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EXCEL - IDEA: XBRL DOCUMENT - Park Place Energy Corp. | Financial_Report.xls |
EX-32.1 - SECTION 906 CERTIFCATION - Park Place Energy Corp. | exhibit32-1.htm |
EX-31.1 - SECTION 906 CERTIFICATION - Park Place Energy Corp. | exhibit31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 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 Number: 000-51712
PARK PLACE ENERGY CORP.
(Exact name of small business issuer as specified in its charter)
Nevada | 71-0971567 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
300, 400 - 5th Avenue SW | |
Calgary, Alberta, Canada | T2P 0L6 |
(Address of principal executive offices) | (Zip Code) |
403-539-8710
Registrants telephone number,
including area code
1541 Ocean Avenue 200, Santa Monica, CA, 90401
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the 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 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 large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer, non-accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] | Accelerated filer [ ] |
Non-accelerated filer [ ] (Do not check if a smaller reporting company) | Smaller reporting company [X] |
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes [
] No [X]
State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date 20,667,726 shares of common stock as of November 14, 2011.
1
PARK PLACE ENERGY CORP.
Quarterly Report On Form 10-Q
For The Quarterly
Period Ended
September 30, 2011
INDEX
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
The following unaudited interim financial statements of Park Place Energy Corp.(sometimes referred to as we, us or our Company) are included in this quarterly report on Form 10-Q:
2
PARK PLACE ENERGY CORP.
(An
exploration stage company)
Consolidated financial statements
September
30, 2011
(Expressed in Canadian dollars)
(unaudited)
Index | |
Consolidated balance sheets | F1 |
Consolidated statements of operations | F2 |
Consolidated statements of cash flows | F3 |
Notes to the consolidated financial statements | F4 |
PARK PLACE ENERGY CORP.
(An
exploration stage company)
Consolidated balance sheets
(Expressed in
Canadian dollars)
September 30, | December 31, | |||||
2011 | 2010 | |||||
$ | $ | |||||
(unaudited) | ||||||
ASSETS | ||||||
Current assets | ||||||
Cash | 354,695 | 22 | ||||
Amounts receivable | 8,932 | 5,680 | ||||
Prepaid expenses and deposits | 37,380 | 2,204 | ||||
Due from related parties (Note 9) | 2,065 | | ||||
Total current assets | 403,072 | 7,906 | ||||
Property and equipment | 6,419 | 7,829 | ||||
Oil and gas properties (Note 3) | 79,350 | 76,860 | ||||
Total assets | 488,841 | 92,595 | ||||
LIABILITIES AND STOCKHOLDERS DEFICIT | ||||||
Current liabilities | ||||||
Accounts payable and accrued liabilities | 39,603 | 169,835 | ||||
Total liabilities | 39,603 | 169,835 | ||||
Going concern (Note 1) | ||||||
Commitments and contingencies (Note 9) | ||||||
Subsequent event (Note 10) | ||||||
Stockholders deficit | ||||||
Common stock | ||||||
Authorized: 40,000,000 shares,
par value US$0.00001 Issued and outstanding: 20,667,726 shares (December 31, 2010 5,598,909 shares) |
208 | 56 | ||||
Additional paid-in capital | 12,765,783 | 11,571,924 | ||||
Share subscriptions receivable (Note 5) | (309,780 | ) | | |||
Accumulated other comprehensive income | 215,800 | 228,480 | ||||
Deficit accumulated during the exploration stage | (12,222,773 | ) | (11,877,700 | ) | ||
Total stockholders deficit | 449,238 | (77,240 | ) | |||
Total liabilities and stockholders deficit | 488,841 | 92,595 |
(The accompanying notes are an integral part of these consolidated financial statements)
F-1
PARK PLACE ENERGY CORP.
