Arcis Resources Corp - FORM 10-Q

Attached files

file	filename
EX-32 - RULE 13A-14(B) CERTIFICATION - Arcis Resources Corp	ex32.htm
EX-31.2 - RULE 13A-14(A) CERTIFICATION ? CFO - Arcis Resources Corp	ex312.htm
EX-31.1 - RULE 13A-14(A) CERTIFICATION ? CEO - Arcis Resources Corp	ex311.htm

U. S. 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 June 30, 2011

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File No. 333-159577


ARCIS RESOURCES CORPORATION (Name of Registrant in its Charter)

Nevada	37-1563401
(State of Other Jurisdiction of incorporation or organization)	(I.R.S.) Employer I.D. No.)

4320 Eagle Point Parkway, Suite A, Birmingham, AL 35242
(Address of Principal Executive Offices)

Issuer's Telephone Number: (205) 453-9650

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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. Yes [X] 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 [X] No [ ]

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

Indicate by check mark whether the registrant is a large accelerated filer, 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. (Check One)

Large accelerated fileroAccelerated filero Non-accelerated fileroSmaller reporting companyx

APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date:

September 1, 2011

Common Voting Stock: 28,796,000

ARCIS RESOURCES CORPORATION

QUARTERLY REPORT ON FORM 10Q

TABLE OF CONTENTS

		Page No
Item 1.	Financial Statements (unaudited):
	Condensed Consolidated Balance Sheets – June 30, 2011 and December 31, 2010	1
	Condensed Consolidated Statements of Operations – for the Three and Six Months Ended June 30, 2011 and 2010 and Period from Inception to June 30, 2011	2
	Condensed Consolidated Statements of Cash Flows – for the Six Months Ended June 30, 2011 and 2010 and Period from Inception to June 30, 2011	3
	Notes to Condensed Consolidated Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3	Quantitative and Qualitative Disclosures about Market Risk	13
Item 4	Controls and Procedures	13
Part II	Other Information
Item 1.	Legal Proceedings	14
Items 1A.	Risk Factors	14
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 3.	Defaults upon Senior Securities	14
Item 4.	Reserved	14
Item 5.	Other Information	14
Item 6.	Exhibits	14
Signatures		15


ARCIS RESOURCES CORPORATION AND SUBSIDIARIES
( A DEVELOPMENT STAGE CORPORATION)
CONDENSED CONSOLIDATED BALANCE SHEETS



	As of			As of
	June 30,			December 31,
	2011			2010
	(Unaudited)
ASSETS

CURRENT ASSETS
Cash	$	163		$	4,386
Receivable due from related party		29,400			29,400
Prepaid expenses		100			6,694
Total current Assets		29,663			40,480

TOTAL ASSETS	$	29,663		$	40,480

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
Accounts Payable and accrued expenses	$	176,405		$	47,214
Notes Payable		21,160			21,160
Payable to related party		53,145			5,600
Capital Stock to be issued		108,700			108,700

Total current liabilities		359,410			182,674


TOTAL LIABILITIES		359,410			182,674

STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, par value $.001 per share; 200,000,000 shares authorized,
and 18,815,000 shares issued and outstanding
at June 30, 2011 and December 31, 2010.		18,815			18,815
Additional paid-in capital		33,128			33,128
(Accumulated deficit) during the development stage		(381,690	)		(194,137	)

Total stockholders' equity (deficit)		(329,747	)		(142,194	)


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$	29,663		$	40,480

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


ARCIS RESOURCES CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE CORPORATION)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)




	Three Months Ended June30, 2011			Three Months Ended June 30, 2010			Six Months Ended June 30, 2011			Six Months Ended June 30, 2010			June 7, 2006 (Date of Inception) to June 30, 2011


REVENUES
Net sales	$	-					$	10,162			790		$	10,952
Cost of Sales		-						10,819						10,819
Gross Income		-			-			(657	)		790			133

COSTS AND EXPENSES
Selling, general and administrative		113,739			5,038			185,388			19,068			379,011
Total costs and expenses		113,739			5,038			185,388			19,068			379,011

