Attached files
file | filename |
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EXCEL - IDEA: XBRL DOCUMENT - FRIENDLY ENERGY EXPLORATION | Financial_Report.xls |
EX-31.1 - EXHIBIT 31.01 SECTION 302 CERTIFICATION - FRIENDLY ENERGY EXPLORATION | f10q063012_ex31z1.htm |
EX-32.2 - EXHIBIT 32.02 SECTION 906 CERTIFICATION - FRIENDLY ENERGY EXPLORATION | f10q063012_ex32z2.htm |
EX-31.2 - EXHIBIT 31.02 SECTION 302 CERTIFICATION - FRIENDLY ENERGY EXPLORATION | f10q063012_ex31z2.htm |
EX-32.1 - EXHIBIT 32.01 SECTION 906 CERTIFICATION - FRIENDLY ENERGY EXPLORATION | f10q063012_ex32z1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X . QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2012
. TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission File Number 000-31423
FRIENDLY ENERGY EXPLORATION
(Name of small business issuer in its charter)
Nevada |
| 91-1832462 |
(State of incorporation) |
| (I.R.S. Employer Identification No.) |
6005 N. Highway 279
Brownwood, TX 76801
(Address of principal executive offices)
(702) 953-0411
(Registrants telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X . No .
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
(Not required) 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" 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 .
As of August 1, 2012 there were 234,943,384 shares of the registrants $0.001 par value common stock issued and outstanding.
FRIENDLY ENERGY EXPLORATION*
TABLE OF CONTENTS
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PART I. | FINANCIAL INFORMATION |
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ITEM 1. | FINANCIAL STATEMENTS | 3 |
ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 14 |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 16 |
ITEM 4. | CONTROLS AND PROCEDURES | 16 |
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PART II. | OTHER INFORMATION |
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ITEM 1. | LEGAL PROCEEDINGS | 17 |
ITEM 1A. | RISK FACTORS | 17 |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 17 |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | 17 |
ITEM 4. | MINE SAFETY DISCLOSURES | 17 |
ITEM 5. | OTHER INFORMATION | 18 |
ITEM 6. | EXHIBITS | 19 |
Special Note Regarding Forward-Looking Statements
Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Friendly Energy Exploration (the Company), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words may, will, should, expect, anticipate, estimate, believe, intend, or project or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
*Please note that throughout this Quarterly Report, and unless otherwise noted, the words "we," "our," "us," the "Company," or "FEGR" refers to Friendly Energy Exploration.
2
PART I - FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
FRIENDLY ENERGY EXPLORATION
An Exploration Stage Company
Financial Statements
June 30, 2012
Index
Balance Sheet | 4 |
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Statement of Operations | 5 |
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Statement of Cash Flows | 6 |
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Statement of Stockholders Equity | 7 |
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Notes to the Financial Statements | 8 |
3
FRIENDLY ENERGY EXPLORATION
(An Exploration Stage Company)
Consolidated Balance Sheet
(Expressed in U.S. Dollars)
(unaudited)
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| Jun. 30, 2012 |
| Dec. 31, 2011 |
ASSETS |
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Current assets |
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| Cash and cash equivalents | $ | 76 | $ | 13,069 | ||
| Accounts Receivable |
| 77,951 |
| 72,276 | ||
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| Total current assets |
| 78,027 |
| 85,345 | |
| Oil and Gas Properties - unproved |
| 132,069 |
| 132,695 | ||
| Property and equipment |
| 52,969 |
| 57,900 | ||
| Notes receivable |
| 7,500 |
| 7,500 | ||
| Other Assets |
| 1,250 |
| 1,250 | ||
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Total Assets | $ | 271,816 | $ | 284,691 | |||
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LIABILITIES AND STOCKHOLDERS' DEFICIT |
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LIABILITIES |
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Current liabilities |
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| Accounts Payable | $ | 75,860 | $ | 74,908 | ||
| Bank Indebtedness |
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| Payroll Tax Liabilities |
| 147,254 |
| 138,074 | ||
| Interest Payable |
| 421,891 |
| 376,119 | ||
| Loan Payable |
| 198,017 |
| 342,252 | ||
| Loans Payable-Related Parties |
| 271,406 |
| 252,650 | ||
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| Total current liabilities |
| 1,114,427 |
| 1,184,003 | |
Long-term Liabilities |
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| Loan Payable |
| 320,000 |
| 615,000 | ||
| Judgement payable |
| 149,073 |
| 141,832 | ||
| Deferred Salaries |
| 1,428,000 |
| 1,308,000 | ||
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| Total long-term liabilities |
| 1,897,073 |
| 2,064,832 | |
Total Liabilities |
| 3,011,500 |
| 3,248,835 | |||
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STOCKHOLDERS' DEFICIT |
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| Common stock, $0.001 par value; 290,000,000 shares authorized, 216,943,384 and 107,180,790 shares, respectively, issued and outstanding |
| 216,943 |
| 107,181 | ||
| Preferred Stock, $0.001 par value, 20,000,000 shares authorized, 3,927,302 and 3,777,302 shares, respectively, issued and outstanding |
| 3,927 |
