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| FXPT.PK > SEC Filings for FXPT.PK > Form 10-Q/A on 17-Jan-2012 | All Recent SEC Filings |
17-Jan-2012
Quarterly Report
We believe that it is important to communicate our future expectations to our security holders and to the public. This report, therefore, contains statements about future events and expectations which are "forward-looking statements" within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934, including the statements about our plans, objectives, expectations and prospects under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations." You can expect to identify these statements by forward-looking words such as "may," "might," "could," "would," "will," "anticipate," "believe," "plan," "estimate," "project," "expect," "intend," "seek" and other similar expressions. Any statement contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement. Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.
Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the "Risk Factors" section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended February 28, 2011 and in our subsequent filings with the Securities and Exchange Commission. The following discussion of our results of operations should be read together with our financial statements and related notes included elsewhere in this report.
Company Overview
We are a development stage company and have not generated significant revenues to date. The following discussions sets forth selected financial information for the periods indicated. We have incurred recurring losses to date. Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.
We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities; however, there is no assurance that we will be successful in raising additional capital.
Plan of Operation
We are a development stage company engaged in the identification, acquisition, exploration and, if warranted, development of prospective oil and gas properties and the acquisition of plastics recycling businesses.
With the acquisition of Ontario in July 2010, the company initiated plans to move into the business of recycling oil based plastics. We are focused on acquiring, developing and operating plastic recycling operations throughout North America. We expect to begin operations of this division in fiscal 2012. Our goal is to become an important partner for leading recycling companies who need proficient services. We expect Ontario to eventually become carbon neutral and process up to 30 Million pounds of post-industrial and post-consumer scrap plastics per year with revenues approaching Five million dollars per year at these processing levels. We are also aggressively seeking additional acquisition targets in the plastics recycling market place to increase our processing capacity and are currently speaking to companies in the automotive and beverage industries to process plastic waste streams and fulfill circular recycling streams
On September 7, 2011, we entered into a Purchase and Sale agreement to acquire the assets of Renfro Energy LLC, a Texas limited liability company, and Cameron Parish Pipelines LLC, a Texas limited liability company. The acquisition was completed December 31, 2011 upon the successful completion of audits of both companies. Our plans are for these acquired companies to begin producing oil and gas and realizing revenues by February 29, 2012. The expected cash required to accomplish successful production is estimated to be $600,000 during the next six months.
The two active wells currently in place in Cameron Parish are averaging production between twenty - thirty barrels of oil per month. each. Based on the previous geological work done on the properties and through 3D seismic obtained by the company, the company estimates conservatively between 250,000 to 500,000 barrels of oil are present at all concessions located at the company's property.
We are also currently identifying and evaluating alternatives to expand our Oil and Natural gas portfolios.
We have no access to capital to repay our debt or fund our current or ongoing operations. Unless we can secure additional capital and renegotiate the terms of our outstanding debts, we may be required to discontinue our operations at any time. We will need additional further advances and issuance of debt instruments to fund our operations over the next nine months. In connection with our future business plan, management anticipates additional increases in operating expenses and capital expenditures relating to acquisition of further interests in oil and gas assets or other acquisitions. We would finance these expenses with further issuances of securities and debt issuances. We expect we would need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities would result in dilution to our current shareholders. Further, such securities may have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If we are not able to obtain additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.
For the Three Months Ended November 30, 2011 and 2010
Revenues
The Company had revenues of $46,142 for the three months ended November 30, 2011 compared to no revenues for the corresponding period in 2010. Costs of revenues were $46,142 and $0 for the three months ended November 30, 2011 and 2010, respectively, resulting in no gross profit in either period. The revenues of $46,142 for the three months ended November 30, 2011 represent the sale of oil inventory purchased and sold at market value.
Operating Expenses
For the three months ended November 30, 2011, our operating expenses were $(13,066,704) compared to $2,130,614 for the three months ended November 30, 2010, representing a decrease of $15,197,318. The decrease in operating expenses was primarily attributable to a decrease in general and administrative expenses of $2,090,925 (reflecting our changes in administrative activity and changes in management structure), a decrease in consulting fees of $13,108,532 primarily consisting of a return of stock issued for stock based compensation of $13,231.631, offset by an increase in lease operating expenses of $22,139 as a result of the acquisition of Renfro Energy LLC.
Other Income (Expense)
During the three months ended November 30, 2011, we incurred interest expense of $122,871 compared to $124,659 in the same period of 2010. We realized a loss on conversion of debt of $138,000 for the three months ended November 30, 2011. For the three months ended November 30, 2010, we realized a loss on conversion of debt of $678,900 and incurred accretion on convertible note discounts of $8,376.
