncertain tax positions as of December 31, 2007 and 2008. As a result, tabular reconciliation of beginning and ending balances would not be meaningful. If interest and penalties were to be assessed, the Company would charge interest to interest expense, and penalties to other operating expense. It is not anticipated that unrecognized tax benefits would significantly increase or decrease within twelve months of the reporting date.
Note 8. FINANCIAL INSTRUMENTS
(a) Interest rate Risk:
It is management's opinion that the Corporation is not exposed to significant interest rate risk
(b) Credit Risk:
The Corporation maintains all of its cash and cash equivalents with major financial institutions in the United States. Management is of the opinion that the Corporation is not exposed to significant credit risk.
(c) Foreign Currency Risk:
A component of the Corporation’s transactions are undertaken in Canadian dollars. Fluctuation in exchange rates between the Canadian and US dollars could have a material effect on the business, results of operations and financial condition of the Corporation.
MAVERICK MINERALS CORPORATION
(An Exploration Stage Company)
Notes to Consolidated Financial Statements
December 31, 2008 and 2007
(Expressed in U.S. Dollars)
Note 9. SUBSEQUENT EVENTS
Subsequent to December 31, 2008,
(a) On February 2, 2009 a major shareholder returned to treasury 20,000,000 common shares of the corporation. The return to treasury preceded an agreement with the Company’s main creditor and an affiliate of that creditor for the conversion of outstanding debt to equity, ongoing operating funding and a project acquisition facility
(b) The Company entered into a loan agreement with Synergy on February 13, 2009, pursuant to which the Company established an unsecured revolving loan of up to $1,000,000 (the “Credit Facility”). The outstanding principal amount of the Credit Facility together with all the accrued and unpaid interest and all other amounts outstanding there under are due and payable in full on December 31, 2012, the maturity date. Outstanding principal under the Credit Facility bears interest at an annual rate of 8%.
(c) In connection with the Company entering into the Credit Facility and Debt Settlement Agreement with Synergy, the Company entered into an Assignment and Assumption Agreement with Synergy and Art Brokerage, Inc. (“ABI”) dated February 13, 2009, pursuant to which ABI assigned to Synergy all of its right, title and interest to a debt (the “Assigned Debt”) of $447,500 owed by the Company to ABI.
(d) On February 13, 2009, the Company entered into a debt settlement and subscription agreement (the “Debt Settlement Agreement”) with Synergy in consideration of Synergy entering into the Credit Facility. Pursuant to the terms of the Debt Settlement Agreement, the company agreed to issue to Synergy 89,500,000 shares of the Company common stock at a deemed price of $0.005 per share in settlement of a $447,500 debt owed to Synergy.
As a result of these transactions, Synergy acquired 89,500,000 shares or 92.3% of the Company’s issued and outstanding common stock. As a result of this subsequent change of control the Company’s Federal and state tax net operating loss carryforwards will be limited as defined by Section 382 of the Internal Revenue Code.
Note 10. COMPARATIVE FIGURES
Certain comparative figures have been restated to conform to the current year’s presentation.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
Item 9A(T).
Item 9A(T). Controls and Procedures.
Evaluation of disclosure controls and procedures and remediation
As required by Rule 13(a)-15 under the Exchange Act, in connection with this annual report on Form 10-K, under the direction of our Chief Executive Officer and Chief Financial Officer, we have evaluated our disclosure controls and procedures as of December 31, 2008, including the remedial actions discussed above, and we have concluded that, as of December 31, 2008, our disclosure controls and procedures were ineffective as discussed in greater detail below. As of the date of this filing, we are still in the process of remediating such material weaknesses in our internal controls and procedures. Additionally, we are currently inactive as we seek new business opportunities
It should be noted that while our management believes our disclosure controls and procedures provide a reasonable level of assurance, they do not expect that our disclosure controls and procedures or internal controls will prevent all error and all fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of internal control is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Management’s annual report on internal control over financial reporting
Management is responsible for establishing and maintaining internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our management evaluated, under the supervision and with the participation of our Chief Executive Officer, the effectiveness of our internal control over financial reporting as of December 31, 2008.
Based on its evaluation under the framework in Internal Control-Integrated Framework , issued by the Committee of Sponsoring Organizations of the Treadway Commission, our management concluded that our internal control over financial reporting was not effective as of December 31, 2008, due to the existence of significant deficiencies constituting material weaknesses, as described in greater detail below. A material weakness is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
This annual report does not include an attestation report of our company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our company’s independent registered public accounting firm pursuant to temporary rules of the SEC that permit our company to provide only management’s report in this annual report.
