Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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x
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934:
For the quarterly period ended September 30, 2011
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For the transition period from ____to____
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Commission File Number: 000-51465
(Exact name of registrant as specified in its charter)
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Nevada
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20-1904354
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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9600 Great Hills Trail, Suite 150W, Austin, TX 78759
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(Address of principal executive offices) (Zip Code)
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(512) 852-7888
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(Registrant’s Telephone Number, including area code)
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Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). xYes oNo
Indicate by check mark whether the registrant is a large accelerated file, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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(Do not check if a smaller reporting company)
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Smaller reporting company
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x
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No
As of November 18, 2011, there were 43,950,000 shares of the issuer's $.001 par value common stock issued and outstanding.
1
CAUTIONARY STATEMENT
This following information specifies certain forward-looking statements of management of the company. Forward-looking statements are statements that estimate the happening of future events and are not based on historical fact. Forward-looking statements may be identified by the use of forward-looking terminology, such as “may,” “shall,” “could,” “expect,” “estimate,” “anticipate,” “predict,” “probable,” “possible,” “should,” “continue,” or similar terms, variations of those terms or the negative of those terms. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements.
The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives require the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. We cannot guaranty that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.
Any of the factors described above, elsewhere in this report, or in the “Risk Factors” section of our most recent annual report on Form 10-K could cause our financial results, including our net income (loss) or growth in net income (loss) to differ materially from prior results, which in turn could, among other things, cause the price of our common stock to fluctuate substantially.
These forward-looking statements speak only as of the date of this report. We undertake no obligation to revise or update publicly any forward-looking statement for any reason, except as otherwise required by law.
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TABLE OF CONTENTS
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Page
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PART I
FINANCIAL INFORMATION
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PART II
OTHER INFORMATION
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PART I - FINANCIAL INFORMATION
UNITED AMERICAN PETROLEUM, INC.
(UNAUDITED)
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September 30,
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December 31,
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2011
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2010
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ASSETS
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CURRENT ASSET
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Cash
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$ | 121,967 | $ | 557,344 | ||||
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Accounts receivable
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29,970 | 3,570 | ||||||
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Other receivable
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59,688 | - | ||||||
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Total current assets
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211,625 | 560,914 | ||||||
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OIL and GAS PROPERTIES (full cost method)
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Evaluated, net of accumulated depletion of $9,587 and $3,910
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as of September 30, 2011 and December 31, 2010
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75,651 | 81,328 | ||||||
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Unevaluated
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295,418 | 205,433 | ||||||
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TOTAL ASSETS
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$ | 582,694 | $ | 847,675 | ||||
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LIABILITIES AND STOCKHOLDERS' DEFICIT
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CURRENT LIABILITIES
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Accounts payable and accrued liabilities
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168,586 | 155,324 | ||||||
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Related party payable
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25,000 | 25,000 | ||||||
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Accrued interest
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97,132 | 20,924 | ||||||
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Revenue Payable
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48,020 | - | ||||||
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Note payable - related party
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- | 50,000 | ||||||
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Note payable
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- | 250,000 | ||||||
| Total current liabilities | 338,738 | 501,248 | ||||||
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Convertible note payable, net of discount
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542,895 | 454,068 | ||||||
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Embedded derivative liability
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1,318,777 | 165,932 | ||||||
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Asset retirement obligation
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16,228 | 15,465 | ||||||
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TOTAL LIABILITIES
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2,216,638 | 1,136,713 | ||||||
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STOCKHOLDERS' DEFICIT
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Common stock, $0.001 par value, 100,000,000 shares authorized,
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43,950,000 shares issued and outstanding, respectively
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43,950 | 43,950 | ||||||
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Additional paid-in capital
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66,799 | (237,338 | ) | |||||
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Accumulated deficit
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(1,744,693 | ) | (95,650 | ) | ||||
| Total stockholders' deficit | (1,633,944 | ) | (289,038 | ) | ||||
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
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$ | 582,694 | $ | 847,675 | ||||
The accompanying notes are an integral part of these financial statements.
4
UNITED AMERICAN PETROLEUM, INC.
FOR THE THREE AND NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2011
AND FOR THE PERIOD FROM AUGUST 10, 2010 (INCEPTION) THROUGH SEPTEMBER 30, 2010
(UNAUDITED)
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FOR THE THREE
MONTHS ENDED |
FOR THE PERIOD FROM (INCEPTION) AUGUST 10, 2010 THROUGH
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FOR THE NINE
MONTHS ENDED |
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SEPTEMBER 30, 2011
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SEPTEMBER 30, 2010
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SEPTEMBER 30, 2011
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REVENUE
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Oil Sales
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$ | 47,842 | $ | - | $ | 71,574 | ||||||
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Gas
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618 | - | 618 | |||||||||
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Administrative Income
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18,423 | - | 71,977 | |||||||||
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TOTAL REVENUE
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66,883 | - | 144,169 | |||||||||
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OPERATING EXPENSES
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Lease operating expenses
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26,193 | - | 41,310 | |||||||||
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Accretion expense
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258 | - | 763 | |||||||||
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Depletion expense
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1,475 | - | 5,677 | |||||||||
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General and administrative
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153,281 | 57 | 713,403 | |||||||||
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TOTAL OPERATING EXPENSES
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181,207 | 57 | 761,153 | |||||||||
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NET LOSS BEFORE OTHER EXPENSE
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(114,324 | ) | (57 | ) | (616,984 | ) | ||||||
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OTHER INCOME (EXPENSE)
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Interest Expense
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(38,713 | ) | (3,493 | ) | (161,484 | ) | ||||||
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Loss on embedded derivatives
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(489,746 | ) | - | (870,575 | ) | |||||||
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Total other expense
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(528,459 | ) | (3,493 | ) | (1,032,059 | ) | ||||||
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NET INCOME (LOSS)
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$ | (642,783 | ) | $ | (3,550 | ) | $ | (1,649,043 | ) | |||
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INCOME (LOSS) PER SHARE - BASIC
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$ | (0.01 | ) | - | $ | (0.04 | ) | |||||
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC
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43,950,000 | - | 43,950,000 | |||||||||
The accompanying notes are an integral part of these financial statements.
