Attached files
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EXCEL - IDEA: XBRL DOCUMENT - GATEWAY ENERGY CORP/NE | Financial_Report.xls |
EX-32.1 - CERTIFICATION OF CEO PER SECTION 906 - GATEWAY ENERGY CORP/NE | exhibit32.htm |
EX-31.1 - CERTIFICATION OF CEO PER SECTION 302 - GATEWAY ENERGY CORP/NE | exhibit31.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 June 30, 2012
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
__________to __________
Commission File No. 000-06404
GATEWAY ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware |
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44-0651207 |
(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification Number) |
1415 Louisiana Street, Suite 4100
Houston, TX 77002
(Address of principal executive offices, including zip code)
(713) 336-0844
(Registrant's telephone number, including area code)
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).
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. (Check one):
Large accelerated filer o |
Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company x |
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes______ No X
As of August 13, 2012, the registrant had 24,363,637 shares of its common stock outstanding.
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
Part I – Financial Information
Item 1. Consolidated Condensed Financial Statements (Unaudited) |
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Balance Sheets as of June 30, 2012 and December 31, 2011 |
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Statements of Operations for the three and six month periods ended June 30, 2012 and 2011 |
4 |
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Statements of Cash Flows for the six month periods ended June 30, 2012 and 2011 |
5 |
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Notes to Financial Statements |
6 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
13 |
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
18 |
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Item 4. |
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Controls and Procedures |
18 |
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Part II - Other Information |
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Item 1. |
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Legal Proceedings |
19 |
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Item 1A. |
Risk Factors |
19 |
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Item 2. |
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Unregistered Sales of Equity Securities and Use of Proceeds |
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Item 3. |
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Defaults Upon Senior Securities |
19 |
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Item 4. |
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Mine Safety Disclosures |
19 |
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Item 5. |
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Other Information |
18 |
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Item 6. |
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Exhibits |
20 |
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Signatures
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21 |
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2
ITEM 1. FINANCIAL STATEMENTS
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES | ||||||
CONSOLIDATED CONDENSED BALANCE SHEETS | ||||||
(Unaudited) | ||||||
As of | ||||||
June 30, 2012 |
December 31, 2011 | |||||
ASSETS | ||||||
Current Assets |
||||||
Cash and cash equivalents |
$ 182,122 |
$ 554,054 | ||||
Accounts receivable trade |
724,863 |
628,819 | ||||
Prepaid expenses and other assets |
264,939 |
160,931 | ||||
Total current assets |
1,171,924 |
1,343,804 | ||||
Property and Equipment, at cost |
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Gas distribution, transmission and gathering |
15,305,815 |
14,293,005 | ||||
Office furniture and other equipment |
173,687 |
163,422 | ||||
15,479,502 |
14,456,427 | |||||
Less accumulated depreciation, depletion and amortization |
(9,006,396) |
(8,805,068) | ||||
6,473,106 |
5,651,359 | |||||
Other Assets |
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Deferred tax assets, net |
4,016,054 |
3,932,734 | ||||
Intangible assets, net of accumulated amortization of $828,327 and $771,580 as of June 30, 2012 and December 31, 2011, respectively |
1,172,273 |
1,229,020 | ||||
Other |
36,485 |
44,713 | ||||
5,224,812 |
5,206,467 | |||||
Total assets |
$ 12,869,842 |
$ 12,201,630 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
Current Liabilities |
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Accounts payable |
$ 598,644 |
$ 466,210 | ||||
Accrued expenses and other liabilities |
55,493 |
125,257 | ||||
Notes payable - insurance |
148,674 |
33,915 | ||||
Asset retirement obligations |
355,447 |
330,926 | ||||
Current maturities of long-term debt |
2,811,957 |
441,496 | ||||
Total current liabilities |
3,970,215 |
1,397,804 | ||||
Asset retirement obligations |
729,407 |
705,627 | ||||
Long term debt, net of current maturities |
- |
1,833,504 | ||||
Other |
200,000 |
200,000 | ||||
Total liabilities |
4,899,622 |
4,136,935 | ||||
Commitments and contingencies |
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Stockholders' Equity |
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Preferred stock, $1.00 par value, 10,000 shares authorized, no shares issued and outstanding, respectively |
- |
- | ||||
Common stock, $0.01 par value, 150,000,000 shares authorized,23,744,047 and 23,674,602 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively |
237,440 |
236,746 | ||||
Additional paid-in capital |
23,129,353 |
23,094,908 | ||||
Accumulated deficit |
(15,396,573) |
(15,266,959) | ||||
Total stockholders' equity |
7,970,220 |
8,064,695 | ||||
Total liabilities and stockholders' equity |
$ 12,869,842 |
$ 12,201,630 |
The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.
