The accompanying Notes are an integral part of these financial statements
Abby, Inc.
(An Exploration Stage Company )
NOTES TO THE FINANCIAL STATEMENTS
August 31, 2012
(UNAUDITED)
NOTE 1 NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Abby, Inc. (the Company) was incorporated under the laws of the State of Colorado on Dec 11, 2000. The Company was dormant until July 2009, when it entered into an agreement to acquire an oil and gas lease in Thailand. The Company is an exploration stage company and has formulated a business plan to investigate the possibilities of a viable gas deposit. The Company has adopted November 30
th
as its fiscal year end.
The results of operations for the interim periods are not necessarily indicative of the results for the full year. In managements opinion all adjustments necessary for a fair presentation of the Companys financial statements are reflected in the interim periods included, and are of a normal recurring nature.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with maturity of three months or less to be cash equivalents.
REVENUE RECOGNITION
The Company considers revenue to be recognized at the time the service is performed.
USE OF ESTIMATES
The preparation of the Companys financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Companys short-term financial instruments consist of cash and cash equivalents and accounts payable. The carrying amounts of these financial instruments approximate fair value because of their short-term maturities. Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash. During the year the Company did not maintain cash deposits at financial institution in excess of the $100,000 limit covered by the Federal Deposit Insurance Corporation. The Company does not hold or issue financial instruments for trading purposes nor does it hold or issue interest rate or leveraged derivative financial instruments.
INVESTMENT IN OIL AND NATURAL GAS PROPERTIES
The Company follows the successful efforts method of accounting and will capitalize successful wells and related leasehold costs. Acquisition costs for proved and unproved properties are capitalized when incurred. Exploration costs, including geological and geophysical costs, the costs of carrying and retaining unproved properties and exploratory dry hole costs are expensed. Development costs, including costs to drill and equip development wells and successful exploratory drilling costs to locate proved reserves are capitalized.
These costs are amortized using the unit of production method. Dry hole and related leasehold costs are expensed.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews and evaluates long-term assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under ASC 360-10-35-17 if events or circumstances indicate that their carrying amount might not be recoverable. When the Company determines that an impairment analysis should be done, the analysis will be performed using the rules of ASC 930-360-35 Asset Impairment, and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Term Assets.
NET INCOME PER COMMON SHARE
Basic net income per common share (EPS) is computed by dividing net income available to common stockholders by the weighted average number of common stock shares outstanding during the year. Diluted EPS is computed by dividing net income available to common stockholders by the weighted-average number of common stock shares outstanding during the year plus potential dilutive instruments such as stock options and warrants. The effect of stock options and warrants on diluted EPS is determined through the application of the treasury stock method, whereby proceeds received by the Company based on assumed exercises are hypothetically used to repurchase the Companys common stock at the average market price during the period. Net loss per common share is unchanged on a diluted basis as the Company does not have any common stock equivalents outstanding as of August 31, 2012.
INCOME TAXES
The Company uses the asset and liability method of accounting for income taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of certain assets and liabilities. Deferred income tax assets and liabilities are computed annually for the difference between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period, plus or minus the change during the period in deferred tax assets and liabilities.
Deferred income taxes may arise from temporary differences resulting from income and expanse items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of the assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse. As of August 31, 2012, the Company had a net operating loss carryforward of $116,145. The related deferred tax asset of approximately $39,000 has been fully offset by a valuation allowance due to the uncertainty of the Company being able to realize the benefit in future years.
CONCENTRATION OF CREDIT RIS
K
The Company does not have any concentration of financial credit risk.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company does not expect that the adoption of any recent accounting pronouncements will have a material impact to its financial statements.
NOTE 3 OIL AND GAS LEASE
The Company purchased an oil & gas lease located in Phetchabun, Thailand on July 17, 2009. The Company purchased this lease by issuing 3,000,000 shares of common stock valued at $.005 per share for an aggregate value of $15,000 (to a related party). As no viable reserves have been identified, management recorded an impairment loss for $15,000 during the year ended November 30, 2009. This amount has been reflected in the statement of operations as an impairment loss on oil and gas lease.
