---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

---

 

FORM 10-Q 

 

---

 

☒ Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2017

☐ Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to __________

Commission File Number:    000-52690

 

 (Exact name of registrant as specified in its charter)

 

 

 

 (Issuer’s telephone number, including area code)

 

Indicate by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the issuer was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒   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).  Yes ☒   No ☐

 

Large accelerated filer r		Accelerated filer r
Non-accelerated filer r		Smaller Reporting Company ☒
Emerging growth company  r

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐   No ☒

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 79,034,505 shares of common stock as of May 15, 2017. 

 

TABLE OF CONTENTS

 

 

 

 

PART I

 Item 1.    Financial Statements

 

PETROLIA ENERGY CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

		March 31, 2017				December 31, 2016
ASSETS
Current assets
Cash		$	4,387			$	68,648
Accounts receivable			48,201				199,003
Other current assets			5,506				31,192
Total current assets			58,094				298,843
Property & equipment
Oil and gas, on the basis of full cost accounting
Evaluated properties			14,032,580				13,465,387
Furniture, equipment & software			236,092				200,416
Less accumulated depreciation			(1,137,981	)			(1,119,708	)
Net property and equipment			13,130,691				12,546,095
Other Assets
Intangible assets			49,886				49,886
Note receivable			---				316,800
Total Assets		$	13,238,671			$	13,211,624
LIABILITIES & STOCKHOLDERS EQUITY
Current liabilities
Accounts payable		$	402,343			$	352,241
Accrued liabilities			584,211				494,983
Debt short term			275,000				275,000
Convertible debt – related party, unamortized discount of 0 and 0			550,000				550,000
Current maturities of installment notes payable			32,582				26,186
Note payable – related parties			1,414,480				1,287,980
Total current liabilities			3,258,616				2,986,390
Asset retirement obligations			436,045				322,710
Installment note payable – long term			28,316				---
Note payable to related party – long term			2,904,020				2,904,020
Total Liabilities			6,626,997				6,213,120
Stockholders’ Equity
Preferred stock, $0.10 par value, 1,000,000 shares authorized;   No shares issued & outstanding			-				-
Common stock, $.001 par value; 150,000,000 shares authorized;     79,034,505 and 79,034,505 shares issued and outstanding			79,034				79,034
Additional paid in capital			14,963,530				14,887,090
Accumulated deficit			(8,430,890	)			(7,967,620	)
Total Stockholders’ Equity			6,611,674				6,998,504
Total Liabilities and Stockholders’ Equity		$	13,238,671			$	13,211,624

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

PETROLIA ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		Three Months Ended March 31, 2017				Three Months Ended March 31, 2016
Revenue		$				$
Oil and gas sales			33,560				22,999
Equipment sales – related party			---				180,000
Total Revenue			33,560				202,999
Operating expenses
Lease operating expense			119,992				45,994
Cost of equipment sold			---				30,300
General and administrative expenses			273,668				338,482
Depreciation, depletion and amortization			18,273				17,532
Asset retirement obligation accretion			11,930				6,428
Total operating expenses			423,863				438,736
Loss from operations			(390,303	)			(235,737	)
Other income (expense)
Interest (expense)			(73,112	)			(73,076	)
Other income			145				19,502
Loss on warrants issued for PORRI			---				(12,631	)
Total other income (expense)			(72,967	)			(66,205	)
Net loss		$	(463,270	)		$	(301,942	)
Loss per share  (Basic and fully diluted)		$	(0.01	)		$	(0.01	)
Weighted average number of common shares outstanding, basic and diluted			79,034,505				43,521,276