| 3,777 | ||
| Additional paid-in capital |
| 4,709,529 |
| 4,357,141 | ||
| Accumulated deficit during the development stage |
| (2,201,561) |
| (2,201,562) | ||
| Accumulated deficit during the exploration stage |
| (5,468,522) |
| (5,230,681) | ||
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| Total stockholders' deficit |
| (2,739,685) |
| (2,964,145) | |
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| Total liabilities and stockholders' deficit | $ | 271,816 | $ | 284,691 |
(The accompanying notes are an integral part of these consolidated financial statements)
4
FRIENDLY ENERGY EXPLORATION
(An Exploration Stage Company)
Consolidated Statement of Operations
(Expressed in U.S. Dollars)
(unaudited)
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| From Inception |
| From Inception |
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| For the |
| For the |
| For the |
| For the |
| Development Stage |
| Exploration Stage |
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| Three Months Ended |
| Three Months Ended |
| Six Months Ended |
| Six Months Ended |
| (Jan. 7, 1993) through |
| (Feb. 11, 2005) through |
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| Jun. 30, 2012 |
| Jun. 30, 2011 |
| Jun. 30, 2012 |
| Jun. 30, 2011 |
| Feb. 10, 2005 |
| Jun. 30, 2012 |
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Revenue | $ | - | $ | 13,209 | $ | 4,169 | $ | 33,082 | $ | 13,372 | $ | 135,873 | ||
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Operating expenses |
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| Bad Debt Expense |
| - |
| - |
| - |
| - |
| - |
| 319,000 | |
| Depletion |
| - |
| 1,981 |
| 625 |
| 4,962 |
| - |
| 17,973 | |
| Depreciation |
| 2,466 |
| 2,260 |
| 4,931 |
| 4,900 |
| 35,287 |
| 30,605 | |
| Dry Hole Cost |
| - |
| - |
| - |
| - |
| - |
| 88,157 | |
| General and administrative |
| 1,923 |
| 2,426 |
| 3,501 |
| 4,758 |
| 218,930 |
| 100,176 | |
| Intangible Drilling Costs |
| - |
| - |
| - |
| - |
| - |
| 333,206 | |
| Officer Wages |
| 60,000 |
| 60,000 |
| 120,000 |
| 120,000 |
| - |
| 1,827,000 | |
| Oil Well Operations Cost |
| 11,879 |
| 108,815 |
| 36,166 |
| 170,637 |
| - |
| 910,417 | |
| Oil & Gas Royalties |
| 753 |
| 289 |
| 753 |
| 1,887 |
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| 4,987 | |
| Payroll Expenses |
| 4,590 |
| 4,590 |
| 9,180 |
| 9,180 |
| 213,228 |
| 109,986 | |
| Professional Fees |
| 10,100 |
| 11,690 |
| 10,100 |
| 12,145 |
| 711,228 |
| 359,305 | |
| Rent |
| 3,141 |
| 3,141 |
| 3,741 |
| 4,239 |
| 282,410 |
| 19,003 | |
| Stock Based Compensation |
| - |
| - |
| - |
| - |
| 156,825 |
| 363,342 | |
| Travel & Entertainment |
| - |
| 4,301 |
| - |
| 10,880 |
| 128,687 |
| 76,638 | |
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| Total operating expenses |
| 94,851 |
| 199,492 |
| 188,997 |
| 343,588 |
| 1,746,595 |
| 4,559,792 |
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| Loss from operations |
| (94,851) |
| (186,284) |
| (184,827) |
| (310,506) |
| (1,733,223) |
| (4,423,919) |
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| - |
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Other income (expenses): |
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| - |
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| Other income |
| - |
| - |
| - |
| - |
| 120,605 |
| 76,118 | |
| Forgiveness of Debt |
| - |
| - |
| - |
| - |
| (122,765) |
| - | |
| Impairment Loss on Asset |
| - |
| - |
| - |
| - |
| (442,800) |
| (328,970) | |
| Interest Expense |
| (25,288) |
| (42,694) |
| (53,012) |
| (73,371) |
| (23,379) |
| (681,751) | |
| Lawsuit Judgment |
| - |
| - |
| - |
| - |
| - |
| (110,000) | |
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| Total other income (expenses) |
| (25,288) |
| (42,694) |
| (53,012) |
| (73,371) |
| (468,339) |
| (1,044,603) |
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| Loss before provision for income taxes | (120,139) |
| (228,978) |
| (237,840) |
| (383,877) |
| (2,201,562) |
| (5,468,522) | |
Provision for income taxes |
| - |
| - |
| - |
| - |
| - |
| - | ||
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| Net loss | $ | (120,139) | $ | (228,978) | $ | (237,840) | $ | (383,877) | $ | (2,201,562) | $ | (5,468,522) |
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Basic and diluted loss per common share | $ | (0.001) | $ | (0.003) | $ | (0.002) | $ | (0.005) | $ | (0.28) | $ | (0.157) | ||
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Basic and diluted weighted average common shares outstanding |
| 205,920,156 |
| 91,164,307 |
| 158,553,073 |
| 80,701,548 |
| 7,762,659 |
| 34,833,489 |
(The accompanying notes are an integral part of these consolidated financial statements)
5
FRIENDLY ENERGY EXPLORATION
(An Exploration Stage Company)
Statement of Cash Flows
(Expressed in U.S. Dollars)
(unaudited)
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| From Inception |
| From Inception |
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| For the |
| For the |
| For the |
| For the |
| Development Stage |
| Exploration Stage |
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| Three Months Ended |
| Three Months Ended |
| Six Months Ended |
| Six Months Ended |
| (Jan. 7, 1993) through |
| (Feb. 11, 2005) through |
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| Jun. 30, 2012 |
| Jun. 30, 2011 |
| Jun. 30, 2012 |
| Jun. 30, 2011 |
| Feb. 10, 2005 |
| Jun. 30, 2012 |
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Cash flows from operating activities: |
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| Net loss | $ | (120,139) | $ | (228,978) | $ | (237,840) | $ | (383,877) | $ | (2,201,562) | $ | (5,468,521) | |||