(LOSS) INCOME BEFORE OTHER INCOME (LOSS)		(113,739	)		(5,038	)		(186,045	)		(18,278	)		(378,878	)

Interest expense		741						1,508						2,812

(LOSS) BEFORE PROVISION FOR INCOME TAX	$	(114,480	)	$	(5,038	)	$	(187,553	)	$	(18,278	)	$	(381,690	)

PROVISION FOR INCOME TAXES		-			-			-			-			-

NET (LOSS)	$	(114,480	)	$	(5,038	)	$	(187,553	)	$	(18,278	)	$	(381,690	)

NET( LOSS) PER COMMON SHARE - BASIC AND DILUTED	$	(0.01	)	$	(0.00	)	$	(0.01	)	$	(0.00	)

WEIGHTED AVERAGE OUTSTANDING SHARES
OF COMMON STOCK - BASIC AND DILUTED		18,815,000			18,815,000			18,815,000			18,815,000

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

ARCIS RESOURCES CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE CORPORATION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	For Six Months			For Six Months
	Ended			Ended			June 7, 2006
	June 30,			June 30,			(Date of Inception)
	2011			2010			to June 30, 2011

CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss)	$	(187,553	)	$	(18,278	)	$	(381,690	)
Adjustments to reconcile net (loss) to
net cash provided by (used in) operating activities:

Changes in operating assets and liabilities:
(Increase)/Decrease in accounts receivable
(Increase)/Decrease in receivable from related party		-			-			(29,400	)
(Increase)/Decrease in prepaid expense		6,594			11,669			(100	)
Increase/(Decrease) in accounts payable and accrued expenses		129,191			-			176,405
Increase/(Decrease) in notes payable		-			-			21,160
Net cash (used in) operating activities		(51,768	)		(6,609	)		(213,625	)

CASH FLOWS FROM INVESTING ACTIVITIES

Net cash provided (used in) investing activities		-			-			-

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from stock to be issued								108,700
Proceeds from related party, net of payments		47,545						53,145
Capital contributions								51,943

Net cash provided by financing activities		47,545			-			213,788

NET INCREASE (DECREASE) IN CASH		(4,223	)		(6,609	)		163

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		4,386			13,921			-

CASH AND CASH EQUIVALENTS - END OF PERIOD	$	163		$	7,312		$	163

SUPPLEMENTAL DISCLOSURES:
Cash paid for interest	$	-		$	-		$	-
Cash paid for income taxes	$	-		$	-		$	-
NON-CASH FINANCING ACTIVITIES:
Conversion of accrued compensation to notes payable	$	-		$	-		$	21,160

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

ARCIS RESOURCES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2011 AND 2010

Note 1 - Organization and Summary of Significant Accounting Policies

Organization of Business

Arcis Resources Corporation (the “Company”) was incorporated in Nevada on March 27, 2008 under the name “Mountain Renewables, Inc.” Effective on November 15, 2010, the Company filed with the Nevada Secretary of State a Certificate of Amendment to its Articles of Incorporation. The amendment changed the name of the corporation to “Arcis Resources Corporation.”

On September 22, 2010, the Company acquired all of the membership interest in Gulf Coast Energy Distribution, LLC, an Alabama limited liability company (“GCED”), and all of the outstanding common stock of ARCIS Energy, Inc., a Nevada corporation (“ARCIS”), pursuant to a Stock Purchase Agreement entered into by these parties on July 21, 2010. The acquisition is referred to herein as the “Share Exchange.” GCED and ARCIS will be engaged in the business of acquiring, trading and distributing fuel oil and other petroleum products.

In exchange for 100% of the membership interest in ARCIS the Company issued to GSA International Group, Ltd., a British Virgin Islands corporation (“GSAI”), 11,000,000 shares of its common stock. The Company issued 2,200,000 shares of common stock to Kenneth Allen Flatt, Jr. and Activa Transportation Services, LLC, an Alabama limited liability company (“Activa”), for their 100% membership interest in GCED.