(An
exploration stage company)
Consolidated statements of operations
(Expressed in Canadian dollars)
(unaudited)
Accumulated from | |||||||||||||||
Three months | Nine months | May 4, 2006 | |||||||||||||
ended | ended | (inception) to | |||||||||||||
September 30, | September 30, | September 30, | |||||||||||||
2011 | 2010 | 2011 | 2010 | 2011 | |||||||||||
$ | $ | $ | $ | $ | |||||||||||
Oil and gas revenue | | | | | 1,619,047 | ||||||||||
Direct costs | |||||||||||||||
Depletion | | | | | 1,235,574 | ||||||||||
Production costs | | | | | 1,140,050 | ||||||||||
| | | | (756,577 | ) | ||||||||||
Expenses | |||||||||||||||
Consulting | 82,183 | 9,503 | 126,826 | 112,117 | 1,992,517 | ||||||||||
Depreciation | 470 | 458 | 1,410 | 1,056 | 5,459 | ||||||||||
Exploration costs | | | | | 308,534 | ||||||||||
Foreign exchange loss | 14,820 | 133 | 18,268 | 2,684 | 139,454 | ||||||||||
Investor relations | 865 | 1,474 | 8,390 | 8,102 | 892,428 | ||||||||||
Management fees | 16,006 | | 31,636 | | 663,274 | ||||||||||
Office and general | 14,849 | 22,021 | 39,073 | 69,864 | 761,664 | ||||||||||
Professional fees | 23,489 | 5,396 | 65,525 | 95,021 | 985,771 | ||||||||||
Stock-based compensation | | 168,072 | | 331,072 | 2,004,083 | ||||||||||
Travel | 3,941 | 337 | 3,941 | 8,200 | 196,660 | ||||||||||
Write off (recovery) of oil and gas costs | | | (35,378 | ) | | 4,209,298 | |||||||||
Total expenses | 156,623 | 207,394 | 259,691 | 628,116 | 12,159,142 | ||||||||||
Loss before other income (expense) | (156,623 | ) | (207,394 | ) | (259,691 | ) | (628,116 | ) | (12,915,719 | ) | |||||
Other income (expense) | |||||||||||||||
Accretion of discount on convertible
note payable |
(95,988 | ) | | (109,946 | ) | | (109,946 | ) | |||||||
Gain on marketable securities | | 4,434 | | 4,434 | 4,635 | ||||||||||
Gain on sale of oil and gas properties | | | | | 381,166 | ||||||||||
Gain on settlement of debt | | | 4,886 | | 346,663 | ||||||||||
Interest and other revenue | | 15,766 | 19,678 | 57,836 | 129,383 | ||||||||||
Loss on sale of oil and gas properties | | | | | (53,869 | ) | |||||||||
Loss on write-down of promissory note | | | | | (254,997 | ) | |||||||||
Total other income (expense) | (95,988 | ) | 20,200 | (85,382 | ) | 62,270 | 443,035 | ||||||||
Loss before income taxes | (252,611 | ) | (187,194 | ) | (345,073 | ) | (565,846 | ) | (12,472,684 | ) | |||||
Deferred income tax recovery | | | | | 291,060 | ||||||||||
Net loss for the period | (252,611 | ) | (187,194 | ) | (345,073 | ) | (565,846 | ) | (12,181,624 | ) | |||||
Other comprehensive income (loss) | |||||||||||||||
Foreign currency translation adjustment | (14,494 | ) | (63 | ) | (12,680 | ) | (12,259 | ) | 215,800 | ||||||
Comprehensive loss | (267,105 | ) | (187,257 | ) | (357,753 | ) | (578,105 | ) | (11,965,824 | ) | |||||
Loss per share, basic and diluted | (0.02 | ) | (0.04 | ) | (0.04 | ) | (0.15 | ) | |||||||
Weighted average number of shares outstanding |
11,184,331 | 4,436,196 | 8,644,038 | 3,732,652 |
(The accompanying notes are an integral part of these consolidated financial statements)
F-2
PARK PLACE ENERGY CORP.
(An
exploration stage company)
Consolidated statements of cash flows
(Expressed in Canadian dollars)
(unaudited)
Accumulated from | |||||||||
Nine months | Nine months | May 4, 2006 | |||||||
ended | ended | (inception) to | |||||||
September 30, | September 30, | September 30, | |||||||
2011 | 2010 | 2011 | |||||||
$ | $ | $ | |||||||
Operating activities | |||||||||
Net loss for the period | (345,073 | ) | (565,846 | ) | (12,181,624 | ) | |||
Adjustments to reconcile net
loss to net cash used in operating activities: |
|||||||||
Accretion of discount on convertible note payable | 109,946 | | 109,946 | ||||||
Deferred income tax recovery | | | (291,060 | ) | |||||
Depletion | | | 1,235,574 | ||||||
Depreciation | 1,410 | 1,056 | 5,459 | ||||||
Gain on sale of marketable securities | | (4,434 | ) | (4,635 | ) | ||||
Gain on sale of oil and gas properties | | | (381,166 | ) | |||||
Gain loss on settlement of debt | (4,886 | ) | | (346,663 | ) | ||||
Interest accrued on notes payable | | | 12,530 | ||||||
Shares and warrants issued for services | | 11,274 | 895,760 | ||||||
Stock-based compensation | | 331,072 | 2,004,083 | ||||||
Write-off of exploration advances | | | 37,558 | ||||||
Write-off of oil and gas costs | | | 2,924,647 | ||||||
Changes in operating assets and liabilities | |||||||||
Amounts receivable | (3,252 | ) | 59,468 | (8,932 | ) | ||||
Prepaid expenses and deposits | (35,176 | ) | (3,030 | ) | (37,420 | ) | |||
Accounts payable and accrued liabilities | (7,035 | ) | 160,164 | 1,007,417 | |||||
Due to related parties | (2,065 | ) | (77,353 | ) | 63,384 | ||||
Net cash used in operating activities | (286,131 | ) | (87,629 | ) | (4,955,142 | ) | |||
Investing activities | |||||||||
Cash acquired through recapitalization | | | 320 | ||||||
Exploration advances | | (37,264 | ) | (270,919 | ) | ||||
Loan receivable | | | (572,000 | ) | |||||
Proceeds from sale of oil and gas properties | | | 50,000 | ||||||
Proceeds from sale of marketable securities | | | 79,635 | ||||||
Oil and gas properties expenditures | | | (3,741,761 | ) | |||||
Purchase of property and equipment | | (6,365 | ) | (11,878 | ) | ||||
Net cash used in investing activities | | (43,629 | ) | (4,466,603 | ) | ||||
Financing activities | |||||||||
Proceeds from loans payable | 145,550 | | 770,550 | ||||||
Proceeds from issuance of
common stock/ subscriptions received |
498,744 | 144,845 | 8,785,753 | ||||||
Repurchase of common stock | | | (15,028 | ) | |||||
Net cash provided by financing activities | 644,294 | 144,845 | 9,541,275 | ||||||
Effect of exchange rate changes on cash | (3,490 | ) | (12,259 | ) | 235,165 | ||||
Change in cash | 354,673 | 1,328 | 354,695 | ||||||
Cash, beginning of period | 22 | 4,414 | | ||||||
Cash, end of period | 354,695 | 5,742 | 354,695 | ||||||
Supplementary cash flow information (Note 8) |
(The accompanying notes are an integral part of these consolidated financial statements)
F-3
PARK PLACE ENERGY CORP.