Limitations on Effectiveness of Controls
Our Chief Executive Officer and Chief Financial Officer do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additional controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Material Weaknesses Identified
In connection with the preparation of our consolidated financial statements for the year ended December 31, 2008, certain significant deficiencies in internal control became evident to management that represent material weaknesses, including:
(i)
Lack of a sufficient number of independent directors for our board and audit committee. We currently have no independent director on our board, which is comprised of one director. As a publicly-traded company, we strive to have a majority of our board of directors be independent;
(ii)
Insufficient segregation of duties in our finance and accounting functions due to limited personnel. During the year ended December 31, 2008, we had limited staff that performed nearly all aspects of our financial reporting process, including, but not limited to, access to the underlying accounting records and systems, the ability to post and record journal entries and responsibility for the preparation of the financial statements. This creates certain incompatible duties and a lack of review over the financial reporting process that would likely result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC. These control deficiencies could result in a material misstatement to our interim or annual consolidated financial statements that would not be prevented or detected;
(iii)
There is a lack of sufficient supervision and review by our corporate management;
(iv)
Insufficient corporate governance policies. Although we have a code of ethics which provides broad guidelines for corporate governance, our corporate governance activities and processes are not always formally documented. Specifically, decisions made by the board to be carried out by management should be documented and communicated on a timely basis to reduce the likelihood of any misunderstandings regarding key decisions affecting our operations and management; and
(v)
Our company’s accounting personnel does not have sufficient technical accounting knowledge relating to accounting for income taxes and complex US GAAP matters. Management corrected any errors prior to the release of our company’s December 31, 2008 consolidated financial statements.
Plan for Remediation of Material Weaknesses
We intend to take appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies. We intend to consider the results of our remediation efforts and related testing as part of our year-end 2009 assessment of the effectiveness of our internal control over financial reporting.
Subject to receipt of additional financing, we intend to undertake the below remediation measures to address the material weaknesses described in this annual report. Such remediation activities include the following:
(1)
We continue to recruit two or more additional independent board members to join our board of directors and will consider the adoption of an audit committee at such time as additional board members are retained; and
(2)
We intend to continue to update the documentation of our internal control processes, including formal risk assessment of our financial reporting processes.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal control over financial reporting during the fourth quarter of our fiscal year ended December 31, 2008 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION.
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
Summary Background of Executive Officers and Directors
The following is a brief account of the education and business experience of each director and executive officer during at least the past five years, indicating each person’s principal occupation during the period, and the name and principal business of the organization by which he was employed.
Robert Kinloch
Since July 5, 2001, Mr. Robert Kinloch has been the President, Chief Executive Officer, Chief Financial Officer and sole member of the Board of Directors of our company. In his capacity as Chief Financial Officer, Mr. Kinloch is and has been responsible for the finance function of our company including supervising the preparation of our financial statements and as the sole member of our board of directors has served on our audit committee. Mr. Kinloch’s duties as President and Chief Executive Officer include the business development function, investigating qualified investment opportunities and designing and implementing the required due diligence and acquisition financing. In addition Mr. Kinloch is responsible for our regulatory obligations as a reporting issuer. From June 2002 until May 2005 Mr. Kinloch was the President and sole member of the board of directors of AMT Canada Inc., a private company registered under the laws of the Yukon Territory, Canada. From March 2004 until April 2005, Mr. Kinloch was President and a member of the board of directors of UCO Energy Corporation, a private company incorporated pursuant to the laws of the State of Nevada. Mr. Kinloch is the brother of Donald Kinloch, our Secretary and Treasurer.
Donald Kinloch
Since September 2002, Mr. Donald Kinloch has been our Secretary and Treasurer. Donald Kinloch is the brother of Robert Kinloch, our President, Chief Executive Officer, Chief Financial Officer and sole member of our board of directors. Since January 1998, Mr. Kinloch has been an independent consultant conducting contractual due diligence, supplying market research and developing communication strategies. From March 2004 until April 2005, Mr. Kinloch was the Secretary and Treasurer of UCO Energy Corporation, a private company incorporated pursuant to the laws of the State of Nevada.
Term of Office
The directors serve until their successors are elected by the shareholders. Vacancies on the Board of Directors may be filled by appointment of the majority of the continuing directors. The executive officers serve at the discretion of the Board of Directors.
Family Relationships
Robert Kinloch and Donald Kinloch are brothers.