The Company has authorized capital stock of 200,000,000 capital shares, consisting of 200,000,000 shares of Common Stock, $.001 par value. Before the Share Exchange, there were 13,615,000 shares outstanding, of which Bristlecone Associates, LLC, a Colorado limited liability company (“Bristlecone”), held 6,000,000 (44.0%) and Richard Giannotti owned 4,030,000 shares (29.6%). As a condition to the Share Exchange, Bristlecone surrendered 4,500,000 shares and Mr. Giannotti surrendered 3,500,000 shares, reducing the outstanding shares to 5,615,000. Immediately after the Share Exchange, there were 18,815,000 shares outstanding, of which Bristlecone held 1,500,000 shares (8.0%) and Mr. Giannotti held 530,000 shares (2.8%).

The acquisition was accounted for as a reverse merger under the purchase method of accounting since there was a change of control. Accordingly, GCED will be treated as the continuing entity for accounting purposes.

Development Stage Company

The Company has not earned significant revenues from planned operations. Accordingly, the Company’s activities have been accounted for as those of a “Development Stage Company.”

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Arcis Energy, Inc. and Gulf Coast Energy Distribution, LLC. All significant inter-company transactions and balances have been eliminated in consolidation

Basis of Presentation

The accompany 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 of Arcis Resources Corporation and related notes thereto contained in the Company’s Form 10-K for the year ended December 31, 2010 filed with the SEC on April 15, 2011. Certain information and note disclosure normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

ARCIS RESOURCES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2011 AND 2010

Note 1 - Organization and Summary of Significant Accounting Policies (Continued)

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reporting 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 periods. Management makes these estimates using the best information available at the time the estimates are made; however, actual results could differ materially from these estimates.

Net Loss Per Share

ASC 260, “Earnings per Share,” requires dual presentation of basic and diluted earnings or loss per share (“EPS”) for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution; diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.

Basic loss per share is computed by dividing net loss applicable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted loss per share reflects the potential dilution that could occur if dilutive securities and other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company, unless the effect is to reduce a loss or increase earnings per share. The Company had no potential common stock equivalents which would result in a diluted loss per share. Therefore, diluted loss per share is equivalent to basic loss per share.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and cash in deposits and all highly liquid debt instruments with an original maturity of three months or less.

Revenue Recognition

The Company recognizes revenue in accordance with the provisions of Staff Accounting Bulletin (“SAB”) 104. Sales and service revenue is recognized at the date of shipment, or completion of services rendered, to a customer when a formal arrangement exists, the price is fixed or determinable, the delivery or service is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all the relevant criteria for revenue recognition are recorded as customer deposits.

ARCIS RESOURCES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2011 AND 2010

Note 1 - Organization and Summary of Significant Accounting Policies (Continued)

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company incurred a loss from operations of $114,480 during the three months ended June 30, 2011, and a loss from operations of 187,553 for the six months ended June 30,2011 and a loss from operations of $381,690 since the date of inception, June 7, 2006. These matters raise substantial doubt about the Company's ability to continue as a going concern.

Management plans to raise additional proceeds from debt and equity transactions and to continue to increase its sales and marketing activities. There is no guarantee, however, that management will be able to secure sufficient financing to sustain the operations of the Company or that operations will become self-sustaining. In the absence of one of those accomplishments, the Company would likely be forced to liquidate. These financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

Fair Value Measurements.

The FASB’s Accounting Standards Codification defines fair value as the amount that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants and requires that assets and liabilities carried at fair value are classified and disclosed in the following three categories:

Level 1 – Quoted prices for identical instruments in active markets.

Level 2 – Quoted prices for similar instruments in active or inactive markets and valuations derived from models where all significant inputs are observable in active markets.

Level 3 – Valuations derived from valuation techniques in which one or more significant inputs are unobservable in any market.

Fair Value of Financial Instruments.

The carrying values of cash, prepaid expenses, accounts payable and accrued expenses approximate their fair values due to their short term maturities. The carrying values of the Company’s notes payable approximate their fair values based upon a comparison of the interest rate and terms of such debt given the level of risk to the rates and terms of similar debt currently available to the Company in the marketplace.

Recent Accounting Pronouncements.

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying condensed consolidated financial statements.

