CONSOLIDATED BALANCE SHEETS (Parentheticals) (USD $)
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Jun. 30, 2011
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Dec. 31, 2010
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Preferred Stock, par or stated value | $ 1 | $ 1 |
Preferred Stock, shares authorized | 250,000 | 250,000 |
Common stock, par or stated value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 250,000,000 | 250,000,000 |
Common Stock, shares issued | 67,060,030 | 66,640,030 |
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)
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3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2011
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Jun. 30, 2010
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Jun. 30, 2011
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Jun. 30, 2010
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Oil | $ 188,405 | $ 178,750 | $ 373,599 | $ 347,517 |
Natural Gas | 6,931 | 21,488 | 16,396 | 40,487 |
Gross Revenues | 195,336 | 200,238 | 389,995 | 388,004 |
Lease Operating Expense | 46,139 | 53,221 | 95,814 | 101,855 |
Production Taxes | 9,272 | 9,813 | 18,574 | 18,991 |
Other Operating Expense | 130,459 | 170,506 | 249,149 | 333,128 |
General & Administrative Expense | 111,532 | 109,923 | 297,219 | 291,620 |
Depreciation and Amortization | 67,226 | 66,932 | 134,614 | 133,863 |
Total Operating Expense | 364,628 | 410,395 | 795,370 | 879,457 |
Loss From Operations | (169,292) | (210,157) | (405,375) | (491,453) |
Interest | 385 | 0 | 1,094 | 0 |
Loss from Unconsolidated Subsidiary | (117) | 0 | (20,119) | 0 |
Total Other Income (Expense) | 401 | 3,295 | (18,981) | 6,809 |
Bank Fees Amortization | 1,636 | 1,704 | 4,706 | 3,224 |
Total Financing Charges | 2,021 | 1,704 | 5,800 | 3,224 |
Loss before provision for Income Taxes | (170,912) | (208,566) | (430,156) | (487,868) |
Provision for Income Taxes (Benefits) | 0 | 0 | 0 | 0 |
Net Loss | $ (170,912) | $ (208,566) | $ (430,156) | $ (487,868) |
Net Income (Loss) per Share (Basic and Fully Diluted) | $ 0.000 | $ 0.000 | $ 0.000 | $ 0.000 |
Weighted Average Number of Common Shares Outstanding | 66,712,363 | 64,954,980 | 66,782,737 | 65,033,424 |
Document and Entity Information
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3 Months Ended | |
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Jun. 30, 2011
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Aug. 03, 2011
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Document and Entity Information | Â | Â |
Entity Registrant Name | CHANCELLOR GROUP INC. | Â |
Document Type | 10-Q | Â |
Document Period End Date | Jun. 30, 2011 | |
Amendment Flag | false | Â |
Entity Central Index Key | 0000894544 | Â |
Current Fiscal Year End Date | --12-31 | Â |
Entity Common Stock, Shares Outstanding | Â | 67,060,030 |
Entity Filer Category | Smaller Reporting Company | Â |
Entity Current Reporting Status | Yes | Â |
Entity Voluntary Filers | No | Â |
Entity Well-known Seasoned Issuer | No | Â |
Document Fiscal Year Focus | 2011 | Â |
Document Fiscal Period Focus | Q2 | Â |
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Related Party Disclosures
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3 Months Ended |
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Jun. 30, 2011
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Related Party Disclosures | Â |
Related Party Transactions Disclosure [Text Block] | NOTE 7. RELATED PARTY TRANSACTIONS
The Company has used the services of a consulting company owned by the Chairman of the Board. The Company has paid $48,000 for those services during the six months ending June 30, 2011. |
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Debt
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3 Months Ended |
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Jun. 30, 2011
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Debt | Â |
Long-term Debt [Text Block] | NOTE 5. LONG-TERM DEBT The Company had no long-term debt at June 30, 2011. At June 30, 2011, the Company has an irrevocable blanket letter of credit totaling $250,000 issued to the Railroad Commission of Texas as required for its oil and gas activities, which is secured by certain bank deposits totaling $250,000. The Company has recognized approximately $2,750 in amortization expense related to bank fees associated with this letter of credit in the six months ending June 30, 2011, and currently has approximately $4,660 in unamortized bank fees as of June 30, 2011. |
Subsequent Events
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3 Months Ended |
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Jun. 30, 2011
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Subsequent Events | Â |
Schedule of Subsequent Events [Table Text Block] | NOTE 8. SUBSEQUENT EVENTS
Events occurring after June 30, 2011 were evaluated through the date this Quarterly Report was issued, in compliance FASB ASC Topic 855 Subsequent Events, to ensure that any subsequent events that met the criteria for recognition and/or disclosure in this report have been included. There were no such subsequent events. |
Organization, Consolidation and Presentation of Financial Statements
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3 Months Ended |