In May of 2010, the Company paid $6,000 to Mitchell Vestco (a related party) of Calgary, Alberta, to secure a gas field in Westerose, Alberta. As no viable reserves have been identified, management recorded an impairment loss for $6,000 during the quarter ended June 9, 2010. In July, 2010, another $1,000 was paid to complete the deposit requirement for this gas field. This amount was also impaired due to lack of identifying viable reserves.
NOTE 4 STOCKHOLDERS EQUITY
The Company has authorized 25,000,000 shares of preferred stock, with a par value of $.001 per share. There are no preferred shares issued and outstanding at August 31, 2012.
The Company issued 4,000,000 shares of its common stock, to its President, in July 2009 in exchange for services rendered, valued at $20,000.
As identified above in Footnote 3, the Company issued 3,000,000 shares of its common stock in July 2009 to acquire the Phetchabun oil and gas lease, valued at $15,000.
During November 2009 the Company issued 9,000,000 shares of its common stock at $.005 per share for a total of $45,000 in cash.
During February 2011 the Company issued 3,500,000 shares of its common stock at $.01 per share for a total of $35,000 in cash.
The Company issued 900,000 shares of its common stock, to its President, on August 24, 2012
, in exchange for services rendered. The Company recorded this transaction based on the value of the services provided, of $3,000.
NOTE 5 RELATED PARTY TRANSACTIONS
In May of 2010, the Company paid $6,000 to Mitchell Vestco (a related party through common principal owners) of Calgary, Alberta, to secure a gas field in Westrose, Alberta. As no viable reserves have been identified, management recorded an impairment loss for $6,000 during the quarter ended June 9, 2010. In July, 2010, another $1,000 was paid to complete the deposit requirement for this gas field. This amount was also impaired due to lack of identifying viable reserves.
A Director of the Company, and principal owner, was paid $5,000 for consulting fees in December 2009, and was also the party from whom the Company acquired the Phetchabun lease as identified above in Footnote 3, through the issuance of 3,000,000 shares of common stock.
The Company issued 900,000 shares of its common stock, to its President, in August 2012 in exchange for services rendered. The Company recorded this transaction based on the value of the services provided, of $3,000.
NOTE 6 GOING CONCERN
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As shown in the accompanying financial statements, the Company has no sales and has incurred a net loss of $114,045 since inception, which raises substantial doubt about its ability to continue as a going concern. The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations from the development of its gas properties. Management has plans to seek additional capital through a private placement and public offering of its common stock. The financial statements do not include any adjustments relating to the recoverability and classifications of recorded assets, or the amounts of and the classification of liabilities that might be necessary in the event the Company cannot continue in existence.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis or Plan of Operation (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should specifically consider various factors, including the risk factors outlined below. These factors may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
RESULTS OF OPERATIONS
Working Capital
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|
|
|
|
|
|
|
|
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At August 31, 2012
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At November 30, 2011
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Current Assets
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$ 2,930
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$ 7,000
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Current Liabilities
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$ 1,075
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$ 4,743
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Working Capital (Deficit)
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$ 1,855
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$ 2,257
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Cash Flows
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Nine Months Ended
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Nine Months Ended
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August 31, 2012
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August 31, 2011
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Cash Flows from (used in) Operating Activities
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$ -
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$ (36,146)
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Cash Flows from (used in) Investing Activities
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$ -
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$ (0)
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Cash Flows from (used in) Financing Activities
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$ -
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$ 35,000
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Net Increase (decrease) in Cash During Period
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$ -
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$ (1,146)
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The decrease in our working capital at August 31, 2012 from the period ended November 30, 2011
is reflective of the current state of our business development, primarily due to our inability secure funding, which allowed for the decrease in our exploration activities and professional fees paid in connection with expenses associated with our continuing reporting obligations under the Securities and Exchange Act of 1934.
As of August 31, 2012, we had cash on hand of 0. Since our inception, we have used our common stock to raise money for our operations and for our property acquisitions. We have not attained profitable operations and are dependent upon obtaining financing to pursue our plan of operation.
Operating Revenues
We have not generated any revenues since inception.
Operating Expenses and Net Loss
For the three and nine months ended August 31, 2012 and 2011
Operating expenses and the net loss for the nine month period ended August 31, 2012 was $3,402 compared with $36,595 for the same period ended August 31, 2011. This decrease is reflective of the current state of our business development, primarily due to our inability secure funding.