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

PETROLIA ENERGY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		Three Months Ended March 31, 2017				Three Months Ended March 31, 2016
Cash Flows from Operating Activities
Net loss		$	(463,270	)		$	(301,942	)
Adjustment to reconcile net loss to net cash provided by/(used in) operating activities:
Depreciation and amortization			18,273				17,532
Accretion of debt discount			---				59,177
ARO accretion			11,930				6,428
Finance fee for extension of note payable			31,660				---
Loss on conveyance of PORRI warrants			---				12,631
Stock-based compensation expense - employees			13,351				127,755
Stock-based compensation expense – directors			12,127				---
Stock-based compensation expense – consultants			19,302				---
Changes in operating assets and liabilities
Accounts receivable			1,815				(19,049	)
Inventory			---				30,300
Other assets			25,686				2,268
Accounts payable			50,102				117,423
Accrued liabilities			89,228				(13,416	)
Net cash flows from operating activities			(189,796	)			39,107
Cash Flows from Investing Activities
Capital expenditures on oil and gas properties			---				114
Capital expenditures on oil and gas properties			---				(2,850	)
Conveyance of oil and gas properties			---				24,000
Cash flows from investing activities			---				21,264
Cash Flows from Financing Activities
Proceeds from affiliate advances			126,500				65,000
Payments of affiliated advances			---				(60,000	)
Payments on notes payable			(965	)			(1,610	)
Cash flows from financing activities			125,535				3,390
Net change in cash and cash equivalents			(64,261	)			63,761
Cash and cash equivalents
Beginning of period			68,648				3,091
End of period		$	4,387			$	66,852

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.  

PETROLIA ENERGY CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2017

 (Unaudited)

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION:

Petrolia Energy Corporation (“we”, “us”, “Rockdale” and the “Company”) an oil and gas exploration, development, and production company.  The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”).

The accompanying unaudited interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s latest Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results of operations for the interim periods presented have been reflected herein. The results of operations for such interim periods are not necessarily indicative of operations for a full year. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year, 2016, as reported in Form 10-K, have been omitted.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Askarii Resources. Our subsidiary operates in the oil field services industry, providing equipment and services to various oil field related Companies. All significant intercompany transactions are eliminated in the consolidation process. Since the single subsidiary is wholly-owned, all non intercompany balances are included in the consolidated financial statement balances.

The severance tax balances for all years presented was reclassified and included in the Consolidated Statements of Operations’ lease operating expense line item. 

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the preparation of the accompanying unaudited consolidated financial statements follows.

 

Management 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.

Intangible Assets - Our intangible assets are subject to amortization and are amortized using the straight-line method over their estimated period of benefit.  Intangible assets acquired as part of a business combination are capitalized at their acquisition-date fair value. 

Equipment sales - Revenues from the sale of oil and gas related equipment are recognized at the time of sale, when the significant risks and rewards of ownership have been transferred to the buyer and the recovery of the consideration is probable.

 

The Company has evaluated all the recent accounting pronouncements through the filing date and believes that none of them will have a material effect on the Company.

NOTE 3. GOING CONCERN

 

The Company has suffered recurring losses from operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.  The Company plans to generate profits by reworking its existing oil or gas wells and drilling additional wells, as needed.  The Company will need to raise funds through either the sale of its securities, issuance of corporate bonds, joint venture agreements and/or bank financing to accomplish its goals.   The Company does not have any commitments or arrangements from any person to provide the Company with any additional capital, at this time.  If additional financing is not available when needed, the Company may need to cease operations.   The Company may not be successful in raising the capital needed to drill and/or rework existing oil wells.  Any additional wells that the Company may drill may be non-productive.  Management believes that actions presently being taken to secure additional funding for the reworking of its existing infrastructure will provide the opportunity for the Company to continue as a going concern.  Since the Company has an oil producing asset, its goal is to increase the production rate by optimizing its current infrastructure.  The accompanying financial statements have been prepared assuming the Company will continue as a going concern; no adjustments to the financial statements have been made to account for this uncertainty.

 

NOTE 4. NOTE PAYABLE

On January 6, 2017, the Company purchased a truck and entered into an installment note with Don Ringer Toyota in the amount of $35,677 for a term of five years at 5.49% APR.

NOTE 5. EQUITY

Preferred Stock – 1,000,000 shares authorized, none issued or outstanding.