ARCIS RESOURCES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2011 AND 2010

Note 2 - Stockholders' Equity

The Company is authorized to issue 200,000,000 shares of $.001 par value common stock. Dividends may be paid on outstanding shares as declared by the Board of Directors. Each share of common stock is entitled to one vote.

During the three month period and six month period ended June 30, 2011, the Company did not issue any common stock shares.

During the year ended December 31, 2010, the Company received $108,700 for its common stock. The stock has not yet been issued, and, accordingly, is a liability on the balance sheet as "Capital Stock to be Issued".

Note 3 - Income Taxes

The Company accounts for income taxes under the asset and liability method as stipulated by Accounting Standards Codification (“ASC”) 740, “Accounting for Income Taxes,” which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of the events that have been included in the financial statements or tax returns. Deferred income taxes are recognized for all significant temporary difference between tax and financial statements bases of assets and liabilities. Valuation allowances are established against net deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.

As a result of the Company incurring net losses, an income tax benefit in the form of net operating loss carry-forwards have been generated for the six months ended June 30, 2011 and the prior years ended December 31, 2010.

The potential future benefit from income taxes arising from operations for the six month period ending June 30, 2011 and 2010 consist of the following:

	Six Months Ended June 30
	2011			2010
Current:
Federal	$	0		$	0
State		0			0
Deferred
Federal		63,768			6,215
State		0			0
		63,768			6,215

Increase in Valuation allowance		(63,678	)		(6,215	)
Income Tax Benefit	$	0		$	0

ARCIS RESOURCES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2011 AND 2010

Note3 - Income Taxes (Continued)

The effective tax rates differ from the statutory rates for 2011 and 2010 and prior primarily due to the following:

	As of June 30, 2011						As of June 30, 2010
	Amount			Effective Tax Rate			Amount			Effective Tax Rate
Federal income tax liability (benefit)	$	(63,768	)		-34	%	$	(6,215	)		-34	%
State income tax liability (benefit)
Permanent Difference		0			0	%		0			0	%
Change in Valuation Allowance		63,768			34	%		6,215			34	%
	$	0			0	%	$	0			0	%

Permanent differences consist primarily of disallowed travel, meal and entertainment expenses.

The Company’s net deferred tax assets consist primarily of net operating loss carry-forwards. At June 30, 2011, the Company had federal net operating loss carry-forwards totaling approximately $380,000 which may be used to offset future taxable income. These net operating loss carry-forwards expire over various years through 2025. The net operating loss carryforwards may be limited under the Change of Control provisions of the Internal Revenue Code section 382. As of June 30, 2011 and December 31, 2010, the Company has determined that due to the uncertainty regarding its future profitability, a full valuation allowance is required for deferred tax assets. Net deferred tax assets and liabilities are comprised of the following as of June 30, 2011 and December 31, 2010:

	As of June 30, 2011			As of December 31, 2010
Deferred Tax Assets
Current	$	0		$	0
Non-current		129,265			65,496
Less Valuation Allowance		(129,265	)		(65,496	)
Net deferred tax asset	$	0		$	0

The federal and states of Florida and Alabama are the significant tax jurisdictions where the Company files income, franchise and gross receipts tax returns as required. There are currently no on-going examinations of tax returns by federal and state tax authorities.

ARCIS RESOURCES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SIX MONTHS ENDED JUNE 30, 2011 AND 2010

Note 4—Related Party Transactions

At June 30, 2011 and December 31, 2010 the Company had an outstanding loan to a related party.

		As of June 30,2011		As of December 31, 2010
a	Loan to American Plant Services, LLC (entity under common control) for working capital. Due on demand without interest	$	29,400	$	29,400
	Total Loans to Related Parties	$	29,400	$	29,400

At June 30, 2011 and December 31, 2010 the Company had an outstanding loan due to a related party.

		As of June 30, 2011		As of December 31, 2010
a	Loan from GSA International Group, Ltd. (majority shareholder) for working capital. Due on demand without interest	$	53,145	$	5,600
	Total Related Party Obligations	$	53,145	$	5,600

Note 5 – Subsequent Events

Acquisition of American Plant Services, LLC and Mobile Fluid Recovery, Inc.