3
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended June 30, |
For the Six Months Ended June 30, | ||||||||||||
2012 |
2011 |
2012 |
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2011 | |||||||||
. |
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Operating revenues |
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Sales of natural gas |
$ 789,762 |
$ 1,348,872 |
$ 1,752,183 |
$2,586,702 | |||||||||
Transportation of natural gas and liquids |
405,997 |
426,125 |
804,223 |
841,938 | |||||||||
Reimbursables |
155,708 |
105,135 |
292,839 |
215,625 | |||||||||
1,351,467 |
1,880,132 |
2,849,245 |
3,644,265 | ||||||||||
Operating costs and expenses |
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Cost of natural gas purchased |
628,147 |
1,155,585 |
1,414,768 |
2,217,775 | |||||||||
Operation and maintenance |
83,601 |
91,428 |
188,629 |
193,570 | |||||||||
Reimbursable costs |
164,608 |
103,509 |
292,839 |
210,760 | |||||||||
General and administrative |
325,404 |
376,916 |
714,350 |
742,658 | |||||||||
Acquisition costs |
(12,654) |
47,867 |
17,988 |
47,867 | |||||||||
Asset retirement obligation accretion |
25,632 |
- |
50,655 |
- | |||||||||
Depreciation and amortization |
132,688 |
168,087 |
258,074 |
338,066 | |||||||||
1,347,426 |
1,943,392 |
2,937,303 |
3,750,696 | ||||||||||
Operating income (loss) |
4,041 |
(63,260) |
(88,058) |
(106,431) | |||||||||
Other income (expense) |
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Interest expense, net |
(50,015) |
(43,329) |
(84,354) |
(83,981) | |||||||||
Other, net |
1,866 |
4,041 |
(12,722) |
(4,744) | |||||||||
Other expense, net |
(48,149) |
(39,288) |
(97,076) |
(88,725) | |||||||||
Loss before income taxes |
(44,108) |
(102,548) |
(185,134) |
(195,156) | |||||||||
Income tax benefit |
11,271 |
30,734 |
55,520 |
58,203 | |||||||||
Net loss |
$ (32,837) |
$ (71,814) |
$ (129,614) |
$ (136,953) | |||||||||
Basic and diluted loss per share |
$ - |
$ - |
$ (0.01) |
$ (0.01) | |||||||||
Weighted average number of basic and |
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diluted common shares outstanding |
23,698,259 |
23,480,853 |
23,686,431 |
23,480,853 | |||||||||
The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.
