UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934: |
| For the quarterly period ended September 30, 2014 | |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934: |
| For the transition period from ____to____ | |
Commission File Number: 000-51465
| United American Petroleum Corp. |
| (Exact name of registrant as specified in its charter) |
| Nevada | 20-1904354 | |||
| (State or other jurisdiction of | (I.R.S. Employer | |||
| incorporation or organization) | Identification No.) | |||
| 9600 Great Hills Trail, Suite 150W, Austin, TX 78759 |
| (Address of principal executive offices) (Zip Code) |
| (512) 852-7888 |
| (Registrant’s Telephone Number, including area code) |
Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes o No
Indicate by check mark whether the registrant is a large accelerated file, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | o | Accelerated filer | o | |
| Non-accelerated filer | o | (Do not check if a smaller reporting company) | Smaller reporting company | x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No
As of November 18, 2014, there were 293,011,261 shares of the issuer’s $0.001 par value common stock issued and outstanding.
TABLE OF CONTENTS
| PART I FINANCIAL INFORMATION |
| 2 |
PART I - FINANCIAL INFORMATION
UNITED AMERICAN PETROLEUM, CORP.
CONSOLIDATED BALANCE SHEETS
| SEPTEMBER 30, 2014 | DECEMBER 31, 2013 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSET | ||||||||
| Cash | $ | 357,642 | $ | 557,298 | ||||
| Accounts receivable, net of allowance for uncollectible accounts | 108,143 | 119,052 | ||||||
| Related party receivables | 97,493 | 99,536 | ||||||
| Total current assets | 563,278 | 775,886 | ||||||
| Oil and gas properties (full cost method): | ||||||||
| Evaluated, net of accumulated depletion of $308,882 and $236,614 as of September 30, 2014 and December 31, 2013, respectively | 371,528 | 1,139,435 | ||||||
| TOTAL ASSETS | 934,806 | 1,915,321 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued liabilities | 1,067,435 | 1,150,116 | ||||||
| Convertible note payable, net of debt discount of $0 and $26,758 as of September 30, 2014 and December 31, 2013, respectively | 15,561 | 131,027 | ||||||
| Embedded derivative liability | 42,369 | 139,508 | ||||||
| Deferred gain on sale of assets | 7,500 | 17,500 | ||||||
| Other payable | 144,417 | 582,278 | ||||||
| Total current liabilities | 1,277,282 | 2,020,429 | ||||||
| Asset retirement obligation | 118,786 | 112,727 | ||||||
| TOTAL LIABILITIES | 1,396,068 | 2,133,156 | ||||||
| STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Preferred Stock, Series B, $0.001 par value, 1,000 shares authorized, 1,000 shares issued and 1,000 share outstanding and no shares issued and outstanding, respectively | 1 | 1 | ||||||
| Common stock, $0.001 par value, 750,000,000 shares authorized, 260,251,261 shares issued and outstanding as of September 30, 2014 and 86,875,192 shares issued and outstanding at December 31, 2013 | 260,251 | 86,876 | ||||||
| Additional paid-in capital | 8,479,071 | 8,301,499 | ||||||
| Accumulated deficit | (9,200,585 | ) | (8,606,211 | ) | ||||
| Total stockholders’ deficit | (461,262 | ) | (217,835 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | 934,806 | $ | 1,915,321 | ||||
The accompanying notes are an integral part of these unaudited financial statements.
| 3 |
UNITED AMERICAN PETROLEUM, CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS PERIODS ENDED SEPTEMBER 30, 2014 AND 2013
(UNAUDITED)
| THREE MONTHS ENDED | THREE MONTHS ENDED | NINE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||
| SEPTEMBER 30, 2014 | SEPTEMBER 30, 2013 | SEPTEMBER 30, 2014 | SEPTEMBER 30, 2013 | |||||||||||||
| REVENUE | ||||||||||||||||
| Oil and Gas sales | $ | 177,057 | $ | 106,634 | $ | 482,339 | $ | 475,145 | ||||||||
| Operator Income | 11,311 | 5,250 | 16,411 | 21,450 | ||||||||||||
| TOTAL REVENUE | 188,368 | 111,884 | 498,750 | 496,595 | ||||||||||||
| OPERATING EXPENSES | ||||||||||||||||
| Lease operating expenses | 42,274 | 82,517 | 295,410 | 354,930 | ||||||||||||
| Bad debt expense | — | — | 12,660 | — | ||||||||||||
| Accretion expense | 3,000 | 1,000 | 9,186 | 3,000 | ||||||||||||
| Depletion expense | 26,725 | 14,769 | 72,268 | 89,022 | ||||||||||||
| General and administrative | 163,564 | 156,045 | 562,876 | 423,591 | ||||||||||||
| TOTAL OPERATING EXPENSES | 235,563 | 254,331 | 952,400 | 870,543 | ||||||||||||
| NET LOSS BEFORE OTHER EXPENSE | (47,195 | ) | (142,447 | ) | (453,650 | ) | (373,948 | ) | ||||||||
| OTHER INCOME (EXPENSE) | ||||||||||||||||
| Interest expense | (10,019 | ) | (193,956 | ) | (189,559 | ) | (274,894 | ) | ||||||||
| Gain (loss) on embedded derivatives | (29,874 | ) | 29,186 | 96,523 | 96,088 | |||||||||||
| Loss on convertible note conversion | (47,688 | ) | — | (47,688 | ) | — | ||||||||||
| Total other income (expense) | (87,581 | ) | (164,770 | ) | (140,724 | ) | (178,806 | ) | ||||||||
| NET LOSS | $ | (134,776 | ) | $ | (307,217 | ) | $ | (594,374 | ) | $ | (552,754 | ) | ||||
| LOSS PER SHARE - BASIC AND DILUTED | (0.00 | ) | (0.01 | ) | (0.00 | ) | (0.01 | ) | ||||||||
| WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED | 181,276,760 | 51,010,765 | 126,198,617 | 50,339,543 | ||||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
| 4 |
UNITED AMERICAN PETROLEUM, CORP.