 

Common Stock –

Effective March 31, 2017, the seven (7) Advisory Board members were compensated for their service from January 1, 2017 through March 31, 2017 by the granting of 12,500 warrants each (87,500 total warrants per quarter), per quarter per Board member, to purchase 12,500 shares of the Company’s common stock at an average exercise price of $0.14 per share, which vested immediately, and are exercisable for 36 months thereafter. The warrants were issued with a fair value of $12,127 based on an average $0.14 valuation, volatility of 296%, a discount rate of 1.09% and a 3 year term.  The warrants were valued using the Black Sholes valuation model.  These warrants are subject to a clawback provision which would be ratably invoked if an advisory board member did not complete his 2017 service term.

NOTE 6. COMMITMENTS AND CONTINGENCIES

 

The Company, as a lessee of oil and gas properties, is subject to various federal, state and local laws and regulations relating to discharge of materials into, and protection of, the environment. These laws and regulations may, among other things, impose liability on the Company for the cost of pollution clean-up resulting from operations and subject the Company to liability for pollution damages. In some instances, the Company may be directed to suspend or cease operations in the affected area.  The Company is not aware of any environmental claims existing as of March 31, 2017, which have not been provided for, or covered by insurance or which may have a material impact on its financial position or results of operations. There can be no assurance, however, that current regulatory requirements will not change, or past noncompliance with environmental laws will not be discovered on the Company’s properties.

Office Lease – As of May 15, 2017, the Company has one annually renewable office lease in Houston at a cost of $1,650 per month.

NOTE 7. RELATED PARTY

Transactions with related parties and affiliates

 

In association with Mr. Deputy’s employment agreement dated July 1, 2016, the Company issued one warrant to purchase one share of the Company’s restricted stock at the exercise price at quarter end for each dollar of Mr. Deputy’s deferred gross salary for the quarter ended March 31, 2017. Mr. Deputy’s total accrued salary from first deferral to March 31, 2017 was $87,520.  The Company granted warrants to purchase 35,000 shares of common shares for quarter ended March 31, 2017. The warrants have a term of 36 months from their issuance date. The fair value of the quarter’s warrants was $4,851, based on a $0.14 price per share valuation, volatility of 296%, a discount rate of 1.09% and a 3 year term.  The warrants were valued using the Black Sholes valuation model.  The warrants were recognized as stock compensation expense.

 

During the three months ended March 31, 2017, shareholders advanced an additional $126,500. This increased the shareholder advance liability from $192,000 at December 31, 2016 to $318,500 at March 31, 2017.

 

On September 23, 2015, the Company’s Board of Directors agreed to issue Mr. Zel C. Khan, the CEO and President of the Company, 1,000,000 shares of the Company’s restricted common stock in consideration for entering into an employment agreement with the Company. The value of the award on the issuance date was $68,000 and the award vests over a twenty four (24) month term. Consequently, $8,500 of the award is being expensed each quarter.  During the first quarter of 2017, $8,500 of the award was expensed.  The remaining award amount is $17,000.

NOTE 8. BUSINESS SEGMENTS

We are a diversified oil and gas company with operations in two segments:

Oil and Gas Exploration and Production – which includes exploration, development, and production of current and potential oil and gas properties.

Oil field services – which includes selling oil field related equipment and providing various oil field related services to the oil and gas industry.

 

All segment expenses were incurred by the Oil & Gas segment.

NOTE 9. SUBSEQUENT EVENTS

Mr. Zel C. Khan, the Company’s CEO’s employment contract has been revised.  His annual salary will now be the sum of ten dollars ($10.00) per annum, effective January 1, 2017.  This salary change will be effective until the end of the fiscal year 2017.

Effective April 11, 2017, the Company initiated a $2,000,000 Series A Convertible Preferred Stock (“Preferred Stock”) offering at a price of $10.00 per share.  This results in a 71.429-for-one basis based on the Company’s common stock market price of $0.14 per share on April 11, 2017.  The holders of Series A Preferred Stock are entitled to receive non-cumulative dividends at a rate of 9%.  The Preferred Stock will automatically convert into common stock when the Company’s common stock market price equals or exceeds $0.30 per share for 30 consecutive days.  Currently 23,000 shares or $230,000 of the offering has been issued.