| Adjustments to reconcile net loss to |
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| net cash used by operating activities: |
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| Depletion |
| - |
| 1,981 |
| 625 |
| 4,962 |
| - |
| 17,973 | ||
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| Depreciation |
| 2,466 |
| 2,260 |
| 4,931 |
| 4,694 |
| 35,287 |
| 30,604 | ||
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| Stock Based Compensation |
| - |
| - |
| - |
| - |
| (61,635) |
| 581,802 | ||
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| Impairment Loss |
| - |
| - |
| - |
| - |
| 442,800 |
| 452,090 | ||
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| Bad Debt Expense |
| - |
| - |
| - |
| - |
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| 319,000 | ||
| Changes in operating assets and liabilities: |
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| - |
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| - | |||
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| Accounts Receivable |
| (3,928) |
| (10,733) |
| (5,675) |
| (22,925) |
| - |
| (77,951) | ||
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| Accounts Payable |
| (7,011) |
| 4,403 |
| 952 |
| 3,458 |
| 73,857 |
| 1,701 | ||
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| Advances |
| - |
| - |
| - |
| - |
| - |
| (250) | ||
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| Judgment payable |
| 2,452 |
| (14,909) |
| 7,241 |
| (19,575) |
| - |
| 149,073 | ||
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| Interest Payable |
| 22,836 |
| 27,603 |
| 45,771 |
| 52,946 |
| 23,079 |
| 398,812 | ||
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| Payroll Liabilities |
| 4,590 |
| 4,590 |
| 9,180 |
| 9,180 |
| 37,268 |
| 109,986 | ||
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| Deferred Salaries |
| 60,000 |
| 60,000 |
| 120,000 |
| 120,000 |
| - |
| 1,428,000 | ||
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| Net cash used by operating activities |
| (38,734) |
| (153,782) |
| (54,814) |
| (231,137) |
| (1,650,906) |
| (2,057,682) | |
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Cash flows from investing activities: |
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| Purchase of property and equipment |
| - |
| - |
| - |
| (941) |
| (41,718) |
| (77,142) | |||
| Issuance of promissory notes |
| (252,500) |
| - |
| (252,500) |
| - |
| - |
| (579,000) | |||
| Investment in oil and gas properties |
| - |
| (10,000) |
| - |
| (21,160) |
| - |
| (602,132) | |||
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| Net cash used by investing activities |
| (252,500) |
| (10,000) |
| (252,500) |
| (22,101) |
| (41,718) |
| (1,258,274) | |
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Cash flows from financing activities: |
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| Proceeds from issuance of notes payable |
| (137,295) |
| (208,300) |
| (144,235) |
| (117,800) |
| - |
| 1,113,320 | |||
| Proceeds from issuance of common stock |
| 332,300 |
| 84,420 |
| 332,300 |
| 84,420 |
| 112,970 |
| 1,065,740 | |||
| Proceeds from issuance of preferred stock |
| 87,500 |
| 294,000 |
| 87,500 |
| 294,000 |
| 1,559,654 |
| 794,568 | |||
| Proceeds on borrowings from related parties |
| 5,610 |
| (1,728) |
| 18,756 |
| 34,074 |
| 20,000 |
| 342,405 | |||
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| Net cash provided by financing activities | 288,115 |
| 168,392 |
| 294,321 |
| 294,694 |
| 1,692,624 |
| 3,316,033 | ||
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Net increase in cash |
| (3,119) |
| 4,610 |
| (12,993) |
| 40,729 |
| - |
| 76 | ||||
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Cash, beginning of period |
| 3,195 |
| 34,277 |
| 13,069 |
| (1,841) |
| - |
| - | ||||
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Cash, end of period | $ | 76 | $ | 38,887 | $ | 76 | $ | 38,887 | $ | - | $ | 76 |
(The accompanying notes are an integral part of these consolidated financial statements)
6
FRIENDLY ENERGY EXPLORATION
(An Exploration Stage Company)
Statement of Stockholders Equity
(Expressed in U.S. Dollars)
(unaudited)
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| Accumulated |
| Accumulated |
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| Deficit Development |
| Deficit Exploration |
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| Common Stock |
| Preferred Stock |
| Additional |
| Stage |
| Stage |
| Total | ||||
| Shares |
| Amount |
| Shares |
| Amount |
| Paid-in Capital |
| Prior to 2-11-05 |
| From 2-11-05 |
| Stockholders' Deficit |
Balance, December 31, 2009 | 52,568,790 | $ | 52,569 |
| 8,842,302 | $ | 8,842 | $ | 4,097,805 | $ | (2,201,562) | $ | (3,459,931) | $ | (1,502,276) |
Preferred shares issued for cash, $0.20 per share | - |
| - |
| 25,000 |
| 25 |
| 4,975 |
| - |
| - |
| 5,000 |
Preferred shares issued for cash, $0.20 per share | - |
| - |
| 75,000 |
| 75 |
| 14,925 |
| - |
| - |
| 15,000 |
Preferred Shares Repurchased | - |
| - |
| (4,200,000) |
| (4,200) |
| (437,800) |
| - |
| - |
| (442,000) |
Common shares issued for cash, $0.0075 | 1,000,000 |
| 1,000 |
| - |
| - |
| 6,500 |
| - |
| - |
| 7,500 |
Common shares issued for cash, $0.028 | 500,000 |
| 500 |
| - |
| - |
| 13,500 |
| - |
| - |
| 14,000 |
Common shares issued for services $0.028 | 1,770,000 |
| 1,770 |
| - |
| - |
| 48,230 |
| - |
| - |
| 50,000 |
Common shares issued for services $0.033 | 2,000,000 |
| 2,000 |
| - |
| - |
| 64,000 |
| - |
| - |
| 66,000 |
Preferred shares issued for cash, $0.20 per share | - |
| - |
| 75,000 |
| 75 |