On July 15, 2011 the Company acquired all of the membership interest in American Plant Services, LLC (“APS”) and Mobile Fluid Recovery, Inc. (“MFR”). In exchange for those equity interests, the Registrant issued a total of 8,800,000 shares of its common stock to (a) the members of APS, who were Kenneth A. Flatt, Jr., Deborah K. Flatt, Trevis Lyon and James E. Goins, and (b) the shareholders of MFR other than APS, who were Clifford Briggs and David Briggs. Kenneth A. Flatt, Jr., Deborah K. Flatt and Trevis Lyon were the members of the Registrant’s Board of Directors at the time of the acquisition. The Company also issued Notes due July 15, 2012 in the aggregate amount of $500,000 to Messrs. Flatt, Lyon and Goins. The Notes bear interest at 11.25% per annum and are payable in advance of maturity out of the proceeds of any financing of four million dollars or more, or out of any net cash provided by operations.

At the same time, the Company issued an additional one million shares of common stock to Kenneth A. Flatt. Jr. and Deborah K. Flatt to compensate them for their personal guarantees of approximately $6.0 million in debt owed by APS. To the extent that the guarantees are not released within 180 days after the closing date, the Company shall be obliged to issue up to one million additional shares of common stock to the Flatts, the number of shares being determined by the amount of unreleased guarantees on the 90th and 180th days after the closing date.

The Agreement imposed on the Company a further obligations, namely to provide sufficient additional compensation to Mr. Flatt to offset any expense that he may incur by reason of a promissory note in the amount of $4.0 million that he delivered to APS (the note bearing interest at 3.5% per annum, with two percent of principal payable every three years and the balance due in fifteen years).

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULT OF OPERATIONS

Forward-Looking Statements: No Assurances Intended

In addition to historical information, this Quarterly Report contains forward-looking statements, which are generally identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “plans to,” “estimates,” “projects,” or similar expressions. These forward-looking statements represent Management’s belief as to the future of Arcis Resources, Inc. Whether those beliefs become reality will depend on many factors that are not under Management’s control. Many risks and uncertainties exist that could cause actual results to differ materially from those reflected in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in the Section 1A, titled “Risk Factors”, in the Company’s Annual Report on Form10-K for the year ended December 31, 2010. Readers are cautioned not to place undue reliance on these forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements.

Outline of Business

As of June 30, 2011, Arcis Resources Corporation had two subsidiaries: Arcis Energy Inc. (“Arcis”) and Gulf Coast Energy Distribution, LLC (“GCED”). Arcis was organized to engage in international fuel trade. GCED was organized to engage in domestic fuel trade, including transfer of oil and refined petroleum products. In 2010 certain affiliates assigned to Arcis certain core contracts that will enable it to initiate the business of fuel trading. Primary among the assigned contracts were:

Contract dated July 7, 2010 with Bashkir Fuel Company providing for the sale by Bashkir Fuel to Arcis of 15,000 metric tons of Kazakhstan fuel oil (grade GOST 10585-99) per month.

Contract dated July 7, 2010 with Bashkir Fuel Company providing for the sale by Bashkir Fuel to Arcis of 15,000 metric tons of Kazakhstan fuel oil (grade GOST 305-1982) per month.

Joint Venture Agreement dated April 27, 2010 with Premier Investment Group, Inc. (“PREMI”) providing that PREMI will make a deposit of one billion Euros to collateralize letters of credit to finance trading of oil and other physical commodities by ARCIS.

Both Arcis and GCED will be engaged in the acquisition, sale and trading of the full spectrum of petroleum products, from crude oil refinery feed stocks to refined products, including base oils, biofuels, bunker fuels, fuel oils, gasoil, kerosene/jet fuel, marine gasoil, and diesel motor gas and naphtha, with an emphasis in the mid-distillates markets. They will be primarily active in physical oil trading including transportation by vessel, pipeline, railcar, and truck. Arcis will operate internationally, and GCED will trade only within North America.