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
| NINE MONTHS ENDED | NINE MONTHS ENDED | |||||||
| SEPTEMBER 30, 2014 | SEPTEMBER 30, 2013 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (594,374 | ) | $ | (552,754 | ) | ||
| Adjustments to reconcile net loss to net cash provided used in operating activities: | ||||||||
| Bad debt expense | 12,660 | — | ||||||
| Accretion expense | 9,186 | 3,000 | ||||||
| Depletion expense | 72,268 | 89,022 | ||||||
| Amortization of debt discount and non-cash interest expense | 179,566 | 274,894 | ||||||
| Gain on embedded derivatives | (96,523 | ) | (96,088 | ) | ||||
| Loss on convertible note conversion | 47,688 | — | ||||||
| Reduction in full cost pool due to operator income from owned wells | 138,986 | — | ||||||
| Change in assets and liabilities: | ||||||||
| Accounts receivable | (1,751 | ) | (126,201 | ) | ||||
| Related party receivable | 2,043 | (10,575 | ) | |||||
| Accounts payable and accrued expenses | (417,588 | ) | 74,221 | |||||
| Other payable | (1,817 | ) | 116,516 | |||||
| Net provided by (used in) operating activities | (649,656 | ) | (227,965 | ) | ||||
| CASH FLOWS USED IN INVESTING ACTIVITIES: | ||||||||
| Proceeds from sale of oil and gas properties | 450,000 | — | ||||||
| Net cash provided by investing activities | 450,000 | — | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from convertible notes | — | 279,448 | ||||||
| Net cash provided by financing activities | — | 279,448 | ||||||
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (199,656 | ) | 51,483 | |||||
| CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD | 557,298 | 572,784 | ||||||
| CASH AND CASH EQUIVALENTS - END OF PERIOD | $ | 357,642 | $ | 624,267 | ||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | — | $ | — | ||||
| Taxes | $ | — | $ | — | ||||
| NON CASH TRANSACTIONS: | ||||||||
| Asset retirement liability retired | $ | 3,127 | $ | 17,449 | ||||
| Discount from derivatives | $ | 152,810 | $ | 210,250 | ||||
| Conversion of principal and interest to common shares | $ | 201,533 | $ | 117,656 | ||||
| Reclassification of derivative liability | $ | 153,426 | $ | 197,821 | ||||
| Settlement of derivative liabilities to additional paid-in capital | $ | — | $ | 70,000 | ||||
| Settlement of legal expenses through exchange of property | $ | 93,525 | $ | — | ||||
The accompanying notes are an integral part of these unaudited financial statements.
| 5 |
UNITED AMERICAN PETROLEUM CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| 1. | Nature of Operations and Basis of Presentation |
Nature of Operations
United American Petroleum Corp. (“United”) is incorporated under the laws of the state of Nevada. United’s principal business is the acquisition and management of leasehold interests in petroleum and natural gas rights, either directly or indirectly, and the exploitation and development of properties subject to these leases.
Basis of Presentation
These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim consolidated financial information and with the instructions to Securities and Exchange Commission (“SEC”) Form 10-Q and Article 8 of SEC Regulation S-X. The principles for interim consolidated financial information do not require the inclusion of all the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. Therefore, these condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements on Form 10-K for the year ended December 31, 2013. The condensed consolidated financial statements included herein are unaudited; however, in the opinion of management, they contain all normal recurring adjustments necessary for a fair statement of the condensed results for the interim periods. Operating results for the nine month period ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014. We made certain reclassifications to prior-period amounts to conform to the current presentation.
| 2. | Going Concern |
The Company has incurred a net loss and negative operating cash flows since inception through September 30, 2014. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s management is implementing plans to sustain the Company’s cash flow from operating activities and/or acquire additional capital funding. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
| 3. | Related Party Transactions |
Our officers and directors are also the directors and shareholders of a related party company that previously owned working interests in several of our oil and gas interests. As of September 30, 2014 the Company had a receivable in the amount of $97,493 due from this related party, with working interest amounts payable. This represents a $2,043 decrease from an amount of $99,536 as of December 31, 2013.