Effective April 18, 2017, all non-insider owners of SUDS PORRI interests are authorized to convert those interests, at their sole discretion, to preferred shares in the Company in conjunction with the Company’s current Series A Preferred Stock Offering.

FORWARD LOOKING STATEMENTS

 

This report contains statements which, to the extent that they do not recite historical fact, constitute forward-looking statements. These statements can be identified by the fact that they do not relate strictly to historical or current facts and may include the words ‘‘may,’’ ‘‘will,’’ ‘‘could,’’ ‘‘should,’’ ‘‘would,’’ ‘‘believe,’’ ‘‘expect,’’ ‘‘anticipate,’’ ‘‘estimate,’’ ‘‘intend,’’ ‘‘plan’’ or other words or expressions of similar meaning. We have based these forward-looking statements on our current expectations about future events. The forward-looking statements include statements that reflect management’s beliefs, plans, objectives, goals, expectations, anticipations and intentions with respect to our financial condition, results of operations, future performance and business, including statements relating to our business strategy and our current and future development plans.

The potential risks and uncertainties that could cause our actual financial condition, results of operations and future performance to differ materially from those expressed or implied in this report include:

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Many factors discussed in this report, some of which are beyond our control, will be important in determining our future performance. Consequently, actual results may differ materially from those that might be anticipated from the forward-looking statements. In light of these and other uncertainties, you should not regard the inclusion of a forward-looking statement in this report as a representation by us that our plans and objectives will be achieved, and you should not place undue reliance on such forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Background

We were incorporated in Colorado on January 16, 2002.

In February 2012 we decided it would be in the best interests of our shareholders to no longer pursue our original business plan and, in April 2012 we became active in the exploration and development of oil and gas properties.

Effective September 2, 2016, we formally changed our name to Petrolia Energy Corporation, pursuant to the filing of a Statement of Conversion with the Secretary of State of Colorado and a Certificate of Conversion with the Secretary of State of Texas, authorized by the Plan of Conversion which was approved by our stockholders at our April 14, 2016, annual meeting of stockholders, each of which are described in greater detail in the Definitive Proxy Statement on Schedule 14A, which was filed with the Securities and Exchange Commission on March 23, 2016. In addition to the Certificate of Conversion filing, we filed a Certificate of Correction filing with the Secretary of State of Texas (correcting certain errors in our originally filed Certificate of Formation) on August 24, 2016.

As previously reported, although the stockholders approved the Plan of Conversion at the annual meeting, pursuant to which our corporate jurisdiction was to be changed from the State of Colorado to the State of Texas by means of a process called a “Conversion” and our name was to be changed to “Petrolia Energy Corporation”, those filings were not immediately made and the Conversion did not become legally effective until September 2, 2016. Specifically, on June 15, 2016, the Company filed a Certificate of Conversion with the Texas Secretary of State, affecting the Conversion and the name change, and including a Certificate of Formation as a converted Texas corporation; however, the Statement of Conversion was not filed with the State of Colorado until a later date. As a result, and because FINRA and the Depository Trust Company (DTC) had advised us that they would not recognize the Conversion or name change, or update such related information in the marketplace, until we became current in our periodic filings with the Securities and Exchange Commission and they had a chance to review and approve such transactions, we took the position that the Conversion and name change were not legally effective until September 2, 2016.

As a result of the filings described above, and FINRA and the Depository Trust Company (DTC) formally recognizing and reflecting the events described above in the marketplace, the Company has formally converted from a Colorado corporation to a Texas corporation, and has formally changed its name to “Petrolia Energy Corporation”.

Two significant acquisitions were made in 2015 and additional working interests in the same properties were acquired in 2016, as described in greater detail in the “Plan of Operation” section below

 

Plan of Operation

Since 2015, we have established a clearly defined strategy to acquire, enhance and redevelop high-quality, resource in place assets.  Focused on acquisitions in the southwest United States while actively pursuing our strategy to offer low-cost operational solutions in established Oil and Gas regions.  We believe our mix of assets-oil-in-place conventional plays, low-risk resource plays and the redevelopment of our late-stage plays is a solid foundation for continued growth and future revenue growth.