5
UNITED AMERICAN PETROLEUM, INC.
FOR THE NINE MONTHS PERIOD ENDED SEPTEMBER 30, 2011
AND FOR THE PERIOD FROM AUGUST 10, 2010 (INCEPTION) THROUGH SEPTEMBER 30, 2010
(UNAUDITED)
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FOR THE PERIOD FROM
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AUGUST 10, 2010
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(INCEPTION)
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THROUGH
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SEPTEMBER 30, 2011
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SEPTEMBER 30, 2010
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net (loss)
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$ | (1,649,043 | ) | $ | (3,550 | ) | ||
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Adjustments to reconcile net (loss)
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to net cash used in operating activities:
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Depletion expense
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5,677 | - | ||||||
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Accretion expense
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763 | - | ||||||
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Amortization of debt discount
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85,234 | - | ||||||
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Loss on embedded derivatives
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870,575 | - | ||||||
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Change in assets and liabilities
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(Increase) in accounts receivable
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(26,400 | ) | - | |||||
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(Increase) in other receivable
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(59,688 | ) | - | |||||
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(Decrease) in accounts payable and accrued expenses
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(71,723 | ) | 3,493 | |||||
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Increase in accrued interest
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76,208 | - | ||||||
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Increase in revenue payable
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48,020 | - | ||||||
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Net cash (used in) operating activities
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(720,377 | ) | (57 | ) | ||||
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CASH FLOWS USED IN INVESTING ACTIVITIES:
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Acquisition of oil and gas properties
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(5,000 | ) | (75,000 | ) | ||||
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Net cash used in investing activities
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(5,000 | ) | (75,000 | ) | ||||
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Proceeds from note payable
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- | 250,000 | ||||||
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Issuance of convertible notes
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590,000 | - | ||||||
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Payment of note payable
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(250,000 | ) | - | |||||
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Payment of related party note payable
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(50,000 | ) | - | |||||
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Net cash provided by financing activities
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290,000 | 250,000 | ||||||
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NET INCREASE IN CASH AND CASH EQUIVALENTS
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(435,377 | ) | 174,943 | |||||
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CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
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557,344 | - | ||||||
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CASH AND CASH EQUIVALENTS - END OF PERIOD
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$ | 121,967 | $ | 174,943 | ||||
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SUPPLEMENTAL CASH FLOW INFORMATION:
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Cash paid during the period for:
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Interest
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$ | - | $ | - | ||||
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Taxes
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$ | - | $ | - | ||||
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NON CASH TRANSACTIONS:
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Discount to notes payable from relative fair value of warrants
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$ | 304,107 | $ | - | ||||
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Acquisition of oil and gas properties for debt
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$ | 84,985 | $ | - | ||||
The accompanying notes are an integral part of these financial statements.
6
UNITED AMERICAN PETROLEUM CORP.
1. Nature of Operations and Basis of Presentation
Nature of Operations
United American Petroleum Corp. was incorporated under the laws of the state of Nevada on August 10, 2010. Our principal business is the acquisition and management of leasehold interests in petroleum and natural gas rights, either directly or indirectly, and the exploitation and development of properties subject to these leases. In these notes, the terms “United,” “Company,” “we,” “us,” or “our” mean United American Petroleum Corp.
On December 31, 2010, the Company entered into a Plan of Merger (the “Merger”) with Forgehouse, Inc and their newly formed wholly-owned subsidiary United PC Acquisition Corp. Following the closing and pursuant to the Plan of Merger, effective as of December 31, 2010, the Company merged with and into United PC Acquisition Corp. with the Company surviving (the “Reverse Merger”). The Company, as a wholly-owned subsidiary of Forgehouse, Inc. was then merged with and into Forgehouse, Inc. and Forghouse, Inc. changed its name to United American Petroleum Corp. For accounting purposes, the Merger was treated as a reverse merger and a recapitalization of United American Petroleum Corp.
On January 13, 2011, the Company formed a wholly owned subsidiary, UAP Management, LLC, a Texas limited liability company, for the purpose of managing the Gabriel Rosser, LP (see Note 5).
On January 13, 2011, the Company formed a wholly owned subsidiary, United Operating, LLC, a Texas limited liability company, for the purpose of operating and managing the various interests acquired from Patriot Minerals, LLC (see Note 5).
Basis of Presentation
These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim consolidated financial information and with the instructions to Securities and Exchange Commission (“SEC”) Form 10-Q and Article 8 of SEC Regulation S-X. The principles for interim consolidated financial information do not require the inclusion of all the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. Therefore, these consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements on Form 10-K for the years ended December 31, 2010. The condensed consolidated financial statements included herein are unaudited; however, in the opinion of management, they contain all normal recurring adjustments necessary for a fair statement of the condensed results for the interim periods. Operating results for the three and nine month period ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. We made certain reclassifications to prior-period amounts to conform to the current presentation.
2. Summary of Significant Accounting Policies
Revenue Recognition- Oil and Gas
The Company recognizes oil and gas revenue from interests in producing wells using the “sales method.” Under this method of accounting, revenues are recognized based on volumes sold, which may differ from the volume to which we are entitled based on our working interest. An imbalance is recognized as a liability only when the estimated remaining reserves will not be sufficient to enable the under–produced owner(s) to recoup its entitled share through future production. Under the sales method, no receivables are recorded where we have taken less than our share of production. Our net imbalance position at September 30, 2011 and December 31, 2010, was immaterial.