4
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES | ||||||||||
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS | ||||||||||
(Unaudited) | ||||||||||
For the Six Months Ended June 30, | ||||||||||
2012 |
2011 | |||||||||
Cash flows from operating activities |
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Net loss |
$ (129,614) |
$ (136,953) | ||||||||
Adjustments to reconcile net loss to net cash |
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provided by operating activities: |
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Depreciation and amortization |
258,074 |
338,066 | ||||||||
Asset retirement obligation accretion |
50,655 |
- | ||||||||
Deferred tax benefit |
(83,320) |
(70,269) | ||||||||
Stock based compensation expense, net of forfeitures |
35,139 |
24,734 | ||||||||
Amortization of deferred loan costs |
11,727 |
10,115 | ||||||||
Net change in operating assets and liabilities, resulting from changes in: |
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Accounts receivable trade |
(96,044) |
46,579 | ||||||||
Prepaid expenses, deposits and other assets |
49,559 |
279,872 | ||||||||
Accounts payable |
132,434 |
(31,963) | ||||||||
Accrued expenses and other liabilities |
(69,764) |
(25,911) | ||||||||
Net cash provided by operating activities |
158,846 |
434,270 | ||||||||
Cash flows from investing activities: |
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Capital expenditures |
(25,429) |
(58,176) | ||||||||
Acquisitions |
(1,000,000) |
- | ||||||||
Net cash used in investing activities |
(1,025,429) |
(58,176) | ||||||||
Cash flows from financing activities: |
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Proceeds from borrowings |
750,000 |
- | ||||||||
Payments on borrowings |
(246,599) |
(59,076) | ||||||||
Deferred financing costs |
(8,750) |
- | ||||||||
Net cash provided by (used in) financing activities |
494,651 |
(59,076) | ||||||||
Net increase (decrease) in cash and cash equivalents |
(371,932) |
317,018 | ||||||||
Cash and cash equivalents at beginning of period |
554,054 |
238,547 | ||||||||
Cash and cash equivalents at end of period |
$ 182,122 |
$ 555,565 | ||||||||
Supplemental disclosures of cash flow information |
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Cash paid for interest |
$ 58,594 |
$ 80,380 | ||||||||
Cash paid for taxes |
$ 24,000 |
$ 34,437 | ||||||||
The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.
5
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2012
(Unaudited)
(1) Business and Organization
Gateway Energy Corporation (the “Company” or “Gateway”), a Delaware corporation, was incorporated in 1960 and entered its current business in 1992. The Company's common stock, par value $0.01 per share, is traded in the over-the-counter market on the bulletin board (“OTCBB”) section under the symbol GNRG. Gateway is engaged in the midstream natural gas business. The Company owns and operates natural gas distribution, transmission and gathering systems located onshore in the continental United States and offshore in federal and state waters of the Gulf of Mexico.
Gateway conducts all of its business through its wholly owned subsidiary companies, Gateway Pipeline Company, Gateway Offshore Pipeline Company, Gateway Energy Marketing Company, Gateway Processing Company, Gateway Pipeline USA Corporation, Gateway Delmar LLC, Gateway Commerce LLC and CEU TX NPI, L.L.C. Gateway-Madisonville Pipeline, L.L.C. is 67% owned by Gateway Pipeline Company and 33% owned by Gateway Processing Company.
Access to our annual reports on Form 10-K, quarterly reports on Form 10-Q, our Code of Ethics and current reports on Form 8-K are available at Gateway’s website, www.gatewayenergy.com.
Glossary
In the following discussion, “Mcf” refers to thousand cubic feet of natural gas; “Bbl” refers to barrel of liquid hydrocarbons of approximately 42 U.S. gallons; “Btu” refers to British thermal unit, a common measure of the energy content of natural gas; “MMBtu” refers to one million British thermal units; “Mcfe” refers to thousand cubic feet equivalent; and liquid hydrocarbons are converted to Mcf equivalents using the ratio of 1.0 barrel of liquid hydrocarbons to 6.0 Mcf of natural gas.
(2) Summary of Significant Accounting Policies and Estimates
Basis of Presentation
The Company has prepared the accompanying unaudited consolidated condensed financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) instructions to Form 10-Q and Item 310(b) of Regulation S-K. These financial statements should be read together with the financial statements and notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, filed with the SEC on March 30, 2012. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U. S. GAAP have been condensed or omitted. The accompanying financial statements reflect all adjustments and disclosures, which, in the Company’s opinion, are necessary for fair presentation. All such adjustments are of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of the results of the entire year. Certain reclassifications have been made to the prior period financial statements to conform to the current period’s presentation.