(An
exploration stage company)
Notes to the consolidated financial statements
Nine months ended September 30, 2011
(Expressed in Canadian dollars)
(unaudited)
1. |
Basis of Presentation |
The accompanying consolidated financial statements of Park Place Energy Corp. (the Company) should be read in conjunction with the consolidated financial statements and accompanying notes filed with the U.S. Securities and Exchange Commission in the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2010. In the opinion of management, the accompanying financial statements reflect all adjustments of a recurring nature considered necessary to present fairly the Companys financial position and the results of its operations and its cash flows for the periods shown. | |
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. The results of operations and cash flows for the periods shown are not necessarily indicative of the results to be expected for the full year. | |
These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has a history of negative cash flows from operating activities and the continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As at September 30, 2011, the Company has accumulated losses of $12,222,773 since inception. This factor raises substantial doubt regarding the Companys ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. | |
2. |
Recent Accounting Pronouncements |
In January 2010, the FASB issued an amendment to ASC 820, Fair Value Measurements and Disclosures, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis. This standard is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010. The adoption of the applicable standard on January 1, 2011 did not have a material effect on the Companys financial statements. | |
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations. | |
3. |
Oil and Gas Properties |
September 30, | December 31, | ||||||
2011 | 2010 | ||||||
$ | $ | ||||||
Unproven Properties | |||||||
Canada | 79,350 | 76,860 |
On June 5, 2011, the Company entered into two farm-in agreements related to our 25% interest in an 80 acre oil and gas parcel located in western Saskatchewan. Pursuant to the terms of the agreement, the operator has agreed to undertake all costs related to drilling two test wells on the property by September 15, 2011. Once the test wells are drilled, the operator will be provided with a 60% working interest in the properties.
The Company presently holds a 98,000 square kilometer exploration claim in the Dobroudja Basin located in northeast Bulgaria (the Vranino Block). The Company intends to conduct exploration activities over a 5 year period including seismic processing and the drilling of, at minimum, six test wells for a minimum cost of approximately US$5,000,000. An appeal against the Bulgarian Council of Ministers decision to award the Vranino Block to the Company was filed with the Supreme Administrative Court of Bulgaria and is presently pending. The Company awaits the result of this appeal process prior commencing the exploration program.
F-4
PARK PLACE ENERGY CORP.
(An
exploration stage company)
Notes to the consolidated financial statements
Nine months ended September 30, 2011
(Expressed in Canadian dollars)
(unaudited)
4. |
Note Payable | |
On March 29, 2011, the Company issued a convertible promissory note for $145,500 (US$150,000). The note was secured by the issuance of 5,000,000 common shares of the Company, bearing interest at 10% per annum. The note was convertible into share of common stock of the Company at US$0.04 per share. In accordance with ASC 470, Debt - Debt with Conversions and Other Options, the Company determined that the note contained a beneficial conversion feature. Accordingly, the Company recognized $109,946 (US$112,500) as additional paid-in capital with an equivalent discount against the note. | ||
On August 19, 2011, an amendment agreement was signed increasing the conversion price to Cdn$0.05 per share of common stock. | ||
On September 30, 2011, the note was converted into 3,288,600 shares of common stock for the balance of the note plus accrued interest. At this time the remaining balance of the discount was recorded to accretion expense for a total of Cdn$109,946 (US$112,500) for the nine month period ending September 30, 2011. | ||
5. |
Common Stock | |
(a) |
On May 4, 2011, the Company issued 500,000 shares of common stock as collateral for the note payable described in Note 4. On September 30, 2011, the shares were cancelled upon conversion of the note payable to shares of common stock. | |
(b) |
On May 27, 2011, the Company issued 500,000 shares of common stock with a fair value of US$0.05 per share to settle accounts payable of Cdn$29,319 (US$30,000). The issuance resulted in a gain on settlement of debt of Cdn$4,886 (US$5,000). | |
(c) |