Management does not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, consolidated financial position or cash flow.
7
UNITED AMERICAN PETROLEUM CORP.
3. Going Concern
The Company has incurred a net loss and negative operating cash flows since inception through September 30, 2011. These factors raise substantial doubt about the Company's ability to continue as a going concern. The Company's management is implementing plans to sustain the Company’s cash flow from operating activities and/or acquire additional capital funding. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
4. Embedded Derivative Liabilities
Conversion Option Liability
As described in Note 9, the Company issued a convertible note with certain reset provisions. The Company accounted for these reset provisions in accordance with ASC 815-40, which requires that the Company bifurcate the embedded conversion option as liability at the grant date and to record changes in fair value relating to the conversion option liability in the statement of operations as of each subsequent balance sheet date. The debt discount related to the convertible note is amortized over the life of the note using the effective interest method. See Note 6 for a reconciliation of the changes in fair value of the Company’s embedded derivative.
On December 31, 2010, the Company determined a fair value of $116,905 for the conversion option liability for the first installment of the convertible notes using the Black Scholes Option Pricing Model based upon the following assumptions: dividend yield of: -0-%, volatility of 117.5%, risk free rate of 1.02% and an expected term of 3 years.
On January 20, 2011, the Company determined a fair value of $333,652 for the conversion option liability for the second installment of the convertible notes using the Black Scholes Option Pricing Model based upon the following assumptions: dividend yield of -0-%, volatility of 116.06%, risk free rate of 1.07% and an expected term of approximately 3 years.
On March 9, 2011, the Company determined a fair value of $376,698 for the conversion option liability for the third installment of the convertible notes using the Black Scholes Option Pricing Model based upon the following assumptions: dividend yield of -0-%, volatility of 116.48%, risk free rate of 1.21% and an expected term of approximately 3 years.
On June 20, 2011, the Company determined a fair value of $95,155 for the conversion option liability for the fourth installment of the convertible notes using the Black Scholes Option Pricing Model based upon the following assumptions: dividend yield of -0-%, volatility of 109.87%, risk free rate of 0.68% and an expected term of approximately 3 years.
On June 30, 2011, the Company determined a fair value of $142,246 for the conversion option liability for the fifth installment of the convertible notes using the Black Scholes Option Pricing Model based upon the following assumptions: dividend yield of -0-%, volatility of 103.96%, risk free rate of 0.81% and an expected term of approximately 3 years.
As of September 30, 2011, the Company determined a fair value of $1,318,777 for the conversion option liability for its convertible notes using the Black Scholes Option Pricing Model based upon the following: dividend yield of -0-%, volatility of 93.42%, risk free rate of .24% and an expected term of approximately 2.25 years. Based upon the increase in the fair value of the conversion option liability, the Company recognized a non-cash loss included in other expense of $254,121 for the nine months ended September 30, 2011.
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As described in Note 9, the Company issued a convertible note with detachable warrants. The Company accounted for these detachable warrants in accordance with ASC 470-20, which requires that the Company calculate the relative fair value of the warrants at the grant date to additional paid-in capital. The Company amortizes the debt discount associated with the warrants over the life of the convertible notes using the effective interest method.
On December 31, 2010, the Company determined a relative fair value of $45,434 for the detachable warrants for the first installment of the convertible notes. In calculating the relative fair value of the warrants the Company used the Black Scholes Option Pricing Model based upon the following assumptions: dividend yield of: -0-%, volatility of 94.1%, risk free rate: 2.01% and an expected term of 5 years.
On January 20, 2011, the Company determined a relative fair value of $78,062 for the detachable warrants for the second installment of the convertible notes. In calculating the relative fair value of the warrants the Company used the Black Scholes Option Pricing Model based upon the following assumptions: dividend yield of: -0-%, volatility of 104.65%, risk free rate: 2.06% and an expected term of 5 years.
On March 9, 2011, the Company determined a relative fair value of $106,132 for the detachable warrants for the third installment of the convertible notes. In calculating the relative fair value of the warrants the Company used the Black Scholes Option Pricing Model based upon the following assumptions: dividend yield of -0-%, volatility of 105.22% , risk free rate of 2.16% and an expected term of approximately 5 years.
On June 20, 2011, the Company determined a relative fair value of $29,276 for the detachable warrants for the fourth installment of the convertible notes. In calculating the relative fair value of the warrants the Company used the Black Scholes Option Pricing Model based upon the following assumptions: dividend yield of -0-%, volatility of 105.87%, risk free rate of 1.55% and an expected term of approximately 5 years.
On June 30, 2011, the Company determined a relative fair value of $45,233 for the detachable warrants for the fifth installment of the convertible notes. In calculating the relative fair value of the warrants the Company used the Black Scholes Option Pricing Model based upon the following assumptions: dividend yield of -0-%, volatility of 107.39%, risk free rate of 1.76% and an expected term of approximately 5 years.
6. Fair Value
The Company measures fair value in accordance with a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
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Level 1
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Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
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Level 2
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Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
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Level 3
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Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
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9
The following table sets forth the Company's consolidated financial assets and liabilities measured at fair value by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
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Total
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Level 1
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Level 2
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Level 3
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LIABILITIES:
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Conversion option liability
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$
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1,318,777
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$
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-
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$
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-
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$
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1,318,777
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1,318,777
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-
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-
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1,318,777
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The following is a reconciliation of the conversion option liability and detachable warrant liability for which Level 3 inputs were used in determining fair value:
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Beginning balance January 1, 2011
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$
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116,905
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Initial recognition of debt derivative from issuance of January 20, 2011, $150,000 convertible note
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333,652
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Initial recognition of debt derivative from issuance of March 9, 2011, $250,000 convertible note
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376,698
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Initial recognition of debt derivative from issuance of June 20, 2011, $75,000 convertible note
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95,155
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Initial recognition of debt derivative from issuance of June 30, 2011, $115,000 convertible note
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142,246
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Increase in fair value of debt derivative
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254,121
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Ending balance as of September 30, 2011
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$
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1,318,777
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The Company’s conversion option liabilities are valued using pricing models and the Company generally uses similar models to value similar instruments. Where possible, the Company verifies the values produced by its pricing models to market prices. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, measures of volatility and correlations of such inputs. These consolidated financial liabilities do not trade in liquid markets, and as such, model inputs cannot generally be verified and do involve significant management judgment. Such instruments are typically classified within Level 3 of the fair value hierarchy. See Note 4 for Black Scholes Option Pricing Model inputs.