All of the Company’s operations are onshore in the continental United States and offshore in federal and state waters of the Gulf of Mexico. Management separately reviews and evaluates the operations of each of its gas distribution, transmission and gathering systems individually, however, these operations are aggregated into one reportable segment due to the fact that all of the Company’s operations are subject to similar economic and regulatory conditions and operate in the same industry group such that they are likely to have similar long-term prospects for financial performance.
6
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2012
(Unaudited)
Principles of Consolidation
The Company consolidates the financial statements of its majority-owned and wholly-owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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 period. Management’s significant estimates include depreciation of long-lived assets, estimates and timing of asset retirement obligations, amortization of deferred loan costs, deferred tax valuation allowance, valuation of assumed liabilities, intangible lives, impairment and valuation of the fair value of our long-lived assets, purchase price allocations and valuation of stock based transactions. Actual results could differ from those estimates.
Concentrations of Credit Risk
The Company maintains all cash in deposit accounts, which at times may exceed federally insured limits. Additionally, the Company maintains credit on account for customers. The Company has not experienced material losses in such accounts and believes its accounts are fully collectable. Accordingly, no allowance for doubtful accounts has been provided.
During the three months ended June 30, 2012, two companies, ETC Marketing, Ltd and Hydrocarbon Exchange Corp. supplied 54.0% and 46.0%, respectively, of the Company’s total natural gas purchases. During the six months ended June 30, 2012, three companies, ETC Marketing, Ltd., Hydrocarbon Exchange Corp. and Cokinos Energy Corporation supplied 53.9%, 28.0% and 18.1%, respectively, of the Company’s total natural gas purchases.
Due to the nature of the Company’s operations and location of its gas distribution, transmission and gathering systems, the Company is subject to concentration of its sources of revenue from a few significant customers. Revenues from customers representing 10% or more of total revenue for the three and six months ended June 30, 2012 and 2011 are as follows:
Three Months Ended June 30, |
Six Months Ended June 30, | ||||||
2012 |
2011 |
2012 |
2011 | ||||
Dart Container Corporation |
39.0% |
46.4% |
39.0% |
45.3% | |||
Owens Corning |
18.1% |
22.7% |
21.0% |
22.9% | |||
McMoran Exploration |
14.9% |
1.6% |
12.3% |
1.9% | |||
The loss of the Company’s contract with Dart Container Corporation or either of its contracts with Owens Corning could have a material adverse effect on its business, results of operations and financial condition. The Company’s revenue from McMoran Exploration was primarily comprised of reimbursement of expenses incurred on behalf of McMoran Exploration and will fluctuate with the level of expenses incurred. The Company’s accounts receivable are not collateralized.
Asset Retirement Obligations
The Company recognizes asset retirement obligations associated with the retirement of tangible long-lived assets that result from their acquisition, construction, development and operation, when laws or regulations require the Company to pay for their abandonment, in accordance with the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 410, “Asset Retirement and Environmental Obligations”. The Company records the fair value of an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying value of the related long-lived asset. The obligation is subsequently allocated to expense using a systematic and rational method. The Company has recorded an asset retirement obligation to reflect its legal obligations related to future abandonment of its pipelines and gas gathering systems, even though the timing and realized allocation of the cost between the Company and its customers may be subject to change. The Company estimates the expected cash flows associated with the legal obligation and discounts the amount using a credit-adjusted, risk-free interest rate. At least annually, the Company reassesses the obligation to determine whether a change in the estimated obligation is necessary. The Company also evaluates whether there are indicators that suggest the estimated cash flows underlying the obligation have materially changed. Should those indicators suggest the estimated obligation may have materially changed on an interim basis (quarterly), the Company will accordingly update its assessment.