Significant Employees
We have no significant employees other than the directors and officers described above.
Involvement in Certain Legal Proceedings
Our directors, executive officers and control persons have not been involved in any of the following events during the past five years:
1.
any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
2.
any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
3.
being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
4.
being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
Audit Committee
The Company’s audit committee is composed of its directors and officers, Robert Kinloch and Donald Kinloch.
Audit Committee Financial Expert
Our board of directors has determined that it does not have an audit committee member that qualifies as an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K. We believe that the audit committee members are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. In addition, we believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated revenues to date.
Code of Ethics
We adopted a Code of Ethics applicable to all of our directors, officers, employees and consultants, which is a “code of ethics” as defined by applicable rules of the SEC. Our Code of Ethics is attached as an exhibit to our annual report on Form 10-KSB filed on April 24, 2008. If we make any amendments to our Code of Ethics other than technical, administrative, or other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of our Code of Ethics to our chief executive officer, chief financial officer, or certain other finance executives, we will disclose the nature of the amendment or waiver, its effective date and to whom it applies in a Current Report on Form 8-K filed with the SEC.
Section 16(a) Beneficial Ownership Compliance
Section 16(a) of the Exchange Act requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports that they file.
Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that all filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
The particulars of compensation paid to the following persons:
our principal executive officer;
each of our two most highly compensated executive officers who were serving as executive officers at the end of the year ended December 31, 2008; and
up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at the end of the most recently completed financial year,
who we will collectively refer to as the named executive officers, for our years ended December 31, 2008 and 2007, are set out in the following summary compensation table:
Employment Contracts
Effective May 5, 2005, we entered into a management agreement with Robert Kinloch wherein Mr. Kinloch would continue to perform the duties of the President, Chief Executive Officer and Chief Financial Officer at a salary of $90,000 per annum for a term of 2 years. The term of the management agreement expired in May, 2007. The Company has not renewed the management agreement with Mr. Kinloch, however, Mr. Kinloch pursuant to a verbal agreement with the Company, continues to receive a consulting fee of $7,500 per month for all management consulting services provided by him to the Company.
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive stock options at the discretion of our board of directors in the future. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our board of directors from time to time. We have no plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control.
Outstanding Equity Awards at Fiscal Year-End
We have a non-qualified stock option plan which became effective on September 12, 2002 and provides for the issuance of up to 3,000,000 shares of our common stock. We had no options outstanding during the year ended December 31, 2008.
Aggregated Options Exercised in the Year Ended December 31, 2008 and Year End Option Values
There were no stock options exercised during the year ended December 31, 2008.
Repricing of Options/SARS
We did not reprice any options previously granted during the year ended December 31, 2008.
Director Compensation
We reimburse our directors for expenses incurred in connection with attending board meetings. We did not pay any other director’s fees or other compensation for services rendered as a director for the fiscal year ended December 31, 2008.
We have no formal plan for compensating our directors for their service in their capacity as directors, although such directors are expected in the future to receive stock options to purchase common shares as awarded by our board of directors or (as to future stock options) a compensation committee which may be established. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director. No director received and/or accrued any compensation for their services as a director, including committee participation and/or special assignments.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
As of March 25, 2009, there were 96,907,208 shares of our common stock outstanding. The following table sets forth certain information known to us with respect to the beneficial ownership of our common stock as of that date by (i) each of our directors, (ii) each of our executive officers, and (iii) all of our directors and executive officers as a group. Except as set forth in the table below, there is no person known to us who beneficially owns more than 5% of our common stock.
*Less than 1%
(1)
Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of
shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights.
(2)
The percentage of class is based on 96,907,208 shares of common stock issued and outstanding as of March 25, 2009.
Changes in Control
On February 13, 2009, the Company entered into a loan agreement with Senergy, a private Nevada limited liability corporation, pursuant to which the Company received a revolving loan of up to US$1,000,000 (the “Credit Facility”). The outstanding principal amount of the Credit Facility together with all accrued and unpaid interest and all other amounts outstanding thereunder are due and payable in full on December 31, 2012, the maturity date. Outstanding principal under the Credit Facility bears interest at an annual rate of 8%. As a condition of the Credit Facility, the Company agreed to use funds received under the Credit Facility solely for the purpose of funding ongoing general and administrative expenses, consulting and due diligence expenses, or professional fees and joint venture programs.