10
UNITED AMERICAN PETROLEUM CORP.
On October 15, 2010, the Company paid $250,000 to acquire oil, gas and mineral leases on the Lozano and Marcee properties. As a result of the asset purchase, we own a twenty-five percent (25%) working interest in the Lozano lease, which is a currently producing asset with three wells. The Lozano lease covers approximately 110 gross acres and is located in Frio County, Texas. The Company has a one hundred percent interest (100%) working interest in the Marcee lease located in Gonzales County Texas. The Marcee lease contains one well and is being developed for production.
As part of the Reverse Merger, the Company acquired an oil and gas lease in Anchorage, Alaska. Production on the properties has not commenced and there can be no assurance that any hydrocarbons will be economically recoverable; however, pre-production activities, such as a multi-phase exploration program of trenching, sampling, geophysical surveys and test drilling have commenced.
On January 28, 2011, United American Petroleum Corp. entered and closed a purchase and sale agreement with Patriot Minerals, LLC, a Texas limited liability company for a $5,000 payment to a consultant. The Purchase Agreement provides, among other things, that United American Petroleum Corp. shall purchase multiple undivided working interests to certain existing wells and to certain leases located in Texas. In connection with the Purchase Agreement, United American Petroleum Corp. formed a wholly owned subsidiary, United Operating, LLC, a Texas limited liability company, for the purpose of operating the various interests set forth in the Purchase Agreement. The properties purchased from Patriot Minerals by United American Petroleum Corp. are producing properties and are unevaluated as of September 30, 2011. The Company is currently undergoing various reserve studies to assess potential production and to continue the development of the wells purchased.
On January 28, 2011, United American Petroleum Corp. entered and closed a purchase, sale and participation agreement with Gabriel Rosser, LP (“Gabriel”). The purchase agreement provides that the Company shall purchase Gabriel's undivided 50.83% working interest and 39.131% revenue interest in the Gabriel 2 SWD Gabriel 3, 4, 5, 9, 15, Rosser #2 and #4 and Koi #1wells in exchange for consideration of $10 and the assumed and paid $84,975 of liabilities, which were owed to certain vendors of Gabriel. The properties purchased from Gabriel Rosser, LP by United American Petroleum Corp. are unevaluated and non-producing as of September 30, 2011, and the Company is currently undergoing various reserve studies to assess potential production and develop the wells purchased.
8. Note Payable
On August 10, 2010, the Company issued a promissory note to an individual in the amount of $250,000. The note matures on August 10, 2011 and is subject to an annual interest of 10%. The note was fully paid in January 2011.
As part of the Reverse Merger, the Company assumed two notes payable owed to an individual who is a shareholder of the Company. The notes payable are unsecured and each has a face value of $25,000 with a fixed interest rate of 10% per annum. The notes payable are due on demand and were fully paid in January 2011.
9. Convertible Note Payable
In connection with the Merger Transaction, the Company entered into a credit facility with one investor pursuant to which the investor agreed to lend up to $2,250,000 to us in multiple installments in exchange for a senior secured convertible promissory note with a conversion price of $0.50 per share and five-year warrants to acquire shares of common stock at an exercise price of $1.00 per share in the amount of each installment. The credit facility provides that the investor will lend additional installments to us in amounts as requested by us; provided however, that we provide the proposed use of proceeds for each requested amount. The investor shall have sole discretion in determining whether the proposed use of proceeds meets those requirements. The notes matures on December 31, 2013, or upon default, whichever is earlier and bear interest at an annual rate of 10%.
11
The first installment of $620,000 was delivered on December 31, 2010 and we issued 620,000 warrants in connection with the first installment.
The second installment of $150,000 was delivered to us on January 20, 2011 and we issued 150,000 warrants in connections with the second installment.
The third installment of $250,000 was delivered to us on March 9, 2011 and we issued 250,000 warrants in connection with the third installment.
The fourth installment of $75,000 was delivered to us on June 20, 2011 and we issued 75,000 warrants in connection with the fourth installment.
The fifth installment of $115,000 was delivered to us on June 30, 2011 and we issued 115,000 warrants in connection with the fifth installment.