For the Nine Months Ended November 30, 2011 and 2010
Revenues
The Company had revenues of $46,142 for the nine months ended November 30, 2011 compared to no revenues for the corresponding period in 2010. Costs of revenues were $46,142 and $0 for the nine months ended November 30, 2011 and 2010, respectively, resulting in no gross profit in either period. The revenues of $46,142 for the nine months ended November 30, 2011 represent the sale of oil inventory purchased and sold at market value.
Operating Expenses
For the nine months ended November 30, 2011, our operating expenses were $957,050 compared to $2,961,914 for the nine months ended November 30, 2010, representing a decrease of $2,004,864. The decrease in operating expenses was primarily attributable to a decrease in general and administrative expenses of $3,407,107 (reflecting our changes in administrative activity and changes in management structure) offset by an increase in consulting fees of $885,604 primarily consisting of stock based compensation of $815,569 and an increase in lease operating expenses of $22,139 as a result of the acquisition of Renfro Energy LLC. For the nine months ended November 30, 2010, we recorded a credit to finance fees of $(494,500) while we incurred no finance fees for the nine months ended November 30, 2011.
Other Income (Expense)
During the nine months ended November 30, 2011, we incurred interest expense of $373,894 compared to $362,345 in the same period of 2010. We realized a gain on recovery of payables of $14,417,928, offset by a loss on conversion of debt of $4,171,173 and accretion of convertible note discounts of $13,401 for the nine months ended November 30, 2011. For the nine months ended November 30, 2010, we realized an impairment of goodwill of $397,575, realized a loss on conversion of debt of $678,900 and accretion of convertible note discounts of $8,376.
Net Loss
For the period from November 4, 2004 (date of inception) to November 30, 2011, we have incurred an accumulated loss of $35,231,216.
Liquidity and Capital Resources during the nine months ended November 30, 2011 compared to the nine months ended November 30, 2010
As of November 30, 2011, the Company had $19 of cash and a deficit in working capital of $7,275,616. The Company used cash of $119,568 in operations for the nine months ended November 30, 2011. The Company used $22,506 in operating activities during the nine months ended November 30, 2010.
Cash flows generated from investing activities and cash from financing activities was $60 and $38,822, respectively, primarily consisting of advances from its officer and director, for the nine months ended November 30, 2011. $45,000 of cash flows were generated from financing activities for the nine months ended November 30, 2010, consisting of advances from the issuance of notes payable.
We will require additional financing during the current fiscal year in order to pay certain general and administrative costs while we re-evaluate our business strategy. We presently do not have sufficient financing to enable us to complete these activities and will require additional financing or loans or advances from our management and shareholders. Our actual expenditures on these activities will depend on the amount of funds we have available as a result of our financing efforts. There is no assurance that we will be able to raise the necessary financing.
Going Concern
Due to the uncertainty of our ability to meet our current operating and capital expenses, our independent auditors included an explanatory paragraph in their report on the consolidated financial statements for the year ended February 28, 2011 regarding concerns about our ability to continue as a going concern. Our unaudited consolidated financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.
Our unaudited consolidated financial statements have been prepared on a going concern basis, which assumes the realization of assets and settlement of liabilities in the normal course of business. Our ability to continue as a going concern is dependent upon our ability to generate profitable operations in the future and/ or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. The outcome of these matters cannot be predicted with any certainty at this time and raise substantial doubt that we will be able to continue as a going concern. Our unaudited consolidated financial statements do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.
There is no assurance that our operations will be profitable. The Company has conducted private placements of its common stock and has issued notes payable, which have generated funds to satisfy the initial cash requirements of its planned exploration ventures. Our continued existence and plans for future growth depend on our ability to obtain the additional capital necessary to operate either through the generation of revenue or the issuance of additional debt or equity.
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.
Our significant accounting policies are summarized in Note 3 of our unaudited consolidated financial statements. While all of these significant accounting policies impact the Company's consolidated financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on the Company and require management to use a greater degree of judgment and estimates. We believe that the estimates and assumptions that are most important to the portrayal of our consolidated financial condition and results of operations, in that they require subjective or complex judgments, form the basis for the accounting for mineral property costs, impairment of long-lived assets, income taxes and stock-based compensation. We believe estimates and assumptions related to these critical accounting policies are appropriate under the circumstances; however, should future events or occurrences result in unanticipated consequences, there could be a material impact on our future consolidated financial conditions or results of operations. We suggest that our significant accounting policies be read in conjunction with this Management's Discussion and Analysis of Financial Condition.
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