In consideration of Senergy entering into the Credit Facility, Maverick agreed to enter into a debt settlement and subscription agreement (the “Debt Settlement Agreement”) with Senergy dated as of February 13, 2009. Pursuant to the terms of the Debt Settlement Agreement, the Company agreed to issue to Senergy 89,500,000 shares of its common stock at a deemed price of US$0.005 per share in settlement of a US$447,500 debt owed to Senergy. The shares were issued to Senergy pursuant to Rule 506 of Regulation D on the basis that Senergy represented that they are an “accredited investor” as such term is defined in Rule 501 of Regulation D. Senergy delivered appropriate investment representations satisfactory to Maverick with respect to this transaction and consented to the imposition of restrictive legends upon the certificates evidencing such shares.
In connection with our entry into the Credit Facility and Debt Settlement Agreement with Senergy, the Company entered into an Assignment and Assumption Agreement (the “Assignment Agreement”) with Senergy and Art Brokerage, Inc. (“ABI”) pursuant to which ABI assigned to Senergy all its right, title and interest to a debt (the “Assigned Debt”) of US$447,500 owed by the Company to ABI. The Company executed the Assignment Agreement solely to consent to and acknowledge the assignment of the Assigned Debt as contemplated by the agreement.
As a result of the above transactions a change in control of the Company has occurred. Senergy has acquired 89,500,000 shares or 92.3% of the Company’s issued and outstanding common stock. There are no arrangements or understandings among the Company and Senergy and/or its affiliates with respect to election of directors or other matters.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Except as set out below, no director, executive officer, principal shareholder holding at least 5% of our common shares, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction, since the beginning of our company’s fiscal year ended December 31, 2008, in which the amount involved in the transaction exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at the year end for the last three completed fiscal years.
On February 13, 2009, the Company entered into a loan agreement with Senergy Partners LLC (“Senergy”), a private Nevada limited liability corporation, pursuant to which the Company received a revolving loan of up to US$1,000,000 (the “Credit Facility”). The outstanding principal amount of the Credit Facility together with all accrued and unpaid interest and all other amounts outstanding thereunder are due and payable in full on December 31, 2012, the maturity date. Outstanding principal under the Credit Facility bears interest at an annual rate of 8%. As a condition of the Credit Facility, the Company agreed to use funds received under the Credit Facility solely for the purpose of funding ongoing general and administrative expenses, consulting and due diligence expenses, professional fees and joint venture programs.
In consideration of Senergy entering into the Credit Facility, the Company agreed to enter into a debt settlement and subscription agreement (the “Debt Settlement Agreement”) with Senergy dated as of February 13, 2009. Pursuant to the terms of the Debt Settlement Agreement, the Company agreed to issue to 89,500,000 shares of its common stock at a deemed price of US$0.005 per share in settlement of a US$447,500 debt owed to Senergy. In connection with our entry into the Credit Facility and Debt Settlement Agreement with Senergy, the Company entered into an Assignment and Assumption Agreement (the “Assignment Agreement”) with Senergy and Art Brokerage, Inc. (“ABI”) pursuant to which ABI assigned to Senergy all its right, title and interest to a debt (the “Assigned Debt”) of US$447,500 owed by the Company to ABI. The Company executed the Assignment Agreement solely to consent to and acknowledge the assignment of the Assigned Debt as contemplated by the agreement. As a result of the above transactions a change in control of the Company has occurred. Senergy has acquired 89,500,000 shares or 92.3% of the Company’s issued and outstanding common stock. There are no arrangements or understandings among the Company and Senergy and/or its affiliates with respect to election of directors or other matters.
On May 5, 2005, we entered into a management agreement with our chief executive officer, Robert Kinloch. The agreement was for a term of two years with an annual fee of $90,000 and will expire, unless amended, on May 31, 2007. Effective May 5, 2005, we entered into a management agreement with Robert Kinloch wherein Mr. Kinloch would continue to perform the duties of the President, Chief Executive Officer and Chief Financial Officer. The term of the management agreement expired in May 2007. The Company has not renewed the management agreement with Mr. Kinloch, however, Mr. Kinloch pursuant to a verbal agreement with the Company, continues to receive a consulting fee of $7,500 per month for all management consulting services provided by him to the Company.
Director Independence
Our common stock is quoted on the Pink Sheets LLC, which does not have director independence requirements. Under NASDAQ rule 4200(a)(15), a director is not considered to be independent if he or she is also an executive officer or employee of the corporation. Mr. Robert Kinloch is our chief executive officer and president and our sole director. As a result, we do not have any independent directors.