On August 11, 2011, the Company issued 266,667 shares of common stock at a price of US$0.075 per share for proceeds of Cdn$19,766 (US$20,000). | |
(d) |
On August 12, 2011 the Company issued 206,250 shares of common stock at a price of US$0.08 per share for proceeds of Cdn$16,347 (US$16,500). | |
(e) |
On September 28, 2011 the Company issued 648,300 shares of common stock with a fair value of Cdn$66,943 (US$64,830) to settle accounts payable. | |
(f) |
On September 29, 2011, the Company issued 184,000 shares of common stock with a fair value of Cdn$19,073 (US$18,400) to settle accounts payable. | |
(g) |
On September 30, 2011 the Company issued 9,975,000 shares of common stock at a price of US$0.075 per share for proceeds of Cdn$772,411 (US$748,025), of which $309,780 (US$300,000) was received as share subscriptions receivable. Refer to Note 11. | |
(h) |
On September 30, 2011 the Company issued 3,288,600 shares of common stock at a price of $0.05 per share for the conversion of the Cdn$157,230 (US$150,000) note payable plus accrued interest of Cdn$7,862 (US$7,500). | |
6. |
Stock Options | |
The following table summarizes the continuity of the Companys stock options: |
Weighted | Weighted | ||||||||||||
average | average | Aggregate | |||||||||||
exercise | remaining | intrinsic | |||||||||||
Number | price | contractual life | value | ||||||||||
of options | $ | (years) | $ | ||||||||||
Outstanding and exercisable, December 31, 2010
and September 30, 2011 |
294,881 | 0.51 | 0.57 | |
F-5
PARK PLACE ENERGY CORP.
(An
exploration stage company)
Notes to the consolidated financial statements
Nine months ended September 30, 2011
(Expressed in Canadian dollars)
(unaudited)
6. |
Stock Options (continued) |
Additional information regarding stock options as of September 30, 2011, is as follows: |
Exercise | ||
Number of | price | |
options | $ | Expiry date |
294,881 | 0.51 | January 25, 2012 |
As of September 30, 2011 and December 31, 2010, the Company had no unrecognized compensation expense relating to unvested options.
The fair value for stock options granted have been estimated using the Black-Scholes option pricing model assuming no expected dividends and the following weighted average assumptions:
Nine months | Nine months | |||||
ended | ended | |||||
September 30, | September 30, | |||||
2011 | 2010 | |||||
Risk-free interest rate | | 1.83% | ||||
Expected life (in years) | | 2.0 | ||||
Expected volatility | | 280% |
7. |
Share Purchase Warrants |
The following table summarizes the continuity of share purchase warrants: |
Weighted | |||||||
average | |||||||
exercise | |||||||
Number of | price | ||||||
warrants | $ | ||||||
Balance, December 31, 2010 | 287,856 | 0.31 | |||||
Expired | (33,333 | ) | 0.60 | ||||
Balance September 30, 2011 | 254,523 | 0.27 |
As at September 30, 2011, the following share purchase warrants were outstanding:
Exercise | ||
Number of | price | |
warrants | $ | Expiry date |
187,857 | 0.26 | January 16, 2012 |
66,666 | 0.30 | May 19, 2012 |
254,523 |
F-6
PARK PLACE ENERGY CORP.
(An
exploration stage company)
Notes to the consolidated financial statements
Nine months ended September 30, 2011
(Expressed in Canadian dollars)
(unaudited)
8. |
Supplementary Cash Flow Information |
Nine months | Nine months | ||||||
ended | ended | ||||||
September 30, | September 30, | ||||||
2011 | 2010 | ||||||
$ | $ | ||||||
Non-cash investing and financing activities: | |||||||
Common stock issued to accounts payable and accrued liabilities | 123,197 | 443,737 | |||||
Common stock issued for conversion of note payable | 157,230 | | |||||
Marketable securities received for assignment of oil and gas interest | | 75,000 | |||||
Supplemental disclosures: | |||||||
Interest paid | | | |||||
Income taxes paid | | |
9. |
Commitments and Contingencies | |
(a) |
The Companys Vranino 1-11 exploration claim in Bulgaria is the subject of an appeal before the Supreme Administrative Court of Bulgaria whereas a competitive bidder seeks to overturn the award. The matter is ongoing and is awaiting trial. | |
(b) |
The Company is obligated to perform a five year work program on the Vranino 1-11 block of North East Bulgaria which total cost is estimated at US$5,000,000, subject to the finalization of the award in favor of the Company. | |
10. |
Subsequent Event | |
Subsequent to September 30, 2011, the Company received the full balance of the share subscriptions receivable of $309,780 (US$300,000). |
F-7
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
This quarterly report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology including "could", "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential" and the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.
While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested in this report.