7
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2012
(Unaudited)
The following table describes changes to the Company’s asset retirement obligation liability during the six months ended June 30, 2012:
Asset retirement obligation, beginning of period |
$ 1,036,553 | ||||
Asset retirement obligation accretion |
50,655 | ||||
Liabilities settled |
(2,354) | ||||
Asset retirement obligation, end of period |
1,084,854 | ||||
Less current portion |
(355,447) | ||||
Asset retirement obligation, long term |
$ 729,407 | ||||
Earnings per Share
Basic earnings per share is computed by dividing net earnings or net loss by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net earnings or net loss by the weighted average number of shares outstanding, after giving effect to potentially dilutive common share equivalents outstanding during the period. Potentially dilutive common share equivalents are not included in the computation of diluted earnings per share if they are anti-dilutive. During the three and six months ended June 30, 2012 and 2011, all potentially dilutive common shares arising from outstanding stock options and restricted stock have been excluded from diluted earnings per share as their effects were anti-dilutive.
(3) |
Business Combinations |
Acquisition of Commerce Pipeline
On February 29, 2012, Gateway Commerce LLC, a wholly owned subsidiary of the Company, purchased a natural gas pipeline from Commerce Pipeline, L.P. (“Commerce”). The acquisition was made as part of the Company’s strategy to expand its unregulated natural gas distribution activities. The pipeline is located in Commerce, Texas and delivers natural gas into an aluminum smelting plant owned by Hydro Aluminum Metal Products North America. The pipeline and related assets were acquired pursuant to an Asset Sales Agreement (the “Agreement”), dated February 29, 2012, between Gateway Commerce LLC and Commerce. Pursuant to the Agreement and subject to the terms contained therein, Gateway Commerce LLC agreed to acquire from Commerce the pipeline and related assets for $1,000,000 in cash. The Agreement contained representations, warranties and indemnities that are customary for transactions of this type. The Company financed the $1,000,000 purchase price through a combination of cash-on-hand and borrowings under its credit facility. The transaction was accounted for in accordance with ASC Topic 805 “Business Combinations” and recorded to its gas distribution, transmission and gathering property and equipment account. During the six months ended June 30, 2012, the Company incurred $17,988 in acquisition costs related to legal fees and due diligence expenses associated with this transaction. During the three months ended June 30, 2012, the Company realized revenue of $45,857 and operating income of $44,651, and during the six months ended June 30, 2012, the Company realized revenue of $61,141 and operating income of $59,217, from the activity associated with its Commerce pipeline.
8
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2012
(Unaudited)
(4) Stock-Based Compensation Plans |
The Company’s 2007 Equity Incentive Plan (“2007 Plan”) provides for stock-based compensation for officers, employees and non-employee directors. The 2007 Plan was approved by shareholders during May 2007 and makes available 2,000,000 shares for award.
The Company made no awards of stock-based compensation during the three or six months ended June 30, 2012. During the six months ended June 30, 2012, the Company had 20,000 stock options which expired unexercised. As of June 30, 2012, 622,249 shares of the Company’s common stock were issuable under outstanding stock option grants under the 2007 Plan (which is in addition to 20,000 shares issuable under outstanding stock option grants under the Company’s former 1998 Stock Option Plans). The Company also has 452,923 shares of unvested restricted stock outstanding under the 2007 Plan. As of June 30, 2012, there are 627,423 shares available for issuance under future grants of awards under the 2007 Plan.
Compensation expense related to non-qualified stock options and restricted stock was $17,306 and $35,139 for the three and six months ended June 30, 2012, respectively, as compared to compensation expense of $16,859 and $24,734 for the three and six months ended June 30, 2011, respectively. We view all awards of stock-based compensation as a single award with an expected life equal to the average expected life of component awards and amortize the fair value of the award over the requisite service period.
Compensation expense related solely to stock options was $4,915 and $9,930 for the three and six months ended June 30, 2012, respectively. The Company had no forfeitures of unvested options during either the three or six months ended June 30, 2012. This is compared to $2,760 and $(1,342) in compensation expense and forfeiture adjustments, respectively, for the three months ended June 30, 2011 and $6,239 and $(2,364) in compensation expense and forfeiture adjustments, respectively, for the six months ended June 30, 2011. At June 30, 2012, there was $28,223 of total unrecognized compensation expense related to unvested stock option awards which is expected to be recognized over a remaining weighted-average period of approximately two years.