Using a pro rata contribution, the Company allocated the proceeds of the January 20, 2011, March 9, 2011, June 20, 2011 and June 30, 2011 first to the relative fair value of the warrants and the remainder to the fair value of the embedded derivative on the date of grant as follows:
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January 20, 2011
Note
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March 9, 2011
Note
|
June 20,
2011
Note
|
June 30,
2011
Note
|
Total
|
|||||||||||||||||
|
Total Proceeds
|
$
|
150,000
|
$
|
250,000
|
$
|
75,000
|
$
|
115,000
|
$
|
590,000
|
|||||||||||
|
Allocated to:
|
|||||||||||||||||||||
|
Conversion Option Liability
|
333,652
|
376,698
|
95,155
|
142,246
|
947,751
|
||||||||||||||||
|
Relative Fair Value of Warrants
|
78,062
|
106,132
|
29,276
|
45,233
|
258,703
|
||||||||||||||||
|
411,714
|
482,830
|
124,431
|
187,479
|
1,206,454
|
|||||||||||||||||
|
Debt Discount
|
(150,000
|
)
|
(250,000
|
)
|
(75,000
|
)
|
(115,000
|
)
|
(590,000
|
)
|
|||||||||||
|
Loss on debt derivative
|
$
|
261,714
|
$
|
232,830
|
$
|
49,431
|
$
|
72,479
|
$
|
616,454
|
|||||||||||
In accordance with ASC 815-40, the Company identified certain reset provisions embedded within our convertible notes that requires that the Company bifurcate the embedded conversion option as liability at the grant date and to record changes in fair value relating to the conversion option liability in the statement of operations as of each subsequent balance sheet date. As discussed in Note 4, the Company incurred a non-cash loss of $254,121 resulting from the fair value calculation of this derivative at September 30, 2011. Our total embedded derivative loss is summarized below:
|
Beginning balance - December 31, 2010
|
-
|
||||
|
Excess of fair value of embedded derivative over face value of convertible debt
|
$
|
616,454
|
|||
|
Change in fair value of embedded derivative
|
254,121
|
||||
|
Ending Balance - September 30, 2011
|
$
|
870,575
|
12
UNITED AMERICAN PETROLEUM CORP.
10. Warrants
Warrant Activity
As described in Note 9, the Company issued a convertible note with detachable warrants. A summary of warrant activity for the period from August 10, 2010 (inception) through September 30, 2011 is presented below:
|
Number of
Warrants
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contract Term
|
|||||||||
|
Outstanding December 31, 2010
|
-
|
-
|
|||||||||
|
Issued
|
1,210,000
|
$
|
1.00
|
||||||||
|
Exercised
|
-
|
-
|
|||||||||
|
Outstanding June 30, 2011
|
1,210,000
|
$
|
1.00
|
4.25 years
|
|||||||
|
Exercisable, June 30, 2011
|
1,210,000
|
$
|
1.00
|
4.25 years
|
|||||||
Shares Reserved for Future Issuance
The Company has reserved shares for future issuance upon conversion of convertible notes payable and warrants as follows:
|
Conversion of notes payable
|
2,420,000
|
||
|
Warrants
|
1,210,000
|
||
|
Reserved shares at June 30, 2011
|
3,630,000
|
11. Subsequent Events
On October 14, 2011, we entered into a Note and Warrant Purchase Agreement with an investor pursuant to which the investor agreed to lend up to $1,500,000 in multiple installments in exchange for a senior secured convertible promissory note with a conversion price of $0.50 per share and five-year warrants to acquire shares of common stock at an exercise price of $1.00 per share in the amount of each installment. The first installment of $400,000 was delivered on the date of the Purchase Agreement and we issued 400,000 warrants to the investor in connection with the first installment. The notes matures on October 14, 2014, or upon default, whichever is earlier and bear interest at an annual rate of 10%.
In accordance with ASC 815-40, the Company identified certain reset provisions in the convertible notes which requires that the Company bifurcate the embedded conversion option as liability at the grant date and to record changes in fair value relating to the conversion option liability in the statement of operations as of each subsequent balance sheet date.
On October 14, 2011 , the Company determined a fair value of $504,907 for the conversion option liability for the first installment of convertible notes issued using the Black Scholes Option Pricing Model based upon the following assumptions: dividend yield of: -0-%, volatility of 109.29%, risk free rate: .24% and an expected term of 3 years.
On October 14, 2011, the Company determined a relative fair value of $110,245 for the detachable warrants for the first installment of convertible notes in accordance with ASC 470-20. In calculating the fair value of the warrants the Company used the Black Scholes Option Pricing Model based upon the following assumptions: dividend yield of: -0-%, volatility of 108.44%, risk free rate: .87% and an expected term of 5 years.
On November 4, 2011, United American Petroleum Corp. entered into and closed an Agreement with Alamo Energy Corp., a Nevada corporation pursuant to which United American acquired a 75% working interest in an oil and gas lease totaling approximately 110 gross acres located in Frio County, Texas and all wellbores and personal property related thereto for the total purchase price of $160,000. The effective date of this transaction was October 1, 2011.
13
The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements for the three and nine month periods ended September 30, 2011, together with notes thereto, and our audited financial statements for the year ended December 31, 2010, together with notes thereto on our Annual Report on Form 10-K. This report and our financial statements and notes to financial statements contain forward-looking statements, which generally include the plans and objectives of management for future operations, including plans and objectives relating to our future economic performance and our current beliefs regarding revenues we might generate and profits we might earn if we are successful in implementing our business strategies. We do not undertake to update, revise or correct any forward-looking statements.
Critical Accounting Policy and Estimates. Our Management’s Discussion and Analysis of Financial Condition and Results of Operations section discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources. In addition, these accounting policies are described at relevant sections in this discussion and analysis and in the notes to the financial statements included in this Quarterly Report on Form 10-Q for the period ended September 30, 2011.
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 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 reported periods. Actual results could materially differ from those estimates.
Revenue Recognition
The Company recognizes oil and gas revenue from interests in producing wells using the “sales method.” Under this method of accounting, revenues are recognized based on volumes sold, which may differ from the volume to which we are entitled based on our working interest. An imbalance is recognized as a liability only when the estimated remaining reserves will not be sufficient to enable the under–produced owner(s) to recoup its entitled share through future production. Under the sales method, no receivables are recorded where we have taken less than our share of production. Our net imbalance position at September 30, 2011 was immaterial.
Concentration of Credit Risk
The Company collects its receivables on its working interests in oil and gas properties from the well operators. As such, the Company generally has relatively few customers. These receivables are unsecured and the Company performs ongoing credit evaluations of the well operators’ financial condition whenever necessary. Bad debt is recognized on an account-by-account review after all means of collection have been exhausted and recovery is not probable. There has been no bad debt expense for the period ended September 30, 2011.