Overview of our Business
We are an oil and natural gas company focusing on the exploration and development of gas primarily in Europe. From 2006 to 2010, we engaged in several exploration projects in the US, Canada and offshore. In 2009 and 2010, we disposed of all but one of our North American projects to refocus our exploration efforts. Historically, our operating strategy with respect to the projects that we have participated in was to utilize local drilling services companies to conduct services on our exploration properties. These arrangements require us to pay our proportionate share of costs for drilling or alternately to farm in an operator for a percentage interest in any oil or gas discoveries. In each of our projects we provide technical input and expertise on how best to develop the properties. As a way to keep our overhead down, we engage the services of consultants who have technical expertise depending on the nature of the exploration claim. Several of these projects have produced oil or gas while others were ultimately deemed unproductive.
In 2010, we revamped our business strategy to focus on obtaining European exploration properties for both conventional and unconventional gas (shale, tight gas and coal bed methane). We retained consultants with specialized technical expertise in unconventional gas exploration to assist us in locating, assessing and planning suitable exploration and development of potential opportunities. In October of 2010, we were awarded an exploration permit for the Vranino 1-11 block located in Dobroudja Basin by the Bulgarian Counsel of Ministers, with terms and conditions of the permit as follows:
-
Five year term exploration program;
-
Perforate and re-test the Vranino #1 well previously drilled;
-
Initiate a comprehensive 2-D and 3-D seismic program over the license area,
-
Drill and complete a 5 additional test wells in the eastern up-thrown block within the license area
Our minimum work commitment as required by the permit broken down by year is as follows:
Year | Exploration activity | Budgeted cost |
Year 1 | Complete the Vranino #1 well, Identify existing seismic lines that would be good candidates for reprocessing, Purchase and reprocess existing seismic data. | $350,000 |
Year 2 | Design and make initial arrangements for acquisition of 2-D seismic, Acquisition of new 2-D high resolution seismic; Process and interpret 2-D seismic; Incorporate data (2-D) into geologic model; Design and make initial arrangements for new 3-D high resolution seismic acquisition | $275,000 |
Year 3 | Acquisition of new 3-D high resolution seismic; Process and interpret 3-D seismic; Incorporate data (3-D) into geologic model. | $350,000 |
Year 4 | Design drilling program; Drill and complete first of five wells; Test and evaluate production; Design drilling program for remaining four wells of 5- Spot based on results of evaluation of first well. | $800,000 |
Year 5 | Drill and complete remaining four wells of 5-Spot; Design gathering system for five wells; Prepare Summary Report of project results. | $3,050,000 |
Total estimated work program budget | $4,825,000 |
3
To formulate our work program, we consulted with the previous operator, local geologists and others. The costs of the exploration plan may vary depending on a variety of factors, including, inter alia, the market price and availability of technical services in the local area, taxes, and transportation costs relating to delivering equipment to the exploration area.
Subsequent to the award of this claim, we have engaged in an assessment of drilling services companies in the local area suitable to engage to provide drilling services in the region. We have located several suitable service providers for drilling and other services which we intend to engage at the appropriate time. Local companies in Bulgaria will be used to provide services to the best extent possible. However, as the Bulgarian energy sector is relatively undeveloped, the availability of local drilling services specialized to unconventional gas exploration is limited. Park Place has determined that such expertise, services or equipment is available in Romania, Turkey and other surrounding regions. We have located suitable drilling services companies in Romania and Turkey that we may hire to perform the more difficult drilling involving unconventional gas hydrocarbon structures.
Our exploration of the Vranino 1-11 block has not yet commenced due to the fact the a competing bidder has disputed the award of the claim to Park Place. The appeal is set to be heard in March 2012. The Ministry of Economy, Energy and Tourism takes the position that the permit was validly issued to Park Place.
Financing
Effective September 30, 2011, we issued an aggregate of 9,975,000 shares of our common stock pursuant to private placement subscription agreements with nine (9) investors at a purchase price of $0.075 per share for aggregate proceeds of $748,125. We issued the shares to seven (7) non-U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933), relying on Regulation S and/or Section 4(2) of the Securities Act of 1933 and to two (2) U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933) relying upon Rule 506 of Regulation D of the Securities Act of 1933.
Effective September 30, 2011, we issued an aggregate of 3,288,600 common shares at a purchase price of CDN$0.05 per share in accordance with the terms of the Convertible Promissory Note dated April 6, 2011 (as reported in our 10-Q dated May 16, 2011), and as amended August 19, 2011. The full amount owing under the note was converted into shares of our common stock for aggregate proceeds of US$157,500. We issued the shares to non-U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933), relying on Regulation S and/or Section 4(2) of the Securities Act of 1933.
Plan of Operations
Overview
Our Plan of Operations is to focus exploring and developing the Vranino 1-11 exploration claim in Bulgaria and acquiring interests in other exploration claims in Bulgaria or similar regions.
Management is in the process of expanding its Board of Directors and management team to accommodate the planned increase in operations and exploration activity.
Park Place will continue to pursue a positive conclusion to the current litigation relating to the Vranino 1-11 claim through any means available. We have obtained legal representation in Bulgaria to represent us in this matter. Our plan of Operations is highly contingent upon the results and timing of the litigation surrounding the Vranino permit.