9
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2012
(Unaudited)
The following table represents stock option activity for the six months ended June 30, 2012:
Weighted |
Weighted |
|||||||
Average |
Average |
Intrinsic Value | ||||||
Exercise |
Contractual |
of Options as of | ||||||
Shares |
Price |
Terms |
December 31, 2011 | |||||
(Years) |
||||||||
Options outstanding, beginning of period |
662,249 |
$ .28 |
3.77 |
|||||
Options granted |
- |
- |
- |
|||||
Options cancelled |
(20,000) |
$ .45 |
- |
|||||
Options exercised |
- |
- |
- |
|||||
Options outstanding, end of period |
642,249 |
$ .28 |
3.52 |
$ - | ||||
Options exercisable, end of period |
122,500 |
$ .37 |
2.70 |
$ - | ||||
The market value of the Company’s common stock, as quoted on the OTCBB, on June 30, 2012, was $0.10 per share.
Compensation expense for restricted stock is recognized on a straight-line basis over the vesting period. We recognized $12,391 and $15,441 in compensation expense related to restricted stock grants during the three months ended June 30, 2012 and 2011, respectively, and $24,783 and $20,858 in compensation expense related to restricted stock grants during the six months ended June 30, 2012 and 2011, respectively. Compensation expense related to restricted stock grants is based upon the market value of the shares on the date of the grant. As of June 30, 2012, unrecognized compensation cost related to restricted stock awards was $73,680, which is expected to be recognized over the remaining weighted average period of approximately two years.
The following table represents restricted stock activity for the six months ended June 30, 2012:
Weighted Average | |||||
Grant Date | |||||
Shares |
Fair Value | ||||
Non-vested, beginning of period |
522,368 |
$ 0.24 | |||
Granted |
- |
- | |||
Vested |
(69,445) |
$ 0.22 | |||
Forfeited |
- |
- | |||
Non-vested, end of period |
452,923 |
$ 0.24 |
10
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2012
(Unaudited)
(5) Debt |
Trade Notes Payable
During 2010, the Company executed premium finance agreements for our insurance premiums. The total original principal amount of the notes issued in connection with these agreements was $428,367 with an interest rate of 4.95%. The notes required monthly principal and interest payments. The amount of the monthly payment varied depending on any changes in coverage and policy renewal periods. The Company repaid the balance due on these notes during the six months ended June 30, 2012.
During 2012, the Company executed premium finance agreements for our insurance premiums. The total original principal amount of the notes issued in connection with these agreements was $148,315 with an interest rate of 3.99%. The notes required monthly principal and interest payments. The amount of the monthly payment varied depending on any changes in coverage and policy renewal periods.
Long Term Debt
On December 7, 2009, the Company entered into a Credit Agreement (the “Loan Agreement”) with Meridian Bank (“Meridian”) regarding a revolving credit facility. The original borrowing base under the Loan Agreement had been established at $3.0 million, which originally could be increased at the discretion of Meridian to an amount not to exceed $6.0 million. The Loan Agreement is secured by all of the Company’s assets and had an original term of 39 months maturing on April 30, 2012. In 2011, the First and Second Amendments to the Loan Agreement shortened the maturity date to November 30, 2011, in consideration of Meridian refraining to institute a minimum commitment reduction. On December 9, 2011, the Loan Agreement was further amended to extend the maturity date to April 30, 2012, setting the loan amount at $2,300,000, and interest on outstanding balances accruing at The Wall Street Journal prime rate, plus one and a half percent, with a minimum rate of 6.0% per annum, payable monthly. Unused borrowing base fees are 0.50% per year and the Loan Agreement contains financial covenants defining various financial measures and levels of these measures.