Because all of the activities of Arcis will be carried out in the international market, it will not require any special licensing nor be subject to any special reporting requirements relating to its business. GCED, on the other hand, is located in Birmingham, Alabama, and will be engaged in the interstate distribution of fuel products. For that reason, GCED is required to obtain a 637

License from the Internal Revenue Service and to file monthly reports of the shipments of fuel that it arranges. GCED is also required to obtain a Motor Fuel License from the State of Alabama, to post a bond with the State of Alabama, and to file monthly reports of fuel shipments. GCED has obtained the required licenses and is current in its filing requirements.

Both companies will be active in both the primary and the reuse markets. The reuse market involves the reclamation of used oil, such as motor oil, through re-refining and sale for reuse for other purposes, such as serving as a base stock for lubricating oil.

In July 2011 Arcis Resources Corporation acquired ownership of American Plant Services, LLC and Mobile Fluid Recovery, Inc. American Plant Services, LLC was engaged in the business of providing industrial services, but is currently in liquidation. Mobile Fluid Recovery, Inc. utilizes patented recyclable absorbent systems to provided fluid recycling services, including separation of oil and water and reuse of the oil.

Results of Operations

Arcis was organized in July 2010 and had not commenced significant operations as of June 30, 2011. Since early in 2009, GCED has been engaged in developing its trading desk, which primarily consisted of securing the government licenses necessary to engage in interstate distribution of fuel products. Under its business plan, GCED will begin generating revenues as crude and refined petroleum products are purchased under its contracts with suppliers and resold. Since inception through June 30, 2011 the combined revenues for ARCIS and GCED were less than $11,000.

During the three months ended March 31, 2011, the Company recorded $10,162 in revenue from one minor domestic fuel trade, on which the Company lost $657. During the three months ended June 30, 2011, the Company recorded no revenue. The Company incurred selling, general and administrative expenses of $185,388 during the six months and $113,739 during the three months ended June 30, 2011. The expenses were primarily accrued salaries for management as well as professional fees incurred in connection with the Company’s efforts to obtain financing and its ongoing SEC reporting obligations. As a result, the Company incurred a net loss of $114,480 during the three months ended June 30, 2011 and a net loss of $187,553 during the six months ended June 30, 2011. By way of comparison, the Company’s operating expenses and net loss for the three months ended June 30, 2010 totaled $5,038. Having recorded $790 in revenue for the six months ended June 30, 2010, operating expenses for that period were $19,068 and the net loss was $18,278.

Liquidity and Capital Resources

GCED’s and ARCIS’s operations have been funded to date by loans, capital contributions from its members, and the private sale of securities which combined have totaled approximately $155,000 from inception through June 30, 2011.

At June 30, 2011 we had a working capital deficit of $329,747, although we have agreements to settle $108,700 of our current liabilities by issuing common stock at a future date. At June 30, 2011 the Company also had no valuable assets to secure a lending arrangement. Our ability to implement our business plan depends on our success in obtaining capital. For that reasons, the opinion of our independent registered public accounting firm on our financial statements for the year ended December 31, 2010 expressed that there is substantial doubt as to whether the Company will continue as going concern.

In order to commence domestic fuel trading operations, GCED will require at least $500,000 to finance the purchase of fuel. We are currently exploring sources for those funds, but have not yet secured a commitment for the necessary financing. Upon receipt of that initial funding, we will be able to engage in trading. Our trading operations, however, will require the full time attention of a number of traders and administrators. The gross profit generated by our initial trading activities is unlikely to be sufficient to cover the direct and indirect costs of these personnel as well as the additional personnel who will be engaged in securing additional financing and developing the relationships necessary in order to expand GCED’s trading operations.

In order to enter into the fuel trading business at a level that can result in net profits for the company, GCED will need at least $10 million in available funds. Our plan is to secure that funding through the sale of debt and/or equity securities, and through joint ventures with investors wishing to participate in the fuel trading business in this fashion. If we are able to secure funding at that level, we will then be able to leverage our equity by using short-term secured debt financing to purchase fuel products for resale. We are currently exploring a number of possible sources for this second level of financing, but have not secured any firm commitment. If we are unable to secure the financing necessary for GCED to become independently viable as a fuel trader, we will limit its operations to providing support for the fuel spill remediation services of its affiliate, Mobile Fluid Recovery, Inc. - namely, resale of spilled fuel recaptured through the cleanup processes provided by MFR. We believe those services could be provided with only one dedicated GCED employee, and so could yield a modest profit to the overall Company.