Oil and Gas Properties
The Company follows the full cost method of accounting for its investments in oil and gas properties. Under the full cost method, all costs associated with the exploration of properties are capitalized into appropriate cost centers within the full cost pool. Internal costs that are capitalized are limited to those costs that can be directly identified with acquisition, exploration, and development activities undertaken and do not include any costs related to production, general corporate overhead, or similar activities. Cost centers are established on a country-by-country basis.
14
Capitalized costs within the cost centers are amortized on the unit-of-production basis using proved oil and gas reserves. The cost of investments in unproved properties and major development projects are excluded from capitalized costs to be amortized until it is determined whether or not proved reserves can be assigned to the properties. Until such a determination is made, the properties are assessed annually to ascertain whether impairment has occurred. The costs of drilling exploratory dry holes are included in the amortization base immediately upon determination that the well is dry.
For each cost center, capitalized costs are subject to an annual ceiling test, in which the costs shall not exceed the cost center ceiling. The cost center ceiling is equal to i) the present value of estimated future net revenues computed by applying current prices of oil and gas reserves (with consideration of price changes only to the extent provided by contractual arrangements) to estimated future production of proved oil and gas reserves as of the date of the latest balance sheet presented, less estimated future expenditures (based on current costs) to be incurred in developing and producing the proved reserves computed using a discount factor of ten percent and assuming continuation of existing economic conditions; plus ii) the cost of properties not being amortized; plus iii) the lower of cost or estimated fair value of unproven properties included in the costs being amortized; less iv) income tax effects related to differences between the book and tax basis of the properties. If unamortized costs capitalized within a cost center, less related deferred income taxes, exceed the cost center ceiling, the excess is charged to expense and separately disclosed during the period in which the excess occurs.
Asset Retirement Obligations
ASC 410, Asset Retirement and Environmental Obligations addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. Specifically, ASC 410 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. In addition, the asset retirement cost is capitalized as part of the asset’s carrying value and subsequently allocated to expense over the asset’s useful life.
Fair Value of Financial Instruments
Unless otherwise indicated, the fair value of all reported assets and liabilities which represent financial instruments approximate the carrying values of such instruments due to their short-term maturity.
Recoverability of Long-Lived Assets
The Company has adopted Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment (“ASC 360-10”). ASC 360-10 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Events relating to recoverability may include significant unfavorable changes in business conditions or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of intangible assets would be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset. ASC 360-10 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less costs to sell.
Share-Based Compensation
The Company accounts for share-based compensation in accordance with Accounting Standards Codification subtopic 718-10, Stock Compensation (“ASC 718-10”). This requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including employee stock options and employee stock purchases related to an Employee Stock Purchase Plan based on the estimated fair values.
As of September 30, 2011, there were no outstanding employee stock options.
15
Income Taxes
The Company has adopted Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”). ASC 740-10 requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to amounts that are expected to be realized.
Recent Accounting Pronouncements
In December 2008, the SEC issued Release No. 33-8995, Modernization of Oil and Gas Reporting (ASC 2010-3), which amended the oil and gas disclosures for oil and gas producers contained in Regulations S-K and S-X, and added a section to Regulation S-K (Subpart 1200) to codify the revised disclosure requirements in Securities Act Industry Guide 2, which was eliminated. The goal of Release No. 33-8995 is to provide investors with a more meaningful and comprehensive understanding of oil and gas reserves. Energy companies affected by Release No. 33-8995 are now required to price proved oil and gas reserves using the unweighted arithmetic average of the price on the first day of each month within the 12-month period prior to the end of the reporting period, unless prices are defined by contractual arrangements, excluding escalations based on future conditions. SEC Release No. 33-8995 is effective beginning for financial statements for fiscal years ending on or after December 31, 2009. The Company adopted SEC Release No. 33-8995 effective December 31, 2009. The impact on the Company's operating results, financial position and cash flows has been recorded in the financial statements and additional disclosures were added to the accompanying notes to the consolidated financial statements for the Company's supplemental oil and gas disclosure.
In January 2010, the Financial Accounting Standards Board (FASB) issued FASB Accounting Standards Update (ASU) No. 2010-03, Oil and Gas Estimation and Disclosures (ASU 2010-03). This update aligns the current oil and natural gas reserve estimation and disclosure requirements of the Extractive Industries Oil and Gas topic of the FASB Accounting Standards Codification (ASC Topic 932) with the changes required by the SEC final rule ASC 2010-3. As discussed above, ASU 2010-03 expands the disclosures required for equity method investments, revises the definition of oil- and natural gas-producing activities to include nontraditional resources in reserves unless not intended to be upgraded into synthetic oil or natural gas, amends the definition of proved oil and natural gas reserves to require 12-month average pricing in estimating reserves, amends and adds definitions in the Master Glossary that is used in estimating proved oil and natural gas quantities and provides guidance on geographic area with respect to disclosure of information about significant reserves. ASU 2010-03 must be applied prospectively as a change in accounting principle that is inseparable from a change in accounting estimate and is effective for entities with annual reporting periods ending on or after a change in accounting estimate and is effective for entities with annual reporting periods ending on or after December 31, 2009. The Company adopted ASU 2010-03 effective December 31, 2009.
In April 2010, the FASB issued ASU 2010-17, Revenue Recognition-Milestone Method (Topic 605): Milestone Method of Revenue Recognition. The amendments in this update are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. If a vendor elects early adoption and the period of adoption is not the beginning of the entity’s fiscal year, the entity should apply the amendments retrospectively from the beginning of the year of adoption. The Company does not expect the provisions of ASU 2010-17 to have a material effect on the financial position, results of operations or cash flows of the Company.
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 a have a material impact on the Company's financial position, results of operations or cash flows.