| 15,675 |
| - |
| - |
| 15,750 |
Conversion of preferred stock | 12,400,000 |
| 12,400 |
| (1,240,000) |
| (1,240) |
| (11,160) |
| - |
| - |
| - |
Stock-based compensation expense on stock options | - |
| - |
| - |
| - |
| 4,213 |
| - |
| - |
| 4,213 |
Net Loss | - |
| - |
| - |
| - |
| - |
| - |
| (972,514) |
| (972,514) |
Balance, December 31, 2010 | 70,238,790 | $ | 70,239 |
| 3,577,302 | $ | 3,577 | $ | 3,820,863 | $ | (2,201,562) | $ | (4,432,444) | $ | (2,739,327) |
Common shares issued for cash, $0.010 | 17,900,000 |
| 17,900 |
| - |
| - |
| 161,100 |
| - |
| - |
| 179,000 |
Common shares issued for services $0.010 | 5,042,000 |
| 5,042 |
| - |
| - |
| 45,378 |
| - |
| - |
| 50,420 |
Preferred shares issued for cash, $0.21 per share | - |
| - |
| 1,400,000 |
| 1,400 |
| 292,600 |
| - |
| - |
| 294,000 |
Preferred shares issued for cash, $0.25 per share | - |
| - |
| 200,000 |
| 200 |
| 49,800 |
| - |
| - |
| 50,000 |
Conversion of preferred stock | 14,000,000 |
| 14,000 |
| (1,400,000) |
| (1,400) |
| (12,600) |
| - |
| - |
| - |
Net Loss | - |
| - |
| - |
| - |
| - |
| - |
| (798,237) |
| (798,237) |
Balance, December 31, 2011 | 107,180,790 | $ | 107,181 |
| 3,777,302 | $ | 3,777 | $ | 4,357,141 | $ | (2,201,562) | $ | (5,230,681) | $ | (2,964,144) |
Common shares issued for debt settlement, $0.0020/share | 21,137,337 |
| 21,137 |
| - |
| - |
| 21,363 |
| - |
| - |
| 42,500 |
Common shares issued for services $0.0049 | 2,000,000 |
| 2,000 |
| - |
| - |
| 7,800 |
| - |
| - |
| 9,800 |
Common shares issued for debt settlement, $0.0014/share | 29,750,257 |
| 29,750 |
| - |
| - |
| 12,750 |
| - |
| - |
| 42,500 |
Common shares issued for debt settlement, $0.008/share | 31,875,000 |
| 31,875 |
| - |
| - |
| 223,125 |
|
|
|
|
| 255,000 |
Common shares issued for debt settlement, $0.0018/share | 14,000,000 |
| 14,000 |
| - |
| - |
| 11,000 |
|
|
|
|
| 25,000 |
Preferred shares issued for cash, $0.07 per share | - |
| - |
| 1,250,000 |
| 1,250 |
| 86,250 |
| - |
| - |
| 87,500 |
Conversion of preferred stock | 11,000,000 |
| 11,000 |
| (1,100,000) |
| (1,100) |
| (9,900) |
| - |
| - |
| - |
Net Loss | - |
| - |
| - |
| - |
| - |
| - |
| (237,840) |
| (237,840) |
Balance, June 30, 2012 | 216,943,384 | $ | 216,943 |
| 3,927,302 | $ | 3,927 | $ | 4,709,528 | $ | (2,201,562) | $ | (5,468,521) | $ | (2,739,684) |
(The accompanying notes are an integral part of these consolidated financial statements)
FRIENDLY ENERGY EXPLORATION
(AN EXPLORATION STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2012
These unaudited interim financial statements as of and for the six months ended June 30, 2012 reflect all adjustments which, in the opinion of management, are necessary to fairly state the Companys financial position and the results of its operations for the periods presented, in accordance with the accounting principles generally accepted in the United States of America. All adjustments are of a normal recurring nature.
These unaudited interim financial statements should be read in conjunction with the Companys financial statements and notes thereto included in the Companys fiscal year end December 31, 2011 report. The Company assumes that the users of the interim financial information herein have read, or have access to, the audited financial statements for the preceding period, and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The results of operations for the three month period ended June 30, 2012 are not necessarily indicative of results for the entire year ending December 31, 2012.
1.
DESCRIPTION OF BUSINESS AND HISTORY
Friendly Energy Corp., a Nevada corporation, (hereinafter referred to as the Company or Friendly Energy) was incorporated in the State of Nevada on January 7, 1993 under the name Eco-Systems Marketing. The company was originally in the business of selling electric power and related services to small and medium sized businesses in a newly deregulated California market. The Company is now in the business of oil and gas exploration and operations. In 2009, the Company acquired four oil and gas leases in central Texas totaling 1,036 acres with twenty-five wells. In the first quarter of 2010, the Company acquired a fifth oil and gas lease in Central Texas totally 1,000 acres with twenty-four wells
The Company is considered an exploration stage company in accordance with by Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 915, Development Stage Entities. The Company entered the oil and gas exploration business in February 2005, so the cumulative columns in the financial statements include activities for the development stage prior to February 2005 and for the exploration stage beginning February 2005.
On March 9, 2000, the Company formed a wholly owned subsidiary named Friendly Energy Services, Inc. All oil and gas activities are conducted through this subsidiary except for work over and drilling operations. On March 3, 2010, the Company formed a wholly owned subsidiary named Friendly Energy Drilling, Inc. All major work over and drilling operations are conducted through this subsidiary.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Going concern The Company incurred net losses of $5,468,522 from the period of February 11, 2005 (date of entering the oil and gas exploration business) through June 30, 2012 and has commenced its operations on a limited basis. The Company is still in the exploration stage, raising substantial doubt about the Companys ability to continue as a going concern. The Company may seek additional sources of capital through the issuance of debt or equity financing, but there can be no assurance the Company will be successful in accomplishing its objectives.