Because Arcis Energy has an available source of credit in its joint venture with PREMI, we need only a modest amount of capital - several hundred thousand dollars - to provide the working capital that will permit us to initiate Arcis Energy’s operations. We are currently exploring opportunities to secure those funds. Over the long term, however, our profitability will depend on our ability to replace the PREMI joint venture with more affordable financing. Under the PREMI arrangement, our costs of financing will include interest at market rate, administrative costs of the letter of credit processing, plus 25% of the gross profits from each transaction - we cannot estimate the total financing cost, since we have no historical record on which to base an expectation of transaction profits, but we anticipate the cost of financing under this arrangement may be twice that paid by our larger competitors.

Our acquisition of American Plant Services, LLC and Mobile Fluid Recovery, Inc. in July 2011 has substantially expanded our anticipated capital obligations. As a result of that transaction, we will require funds for the following purposes:

Proper marketing of the technological capabilities of Mobile Fluid Recovery will entail a commitment of several million dollars to working capital.

We have determined that it is in the best interest of the organization to cease the operating activities of American Plant Services, LLC. That entity is now in liquidation, and we have assumed responsibility for settling its liabilities in an orderly fashion.

The employment agreements of the four members of our management became effective upon completion of the acquisition. The Company is currently accruing salaries to the four officers at an aggregate rate of $708,000 per annum. If the Company completes a $10 million equity offering or achieves annual net income of $2.5 million, the salary obligation to the four executives will increase to $1,328,000.

Our efforts to obtain the funding needed for all of these purposes and commitments is ongoing. To date we have obtained no firm commitment for significant funds from any source. If we are unable to obtain the necessary funds, our business operations will not be successful.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.

ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2011. Pursuant to Rule 13a-15(e) promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, “disclosure controls and procedures” means controls and other procedures that are designed to insure that information required to be disclosed by the Company in the reports that it files with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time limits specified in the Commission’s rules. “Disclosure controls and procedures” include, without limitation, controls and procedures designed to insure that information the Company is required to disclose in the reports it files with the Commission is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure.

In carrying out that evaluation, management identified a material weakness (as defined in Public Company Accounting Oversight Board Standard No. 2) in our internal control over financial reporting. The material weakness identified by management consisted of inadequate staffing and supervision within the bookkeeping and accounting operations of our company. The relatively small number of employees who have bookkeeping and accounting functions prevents us from segregating duties within our internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s system of disclosure controls and procedures was not effective as of June 30, 2011 for the purposes described in this paragraph.

Changes in Internal Controls. The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated any changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act or 1934) that occurred during the fiscal quarter covered by this report, and they have concluded that there was no change to the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings.
	None.

Item 1A.	Risk Factors.
	Not applicable.

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

(a) Unregistered Sale of Equity Securities

	Arcis Resources Corporation did not effect any unregistered sales of equity securities during the 2nd quarter of 2011.

(c) Repurchase of Equity Securities
	The Company did not repurchase any shares of its common stock during the 2nd quarter of 2011.
Item 3.	Defaults Upon Senior Securities.
	None.

Item 4.	Reserved.

Item 5.	Other Information.
	None.

Item 6.	Exhibits
31.1	Rule 13a-14(a) Certification – CEO
31.2	Rule 13a-14(a) Certification – CFO
32	Rule 13a-14(b) Certification
101.ins	XBRL Instance
101.sch	XBRL Schema
101.cal	XBRL Calculation
101.def	XBRL Definition
101.lab	XBRL Label
101.pre	XBRL Presentation

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.

	ARCIS RESOURCES CORPORATION

Date: September 1, 2011	By: /s/ Kenneth A. Flatt, Jr.
	Kenneth A. Flatt, Jr., Chief Executive Officer

	By: /s/ Robert J. Fanella
	Robert J. Fanella, Chief Financial Officer

Arcis Resources Corp - FORM 10-Q - September 1, 2011

Attached files

Arcis Resources Corp Reports