Overview. On December 31, 2010, Forgehouse, Inc. (“Forgehouse,” “We” or the “Company”) entered into and closed an Agreement and Plan of Merger (the “Merger Agreement”) by and among, the Company, United American Petroleum Corp., a Nevada corporation (“United”), and our newly formed wholly-owned subsidiary, United PC Acquisition Corp., a Nevada corporation (“Merger Sub”) (the “Merger Transaction”). The transaction contemplated under the Merger Agreement was deemed to be a reverse acquisition, where Forgehouse, Inc. (the legal acquirer) is considered the accounting acquiree and United (the legal acquiree) is considered the accounting acquirer. Forgehouse is deemed a continuation of the business of United, and the historical financial statements of United became the historical financial statements of Forgehouse. United was incorporated on August 10, 2010, and, as such, had limited operations for the period from August 10, 2010 (inception) to September 30, 2010.
16
Recent Developments.
On October 14, 2011, we entered into a Note and Warrant Purchase Agreement with an investor pursuant to which the investor agreed to lend up to $1,500,000 in multiple installments in exchange for convertible promissory notes with a conversion price of $0.50 per share and five-year warrants to acquire shares of common stock at an exercise price of $1.00 per share in the amount of each installment. The first installment of $400,000 was delivered on October 14, 2011 and we issued 400,000 warrants to the investor in connection with the first installment. The notes matures on October 14, 2014, or upon default, whichever is earlier and bear interest at an annual rate of 10%.
On November 4, 2011, we entered into and closed an Agreement (the “Purchase Agreement”) with Alamo Energy Corp., a Nevada corporation pursuant to which we acquired a 75% working interest in an oil and gas lease (“Lozano Lease”) totaling approximately 110 gross acres located in Frio County, Texas and all wellbores and personal property related thereto for the total purchase price of $160,000. As a result of the Purchase Agreement, we own 100% working interest in the Lozano Lease, which is a currently producing asset with three wells with proven reserves.
For the three months ended September 30, 2011.
Results of Operations.
Revenues. We had oil sales of $47,842, gas sales of $618 and administrative income of $18,423 for the three months ended September 30, 2011. The oil sales were generated from our interest in the Lozano, McKinney, Walker Smith, Welder, Bailey, Rogers and Fohn leases. Our natural gas sales of $618 resulted from our Crouch and Lane Heady leases. Our administrative income was a result of income derived from oil and gas administrative fees charged by United Operating, LLC to well owners for managing and accounting for the development and production of their oil and gas property interests.
To implement our business plan during the next twelve months, we need to generate increased revenues from our existing oil and natural gas leases. Our failure to do so will hinder our ability to increase the size of our operations and to generate additional revenues. If we are not able to generate additional revenues to cover our operating costs, we may not be able to expand our operations.
Operating Expenses. For the three months ended September 30, 2011, our total operating costs and expenses were $181,207 which is primarily comprised of lease operating expenses of $26,193, accretion expense of $258, depletion expense of $1,475, and general and administrative expenses of $153,281. Our lease operating expenses relate to operating costs associated with our oil and natural gas leases. General and administrative expenses relate to wages, corporate start-up costs and administrative expenses associated with our leases and managing oil and gas properties. Our professional fees are related to our legal and accounting expenditures as well as consulting work performed on our oil and gas properties.
We expect that our future monthly operating expenses for fiscal year 2012 will be similar to our current expense levels, plus additional direct costs relating to newly acquired interests. We will continue to incur significant general and administrative expenses, but expect to generate increased revenues after further developing our business.
Other Expense. For the three months ended September 30, 2011, we incurred interest expense of $38,713 related to our convertible notes payable, and a loss on our embedded derivative related to our convertible notes in the amount of $489,746. Our change in the fair value of the embedded derivative liability related to changes in our Black Scholes model inputs which include the following: stock price, volatility, term of the note and the risk free rate. We incurred a non-cash charge of $489,746 relating to a fair value calculation in which the fair value of the debt derivative conversion features on the date of grant were in excess of the convertible note proceeds received. As such, we recognized an immediate expense in the amount of $489,746 in our Statement of Operations.
Net Loss. For the three months ended September 30, 2011, our net loss was $642,783. We hope to generate additional revenues from our projects to cover out operating costs, which will reduce our net loss in the future. We cannot guaranty that we will be able to generate additional revenues or, if that we do generate additional revenues, that such increased revenues will reduce our net loss in future periods.
17
For the nine months ended September 30, 2011.
Results of Operations.
Revenues. We had oil sales of $71,574, gas sales of $618 and administrative income of $71,977 for the nine months ended September 30, 2011. The oil sales were generated from our interest in the Lozano, McKinney, Walker Smith, Welder, Bailey Rogers and Fohn leases. Our natural gas sales of $618 resulted from our Crouch and Lane Heady leases. Our administrative income was a result of income derived from oil and gas administrative fees charged by United Operating, LLC to well owners for managing and accounting for the development and production of their oil and gas property interests.
To implement our business plan during the next twelve months, we need to generate increased revenues from the Lozano lease and other interests. Our failure to do so will hinder our ability to increase the size of our operations and to generate additional revenues. If we are not able to generate additional revenues to cover our operating costs, we may not be able to expand our operations.
Operating Expenses. For the nine months ended September 30, 2011, our total operating costs and expenses were $761,153 which is primarily comprised of lease operating costs of $41,310, accretion expense of $763, depletion expense of $5,677, and general and administrative expenses of $713,403. Our lease operating costs relate to operating costs associated with our oil and gas leases. General and administrative expenses relate to wages, corporate start-up costs and administrative expenses associated with our leases and managing oil and gas properties. Our professional fees are related to our legal and accounting expenditures as well as consulting work performed on our oil and gas properties.