On February 29, 2012, in connection with the Company’s acquisition of the Commerce pipeline asset, the Company entered into a Fourth Amendment to the Loan Agreement, pursuant to which:
· Borrowings under the Loan Agreement were limited solely to a term loan of $2,995,000 (the “Term Note”), all of which was advanced on or before February 29, 2012 (in addition to an outstanding letter of credit obligation of $137,500);
· Commencing in each calendar quarter ending June 30, 2012, the Company is required to make a payment to Meridian to reduce the outstanding principal balance owing under the Term Note equal to seventy five percent (75%) of its net cash provided by operating activities, less cash used in investing activities (excluding acquisitions and growth projects), less required monthly payments of principal and interest on the Term Note;
· The pipeline acquired from Commerce Pipeline and certain other collateral was pledged as security for the Term Note;
· The Company is required to maintain a debt to tangible net worth ratio of 1.90 to 1.00, a current ratio of 1.25 to 1.00 and a debt service coverage ratio of 1.50 to 1.00, as defined in the Loan Agreement;
· The Company is required to pay a principal and interest payment of $58,000 per month under the Term Note; and
· The Term Note has a maturity date of June 30, 2013.
11
GATEWAY ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2012
(Unaudited)
As of June 30, 2012, there was a $2,811,957 outstanding balance on the facility. At June 30, 2012, the Company was not in compliance with the current ratio covenant of the Loan Agreement. The Company received a waiver, through September 29, 2012, of this non-compliance from Meridian. The Company is currently in discussions with Meridian to amend its covenants and principal amortization requirements, but there are no assurances that such amendments will be obtained.
(6) Subsequent Event |
On July 31, 2012, the Company sold its Bolivar pipeline to Duma Energy Corporation (“Duma”), the operator of the field in which the Bolivar pipeline is located. In connection with the sale the Company received $1.00 and Duma assumed certain post-closing liabilities, including the future abandonment obligation of the pipeline. As of June 30, 2012, the Company carried an asset retirement obligation of $49,310 on its balance sheet with respect to the Bolivar pipeline. The Company realized an operating loss of $40,584 and $45,540 during the three and six months ended June 30, 2012, respectively, with respect to the Bolivar pipeline.
12
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 that relate to, among others, possible future events, our future performance, and our future operations. Forward-looking statements can be identified by words such as “may,” “will,” “should,” “anticipates,” “believes,” “expects,” “plans,” “future,” “intends,” “could,” “estimate,” “predict,” “potential,” “continue,” or the negative of these terms or other similar references to future periods. These statements are only our predictions. Any forward-looking statement made by us in this Quarterly Report on Form 10-Q is based only on information currently available to us and speaks only as of the date on which it is made. Our actual results could and likely will differ materially from these forward-looking statements for many reasons, including the risks described in our Annual Report on Form 10-K for the year ended December 31, 2011, and our quarterly reports on Form 10-Q. We cannot guarantee future results, levels of activities, performance, or achievements. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time, whether as a result of new information, future developments or otherwise.
Examples of forward-looking statements include, among others, statements we make concerning:
· Expectations regarding our operating margins from our distribution systems;
· Expectations regarding our transportation revenues from our gathering systems;
· Expectations regarding our operating margins from our gathering systems;
· Expectations regarding our general and administrative expenses in 2012; and
· Expectations regarding our ability to finance the construction of new facilities.
Critical Accounting Policies
The preparation of financial statements in conformity with U.S. GAAP requires estimates and assumptions that affect the reporting of assets, liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities. Note 2 to our audited Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2011, provides a summary of our significant accounting policies, which are all in accordance with generally accepted accounting principles in the United States. Certain of our accounting policies are critical to understanding our Consolidated Financial Statements because their application requires management to make assumptions about future results and depends to a large extent on management’s judgment, because past results have fluctuated and are expected to continue to do so in the future.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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 period. Management’s significant estimates include depreciation of long-lived assets, estimates and timing of asset retirement obligations, amortization of deferred loan costs, deferred tax valuation allowance, valuation of assumed liabilities, intangible lives, impairment and valuation of the fair value of our long-lived assets, purchase price allocations and valuation of stock based transactions. Actual results could differ from those estimates.