Operating expenses and the net loss for the three month period ended August 31, 2012 was $3,134 compared with $112 for the same period ended August, 2011. This increase was mainly related to the issuance of 900,000 shares of stock to our President for services rendered (valued at $3,000).
Liquidity and Capital Resources
As at August 31, 2012 and November 30, 2011, the Companys cash balance was $0.
As at August 31, 2012, the Company had total liabilities of $1,075 compared to total liabilities of $4,743 as at November 30, 2011.
Cash flows from Operating Activities
During the nine month period ended August 31, 2012, the Company used $0 cash in operating activities compared to the use of $36,146 for the nine month period ended August 31, 2011. This decrease is mainly due to the decrease in net loss.
Cash flows from Investing Activities
During the nine month periods ended August 31, 2012 and August 31, 2012, the Company had no cash flows from investing activities.
Cash flows from Financing Activities
During the nine month period ended
August 31, 2012, the Company had no cash flow from the issuance of stock compared to cash flow provided of $35,000 from the issuance of stock, for the nine month period ended August 31, 2011.
Going Concern
We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.
Future Financings
We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and exploration 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.
Critical Accounting Policies
We have identified certain accounting policies, described below, that are most important to the portrayal of our current financial condition and results of operations. Our significant accounting policies are disclosed in the notes to the audited financial statements included in this Quarterly Report.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes for the reporting period. Significant areas requiring the use of management estimates relate to the valuation of its properties.
Exploration Stage Enterprise
Our financial statements are prepared using the accrual method of accounting. We devote substantially all of our efforts to acquiring and exploring properties. Until such properties are acquired and developed, we will continue to prepare our financial statements and related disclosures in accordance with entities in the exploration stage.
Investment in oil and natural gas properties
The Company follows the successful efforts method of accounting and will capitalize successful wells and related leasehold costs. Acquisition costs for proved and unproved properties are capitalized when incurred. Exploration costs, including geological and geophysical costs, the costs of carrying and retaining unproved properties and exploratory dry hole costs are expensed. Development costs, including costs to drill and equip development wells and successful exploratory drilling costs to locate proved reserves are capitalized.
These costs are amortized using the unit of production method. Dry hole and related leasehold costs are expensed.
Impairment of long-lived assets
The Company reviews and evaluates long-term assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under ASC 360-10-35-17 if events or circumstances indicate that their carrying amount might not be recoverable. When the Company determines that an impairment analysis should be done, the analysis will be performed using the rules of ASC 930-360-35 Asset Impairment, and 360-10-15-3 through 15-5, Impairment or Disposal of Long-Term Assets.
Recent Accounting Pronouncements
The Company does not expect the adoption of any recent accounting pronouncements to have a material impact on its financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the "Exchange Act"), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of August 31, 2012. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective. Please refer to our Annual Report on Form 10-K as filed with the SEC on November 30, 2011, for a complete discussion relating to the foregoing evaluation of Disclosures and Procedures.
Managements Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Exchange Act. Our management assessed the effectiveness of our internal control over financial reporting as of November 30, 2010. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in
Internal Control-Integrated Framework
. Our management has concluded that, as of August 31, 2012, our internal control over financial reporting is not effective based on these criteria, due to material weaknesses resulting from not having an Audit Committee or financial expert on our Board of Directors and our failure to maintain appropriate cash controls.
Changes In Internal Control and Financial Reporting
Our management has also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.
The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial reporting.
Part II
OTHER INFORMATION
Item 1.
Legal Proceedings
None
Item 2
.
Changes in Securities
None
Item 3.
Defaults Upon Senior Securities
Not Applicable
Item 5. Other Information
Not Applicable
Item 6
.
Exhibits and Reports on Form 8K
Exhibit 31.1 Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of 2003.
Exhibit 31.2 Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 and 906 of the Sarbanes-Oxley Act of 2003.
Exhibit 32.2 Certifications of CEO And CFO Pursuant To Section 906 Of The Sarbanes-Oxley Act
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
Abby Inc.
Dated September 14, 2012
/s/
Thomas Forzani
Thomas Forzani, President, Director and Chief Executive Officer, Secretary/Treasurer, and Principal Accounting Officer
/s/
Don Thompson
Don Thompson, Director,