The ability of the Company to continue as a going concern is dependent on additional sources of capital and the success of the Companys plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
Year end The Companys year end is December 31.
Principles of consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and balances have been eliminated.
Use of estimates The preparation of consolidated financial statements in conformity with generally accepted accounting principles 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.
Oil and Gas Properties The Company utilizes the full-cost method of accounting for petroleum and natural gas properties. Under this method, the Company capitalizes all costs associated with acquisition, exploration and development of oil and natural gas reserves, including leasehold acquisition costs, geological and geophysical expenditures, lease rentals on undeveloped properties and costs of drilling of productive and non-productive wells into the full cost pool on a country by country basis. When the Company obtains proven oil and gas reserves, capitalized costs, including estimated future costs to develop the reserves proved and estimated abandonment costs, net of salvage, will be depleted on the units-of-production method using estimates of proved reserves. The costs of unproved properties are not amortized until it is determined whether or not proved reserves can be assigned to the properties. Until such determination is made the Company assesses annually whether impairment has occurred, and includes in the amortization base drilling exploratory dry holes associated with unproved properties.
The Company applies a ceiling test to the capitalized cost in the full cost pool. The ceiling test limits such cost to the estimated present value, using a ten percent discount rate, of the future net revenue from proved reserves, based on current economic and operating conditions. Specifically, the Company computes the ceiling test so that capitalized cost, less accumulated depletion and related deferred income tax, do not exceed an amount (the ceiling) equal to the sum of: (A) The present value of estimated future net revenue 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 cost) 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 (B) the cost of property not being amortized; plus (C) the lower of cost or estimated fair value of unproven properties included in the costs being amortized; less (D) income tax effects related to differences between the book and tax basis of the property.
For unproven properties, the Company excludes from capitalized costs subject to depletion, all costs directly associated with the acquisition and evaluation of the unproved property until it is determined whether or not proved reserves can be assigned to the property. Until such a determination is made, the Company assesses the property at least annually to ascertain whether impairment has occurred. In assessing impairment the Company considers factors such as historical experience and other data such as primary lease terms of the property, average holding periods of unproved property, and geographic and geologic data. The Company adds the amount of impairment assessed to the cost to be amortized subject to the ceiling test.
Asset Retirement Obligations The Company follows the provisions of ASC 410, Asset Retirement and Environmental Obligations, which establishes standards for the initial measurement and subsequent accounting for obligations associated with the sale, abandonment or other disposal of long-lived tangible assets arising from the acquisition, construction or development and for normal operations of such assets.
Property and equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided principally on the straight-line method over the estimated useful lives of the assets, which are generally 3 to 27 years. The amounts of depreciation provided are sufficient to charge the cost of the related assets to operations over their estimated useful lives.
The Company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful life of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. The Company uses an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability.
Income taxes Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740, Accounting for Income Taxes, as of its inception. Pursuant to ASC 740, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
Net loss per common share The Company computes net income (loss) per share in accordance with ASC 260, Earning per Share. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing Diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti dilutive.
2
Stock-Based Compensation -- The Company records stock-based compensation in accordance with ASC 718, Share-Based Payments, using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.
Concentration of risk A significant amount of the Companys assets and resources are currently dependent on the financial support of Douglas Tallant and Donald Trapp. Should they determine to no longer finance the operations of the company before new capital is raised, it may be unlikely for the company to continue.
Revenue recognition The Company has had revenues of $135,873 to date from its operations. Revenue is recognized as it is received.
Financial Instruments - Pursuant to ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments, an entity is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 and 825 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instruments categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 and 825 prioritizes the inputs into three levels that may be used to measure fair value:
Level 1
Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2
Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3
Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The Companys financial instruments consist principally of cash, notes receivable, investment, accounts payable, payroll tax liabilities, judgment payable, deferred salaries, interest payable, loans payables, and amounts due to related parties. Pursuant to ASC 820 and 825, the fair value of cash is determined based on Level 1 inputs, which consist of quoted prices in active markets for identical assets. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
3.
OIL & GAS PROPERTIES
| June 30, 2012 |
| June 30, 2011 | ||||||
Oil & Gas Properties - Unproved |
|
|
| ||||||
| Panther Lease | 8,596 |
| 9,873 | |||||
| Byler Lease | 45,143 |
| 45,143 | |||||
| Mud Creek Lease | 20,000 |
| 20,000 | |||||
| Hutchins Lease | 2,400 |
| 2,400 | |||||
| South Thrifty Lease | 55,931 |
| 59,799 | |||||
| Red Oak Project | 242,000 |
| 242,000 | |||||
| Talpa Project | 50,000 |
| 50,000 | |||||
| West Peach Project | 36,970 |
| 36,970 | |||||
|
| 461,039 |
| 466,185 | |||||
| Impairment | (328,970) |
| (328,970) | |||||
|
| Total oil & gas properties | 132,069 |
| 137,214 |
3
Byler Lease In 2009, the Company purchased, through its wholly-owned subsidiary, a 100% interest in oil and gas properties in central Texas for $33,650. In 2010, there were additional lease costs of $333, and in 2011 there were additional lease costs of $11,160. The property totals 372 acres and consists of 17 wells. The Company remits a 22% royalty payment. As at June 30, 2012, there was production on the property from four wells. We are planning to rework additional wells.