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Jun. 30, 2011
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Organization, Consolidation and Presentation of Financial Statements | Â |
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block] | NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Organization Chancellor Group, Inc. (the "Company", our, we, Chancellor or the Company) was incorporated in the state of Utah on May 2, 1986, and then, on December 30, 1993, dissolved as a Utah corporation and reincorporated as a Nevada corporation. The Company's primary business purpose is to engage in the exploration and production of oil and gas. On March 26, 1996, the Company's corporate name was changed from Nighthawk Capital, Inc. to Chancellor Group, Inc. The Companys headquarters is in Pampa, Texas. Operations The Company and its wholly-owned subsidiaries, Gryphon Production Company, LLC and Gryphon Field Services, LLC, own 138 wells, of which 29 are water disposal wells and 2 are gas wells, although associated gas is also produced from some oil wells. As of June 30, 2011, approximately 60 oil wells and 2 gas wells located in Gray and Hutchinson counties in the Texas panhandle are actively producing. We also own and operate our 15.9 acre property, with its shop, yard and office complex. Company equipment includes two work-over rigs as well as other oil field related equipment. In addition, we own approximately 4,830 gross and net acres of production rights on nine leases, which includes 4,300 acres of developed acreage and 500 acres of undeveloped acreage, approximately 300 acres of which was previously owned by Mobil and approximately 200 acres of which are on the Worley Combs lease. The nine leases have the production rights for oil, casing-head gas and natural gas. We produced a total of 4,021 barrels of oil and 2,490 mcf of gas in the six months ended June 30, 2011. The oil is light sweet crude and the natural gas has very high heat content, 1600 to 2600 btu/scf. Basis of Presentation The consolidated financial statements of Chancellor Group, Inc. have been prepared pursuant to the rules and regulations of the SEC for Quarterly Reports on Form 10-Q and in accordance with GAAP. Accordingly, these consolidated financial statements do not include all of the information and footnotes required by GAAP for annual financial statements. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes in the Chancellor Group, Inc. Annual Report on Form 10-K for the year ended December 31, 2010. The consolidated financial statements are unaudited, but, in management's opinion, include all adjustments (which, unless otherwise noted, include only normal recurring adjustments) necessary for a fair presentation of such financial statements. Financial results for this interim period are not necessarily indicative of results that may be expected for any other interim period or for the year ending December 31, 2011. Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include the accounts of Chancellor Group, Inc.; and its wholly owned subsidiaries: Gryphon Production Company, LLC, and Gryphon Field Services, LLC. These entities are collectively hereinafter referred to as "the Company". Any inter-company accounts and transactions have been eliminated. Accounting Year The Company employs a calendar accounting year. The Company recognizes income and expenses based on the accrual method of accounting under generally accepted accounting principles in the United States of America. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Products and Services, Geographic Areas and Major Customers The Company plans to develop its domestic oil and gas properties, located in Gray and Hutchinson counties in the Texas panhandle, and possibly to acquire additional producing oil and gas properties. The Companys major customers, to which the majority of its oil and gas production is sold, are Plains Marketing and DCP Midstream. Net Income (loss) per share The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company's preferred stock (if any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss per share. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of six months or less as cash equivalents. Concentration of Credit Risk Some of the Company's operating cash balances are maintained in accounts that currently exceed federally insured limits. The Company believes that the financial strength of depositing institutions mitigates the underlying risk of loss. To date, these concentrations of credit risk have not had a significant impact on the Companys financial position or results of operations. Restricted Cash Included in cash in bank at June 30, 2011 are deposits totaling $250,000 which are assigned and held as collateral for a letter of credit issued to the Railroad Commission of Texas as required for its oil and gas activities. Accounts Receivable The Company reviews accounts receivable periodically for collectibles and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. An allowance for doubtful accounts was not considered necessary or recorded at June 30, 2011. Property and Equipment Property and equipment are recorded at cost and depreciated under the straight line method over the estimated useful life of the