We expect that our future monthly operating expenses for fiscal year 2012 will be similar to our current expense levels, plus additional direct costs relating to newly acquired interests. We will continue to incur significant general and administrative expenses, but expect to generate increased revenues after further developing our business.
Other Expense. For the nine months ended September 30, 2011, we incurred interest expense of $161,484 related to our convertible notes payable, and a loss on our embedded derivative related to our convertible notes in the amount of $870,575. Our change in the fair value of the embedded derivative liability related to changes in our Black Scholes model inputs which include the following: stock price, volatility, term of the note and the risk free rate. We incurred a non-cash charge of $870,575 relating to a fair value calculation in which the fair value of the debt derivative conversion features on the date of grant were in excess of the convertible note proceeds received. As such, we recognized an immediate expense in the amount of $870,575 in our Statement of Operations.
Net Loss. For the nine months ended September 30, 2011, our net loss was $1,649,043. We hope to generate additional revenues from our projects to cover out operating costs, which will reduce our net loss in the future. We cannot guaranty that we will be able to generate additional revenues or, if that we do generate additional revenues, that such increased revenues will reduce our net loss in future periods.
Liquidity and Capital Resources. As of September 30, 2011, our current assets were $211,625, which consisted of cash of $121,967, accounts receivable of $29,970 and other receivable of $59,688. Our current assets of $211,625 together with our evaluated oil and gas properties of $75,651, net of accumulated depletion of $9,587, and our unevaluated oil and gas properties of $295,418, represent our total assets of $582,694 as of September 30, 2011.
On August 10, 2010, we issued a promissory note for $250,000 bearing interest at 10% per annum and payable in one year. These proceeds were used to pay for the asset purchase of the Lozano and Marcee leases located in Texas. This note was fully paid in January 2011 by the Company. In January 2011, we paid $50,000 to a related party for a liability which we assumed as a result of the reverse merger with Forgehouse, Inc.
On December 31, 2010, we entered into a credit facility with one investor, whereby the investor agreed to lend up to $2,250,000 to us in multiple installments in exchange for senior secured convertible promissory notes with a conversion price of $0.50 per share and five-year warrants to acquire shares of common stock at an exercise price of $1.00 per share in the amount of each installment. The notes are due on December 31, 2013, or upon default, whichever is earlier, and bear interest at the annual rate of 10%. The first installment of $620,000 was delivered on December 31, 2010, and we issued 620,000 warrants to the investor in connection with the first installment. The agreement provides that the investor will lend additional installments to us in amounts as requested by us; provided however, that we provide the proposed use of proceeds for each requested amount. The second installment of $150,000 was delivered on January 20, 2011, and we issued 150,000 warrants to the investor in connection with second installment. The third installment of $250,000 was delivered on March 9, 2011, and we issued 250,000 warrants to the investor in connection with the third installment. The fourth installment of $75,000 was delivered on June 20, 2011, and we issued 75,000 warrants to the investor in connection with the fourth installment. The fifth installment of $115,000 was delivered on June 30, 2011, and we issued 115,000 warrants to the investor in connection with the fifth installment.
18
During the nine months ended September 30, 2011, we purchased oil and gas property interests for $5,000 from Patriot Minerals, LLC, and paid $10 and assumed liabilities and paid in the amount of $84,975 for the purchase of oil and gas interest from Gabriel Rosser, LP.
As of September 30, 2011, we had current liabilities in the amount of $338,738, of which $168,586 were represented by accounts payable and accrued expenses, $25,000 payable to a related party, $97,132 of accrued interest, $48,020 of revenue payable. As of September 30, 2011, we had long-term liabilities of $542,895 related to our convertible note net of discount, a debt derivative liability of $1,318,777, and an asset retirement obligation of $16,228.
During 2011 and 2012, we expect that the legal and accounting costs of being a public company will continue to impact our liquidity and we may need to obtain funds to pay those expenses. We also expect that we will incur significant expenses related to oil and gas exploration and development activities. Other than the anticipated increases in legal and accounting costs due to the reporting requirements of being a reporting company and expenses related to oil and gas exploration and development, we are not aware of any other known trends, events or uncertainties, which may affect our future liquidity.
We have incurred a net loss of $1,744,693 since August 10, 2010 (inception). These factors raise substantial doubt about our ability to continue as a going concern. Our management is implementing plans to sustain our cash flow from operating activities and/or acquire additional capital funding. No assurances can be given that we will obtain sufficient working capital to sustain ongoing operations. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
In the opinion of management, available funds will not satisfy our working capital requirements to operate at our current level of activity for the next twelve months. If we do not raise additional capital, then we may not be able to conduct oil and gas exploration and development activities and expand our operations.
Off-Balance Sheet Arrangements. We have no off-balance sheet arrangements as of September 30, 2011.
Not applicable.
Evaluation of disclosure controls and procedures. We maintain controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosures. Based upon their evaluation of those controls and procedures performed as of the end of the period covered by this report, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective due to our over reliance on consultants in our accounting and financial statement closing processes.
Changes in internal controls. There were no changes in our internal control over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
None.
Not applicable.
19
None.
None.
None.
| 101.ins | XBRL Instance Document |
| 101.sch | XBRL Taxonomy Schema Document |
| 101.cal | XBRL Taxonomy Calculation Linkbase Document |
| 101.lab | XBRL Taxonomy Label Linkbase Document |
| 101.pre | XBRL Taxonomy Presentation Linkbase Document |
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
United American Petroleum Corp.,
a Nevada corporation
|
|||
|
Date: November 21, 2011
|
By:
|
/s/ Michael Carey
|
|
|
Michael Carey
|
|||
|
CEO, President, and a director
(Principal Executive Officer)
|
|||
|
Date: November 21, 2011
|
By:
|
/s/ Christian Negri
|
|
|
Christian Negri
Treasurer and a director
(Principal Financial and Accounting Officer)
|
|||
21