Our strategy is to acquire low risk, conventionally producing oil fields.  This strategy allows us to incorporate new technology to minimize risk and maximize the recoverability of existing reservoirs.  This approach allows us to minimize the environmental impact caused by exploratory development.

 

Our activities will primarily be dependent upon available financing.

Oil and gas leases are considered real property.  Title to properties which we may acquire will be subject to landowner’s royalties, overriding royalties, carried working and other similar interests and contractual arrangements customary in the oil and gas industry, to liens for current taxes not yet due, liens for amounts owing to persons operating wells, and other encumbrances.  As is customary in the industry, in the case of undeveloped properties little investigation of record title will be made at the time of acquisition (other than a preliminary review of local records).  However, drilling title opinions may be obtained before commencement of drilling operations.

Minerva-Rockdale Field

The Minerva-Rockdale Field, which is located approximately 30 miles Northeast of Austin, Texas, was first discovered in 1921 and is approximately 50 square miles in size. The main producing formation for this field is the Upper Cretaceous Navarro Group of sands and shale’s. The Navarro is typically subdivided into several producing zones from the uppermost “A” and “B” sands to the lower “C” and “D” sands. The “B” sand is the primary producing zone. These sands are commonly fine grained and poorly sorted and were deposited close to a shoreline during a cycle of marine regression.

 

In April 2013, the Company entered into a lease pertaining to a 423 acre tract in Milam County, Texas, which is adjacent to the Company’s original 200 acre lease.  The Company issued 500,000 shares of its common stock as consideration for a 100% working interest (75% net revenue interest) in such lease.

In August 2013, we became an oil and gas operator and took over the operation of 100% of our wells.  As such, we terminated our relationship with RTO Operating, LLC for the day-to-day operations and monitoring of our wells. During 2014, the Company continued to operate its own lease. During the fourth quarter of 2014, the Company hired Jovian Petroleum Corporation (Jovian) to survey the operations and well performance at the Noack field. Their report identified paraffin buildup problems in the well bores and gathering lines as the main production issue for the Company to overcome. In December 2014, the Company signed an operating agreement with Jovian to assume full operational responsibility for the Noack field under a fixed fee agreement of $10,000 per month for full operating field services.  On March 1, 2015, the Company hired Zel C. Khan, our current CEO and director, who is the largest stockholder of Jovian, as well as several former employees of Jovian Petroleum.  This allowed for the fixed fee agreement with Jovian to end.

During the period from our inception to December 31, 2011, we did not drill any oil or gas wells. During the year-ended December 31, 2012 we drilled and completed six (6) oil wells and during 2013 the Company drilled and completed three (3) wells of which one (1) was converted to an injection well. During 2014 the Company drilled seven (7) new wells. In 2015, six (6) of the wells were completed, five (5) wells produced, one (1) did not produce and one (1) well was not completed. During 2016 and through first quarter end, the Company had thirteen (13) wells producing with one (1) injection well and one (1) did not produce/one (1) well not completed.

Slick Unit Dutcher Sands (“SUDS”) Field

The SUDS oilfield consists of 2,600 acres located in Creek County, Oklahoma and carries a 7.8% net revenue interest (NRI). The first oil producer was completed in 1918 by Standard Oil of Ohio (“Sohio”), which at that time was owned by John D. Rockefeller. By 1959, approximately 14,000,000 barrels of oil had been recovered at an average well depth of 3,100 feet and over 100 wells in production. Through a series of events, the infrastructure had deteriorated and the field suffered a lot of neglect.  Since 2011, Jovian has invested an estimated $1.6 million into the restoration of the field; rebuilding the infrastructure and putting wells back in production.  To date, 18 wells have been worked over and 9 are fully operational with considerable reserves remaining.

 

The Company has approved SUDS well#1, a new infill drill well, to be drilled during the second quarter of 2017, funding permitting.