| 6 |
| 4. | Convertible Notes and Detached Warrants |
The following table summarizes the changes in our convertible notes as of September 30, 2014:
| Convertible notes payable | Face value | Debt discount | Convertible notes payable, net | |||||||||
| Balance as of December 31, 2013 | $ | 157,785 | (26,758 | ) | 131,027 | |||||||
| Additions due to new convertible debt | — | — | — | |||||||||
| Debt discount additions | — | (152,810 | ) | (152,810 | ) | |||||||
| Debt discount amortization | — | 179,568 | 179,568 | |||||||||
| Conversions of convertible debt (principal) into common shares | (142,224 | ) | — | (142,224 | ) | |||||||
| Balance as of September 30, 2014 | $ | 15,561 | — | 15,561 | ||||||||
Convertible Promissory Note – January 31, 2013
On January 31, 2013, we entered into a convertible promissory note (“Note”) with JMJ Financial (“JMJ”) pursuant to which JMJ agreed to lend the Company up to $400,000 in multiple installments in exchange for a senior secured convertible promissory note with a conversion price equal to 60% of the lowest trading price per share during the previous 25 trading days. The first installment of $55,000 was delivered less a fee of $5,000 on the date of the Note. The second installment of $25,000 was delivered in April 2013. The Note matures on January 31, 2014, or upon default, whichever is earlier, and bears interest at an annual rate of 12%. As described in Note 5, the embedded conversion feature qualified for liability classification at fair value. As a result, the Company recorded a discount of $55,000 to the Note payable on issuance of the first installment. The Company also recorded a discount of $25,000 to the Note payable on issuance of the second installment. As of September 30, 2014 there was $14,783 in outstanding principal and $18,333 in outstanding original interest discount (OID) on this Note.
On January 7, 2014, JMJ exercised a portion of the conversion rights of the note for 2,800,000 shares of common respectively at a stock price of $0.0011 for a total of $6,380 principal converted. Later in January 2014, JMJ submitted another conversion request under its Note; however, the Company was unable to comply with this request due to insufficient authorized shares of common stock. The lack of authorized shares constituted a default pursuant to the Note. The Company promptly notified JMJ of its inability to honor the conversion request. Subsequently, the Company amended its Articles of Incorporation to increase the authorized common shares of the Company to 750,000,000 shares, effective June 3, 2014. JMJ has not expressed an intention to assert the remedies set forth in the Note at this time.
On June 9, 2014, JMJ exercised a portion of the conversion rights of the note for 3,000,000 shares of common respectively at a stock price of $0.0011 for a total of $3,300 principal converted.
On June 27, 2014, JMJ exercised a portion of the conversion rights of the note for 4,600,000 shares of common respectively at a stock price of $0.00115 for a total of $5,290 principal converted.
During the quarter ended September 30, 2014, JMJ exercised a portion of the conversion rights of the note for 34,900,000 shares of common respectively at a stock price of $0.0005 for a total of $17,555 principal converted.
As of September 30, 2014, there was $23,667 in outstanding principal and interest on these Notes.
| 7 |
Convertible Note – February 19, 2013
On February 19, 2013, we entered into a Note with Asher Enterprises, Inc. (“Asher”) pursuant to which Asher lent $103,500 to us in a single installment (minus fees of $3,500 paid to the Company’s securities counsel). Principal and interest outstanding under the Note can be converted into common stock of the Company at a price equal to 60% of the average lowest trading price per share during the previous 10 trading days. The embedded conversion option cannot be exercised until 180 days from the date of the note and as such, was not priced until exercisable. The total number of conversion shares is calculated by dividing the amount of the notes by the conversion price.
On January 2, 2014, Asher exercised a portion of the conversion rights of the note for 2,235,294 shares of common respectively at a stock price of $0.0017, for a total of $3,800 accrued interest converted.
As of December 31, 2013 the principal on this note had been fully converted. Upon conversion of the final accrued interest of $3,800 in the first quarter of 2014 described above, the obligations relating to the note were fully satisfied.
Convertible Note – April 22, 2013
On April 22, 2013, we entered into another Note with Asher pursuant to which Asher lent $63,000 (minus fees of $3,000) to us in a single installment with a conversion price equal to 60% of the average lowest trading price per share during 5 of the previous 10 trading days.
On September 23, 2013, Asher lent us an additional $50,000 in a single installment (minus fees of $3,000) under the same terms as the previous installment made April 22, 2013.
On January 7, 2014, Asher converted $5,240 of principal of the Note into 2,757,895 shares of common stock. On January 13, 2014, Asher converted $4,950 of principal of the Note into 2,750,000 shares of common stock.
In January 2014, Asher submitted a conversion request under one of its Notes; however, the Company did not have sufficient shares of authorized common stock to honor the conversion request. Asher issued us a notice of default; however, Asher immediately waived the default provided that we began the process to increase our number of authorized shares. Asher later reissued the notice of default to us due to our delay in commencing the increase process. Therefore, we initially recognized a liability and a loss of $102,810 in the first quarter of 2014, which represented the additional amount due under the Notes in the event of default. Subsequently, the Company amended its Articles of Incorporation to increase the number of authorized shares of common stock of the Company to 750,000,000, effective June 3, 2014. In the second quarter of 2014 we received confirmation from Asher’s legal counsel that the penalty was waived in Q2and as such we de-recognized the penalty liability as of June 30, 2014. Due to the reversal of the penalty in Q2 2014, there is zero net impact to the three months and nine months ended September 30, 2014.
On June 4, 2014, Asher converted $4,690 of principal of the Note into 2,758,824 shares of common stock.
On June 16, 2014, Asher converted $12,150 of principal of the Note into 4,860,000 shares of common stock.