Park Place intends to pay for the initial year of the Vranino exploration program utilizing funds received from the August Offering. Park Place plans intends to raise additional capital within the next twelve months to pay for the balance of the work program relating to Vranino 1-11 in Bulgaria. The work program is expected to conclude no later than in 2016. Subject to the positive conclusion of the appeal before the Supreme Administrative Court of Bulgaria, management will undertake subsequent financings as required.
Utilizing funding from the August Offering Park Place intents to open a permanent office in Bulgaria in which to base its exploration activities. Park Place plans to hire a local geologist, a regional manager, and other staff on a full time basis. As the exploration program progresses, Park Place plans to hire additional employees. Park Place estimates it will cost at minimum $250,000 over 12 months to establish the office in Bulgaria.
Management intends to conduct additional 2-D and 3-D seismic processing, the reprocessing of historical seismic data, and the purchase of additional seismic data held by third parties. Park Place plans to perforate and test the existing Vranino #1 well over the next twelve months. Park Place estimates that the first year seismic program as described herein will cost $375,000.
We anticipate spending approximately $250,000 over the next 12 months in office and general expenses, as well as approximately $200,000 in professional and consulting fees.
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Park Place anticipates disposing of its interest in the Edam property for cash consideration so that it may use the proceeds towards general corporate purposes in furtherance of its Vranino 1-11 claim in Bulgaria. Until the production results and production quantities are known, it is difficult to assess the potential selling price for its interest in the Edam claim.
While the Company awaits the outcome of legal in Bulgaria relating to the Vranino 1-11 claim, Park Place is actively seeking further exploration opportunities either through direct acquisition or joint venture agreements in the same region.
Working Capital
Based on our current plan of operations as set forth above, we estimate that we will require approximately $1,075,000 to pursue our plan of operations over the next 12 months. As at September 30, 2011, we had cash of $354,695. On October 4, 2011 we received payment for subscription receivables of $309,780.
We anticipate that additional funding will be in the form of equity financing from the sale of our common stock will be required to complete our plan of operations. If we do not continue to obtain additional financing going forward, we will reevaluate our plans.
Results of Operations
The following summary of our results of operations should be read in conjunction with our financial statements for the quarter ended September 30, 2011 which are included herein.
Revenue
We did not have any oil and gas revenue for the nine months ended September 30, 2011, nor for the nine months ended September 30, 2010.
Since inception, we have incurred oil and gas revenues of $1,619,047 relating to our successful exploration efforts and depletion costs of $1,235,574. We have written off expenditures of $4,209,298 relating to exploration efforts that did not yield productive results.
Expenses
Our total expenses for the nine months ending September 30, 2011 total $259,691 compared to $628,116 for the same period in 2010. The significant reduction in expenses relates to the fact that we have been delayed in implementing our exploration program in Bulgaria which results from the appeal taken of the award of the claim by a competitive bidder. Our expenses for the three months ending September 30, 2011 were $156,623 compared with $207,394 for the same period in 2010.
Our primary expense categories are described below:
Office and General Expenses
Our office and general expenses decreased to $14,849 for the three months ended September 30, 2011 from $22,021 for the three months ended September 30, 2010.
Professional Fees
Our professional fees decreased to $23,489 for the three months ended September 30, 2011 from $5,396 for the three months ended September 30, 2010.
Management and Consulting
Our management and consulting fees increased to $98,189 for the three months ended September 30, 2011 from $9,503 for the three months ended September 30, 2010.
Investor Relations Expenses
Our investor relations expense for the three months ended September 30, 2011 increased to $865 compared to $1,474 for the three months ended September 30, 2010.
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Stock-Based Compensation Expense
Our stock-based compensation expense decreased to $nil for the three months ended September 30, 2011 from $168,072 for the three months ended September 30, 2010.
Loss
Our net loss before other items and taxes for the three months ended September 30, 2011 was $252,611, compared to $187,194 for the three months ended September 30, 2010. Our net loss before other items and taxes for the nine months ended September 30, 2011 was $345,073, compared to $565,846 for the nine months ended September 30, 2010.
Liquidity and Capital Resources
Overview
From May 4, 2006 (date of inception) to September 30, 2011, we raised net proceeds of $8,785,753 in cash from the issuance of common stock and share subscriptions received, $770,550 from loans payable for a total of $9,556,303 of cash provided by financing activities for the period.
We used net cash of $286,131 in operating activities for the nine months ended September 30, 2011 compared to $87,629 for the same period in 2010. We used net cash of $4,955,142 in operating activities for the period from May 4, 2006 (date of inception) to September 30, 2011.
