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FREESTONE RESOURCES, INC. - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS

February 13, 2014



This report contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. The Company's actual results could differ materially from those set forth on the forward looking statements as a result of the risks set forth in the Company's filings with the Securities and Exchange Commission, general economic conditions, and changes in the assumptions used in making such forward looking statements.

General



On August 22, 2007, the Company changed its name to Freestone Resources, Inc. in anticipation of going into the oil and gas technology development business. Since that time Freestone has been actively engaged in the development of technologies that can enhance oil and gas production in an environmentally responsible way. The Company currently markets and sells Petrozene, which is a solvent derived from recycled hydrocarbons. Petrozene can cost effectively decrease paraffin buildup in oil and gas wells, and can be utilized to clean oil storage facilities. Furthermore, Petrozene has been shown to reduce bottom sediment and water in oil storage tanks and act as a de-emulsification agent.

Results of Operations



Three and six months Ended December 31, 2013 compared to three and six months Ended December 31, 2012

Revenue - Our revenue for the three months ended December 31, 2013 was $6,148, compared to $8,983 for the same period in 2012, and for the six months ended December 31, 2013 was $12,608 and $8,983 for the same period in 2012. Revenue decreased in the fiscal second quarter as there were no development sales in fiscal 2014. Revenue increased in the six months ended December 31, 2013, due to the sale of Petrozene.

Cost of Revenues - Cost of sales (Petrozene) for the three months ended December 31, 2013 and 2012 were $2,591 and $0, respectively. Cost of sales for the six months ended December 31, 2013 and 2012 were $5,516 and $0, respectively. The cost is related to purchasing and transporting the product.

Lease Operating Expense - Lease operating expense for the three months ended December 31, 2013 was $22,331 compared to $2,446 for the same period in 2012 and $22,387 for the six months ended December 31, 2012 compared to $8,959 for the same period in 2012.

Operating Expense - Total operating expenses for the three months ended December 31, 2013 were $7,181 of depreciation expense and $85,077 of general and administrative expenses respectively, compared to $5,253 depreciation expense and $231,725 of general and administrative expenses for the same period in 2012. The decrease costs ($146,648) in the three months ended December 31, 2011 were related to consulting expense of $167,400 recognized for the issuance of stock for services related to the formation of Aqueous Services, LLC in the three months ended December 31, 2012.

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Total operating expenses for the six months ended December 31, 2013 were $14,055 of depreciation expense and $160,436 of general and administrative expenses respectively, compared to $10,505 depreciation expense and $305,678 of general and administrative expenses for the same period in 2012. The decrease costs ($145,242) in the six months ended December 31, 2012 were related consulting expense of $167,400 recognized for the issuance of stock for services related to the formation of Aqueous Services, LLC in the three months ended December 31, 2012.

Net Income (Loss) - Net loss for the three months ended December 31, 2013 was $105,931 compared to net loss of $508,750 for the same period in 2012. Net loss for the six months ended December 31, 2013 was $192,206 compared to $594,490 for the same period in 2012. The change in loss in the three and six month periods ended December 31, 2012 is mainly related to the consulting expense mention above in warrant expense of $278,273 included in other income and expense in the period ended December 31, 2012.

Liquidity and Capital Resources

We have little cash reserves and liquidity to the extent we receive it from operations and from the sale of stock.

Net cash used from operating activities of the Company was $176,338 for the six months ended December 31, 2013 compared to cash used of $147,583 for the same period in 2012. We continue to explore working capital options and in the short-term rely on our line-of-credit and advances/loans from shareholders. During the six months ended December 31, 2011, our cash and cash equivalent decreased to $78,218 from $205,767 at June 30, 2012 mainly due to the net loss incurred by the Company.

Employees



As of December 31, 2013, Freestone had two employees.

Need for Additional Financing



No commitments to provide additional funds have been made by management or other stockholders. Our independent auditors included a going concern explanatory paragraph in their report included in our annual report on Form 10-K for the year ended June 30, 2013, which raises substantial doubt about our ability to continue as a going concern.


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Source: Edgar Glimpses


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