On June 24, 2014, Asher converted $7,750 of principal of the Note into 4,843,750 shares of common stock.
During the quarter ended September 30, 2014, Asher exercised all of the conversion rights of the notes for 107,870,304 shares of common respectively at a stock price of $0.00073 for a total of $82,713 principal and accrued interest converted.
| 8 |
As of September 30, 2014, the principal on this note had been fully converted and the obligations relating to the note were fully satisfied.
| 5. | Fair Value Measurements and Derivative Liabilities |
The Company measures fair value in accordance with a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
| Level 1 | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; | |
| Level 2 | Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and | |
| Level 3 | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). |
The following table sets forth the Company’s consolidated financial assets and liabilities measured at fair value by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
| LIABILITIES: | ||||||||||||||||
| Conversion option liability (as of September 30, 2014) | — | — | — | 42,369 | ||||||||||||
During 2013, the Company issued debt instruments that were convertible into common stock at a conversion price equal to 60% of the lowest trading price per share during the previous 25 trading days. The conversion options embedded in these instruments contain no explicit limit to the number of shares to be issued upon settlement and as a result are classified as liabilities under ASC 815. Additionally, because the number of shares to be issued upon settlement is indeterminate, all other share settle-able instruments must also be classified as liabilities. As a result, the Company measured its outstanding warrants on September 30, 2014 at fair value and re-classified these amounts from additional paid-in capital to derivative liabilities.
| 9 |
The following is a reconciliation of the conversion option liability and embedded warrant liability for which Level 3 inputs were used in determining fair value:
| Beginning balance December 31, 2013 | $ | 139,508 | ||
| Additions due to new convertible debt | 152,810 | |||
| Reclassification of derivative liabilities to additional paid-in capital due to conversion of related notes payable | (153,426 | ) | ||
| Mark to market of debt derivative | (96,523 | ) | ||
| Debt derivative as of September 30, 2014 | $ | 42,369 |
The Company’s conversion option liabilities are valued using pricing models and the Company generally uses similar models to value similar instruments. Where possible, the Company verifies the values produced by its pricing models to market prices. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, measures of volatility and correlations of such inputs. These consolidated financial liabilities do not trade in liquid markets, and as such, model inputs cannot generally be verified and do involve significant management judgment. Such instruments are typically classified within Level 3 of the fair value hierarchy. The Company uses the Black Scholes Option Pricing Model to value its derivatives based upon the following assumptions: dividend yield of -0-%, volatility of 158%-398%, risk free rate of 0.01-0.07% and an expected term of 0 years to .75 year.
| 6. | Commitments and Contingencies |
Legal matters
In April 2014, we settled a judgment that had been rendered against the Company in the amount of $19,856 plus attorneys’ fees of $73,669. We settled this judgment by assigning our interest in the Walker Smith lease and having the other working interest owners assign their interest in the lease as well.
| 7. | Recent Events |
On February 26, 2014, the Company completed the sale of a 46% working interest (comprising a 34.5% net revenue interest) in an oil, gas and mineral lease covering 430 acres in Duval County, Texas, to RTO Exploration, LLC (“Buyer”) for the purchase price of $400,000. In addition to the purchase price, in 2013 the Buyer paid a $10,000 non-refundable option payment to the Company. The purchase price was the result of negotiations between the Company and the Buyer.
On July 7, 2014, we assigned our interest in the Crouch, Lane Heady, Shillingburg, Duvalle 1&2 and RP Wilson well leases to DMV Pipeline LLC. We received $50,000 as consideration for the assignment of interest.
To account for the sale, we applied the two step process required by the full cost rules. First we calculated the impact of the sale of the working interest on the Company’s depletion rate, determining that the resulting change was not significant (less than 10%). Therefore, step two of the process (calculate loss or gain on sale) was not applicable, and we recognized the $50,000 proceeds as a direct reduction to the full cost pool.
| 10 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward Looking Statements
| This Quarterly Report of United American Petroleum Corp. on Form 10-Q contains forward-looking statements, particularly those identified with the words “anticipates,” “believes,” “expects,” “plans,” “intends,” “objectives” and similar expressions. These statements reflect management’s best judgment based on factors known at the time of such statements. The reader may find discussions containing such forward-looking statements in the material set forth under “Management’s Discussion and Analysis and Plan of Operations,” generally, and specifically therein under the captions “Liquidity and Capital Resources” as well as elsewhere in this Quarterly Report on Form 10-Q. Actual events or results may differ materially from those discussed herein. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guarantee, or warranty is to be inferred from those forward-looking statements. |
The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.
Critical Accounting Policy and Estimates.
Our Business. We are an exploration company engaged in the acquisition, exploration, development and production of oil and gas properties. Our principal business is the acquisition of leasehold interests in petroleum and natural gas rights, either directly or indirectly, and the exploitation and development of properties subject to these leases. Our primary focus is to develop our properties that have potential for near-term production. We also provide operational expertise for several third-party well owners out of our operation base in Austin, Texas. We currently have proved reserves in the State of Texas.
The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements for the period ended September 30, 2014, together with notes thereto, which are included in this Quarterly Report.