The following table summarizes our liquidity position as of September 30, 2011 (excluding Capital received after quarter-end):
As at | As at | |||||
September 30, 2011 | December 31, 2010 | |||||
(Unaudited) | (Audited) | |||||
Cash | $ | 354,695 | $ | 22 | ||
Working capital (deficit) | 363,469 | (161,929 | ) | |||
Total assets | 488,841 | 92,595 | ||||
Total liabilities | 39,603 | 169,835 | ||||
Shareholders equity (deficiency) | 449,238 | (77,240 | ) |
We anticipate that we will require approximately $1,075,000 to pursue our plan of operations over the next 12 months. As at September 30, 2011, we had cash of $ 354,695 and working capital of $363,469. We require additional financing to pursue our plan of operations over the next 12 months, with amounts primarily depending upon the results of any cash flows from Edam oil revenues, and the actual costs of our first year exploration program in Bulgaria on Vranino 1-11. We anticipate raising additional funds over the next twelve months to pay for our exploration commitments in Bulgaria.
Below is a summary of our anticipated expenditures over the next 12 months:
Description | Estimated |
expenses | |
($) | |
Office and general | 275,000 |
Consulting Fees | 100,000 |
Professional Fees | 200,000 |
Wages and Benefits | 150,000 |
Management Fees | 400,000 |
Total | 1,075,000 |
If we lose the Vranino 1-11 claim in Bulgaria then our anticipated expenditures will be significantly reduced.
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Cash Flow from Investing Activities
Net cash from investing activities in the nine months ended September 30, 2011 was $nil compared to $43,629 used in investing activities in the nine months ended September 30, 2010.
Cash Provided By Financing Activities
For the nine months ended September 30, 2011, received cash of $640,294 compared to $144,845 for the nine months ended September 30, 2010.
Off-Balance Sheet Arrangements
There are no off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources, which individually or in the aggregate is material to our investors.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable because we are a smaller reporting company.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
David Johnson, our principal executive and our principal financial officer, is responsible for establishing and maintaining disclosure controls and procedures for our company.
Management has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2011 (under the supervision and with the participation of our principal executive officer and principal financial officer), pursuant to Rule 13a-15(b) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and principal financial officer concluded that our companys disclosure controls and procedures were effective as of September 30, 2011.
No Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
We currently are party to legal proceedings in Bulgaria where a competitive bidder, Overgas, seeks to overturn the Bulgarian Counsel of Ministers award of the Vranino 1-11 exploration claim to us. The Ministry of Energy, Environment and Tourism continues to support the granting of the award to Park Place. The next court hearing is scheduled for March 2012.
Item 1A. Risk Factors
Not applicable because we are a smaller reporting company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On August 11, 2011 the Company issued 266,667 common shares at a value of US$0.075 per share for cash payment of US$20,000. We relied on Regulation S as an exemption from the registration requirements of the Securities Act for the issuance of the shares.
On August 12, 2011 the Company issued 206,250 common shares at a value of $0.08 per share for cash payment of US$16,500. We relied on Regulation S as an exemption from the registration requirements of the Securities Act for the issuance of the shares.
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On September 28, 2011, the Company issued of 648,300 common shares to settle debt with a fair value of US$64,830. We relied on Regulation S as an exemption from the registration requirements of the Securities Act for the issuance of the shares.
On September 29, 2011 the Company issued 184,000 common shares to settle debt with a fair value of US$18,400. We relied on Regulation S as an exemption from the registration requirements of the Securities Act for the issuance of the shares.
On September 29, 2011 the Company issued 9,975,000 common shares at a value of US$0.075 per share for cash payment of $748,025. We relied on Regulation S as an exemption from the registration requirements of the Securities Act for the issuance of the shares.
On September 30, 2011, we issued an aggregate of 3,288,600 common shares at a purchase price of CND$0.05 per share in accordance with the terms of the Convertible Promissory Note dated April 6, 2011 (as reported in our 10-Q dated May 16, 2011), and as amended August 19, 2011. The full amount owing under the note of US$150,000 plus accrued interest of US$7,500) was converted into shares of our common stock. We issued the shares to non-U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933), relying on Regulation S and/or Section 4(2) of the Securities Act of 1933.
Item 3. Defaults Upon Senior Securities
None.
Item 4. (Removed and Reserved)
Not applicable.