The Company acquired a 10% working interest in the SUDS field located in Creek County Oklahoma on September 23, 2015, in exchange for 10,586,805 shares of restricted common stock. Based on the then current market value of our common stock, $0.068 per share, the price paid was $719,903 or $4.77 dollars per barrel of oil (Bbl). Through this transaction, the Company increased its reserve base by approximately 151,000 Bbls of (1P) proven reserves. Concurrently with the purchase, Jovian agreed to assign to the Company the right to be the operator of record of the SUDS field, governed by an American Association of Professional Landmen (AAPL) standard Joint Operating Agreement (JOA).

On the effective date of September 28 2016, the Company acquired a 90% net working interest in the SUDS field as a result of two separate agreements, Purchase and Sale Agreement and the Share Exchange Agreement, both between the Company and Jovian.

The Company issued two notes for a combined value of $4,000,000 in exchange for a cumulative 50% working interest in SUDS. A Promissory Note to Jovian for $1,000,000 was executed bearing interest at 5% and due on December 31, 2016 related to the acquisition of a 50% working interest in the SUDS field.  The Promissory Note is secured by a 12.5% undivided working interest in the SUDS field.  In addition, a Production Payment Note was executed for the same 50% working interest in the SUDS field.  This note was for $3,000,000, paid out of twenty percent (20%) of the 50% undivided interest of net revenues received by the Purchaser that is attributable to the SUDS field assets.  The Production Payment Note is secured by a 12.5% undivided working interest in the SUDS field.

The Company issued 24,308,985 shares of its restricted common stock to Jovian to acquire an additional 40% working interest ownership of SUDS. The purchase price of the shares equates to a $4,373,186 value, based on the $0.1799/share market price of our common stock on September 28, 2016 (the effective date of the transaction).

Results of Operations/Liquidity and Capital Resources

Revenues

Cash provided (used) in operations		$	(189,796	)
Proceeds from shareholder and affiliate advances			126,500

See Note 2 to the financial statements included as part of our Annual Report  on Form 10-K, for the year ended December 31, 2016, filed with the Securities and Exchange Commission on April 17, 2017 for a description of our critical accounting policies and the potential impact of the adoption of any new accounting pronouncements.

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.

(a)  We maintain a system of controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act , is recorded, processed, summarized and reported within time periods specified in the SEC’s rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Principal Executive and Financial Officer, as appropriate to allow timely decisions regarding required disclosure.  As of March 31, 2017, our Principal Executive and Financial Officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures.  Based on that evaluation, our Principal Executive and Financial Officer concluded that our disclosure controls and procedures were effective.

(b)  Changes in Internal Controls.  There were no changes in our internal controls over financial reporting during the quarter ended March 31, 2017 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II :OTHER INFORMATION

 

Item 1.  Legal Proceedings. 

 

We are periodically named in legal actions arising from normal business activities. We evaluate the merits of these actions and, if we determine that an unfavorable outcome is probable and can be reasonably estimated, we will establish the necessary reserves. We are not currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future.

 

Item 1A.  Risk Factors.

 

There have been no material changes from the risk factors previously disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the Commission on April 17, 2017, under the heading “Risk Factors”, and investors should review the risks provided in the Form 10-K, prior to making an investment in the Company. The business, financial condition and operating results of the Company can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in the Form 10-K for the year ended December 31, 2016, under “Risk Factors”, any one or more of which could, directly or indirectly, cause the Company’s actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect the Company’s business, financial condition, operating results and stock price.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds. 

 

Use of Proceeds from Sale of Registered Securities 

 

Item 3. Defaults Upon Senior Securities 

 

None.

 

Item 4. Mine Safety Disclosures. 

 

Not Applicable. 

 

Item 5. Other Information.

 

Item 6.    Exhibits

 

See the Exhibit Index following the signature page to this Quarterly Report on Form 10-Q for a list of exhibits filed or furnished with this report, which Exhibit Index is incorporated herein by reference.

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.

 

 

 

 

 

 

20