This Management's Discussion and Analysis of Financial Condition and Results of Operations (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 consider various factors which 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 A summary of operations for the first quarter of 2014 compared to the first quarter of 2013 follows: 2014 2013 Revenues Oil & Gas Sales
$ 78,326 $ 106,874Costs and Expenses Cost of Revenue 172,695 103,300 Depletion and Depreciation 81,310 49,980 Derivative Expense 1,333,973 82,300 General and Administrative 598,288 200,321 Interest 141,016 54,562 Total Expenses 2,327,282 490,463 Net Loss $ (2,248,956 ) $ (383,589 )
The decrease in revenue of approximately
In May of 2013 we started recording fees related to a Consulting and Operating Agreement with
Depletion and depreciation increased due to depreciation associated with a significant equipment purchase recorded after the first quarter of 2013.
In the first quarter of 2013 we started raising capital with convertible debt. The conversion terms of the convertible debt resulted in a beneficial conversion option to the lender. In accordance with GAAP we have expensed the beneficial conversion option. In the first quarter of 2014 we issued approximately
Significant items that contributed to the increase in the General and Administrative expenses for the first quarter of 2014 as compared to the first quarter of 2013 are:
Approximate Item Increase Description This cost increase is related to more work in the area of Investor Consultants
$ 60,000Relations Director fees of $15,000per month ( $5,000per director) started in Director Fees 45,000 August of 2013. Our Chief Financial Officer started in July 2013 so there is no similar cost in the first Payroll 40,000 quarter 2013. Fees related to the various notes that were issued in the first quarter Financing Fees 50,000 of 2014 Investor Relations/Financing broker Commissions 105,000 fee. See below. We have recorded audit fees when billed. Last year most fees were billed in Audit 60,000 the second quarter $ 360,000
Subsequent to the end of the first quarter, we renegotiated an agreement with an individual who was working for the Company in the capacity of a financing broker and investor relations consultant. The renegotiated terms cover the time from
Interest expense has increased due to the increase in the convertible debt, but also due to a line of credit agreement entered into with
Liquidity and Capital Resources
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.
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.
3 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 our operations and other activities.
Critical Accounting Policies
Our financial statements and accompanying notes have been prepared in accordance with
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in note 2 of the notes to our financial statements. In general, management's estimates are based on historical experience, information from third party professionals, and various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
Recently Issued Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.