Item 5. Other Information
None
Item 6. Exhibits
Articles of Incorporation and By-laws | |
3.1 |
Articles of Incorporation(1) |
3.2 |
Bylaws(2) |
3.3 |
Certificate of Change Effective August 31, 2009(7) |
3.4 |
Certificate of Change Effective March 24, 2010(8) |
Material Contracts |
|
10.1 |
Amalgamation agreement dated July 30, 2007 among the Company, Park Place Energy Inc., and 0794403 B.C. Ltd. (1) |
10.2 |
Farmout Agreement dated May 30, 2006 between Bounty Developments Ltd. and the Company(1) |
10.3 |
Oil Sands Lease No. 7406080083 dated August 10, 2006 (1) |
10.4 |
Oil Sands Lease No. 7406080084 dated August 10, 2006 (1) |
10.5 |
Seismic Option Agreement dated September 22, 2006 among the Company, Bounty Developments Ltd. and Damascus Energy Inc. (1) |
10.6 |
Farmout and Option Agreement dated September 25, 2006 between the Company and Patch Energy Inc. (1) |
10.7 |
Farmout Participation and Option Agreement dated October 12, 2006 among the Company, Terra Energy Corp., Regal Energy Ltd. and Patch Energy Inc. (1) |
10.8 |
Amendment Agreement dated November 2, 2006 among Pine Petroleum Limited, Tidewater Resources Inc. and the Company (1) |
10.9 |
Letter Agreement dated March 27, 2007 between the Company and Great Northern Oilsands, Inc. (1) |
10.10 |
Letter Agreement dated April 4, 2007 between the Company and Great Northern Oilsands, Inc. (1) |
10.11 |
Letter Agreement dated April 30, 2007 between the Company and Great Northern Oilsands, Inc. (1) |
10.12 |
Earning Agreement dated June 1, 2007 among the Company, Great Northern Oilsands Inc. and Tidewater Resources Inc. (1) |
10.13 |
Letter Agreement dated July 6, 2007 between Britcana Energy Ltd. and the Company (1) |
10.14 |
Letter Agreement dated November 30, 2007 between Great Northern Oilsands, Inc. and the Company (5) |
10.15 |
Participation Agreement dated August 8, 2007 between Montello Resources Ltd. and Great Northern Oilsands, Inc. (5) |
10.16 |
Consulting Agreement dated January 1, 2007 between the Company and David Stadnyk(1) |
10.17 |
Change of Control Agreement dated December 1, 2007 between the Company and Merchant Equities Capital Corp. (5) |
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10.18 | Park Place Energy Corp. 2007 Stock Option Plan (5) |
10.19 | Park Place Energy Corp. 2007 Stock Option Plan, as amended June 2009(10) |
10.20 | Purchase and Sale Agreement dated February 15, 2008 among the Company, Panther Minerals Inc. and Brasam Extracao Ltda.(3) |
10.21 | Amended Management Services Agreement dated April 10, 2008 between the Company and David Stadnyk (5) |
10.22 | Termination Agreement regarding the Worsley Area Properties between the Company and Bounty Developments Ltd. dated June 25, 2008(6) |
10.23 | Termination Agreement regarding the Atlee Buffalo Area Properties between the Company and Bounty Developments Ltd. dated June 25, 2008(6) |
10.24 | Offer to Purchase Agreement regarding the Kerrobert Area Properties between the Company and True Energy Inc. dated June 25, 2008(6) |
10.25 | Purchase and Sale Agreement between the Company and Brasam Extracao Minerals Ltda. dated June 26, 2008(6) |
10.26 | Petroleum and Natural Gas Lease dated July 24, 2008(6) |
10.27 | Termination Agreement regarding
the Cecil (Eureka) Area Properties between the Company and Bounty Developments
Ltd. dated March 30, 2009(6) |
10.28 | Seismic Earning Agreement dated August 19, 2009(7) |
10.29 | Purchase and Sale Agreement dated September 16, 2009(9) |
10.30 | Notice of Assignment(9) |
10.31 | Assignment Agreement dated May 11, 2010 with Canadian Rigger Energy Inc. (11) |
10.32 | Convertible Promissory Note dated April 6, 2011 with Pikka Asset Management Ltd (12) |
14.1 | Code of Ethics (4) |
Subsidiaries of the Small Business Issuer | |
21.1 | Subsidiaries of Small Business Issuer: |
Name of Subsidiary | Jurisdiction of Incorporation | |
Park Place Energy (Canada) Inc. | British Columbia | |
Park Place Energy (International) Inc. | British Columbia |
Certifications | |
31.1 | |
32.1 |
Notes |
|
(1) |
Incorporated by reference from our Current Report on Form 8-K/A, filed with the SEC on August 8, 2007. |
(2) |
Incorporated by reference from our registration statement on Form SB-2, filed with the SEC on December 9, 2004. |
(3) |
Filed with our Current Report on Form 8-K, filed with the SEC on March 6, 2008. |
(4) |
Incorporated by reference from our Annual Report of Form 10-KSB, filed with the SEC on October 11, 2006. |
(5) |
Incorporated by reference from our Annual Report on Form 10-KSB, filed with the SEC on April 15, 2008. |
(6) |
Incorporated by reference from our Annual Report on Form 10-K, filed with the SEC on March 31, 2009. |
(7) |
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on September 3, 2009. |
(8) |
Incorporated by reference form our Current Report on Form 8-K, filed with the SEC on March 29, 2010. |
(9) |
Incorporated by reference form our Current Report on Form 8-K, filed with the SEC on November 11, 2009. |
(10) |
Incorporated by reference from our Annual Report on Form 10-K, filed with the SEC on April 15, 2010. |
(11) |
Incorporated by reference from our Current Report on Form 8-K, filed with the SEC on May 25, 2010. |
(12) | Incorporated by reference from our Quarterly Report on Form 10-Q, filed with the SEC on May 16, 2011 |
(13) |
Filed herewith. |
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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.
PARK PLACE ENERGY CORP.
By: | David Johnson |
David Johnson | |
President, Chief Executive Officer, Secretary, | |
Treasurer and a Director | |
(Principal Executive Officer and Principal Financial Officer) | |
Date: November 18, 2011 |
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