equipment. The estimated useful life of leasehold costs, equipment and tools ranges from five to seven years. The useful life of the office building and warehouse is estimated to be twenty years. Oil and Gas Properties The Company follows the successful efforts method of accounting for its oil and gas activities. Under this accounting method, costs associated with the acquisition, drilling and equipping of successful exploratory and development wells are capitalized. Geological and geophysical costs, delay rentals and drilling costs of unsuccessful exploratory wells are charged to expense as incurred. The carrying value of mineral leases is depleted over the minimum estimated productive life of the leases, or ten years. Undeveloped properties are periodically assessed for possible impairment due to un-recoverability of costs invested. Cash received for partial conveyances of property interests is treated as a recovery of cost and no gain or loss is recognized. Depletion The carrying value of the mineral leases is depleted over the minimum estimated productive life of the leases, or ten years. Income Tax Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Revenue Recognition The Company recognizes revenue when a product is sold to a customer, either for cash or as evidenced by an obligation on the part of the customer to pay. Fair Value Measurements and Disclosures The Company estimates fair values of assets and liabilities which require either recognition or disclosure in the financial statements in accordance with FASB ASC Topic 820 Fair Value Measurements. There is no material impact on the consolidated financial statements related to fair value measurements and disclosures. Fair value measurements include the following levels: Level 1: Quoted market prices in active markets for identical assets or liabilities. Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Level 1 also includes U.S. Treasury and federal agency securities and federal agency mortgage-backed securities, which are traded by dealers or brokers in active markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data. Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or similar assets or liabilities. Level 3: Unobservable inputs that are not corroborated by market data. Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. Fair Value of Financial Instruments The carrying value of the Company's financial instruments, including cash and cash equivalents, accounts receivable and accounts payable and long term debt, as reported in the accompanying consolidated balance sheet, approximates fair values. Employee Stock-Based Compensation Compensation expense is recognized for performance-based stock awards if management deems it probable that the performance conditions are or will be met. Determining the amount of stock-based compensation expense requires us to develop estimates that are used in calculating the fair value of stock-based compensation, and also requires us to make estimates of assumptions including expected stock price volatility which is derived based upon our historical stock prices. Business Combinations The Company accounts for business combinations in accordance with FASB ASC Topic 805 Business Combinations. This standard modifies certain aspects of how the acquiring entity recognizes and measures the identifiable assets, the liabilities assumed and the goodwill acquired in a business combination. The Company did not enter into any business combinations during the quarter ending June 30, 2011. The Company complies with the accounting guidance related to consolidation of variable interest entities (VIEs) that requires a reporting entity to determine if a primary beneficiary that would consolidate the VIE from a quantitative risk and rewards approach, to a qualitative approach based on which variable interest holder has the power to direct the economic performance related activities of the VIE as well as the obligation to absorb losses or right to receive benefits that could potentially be significant to the VIE. This guidance requires the primary beneficiary assessment to be performed on an ongoing basis and also requires enhanced disclosures that will provide more transparency about a companys involvement in a VIE. The Company did not have any VIEs that required consolidation in these financial statements during the quarter ending June 30, 2011. Subsequent Events Events occurring after June 30, 2011, were evaluated through the date this Quarterly Report was issued, in compliance FASB ASC Topic 855 Subsequent Events, to ensure that any subsequent events that met the criteria for recognition and/or disclosure in this report have been included. Recent Accounting Pronouncements In January 2010, the FASB issued Accounting Standards Update (ASU) 2010-03 to align the oil and gas reserve estimation and disclosure requirements of Extractive Industries -- Oil and Gas Topic of the Accounting Standards Codification with the requirements in the SEC's final rule, Modernization of the Oil and Gas Reporting Requirements. We implemented ASU 2010-03 as of December 31, 2009. Key items in the new rules include changes to the pricing used to estimate reserves and calculate the full cost ceiling limitation, whereby a 12-month average price is used rather than a single day