Recent Events. On July 7, 2014, we assigned our interest in the Crouch, Lane Heady, Shillingburg, Duvalle 1&2 and RP Wilson well leases to DMV Pipeline LLC. We received $50,000 as consideration for the assignment of interest.
| 11 |
Results of operations for the three months ended September 30, 2014, as compared to the three months ended September 30, 2013
Revenues. We had total revenues of $188,368 for the three months ended September 30, 2014, which were generated from oil and gas sales of $177,057 and well operating revenues of $11,311. This was a $76,484 increase from total revenues of $111,884 for the three months ended September 30, 2013, which were generated from oil and gas sales of $106,634 and well operation revenues of $5,250. Barrels of oil per day produced (BOPD) increased to an average of 22.12 BOPD from 12.01 BOPD for the three months ended September 30, 2013.
Our administrative revenue increase was a result of income derived from well administrative/operator fees charged through United Operating, LLC, our wholly-owned subsidiary, to third party well owners for managing and accounting for the development and production of their oil and gas property interests. Administrative revenue was only recognized on wells where the Company did not own an interest. The Company also operates certain wells where the Company also has an ownership interest. For these partially owned wells, no administrative income is recognized. Rather, operating fees received from other well interest owners are recorded as a reduction to the full cost pool per the full cost rules.
The following table sets forth the revenue and production data for the three months ended September 30, 2014 and 2013.
| THREE MONTHS ENDED SEPTEMBER 30, 2014 | THREE MONTHS ENDED SEPTEMBER 30, 2013 | INCREASE (DECREASE) | % INCREASE (DECREASE) | |||||||||||||
| REVENUES | ||||||||||||||||
| Oil and Gas Revenues | $ | 177,057 | $ | 106,634 | $ | 70,423 | 66 | % | ||||||||
| Administrative revenues | 11,311 | 5,250 | 6,061 | 115 | % | |||||||||||
| Total Revenues | 188,368 | 111,884 | 76,484 | 68 | % | |||||||||||
| PRODUCTION: | ||||||||||||||||
| Total production (Barrel of Oil Equivalent) | 1,991 | 1,081 | 910 | 84 | % | |||||||||||
| Barrels of Oil Equivalent per day | 22.12 | 12.01 | 5 | 42 | % | |||||||||||
| AVERAGE SALES PRICES: | ||||||||||||||||
| Price per Barrel of Oil Equivalent | $ | 88.93 | $ | 98.65 | $ | (10 | ) | -10 | % | |||||||
Operating Expenses. For the three months ended September 30, 2014, our total operating expenses were $235,563, which consisted of lease operating expenses of $42,274, accretion expense of $3,000, depletion expense of $26,725 and general and administrative expenses of $163,564. By comparison, for the three months ended September 30, 2013, our total operating expenses were $254,331, which consisted of lease operating expenses of $82,517, accretion expense of $1,000, depletion expense of $14,769, and general and administrative expenses of $156,045.
| 12 |
The following table sets forth information relating to our operating expenses for the three months ended September 30, 2014 and 2013.
| THREE MONTHS ENDED SEPTEMBER 30, 2014 | THREE MONTHS ENDED SEPTEMBER 30, 2013 | INCREASE (DECREASE) | % INCREASE (DECREASE) | |||||||||||||
| LEASE OPERATING EXPENSES | ||||||||||||||||
| Lease operating expenses | $ | 28,868 | $ | 62,480 | $ | (33,612 | ) | -54 | % | |||||||
| Workover expenses | 3,021 | 13,071 | (10,050 | ) | -77 | % | ||||||||||
| Legal, title and administrative well expenses | 10,385 | 6,966 | 3,419 | 49 | % | |||||||||||
| Total Lease Operating expenses | 42,274 | 82,517 | (40,243 | ) | -49 | % | ||||||||||
| DEPLETION AND ACCRETION EXPENSE | ||||||||||||||||
| Depreciation, depletion, amortization and accretion expense | 29,725 | 15,769 | 13,956 | 89 | % | |||||||||||
| BAD DEBT EXPENSE | ||||||||||||||||
| Bad debt expense | — | — | — | 0 | % | |||||||||||
| GENERAL AND ADMINISTRATIVE EXPENSES | ||||||||||||||||
| SEC related general and administrative expenses | $ | 5,276 | $ | 65,647 | $ | (60,371 | ) | -92 | % | |||||||
| Employee and officer expenses | 35,000 | 27,126 | 7,874 | 29 | % | |||||||||||
| Other general and administrative | 123,288 | 63,272 | 60,016 | 95 | % | |||||||||||
| Total General and Administrative expenses | 163,564 | 156,045 | 7,519 | 5 | % | |||||||||||
| TOTAL OPERATING EXPENSES | 235,563 | 254,331 | (18,768 | ) | -7 | % | ||||||||||
For the three months ended September 30, 2014 we incurred lease operating expenses of $42,274, a decrease of $40,243 or 49% compared to the three months ended September 30, 2013, as a result of Company incurring lower operating expenses during 2014.
During the three months ended September 30, 2014 compared to the three months ended September 30, 2013, our depreciation, depletion, amortization, and accretion expenses increased by $11,956, or 81%. These expenses increased largely due to higher depletion expense based on revised well life and production estimates from December 31, 2013.
The increase in general and administrative expenses of $7,519 or 5% during the three months ended September 30, 2014, compared to the prior period, was largely due to an increase in officer compensation and other general and administrative expenses.