As a result of our limited operating history and limited resources, our management believes that we will have difficulty in attracting independent directors. In addition, we would be likely be required to obtain directors and officers insurance coverage in order to attract and retain independent directors. our management believes that the costs associated with maintaining such insurance is prohibitive at this time.
Board of Directors
Our board of directors facilitates its exercise of independent supervision over management by endorsing the guidelines for responsibilities of the board as set out by regulatory authorities on corporate governance in the United States. Our board’s primary responsibilities are to supervise the management of our company, to establish an appropriate corporate governance system, and to set a tone of high professional and ethical standards.
The board is also responsible for:
selecting and assessing members of the Board;
choosing, assessing and compensating the Chief Executive Officer of our company, approving the compensation of all executive officers and ensuring that an orderly management succession plan exists;
reviewing and approving our company’s strategic plan, operating plan, capital budget and financial goals, and reviewing its performance against those plans;
adopting a code of conduct and a disclosure policy for our company, and monitoring performance against those policies;
ensuring the integrity of our company’s internal control and management information systems;
approving any major changes to our company’s capital structure, including significant investments or financing arrangements; and
reviewing and approving any other issues which, in the view of the Board or management, may require Board scrutiny.
Orientation and Continuing Education
We have an informal process to orient and educate new recruits to the board regarding their role of the board, our committees and our directors, as well as the nature and operations of our business. This process provides for an orientation with key members of the management staff, and further provides access to materials necessary to inform them of the information required to carry out their responsibilities as a board member. This information includes the most recent board approved budget, the most recent annual report, the audited financial statements and copies of the interim quarterly financial statements.
The board does not provide continuing education for its directors. Each director is responsible to maintain the skills and knowledge necessary to meet his or her obligations as directors.
Nomination of Directors
The board is responsible for identifying new director nominees. In identifying candidates for membership on the board, the board takes into account all factors it considers appropriate, which may include strength of character, mature judgment, career specialization, relevant technical skills, diversity and the extent to which the candidate would fill a present need on the board. As part of the process, the board, together with management, is responsible for conducting background searches, and is empowered to retain search firms to assist in the nominations process. Once candidates have gone through a screening process and met with a number of the existing directors, they are formally put forward as nominees for approval by the board.
Assessments
The board intends that individual director assessments be conducted by other directors, taking into account each director’s contributions at board meetings, service on committees, experience base, and their general ability to contribute to one or more of our company’s major needs. However, due to our stage of development and our need to deal with other urgent priorities, the board has not yet implemented such a process of assessment.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit fees
The aggregate fees billed for the two most recently completed fiscal periods ended December 31, 2008 and December 31, 2007 for professional services rendered by BDO Dunwoody LLP, Chartered Accountants, for the audit of our annual consolidated financial statements, quarterly reviews of our interim consolidated financial statements and services normally provided by the independent accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:
Year Ended
December 31,
Year Ended
December 31,
Audit Fees $90,000 $50,000
Audit Related Fees -
-
Tax Fees $15,250 -
All Other Fees -
-
Total $105,250 $50,000
In the above table, “audit fees” are fees billed by our company’s external auditor for services provided in auditing our company’s annual financial statements for the subject year along with reviews of interim quarterly financial statements and involvement with various in arrears filing earlier in 2008. “Audit-related fees” are fees not included in audit fees that are billed by the auditor for assurance and related services that are reasonably related to the performance of the audit review of our company’s financial statements. “Tax fees” are fees billed by the auditor for professional services rendered for tax compliance, tax advice and tax planning. “All other fees” are fees billed by the auditor for products and services not included in the foregoing categories.
Policy on Pre-Approval by Audit Committee of Services Performed by Independent Auditors
The board of directors pre-approves all services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.
The board of directors has considered the nature and amount of fees billed by BDO Dunwoody LLP and believes that the provision of services for activities unrelated to the audit is compatible with maintaining BDO Dunwoody LLP.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
* Filed herewith.
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.
MAVERICK MINERALS CORPORATION
By /s/ Robert Kinloch
Robert Kinloch
President, Chief Executive Officer and Chief Financial Officer
(Principal Executive Officer, Principal Accounting Officer
and Principal Financial Officer)
Date: April 9, 2009
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By /s/ Robert Kinloch
Robert Kinloch
Sole director, Chief Executive Officer and Chief Financial Officer
(Principal Executive Officer, Principal Accounting Officer
and Principal Financial Officer)
Date: April 9, 2009