spot price, the use of new technology for determining reserves, the ability to include nontraditional resources in reserves and the ability to disclose probable and possible reserves. Management has elected not to include probable and possible reserves in its reserve studies and related disclosures. In January 2010, the FASB issued ASU 2010-6, "Improving Disclosures about Fair Value Measurements. This update requires additional disclosure within the roll forward of activity for assets and liabilities measured at fair value on a recurring basis, including transfers of assets and liabilities between Level 1 and Level 2 of the fair value hierarchy and the separate presentation of purchases, sales, issuances and settlements of assets and liabilities within Level 3 of the fair value hierarchy. In addition, the update requires enhanced disclosures of the valuation techniques and inputs used in the fair value measurements within Levels 2 and 3. The new disclosure requirements are effective for interim and annual periods beginning after December 15, 2009, except for the disclosure of purchases, sales, issuances and settlements of Level 3 measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010. As ASU 2010-6 only requires enhanced disclosures, the adoption of this update did not have a material effect on its financial position, cash flows and results of operations. In May 2011, ASU 2011-04 was issued which amends U.S. GAAP to confirm with measurement and disclosure requirements in International Financial Reporting Standards. The amendments in this Update change the wording used to describe the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments include the following: 1. Those that clarify the Boards intent about the application of existing fair value measurement and disclosure requirements. 2. Those that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. In addition, to improve consistency in application across jurisdictions some changes in wording are necessary to ensure that U.S. GAAP and IFRS fair value measurement and disclosure requirements are described in the same way (for example, using the word shall rather than should to describe the requirements in U.S. GAAP). The amendments in this Update are to be applied prospectively and are effective during interim and annual period beginning after December 15, 2011. In June 2011, ASU 2011-05, Comprehensive Income (Topic 220) was issued to provide guidance on the presentation of total comprehensive income, the components of net income, and the components of other comprehensive income. The amendments in this update are to be applied retrospectively and are effective for financial statements issued for fiscal years, and interim periods within those years, beginning after December 15, 2011. The provisions of ASU 2011-05 are not expected to have a material impact on our financial statements. There were various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries, and are not expected to have a material impact on the Companys financial position, results of operations or cash flows. |
Equity
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Jun. 30, 2011
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Equity | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note Disclosure [Text Block] | NOTE 3. STOCKHOLDERS' EQUITY
Preferred Stock
The Company has provided for the issuance of 250,000 shares, par value $1,000 per share, of convertible Preferred Series B stock ("Series B"). Each Series B share is convertible into 166.667 shares of the Company's common stock upon election by the shareholder of the Series B Share, with dates and terms set by the Board. No shares of Series B preferred stock are outstanding.
Common Stock
The Company has 250,000,000 authorized shares of common stock, par value $.001, with 67,060,030 shares issued and outstanding as of June 30, 2011.
Stock based Compensation
For the six months ending June 30, 2011, the Company recognized $23,100 in professional and consulting fees expense related to stock issued, which is recorded in general and administrative expenses.
Stock Options and Warrants
Non-employee Stock Options and Warrants
The Company accounts for non-employee stock options under FASB ASC Topic 505 Equity-Based Payments to Non-Employees, whereby options costs are recorded based on the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. For the quarter ending June 30, 2011, no options were issued, exercised or cancelled.
The Company currently has outstanding warrants expiring December 31, 2014 to purchase an aggregate of 6,000,000 shares of common stock; these warrants consist of warrants to purchase 2,000,000 shares at an exercise price of $.025 per share, and warrants to purchase 4,000,000 shares at an exercise price of $0.02 per share. In July 2009, the Company issued additional warrants expiring June 30, 2014 to purchase an aggregate of 500,000 shares of common stock at an exercise price of $0.125 per share. In 2010, the Company issued additional warrants expiring in 2015 to purchase an aggregate of 336,000 shares of common stock at an exercise price of $0.125 per share. During 2011, the Company issued additional warrants expiring in 2016 to purchase an aggregate of 168,000 shares of common stock at an exercise price of $0.125 per share.