Net Operating Loss. For the three months ended September 30, 2014, our total net operating loss was $41,195 as compared to a net operating loss of $142,447 for the three months ended September 30, 2013, an improvement of $95,252 or 67% from the prior period.
Other Income (Expense). For the three months ended September 30, 2014, we incurred interest expense of $10,019 associated with the amortization of debt discount related to the conversion features on our convertible notes, compared to interest expense of $193,956 for the three months ended September 30, 2013, relating to our outstanding convertible promissory notes. We recorded a loss on embedded derivatives of $29,874 for the three months ended September 30, 2014 compared to a gain on embedded derivatives of $29,186 for the three months ended September 30, 2013. We also recorded a loss on conversion of convertible notes of $47,688 for the three months ended September 30, 2014 due to conversion prices that were below par value of our common stock.
Net Loss. For the three months ended September 30, 2014, our net loss was $134,776 as compared to a net loss of $307,217 for the three months ended September 30, 2013, an improvement of $172,441 or 56% from the prior period. The decrease in net loss for the current quarter was largely due to higher revenues and lower interest expense for the quarter ended September 30, 2014.
| 13 |
Results of operations for the nine months ended September 30, 2014, as compared to the nine months ended September 30, 2013
Revenues. We had total revenues of $498,750 for the nine months ended September 30, 2014, which were generated from oil and gas sales of $482,339 and well operating revenues of $16,411. This was a $2,155 increase from total revenues of $496,595 for the nine months ended September 30, 2013, which were generated from oil and gas sales of $475,145 and well operation revenues of $21,450. Barrels of oil per day produced (BOPD) increased to an average of 19.83 BOPD from 18.71 BOPD for the nine months ended September 30, 2013.
Our administrative revenue increase was a result of income derived from well administrative/operator fees charged through United Operating, LLC, our wholly-owned subsidiary, to third party well owners for managing and accounting for the development and production of their oil and gas property interests. Administrative revenue was only recognized on wells where the Company did not own an interest. The Company also operates certain wells where the Company also has an ownership interest. For these partially owned wells, no administrative income is recognized. Rather, operating fees received from other well interest owners are recorded as a reduction to the full cost pool per the full cost rules.
The following table sets forth the revenue and production data for the nine months ended September 30, 2014 and 2013.
| NINE MONTHS ENDED SEPTEMBER 30, 2014 | NINE MONTHS ENDED SEPTEMBER 30, 2013 | INCREASE (DECREASE) | % INCREASE (DECREASE) | |||||||||||||
| REVENUES | ||||||||||||||||
| Oil and Gas Revenues | $ | 482,339 | $ | 475,145 | $ | 7,194 | 2 | % | ||||||||
| Administrative revenues | 16,411 | 21,450 | (5,039 | ) | -23 | % | ||||||||||
| Total Revenues | 498,750 | 496,595 | 2,155 | 0 | % | |||||||||||
| PRODUCTION: | ||||||||||||||||
| Total production (Barrel of Oil Equivalent) | 5,355 | 5,053 | 302 | 6 | % | |||||||||||
| Barrels of Oil Equivalent per day | 19.83 | 18.71 | 2 | 9 | % | |||||||||||
| AVERAGE SALES PRICES: | ||||||||||||||||
| Price per Barrel of Oil Equivalent | $ | 90.07 | $ | 94.03 | $ | (4 | ) | -4 | % | |||||||
Operating Expenses. For the nine months ended September 30, 2014, our total operating expenses were $952,400, which consisted of lease operating expenses of $295,410, accretion expense of $9,186, depletion expense of $72,267, bad debt expense of $12,660 and general and administrative expenses of $562,876. By comparison, for the nine months ended September 30, 2013, our total operating expenses were $870,543, which consisted of lease operating expenses of $354,930, accretion expense of $3,000, depletion expense of $89,022, and general and administrative expenses of $423,591.
| 14 |
The following table sets forth information relating to our operating expenses for the nine months ended September 30, 2014 and 2013.
| NINE MONTHS ENDED SEPTEMBER 30, 2014 | NINE MONTHS ENDED SEPTEMBER 30, 2013 | INCREASE (DECREASE) | % INCREASE (DECREASE) | |||||||||||||
| LEASE OPERATING EXPENSES | ||||||||||||||||
| Lease operating expenses | $ | 274,938 | $ | 214,650 | $ | 60,288 | 28 | % | ||||||||
| Workover expenses | 4,967 | 129,081 | (124,114 | ) | -96 | % | ||||||||||
| Legal, title and administrative well expenses | 15,505 | 11,199 | 4,306 | 38 | % | |||||||||||
| Total Lease Operating expenses | 295,410 | 354,930 | (59,520 | ) | -17 | % | ||||||||||
| DEPLETION AND ACCRETION EXPENSE | ||||||||||||||||
| Depreciation, depletion, amortization and accretion expense | 81,454 | 92,022 | (10,568 | ) | -11 | % | ||||||||||
| BAD DEBT EXPENSE | ||||||||||||||||
| Bad debt expense | 12,660 | — | 12,660 | 100 | % | |||||||||||
| GENERAL AND ADMINISTRATIVE EXPENSES | ||||||||||||||||
| SEC related general and administrative expenses | $ | 61,916 | $ | 209,558 | $ | (147,642 | ) | -70 | % | |||||||
| Employee and officer expenses | 159,762 | 100,632 | 59,130 | 59 | % | |||||||||||
| Other general and administrative | 341,198 | 113,401 | 227,797 | 201 | % | |||||||||||
| Total General and Administrative expenses | 562,876 | 423,591 | 139,285 | 33 | % | |||||||||||
| TOTAL OPERATING EXPENSES | 952,400 | 870,543 | 81,857 | 9 | % | |||||||||||
For the nine months ended September 30, 2014, we incurred lease operating expenses of $295,410, a decrease of $59,520 or 17% compared to the nine months ended September 30, 2013. The decrease was driven by fewer workovers in 2014, offset by the Company incurring higher extraction costs on its wells during 2014.