Hutchins Lease - In 2009, the Company purchased, through its wholly-owned subsidiary, a 100% interest in oil and gas properties in central Texas for $2,400. The property totals 194 acres. Upon production, the Company will remit a 15.125% royalty payment. As at June 30, 2012, there was no production on the property.
Mud Creek Lease - In 2009, the Company purchased, through its wholly-owned subsidiary, a 100% interest in oil and gas properties in central Texas for $10,000. In 2011 there were additional lease costs of $11,160. The property totals 355 acres. Upon production, the Company will remit a 22% royalty payment. As at June 30, 2012, there was no production on the property.
Panther Creek Lease - In 2009, the Company purchased, through its wholly-owned subsidiary, a 100% interest in oil and gas properties in central Texas for $15,000. After the depletion allowance, the balance is $8,596. The property totals 155 acres. The Company remits a 22% royalty payment. As at June 30, 2012, 2011, there was production on the property from three wells. We are planning to rework additional wells.
South Thrifty Lease - In the first quarter of 2010, the Company purchased, through its wholly-owned subsidiary, a 50% interest in oil and gas properties in central Texas for $67,500. After the depletion allowance, the balance is $56,556. The property totals 1,000 acres. The Company remits approximately a 22% royalty payment (the royalty payment varies for the wells). As at June 30, 2012, there was production on the property from sixteen wells. We are planning to rework additional wells.
4.
PROPERTY & EQUIPMENT
Property and equipment consist of the following as of June 30, 2012 and 2011:
|
| June 30, 2012 |
| June 30, 2011 |
Furniture and Fixtures | $ | 21,980 | $ | 23,858 |
Computers and Equipment | $ | 29,489 | $ | 28,548 |
Oil Field Equipment | $ | 67,392 | $ | 67,392 |
| $ | 118,861 | $ | 119,798 |
Less: accumulated depreciation | $ | (65,892) | $ | (56,967) |
Net Furniture, fixtures, computers & equipment | $ | 52,969 | $ | 62,831 |
5.
RELATED PARTY TRANSACTIONS
In the first quarter of 2011, the officers agreed with the Company to defer their salaries totaling $60,000, see note 9.
As of June 30, 2012 and 2011, loans payable from related parties consists of the following:
| June 30, 2012 |
| June 30, 2011 |
Notes payable from officers of |
|
|
|
the Company bearing interest at 8% |
|
|
|
unsecured and due on demand | $ 271,406 |
| $252,650 |
6.
OTHER CURRENT LIABILITIES
The company has accrued for unpaid federal payroll taxes in the amounts of $147,254 and $128,842 for the quarters ended June 30, 2012 and 2011, respectively. $37,268 is owed from 2000 and 2001 unpaid federal payroll taxes; the Company has filed the payroll taxes with the Internal Revenue Service. $109,986 is owed for accrued payroll taxes on deferred salaries; the Company has yet to file the payroll tax forms with the Internal Revenue Service or related state taxing authorities.
The company has accrued deferred salaries owed to two officers in the amount of $1,428,000 and $1,143,000 for the quarters ended June 30, 2012 and 2011, respectively.
4
The company has accrued interest in the amount of $421,891 and $297,871 for the quarters ended June 30, 2012 and 2011, respectively. The accrued interest includes interest on unpaid payroll taxes and related party loans.
Two companies have loaned the company monies in the amount of $198,017 for the quarter ended June 30, 2012. $197,318 has been loaned by Merus Corporation and $699 by Douglas Financial Corporation.
7.
STOCKHOLDERS DEFICIT
Common Shares: As of June 30, 2012 and 2011, there were 216,943,384 and 70,238,790 shares of common stock outstanding. During the quarter ended June 30, 2012, the Company issued 96,762,594 common shares in in settlement for repayment of $365,000 in loans. 2,000,000 common shares were issued for services, Also, 1,4000,000 preferred shares were converted to 14,000,000 common shares.
Preferred Shares: Each share of preferred stock is convertible into ten shares of common stock and has voting rights equal to ten shares of common stock. Holders of preferred stock are entitled to twenty votes for each share of record on all matters to be voted on by shareholders. During the quarter ended June 30, 2012, 1,250,000 preferred shares were issued in settlement of debt. As of June 30, 2012 and 2011, there were 3,927,302 and 3,577,302 shares of preferred stock outstanding.
8.
STOCK OPTIONS & WARRANTS
The Company granted no options under the Companys Stock Option Plan in the second quarter of 2012 and had no stock-based compensation expense.
The following table summarizes stock option plan activities:
| Number of Options | Weighted Average Exercise Price $ | Weighted Average Remaining Contractual Life (years) | Aggregate Intrinsic Value $ |
|
|
|
|
|
Balance December 31, 2007 and 2008 | 400,000 | 0.55 |
|
|
|
|
|
|
|
Granted in 2009 | 1,500,000 | 0.005 |
|
|
|
|
|
|
|
Balance June 30, 2012 | 1,900,000 | 0.12 | 7.50 | |
Additional information regarding stock options as of June 30, 2012, is as follows:
Number of Options | Exercise Price $ | Expiry Date |
|
|
|
40,000 | 1.25 | April 20, 2015 |
60,000 | 1.56 | September 28, 2016 |
300,000 | 0.25 | December 27, 2017 |
1,500,000 | 0.005 | July 23, 2019 |
|
|
|
1,900,000 |
|
|
There are no non-vested stock options and the Company had no unrecognized compensation expense relating to unvested options as of June 30, 2012.
The Company granted warrants under a non-brokered subscription agreement on July 15, 2011. 12,000,000 warrants were granted with each warrant entitling the holder to purchase one additional share of common stock of the Corporation at $0.015 per share until July 15, 2013.