On June 30, 2011, the Company had the following outstanding warrants:
Employee Stock Options
The Company accounts for employee stock options under FASB ASC Topic 718 Compensation-Stock Compensation. The Company issued no employee stock options and had none outstanding as of June 30, 2011.
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Compensation Related Costs, Share Based Payments
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3 Months Ended |
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Jun. 30, 2011
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Compensation Related Costs, Share Based Payments | Â |
Schedule of Compensation Cost for Share-based Payment Arrangements, Allocation of Share-based Compensation Costs by Plan [Table Text Block] | NOTE 6. ACCUMULATED COMPENSATED ABSENCES
It is the Companys policy to permit employees to accumulate a limited amount of earned but unused vacation, which will be paid to employees upon separation from the Companys service. The cost of vacation and sick leave is recognized when payments are made to employees. These amounts are immaterial and not accrued. |
Income Taxes
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3 Months Ended |
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Jun. 30, 2011
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Income Taxes | Â |
Income Tax Disclosure [Text Block] | NOTE 2. INCOME TAXES
Deferred income taxes arise from temporary differences in recognition of certain revenues and expenses between financial statement and income tax basis of accounting, and also net operating loss carry-forwards and other tax credit carry-forwards
At June 30, 2011, the Company had a federal net operating loss carry-forward of approximately $2,550,000. A deferred tax asset of approximately $510,000 has been partially offset by a valuation allowance of approximately $333,000 due to federal net operating loss carry-back and carry-forward limitations.
At June 30, 2011, the Company also had approximately $177,000 in deferred income tax liability attributable to timing differences between federal income tax depreciation, depletion and book depreciation, which has been offset against the deferred tax asset related to the net operating loss carry-forward.
Management evaluated the Companys tax positions under FASB ASC Topic 740 Uncertain Tax Positions, and concluded that the Company had taken no uncertain tax positions that require adjustment to the consolidated financial statements to comply with the provisions of this guidance. With few exceptions, the Company is no longer subject to income tax examinations by the U.S. federal, state or local tax authorities for years before 2008.
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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
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6 Months Ended | |
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Jun. 30, 2011
|
Jun. 30, 2010
|
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Net Loss | $ (430,156) | $ (487,868) |
Depreciation and Amortization | 134,614 | 133,863 |
Non-Cash Stock Compensation | 23,100 | 53,350 |
Decrease in Operating Assets | 78,387 | 90,154 |
Increase in Operating Liabilities | 46,752 | 39,494 |
Net Cash (Used for) Operating Activities | (147,303) | (171,007) |
Sale of Assets Proceeds | 12,223 | 0 |
Capital Expenditures | (28,841) | (153,778) |
Net Cash Provided by (Used for) Investing Activities | (16,618) | (153,778) |
Net Cash Provided by (Used for) Financing Activities | 0 | 0 |
Net Increase (Decrease) in Cash and Cash Equivalents | (163,921) | (324,785) |
Cash and Cash Equivalents at the Beginning of the Period | 560,098 | 1,404,695 |
Cash and Cash Equivalents at the End of the Period | $ 396,177 | $ 1,079,910 |
Property, Plant, and Equipment
|
3 Months Ended |
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Jun. 30, 2011
|
|
Property, Plant, and Equipment | Â |
Property, Plant and Equipment Disclosure [Text Block] | NOTE 4. PROPERTY AND EQUIPMENT
A summary of fixed assets at:
Balance Balance December 31, June 30, 2010 Additions Deletions 2011 Auto/Transportation Equipment $ 178,929 $ - $ 23,583 $ 155,346 Buildings & Improvements 125,280 125,280 Leasehold Costs - Developed 1,773,749 10,498 1,784,247 Furniture, Fixtures & Office Equipment 9,350 9,350 Machinery & Equipment 455,128 18,343 473,471 $ 2,542,436 $ 28,841 $ 23,583 $ 2,547,694
Less: Accumulated Depreciation 773,487 134,614 11,360 896,741 $ 1,768,949 $ 134,614 $ 11,360 $ 1,650,953
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