During the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013, our depreciation, depletion, amortization, and accretion expenses decreased by $10,568, or 11%. These expenses increased largely due to lower depletion expense based on revised well life and production estimates from December 31, 2013.
The increase in general and administrative expenses of $81,857 or 9% during the nine months ended September 30, 2014, compared to the prior period, was largely due to an increase in officer compensation and other general and administrative expenses.
Net Operating Loss. For the nine months ended September 30, 2014, our total net operating loss was $453,650 as compared to a net operating loss of $373,948 for the nine months ended September 30, 2013, an increase of $79,702 or 21% from the prior period. Our net operating loss increased over the prior period due to higher costs of oil and gas extraction on the Company’s wells.
Other Income (Expense). For the nine months ended September 30, 2014, we incurred interest expense of $189,559 associated with the amortization of debt discount related to the conversion features on our convertible notes, compared to interest expense of $274,894 for the nine months ended September 30, 2013, relating to our outstanding convertible promissory notes. We recorded a gain on embedded derivatives of $96,523 for the nine months ended September 30, 2014 compared to a gain on embedded derivatives of $96,088 for the nine months ended September 30, 2013.
Net Loss. For the nine months ended September 30, 2014, our net loss was $594,374 as compared to a net loss of $552,754 for the nine months ended September 30, 2013, a decrease of $41,620 or 7.5% from the prior period. Net loss for the current period was largely due to an increase in operating expenses partially offset by a decrease in interest expense.
| 15 |
Liquidity and Capital Resources. During the nine months ended September 30, 2014, we used $649,656 in operations, largely due to our net loss for the period and a decrease in other payable. We received proceeds from investing activities of $450,000 from the sale of a working interest in an oil and gas property, and we had no cash provided by or used in financing activities during the nine months ended September 30, 2014. The Company had outstanding convertible promissory notes during the period, and most of the remaining principal and accrued interest on these notes were converted to common shares. We did not obtain new financing during the nine months ended September 30, 2014.
Off-Balance Sheet Arrangements. We have no off-balance sheet arrangements as of September 30, 2014.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “smaller reporting company,” as defined by Rule 229.10(f)(1).
Item 4. Controls and Procedures.
Evaluation of disclosure controls and procedures. We maintain controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management including our principal executive and principal financial officer, to allow timely decisions regarding required disclosures. Based upon the evaluation by our principal executive and principal financial officer, of those controls and procedures, performed as of the end of the period covered by this report, our principal executive and principal financial officer concluded that our disclosure controls and procedures were not effective due to our over reliance on consultants in our accounting and financial statement closing processes. To address the need for more effective internal controls, management has plans to improve the existing controls and implement new controls as our financial position and capital availability improves.
Changes in internal controls. There were no changes in our internal control over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 16 |
None.
There have been no material changes from the risk factors previously disclosed in the Company’s Form 10-K filed with the Commission on April 16, 2014, which risk factors are incorporated by reference herein. Investors are encouraged to read and review the risk factors included in the Form 10-K prior to making an investment in the Company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On January 7, 2014, JMJ exercised a portion of the conversion rights of the note for 2,800,000 shares of common respectively at a stock price of $0.0011 for a total of $6,380 principal converted.
On June 9, 2014, JMJ exercised a portion of the conversion rights of the note for 3,000,000 shares of common respectively at a stock price of $0.0011 for a total of $3,300 principal converted.
On June 27, 2014, JMJ exercised a portion of the conversion rights of the note for 4,600,000 shares of common respectively at a stock price of $0.00115 for a total of $5,290 principal converted.
On January 2, 2014, Asher exercised a portion of the conversion rights of the note for 2,235,294 shares of common respectively at a stock price of $0.0017, for a total of $3,800 accrued interest converted.
On January 7, 2014, Asher converted $5,240 of principal of the Note into 2,757,895 shares of common stock.
On January 13, 2014, Asher converted $4,950 of principal of the Note into 2,750,000 shares of common stock.
On June 4, 2014, Asher converted $4,690 of principal of the Note into 2,758,824 shares of common stock.
On June 16, 2014, Asher converted $12,150 of principal of the Note into 4,860,000 shares of common stock.
On June 24, 2014, Asher converted $7,750 of principal of the Note into 4,843,750 shares of common stock.
During the quarter ended September 30, 2014, JMJ converted $17,555 of its Note into 34,900,000 shares of common stock at an average price of $0.0005 per share.