5
9.
COMMITMENTS AND CONTINGENCIES
Employment contracts
Douglas Tallant - The Company entered into an employment agreement with Douglas Tallant effective January 1, 2007. Pursuant to the terms of the agreement, Mr. Tallant is to be paid an annual salary of $180,000 in consideration of which Mr. Tallant agreed to act as the Companys President. The term of the agreement is for an indefinite period, unless otherwise terminated pursuant to the terms of the agreement.
Donald Trapp - The Company entered into an employment agreement with Donald Trapp effective February 1, 2005. Pursuant to the terms of the agreement, Mr. Trapp is to be paid an annual salary of $60,000 in consideration of which Mr. Trapp agreed to act as the Companys Corporate Secretary and Treasurer. The term of the agreement is for an indefinite period, unless otherwise terminated pursuant to the terms of the agreement.
10.
LITIGATION
In 2005, an employee received a defaulted judgment against the Company concerning the case Bowers v. Friendly Energy Corporation, San Diego Superior Court Case No. 775084. The default judgment in the principle sum of $434,211.50 was reduced to a principal amount of $110,000, with interest from October 13, 2000. With accrued interest and less principal paid of $140,000, the balance at June 30, 2012 is $149,073, as reported in the liability section of the balance sheet.
11.
SUBSEQUENT EVENTS
In accordance with ASC 855, we have evaluated subsequent events through our audit issuance date, and did not have any material recognizable subsequent events.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed, or implied, by those forward-looking statements. You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
RESULTS OF OPERATIONS
Working Capital
| June 30, 2012 | December 31, 2011 |
Current Assets | $78,027 | $85,345 |
Current Liabilities | $1,114,427 | $1,184,003 |
Working Capital (Deficit) | $(1,036,400) | $(1,098,658) |
Cash Flows
| June 30, 2012 | June 30, 2011 |
Cash Flows from (used in) Operating Activities | $(38,734) | $(274,730) |
Cash Flows from (used in) Investing Activities | $(252,500) | $(4,072) |
Cash Flows from (used in) Financing Activities | $288,115 | $259,669 |
Net Increase (decrease) in Cash During Period | $(3,119) | $(19,133) |
Operating Revenues
Operating revenues for the three month period ended June 30, 2012 was $0.
Operating revenues for the three month period ended June 30, 2011 was $13,209 and is comprised of oil and gas revenues.
Operating Expenses and Net Loss
Operating expenses for the three month period ended June 30, 2012 was $94,851 and is comprised mostly of oil well operations costs and deferred salaries.
Operating expenses for the three month period ended June 30, 2011 was $199,492 and is comprised mostly of oil well operations costs and deferred salaries.
Net loss for the three month period ended June 30, 2012 was $120,139 and is comprised of operating expenses and interest expenses less oil and gas revenues.
Net loss for the three month period ended June 30, 2011 was $228,978 and is comprised of operating expenses and interest expenses less oil and gas revenues.
Liquidity and Capital Resources
As at June 30, 2012, the Companys cash and total asset balance was $271,816 compared to $284,691 as at December 31, 2011. The decrease in total assets is attributed mainly to a decrease in cash and cash equivalents.
As at June 30, 2012, the Company had total liabilities of $3,011,500 compared with total liabilities of $3,248,835 as at December 31, 2011. The decrease in total liabilities was attributed primarily to an decrease loans payable.
As at June 30, 2012, the Company had a working capital deficit of $2,739,685 compared with a working capital deficit of $2,964,145 as at December 31, 2011. The change in working capital deficit was due to common shares issued for debt settlement.
7
Cashflow from Operating Activities
During the period ended June 30, 2012, the Company used $38,734 of cash for operating activities compared to the use of $274,730 of cash for operating activities during the period ended June 30, 2011. The change in net cash used in operating activities is attributed primarily to a smaller net loss.
Cashflow from Investing Activities
During the period ended June 30, 2012 the Company had $252,500 in cash flows from investing activities, and during the period ended June 30, 2011 there was $4,072 in cash flows from investing activities.
Cashflow from Financing Activities
During the period ended June 30, 2012, the Company received $288,115 of cash from financing activities compared to $259,669 for the period ended June 30, 2011. The change in cash flows from financing activities is attributed to decreases in proceeds from issuance of notes payable and increases in proceeds from issuance of common stock.
Going Concern
We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive acquisitions and activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.
Off-Balance Sheet Arrangements
We have no significant 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 that are material to stockholders.
Future Financings
We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund our operations and other activities.
Critical Accounting Policies
Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.
Recently Issued Accounting Pronouncements
In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-04, "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs." The amendments in this update generally represent clarifications of Topic 820, but also include some instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. This update results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and IFRS. The amendments in this update are to be applied prospectively. The amendments are effective for interim and annual periods beginning after December 15, 2011. Early application is not permitted. The Company does not expect this guidance to have a significant impact on its consolidated financial position, results of operations or cash flows.
8
In June 2011, the FASB issued ASU No. 2011-05, "Presentation of Comprehensive Income." This update was amended in December 2011 by ASU No. 2011-12, "Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05." This update defers only those changes in update 2011-05 that relate to the presentation of reclassification adjustments. All other requirements in update 2011-05 are not affected by this update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. ASU No. 2011-05 and 2011-12 are effective for fiscal years (including interim periods) beginning after December 15, 2011. The Company does not expect this guidance to have a significant impact on its consolidated financial position, results of operations or cash flows.
In December 2011, the FASB issued ASU No. 2011-11, "Disclosures about Offsetting Assets and Liabilities." The amendments in this update require enhanced disclosures around financial instruments and derivative instruments that are either (1) offset in accordance with either ASC 210-20-45 or ASC 815-10-45 or (2) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in accordance with either ASC 210-20-45 or ASC 815-10-45. An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The amendments are effective during interim and annual periods beginning on or after January 1, 2013. The Company does not expect this guidance to have any impact on its consolidated financial position, results of operations or cash flows.
A variety of proposed or otherwise potential accounting standards are currently under study by standard setting organizations and various regulatory agencies. Due to the tentative and preliminary nature of those proposed standards, the Companys management has not determined whether implementation of such standards would be material to its financial statements.
The Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company 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.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by our company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management carried out an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act"). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were not effective as of June 30, 2012, due to the material weaknesses resulting from the Board of Directors not currently having any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K, and controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Please refer to our Annual Report on Form 10-K as filed with the SEC on March 29, 2012, for a complete discussion relating to the foregoing evaluation of Disclosures and Procedures.
Changes in Internal Control over Financial Reporting
Our management has also evaluated our internal control over financial reporting, and there have been no significant changes in our internal controls or in other factors that could significantly affect those controls subsequent to the date of our last evaluation.
The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
ITEM 1A.
RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
1.
Quarterly Issuances:
During the quarter, we did not issue any unregistered securities other than as previously disclosed.
2.
Subsequent Issuances:
Subsequent to the quarter, we did not issue any unregistered securities other than as previously disclosed.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.
MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5.
OTHER INFORMATION
None.
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ITEM 6.
EXHIBITS
Exhibit Number | Description of Exhibit | Filing |
3.01a | Articles of Incorporation | Filed with the SEC on August 31, 2000 as part of our Registration Statement on Form 10-SB. |
3.01b | Certificate of Amendment to Articles of Incorporation dated April 21, 1997 | Filed with the SEC on August 31, 2000 as part of our Registration Statement on Form 10-SB. |
3.01c | Certificate of Amendment to Articles of Incorporation dated April 28, 1997 | Filed with the SEC on August 31, 2000 as part of our Registration Statement on Form 10-SB. |
3.01d | Certificate of Amendment to Articles of Incorporation dated September 25, 1997 | Filed with the SEC on August 31, 2000 as part of our Registration Statement on Form 10-SB. |
3.01e | Certificate of Amendment to Articles of Incorporation dated April 2, 1999 | Filed with the SEC on August 31, 2000 as part of our Registration Statement on Form 10-SB. |
3.01f | Amended and Restated Articles of Incorporation | Filed with the SEC on November 15, 2010 as part of our Quarterly Report on Form 10-Q. |
3.02 | Bylaws | Filed with the SEC on August 31, 2000 as part of our Registration Statement on Form 10-SB. |
4.01 | 2010 Share Incentive Plan | Filed with the SEC on October 18, 2010 as part of our Registration Statement on Form S-8. |
4.02 | Sample Qualified Stock Option Grant Agreement | Filed with the SEC on October 18, 2010 as part of our Registration Statement on Form S-8. |
4.03 | Sample Non-Qualified Stock Option Grant Agreement | Filed with the SEC on October 18, 2010 as part of our Registration Statement on Form S-8 |
4.04 | Sample Performance-Based Award Agreement | Filed with the SEC on October 18, 2010 as part of our Registration Statement on Form S-8. |
10.01 | Stock Repurchase Agreement dated March 31, 2010 between the Registrant and Douglas B. Tallant | Filed with the SEC on April 5, 2010 as part of our Current Report on Form 8-K. |
10.02 | Stock Repurchase Agreement dated March 31, 2010 between the Registrant and Donald Trapp | Filed with the SEC on April 5, 2010 as part of our Current Report on Form 8-K. |
10.03 | Stock Repurchase Agreement dated March 31, 2010 between the Registrant and Merus Energy Corp. | Filed with the SEC on April 5, 2010 as part of our Current Report on Form 8-K. |
10.04 | Promissory Note dated March 31, 2010 between the Registrant and Douglas B. Tallant | Filed with the SEC on April 5, 2010 as part of our Current Report on Form 8-K. |
10.05 | Promissory Note dated March 31, 2010 between the Registrant and Donald L. Trapp | Filed with the SEC on April 5, 2010 as part of our Current Report on Form 8-K. |
10.06 | Promissory Note dated March 31, 2010 between the Registrant and Merus Energy Corp. | Filed with the SEC on April 5, 2010 as part of our Current Report on Form 8-K. |
31.01 | Certification of Principal Executive Officer Pursuant to Rule 13a-14 | Filed herewith. |
31.02 | Certification of Principal Financial Officer Pursuant to Rule 13a-14 | Filed herewith. |
32.01 | CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act | Filed herewith. |
32.02 | CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act | Filed herewith. |
101.INS* | XBRL Instance Document | Filed herewith. |
101.SCH* | XBRL Taxonomy Extension Schema Document | Filed herewith. |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | Filed herewith. |
101.LAB* | XBRL Taxonomy Extension Labels Linkbase Document | Filed herewith. |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | Filed herewith. |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | Filed herewith. |
*Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
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SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
| FRIENDLY ENERGY EXPLORATION |
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Dated: August 7, 2012 |
| /s/ Douglas Tallant |
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| By: DOUGLAS TALLANT |
Dated: August 7, 2012 |
| Its: President and Chief Executive Officer /s/ Donald Trapp By: DONALD TRAPP Its: Chief Financial Officer & Principal Accounting Officer |
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
Dated: August 7, 2012 | /s/ Douglas Tallant |
| By: DOUGLAS TALLANT Its: Director |
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Dated: August 7, 2012 | /s/ Donald Trapp By: DONALD TRAPP Its: Director |
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