During the quarter ended September 30, 2014, Asher converted the total amount outstanding under its Note ($82,713 in principal and accrued interest) into 107,870,304 shares of common stock at an average price of $0.00073 per share.
| 17 |
Item 3. Defaults upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
None.
| 2.4 | Agreement and Plan of Merger, by and among the Company, United American Petroleum Corp. and United PC Acquisition Corp., dated December 31, 2010 (1) | |
| 2.5 | Agreement and Plan of Merger and Reorganization dated December 31, 2010, by and between the Company and United American Petroleum Corp. (1) | |
| 3.1 | Amended and Restated Articles of Incorporation, as filed with the Secretary of State of the State of Nevada, effective June 2, 2014 (incorporated by reference to the Company’s Schedule 14C filed on May 6, 2014) | |
| 3.2 | Certificate of Designation of Series B Preferred Stock (incorporated by reference as Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed November 14, 2012) | |
| 3.3 | Certificate of Withdrawal of Certificate of Designation of Series A Convertible Preferred Stock (incorporated by reference as Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, filed November 14, 2012) | |
| 3.4 | Bylaws (incorporated by reference to Exhibit 3(ii) of the Company’s Registration Statement on Form SB-2, filed on April 15, 2005) | |
| 3.5 | Articles of Merger, as filed with the Secretary of State of the State of Nevada, effective December 16, 2009 | |
| 3.6 | Certificate of Correction to Articles of Merger, as filed with the Secretary of State of the State of Nevada, effective January 29, 2010 (incorporated by reference to Exhibit 3.6 of the Company’s Annual Report on Form 10-K, as amended, filed January 21, 2011) | |
| 3.7 | Articles of Merger between United PC Acquisition Corp. and United American Petroleum Corp. (1) | |
| 3.8 | Articles of Merger between United American Petroleum Corp. and Forgehouse, Inc. (1) | |
| 3.9 | Form of Note and Warrant Purchase Agreement (1) | |
| 3.10 | Form of Senior Secured Convertible Promissory Note (1) | |
| 3.11 | Form of Warrant (1) | |
| 3.12 | Form of Security Agreement (1) | |
| 3.13 | Form of Note and Warrant Purchase Agreement (3) | |
| 3.14 | Form of Convertible Promissory Note (3) | |
| 3.15 | Form of Warrant (3) | |
| 10.1 | $400,000 Promissory Note – JMJ Financial (January 31, 2013) (6) | |
| 10.2 | Securities Purchase Agreement – Asher Enterprises, Inc. (February 19, 2013) (6) | |
| 10.3 | $103,500 Convertible Promissory Note – Asher Enterprises, Inc. (February 19, 2013) (6) | |
| 21 | List of Subsidiaries (7) | |
| 31.1 | Certification of Principal Executive and Financial Officer, pursuant to Rule 13a-14 and 15d-14 of the Securities Exchange Act of 1934 (8) | |
| 32.1 | Certification of Principal Executive and Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (8) | |
| 101.ins* | XBRL Instance Document (8) | |
| 101.sch* | XBRL Taxonomy Schema Document (8) |
| 18 |
| 101.cal* | XBRL Taxonomy Calculation Linkbase Document (8) | |
| 101.lab* | XBRL Taxonomy Label Linkbase Document (8) | |
| 101.pre* | XBRL Taxonomy Presentation Linkbase Document (8) |
| (1) | Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on January 5, 2011. | |
| (2) | Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on February 3, 2011. | |
| (3) | Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on October 18, 2011. | |
| (4) | Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on November 8, 2011. | |
| (5) | Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on December 5, 2011. | |
| (6) | Incorporated by reference as to the Registrant’s Current Report on Form 8-K, filed with the Commission on March 7, 2013. | |
| (7) | Incorporated by reference to the Registrant’s Annual Report on Form 10-K filed on April 16, 2014. | |
| (8) | Filed herewith. |
| 19 |
SIGNATURES
Pursuant to the requirements 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.
| United American Petroleum Corp., a Nevada corporation | ||
| Date: November 19, 2014 | By: | /s/ Michael Carey |
| Michael Carey | ||
| Chief Executive Officer, Chief Financial Officer, President, Treasurer and a director (Principal Executive Officer and Principal Financial Officer) | ||
| 20 |
Exhibit 31.1
United American Petroleum Corp 10-Q
Certification of Principal Executive and Financial Officer,
Required By Rule 13a-14(A) of the Securities Exchange Act of 1934, As Amended,
As Adopted Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002
I, Michael Carey, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of United American Petroleum Corp.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| 21 |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 19, 2014 | By: | /s/ Michael Carey |
| Michael Carey | ||
| Chief
Executive Officer and Chief Financial Officer (Principal Executive and Financial Officer) |
| 22 |
Exhibit 32.1
United American Petroleum Corp 10-Q
Certification of Principal Executive and Financial Officer
Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of United American Petroleum Corp., a Nevada corporation (the “Company”) on Form 10-Q for the period ending March 31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Michael Carey, Chief Executive Officer, Chief Financial Officer, President, Treasurer and a director of the Company, certifies to the best of his knowledge, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant as of the dates and for the periods expressed in the Report. |
| Date: November 19, 2014 | By: | /s/ Michael Carey |
| Michael Carey | ||
| Chief
Executive Officer and Chief Financial Officer, (Principal Executive Officer and Principal Financial Officer) |
| 23 |