13
Results of Operations
General
All of our operations are onshore in the continental United States and offshore in federal and state waters of the Gulf of Mexico. We separately review and evaluate the operations of each of our gas distribution, transmission and gathering systems; however, these operations are aggregated into one reportable segment due to the fact that all of our operations are subject to similar economic and regulatory conditions and operate in the same industry group such that they are likely to have similar long-term prospects for financial performance.
The Henry Hub monthly, INSIDE FERC price for natural gas (as quoted in the Platts Gas Daily Price Guide) during the three months ended June 30, 2012, averaged $2.21 per MMBtu, as compared to $4.32 per MMBtu for the three months ended June 30, 2011, and for the six months ended June 30, 2012, averaged $2.47 per MMBtu, as compared to $4.21 per MMBtu for the six months ended June 30, 2011.
Results for the three and six months ended June 30, 2012 and 2011
For the Three Months Ended June 30, |
For the Six Months Ended June 30, |
| ||||||||||||
2012 |
2011 |
2012 |
2011 | |||||||||||
Operating revenues |
||||||||||||||
Sales of natural gas |
$ 789,762 |
$ 1,348,872 |
$ 1,752,183 |
$2,586,702 | ||||||||||
Transportation of natural gas and liquids |
405,997 |
426,125 |
804,223 |
841,938 | ||||||||||
Reimbursables |
155,708 |
105,135 |
292,839 |
215,625 | ||||||||||
1,351,467 |
1,880,132 |
2,849,245 |
3,644,265 | |||||||||||
Operating costs and expenses |
||||||||||||||
Cost of natural gas purchased |
628,147 |
1,155,585 |
1,414,768 |
2,217,775 | ||||||||||
Operation and maintenance |
83,601 |
91,428 |
188,629 |
193,570 | ||||||||||
Reimbursable costs |
164,608 |
103,509 |
292,839 |
210,760 | ||||||||||
General and administrative |
325,404 |
376,916 |
714,350 |
742,658 | ||||||||||
Acquisition costs |
(12,654) |
47,867 |
17,988 |
47,867 | ||||||||||
Asset retirement obligation accretion |
25,632 |
- |
50,655 |
- | ||||||||||
Depreciation and amortization |
132,688 |
168,087 |
258,074 |
338,066 | ||||||||||
1,347,426 |
1,943,392 |
2,937,303 |
3,750,696 | |||||||||||
Operating income (loss) |
$ 4,401 |
$ (63,260) |
$ (88,058) |
$ (106,431) | ||||||||||
14
Revenues
Our total revenues declined $528,665, or 28.1%, during the three months ended June 30, 2012, as compared to the three months ended June 30, 2011, and declined $795,020, or 21.8% during the six months ended June 30, 2012, as compared to the six months ended June 30, 2011.
Revenues from sales of gas on our Waxahachie distribution system decreased $559,110 and $834,519 for the three and the six months ended June 30, 2012, respectively, as compared to the same periods of 2011, predominantly attributable to significantly lower gas prices. The Company realized an average price of $2.87 per MMBtu for the second quarter of 2012, as compared to $4.93 per MMBtu for the second quarter of 2011, and $3.13 per MMBtu for the first six months of 2012, as compared to $4.79 per MMBtu for the first six months of 2011. Our sales volumes were essentially unchanged between the periods, as we realized 3,028 MMBtu per day in the second quarter of 2012 as compared to 3,006 MMBtu per day in the second quarter of 2011. For the first six months of 2012, we averaged 3,076 MMBtu per day as compared to 2,986 MMBtu per day in 2011. The decrease in revenues due to lower gas prices from our Waxahachie system, however, was largely offset by reductions in the cost of purchased gas, as volumes are bought and sold pursuant to “back-to-back” contracts based on monthly price indices.
Our transportation revenues decreased by $20,128 for the three months ended June 30, 2012, as compared to the same period in 2011. This decrease was primarily attributable to decreases of $110,985 in transportation revenues attributable to production declines on natural gas wells connected to our gathering systems. However, partially offsetting these declines were $90,857 of revenue contributions from our newly acquired Delmar and Commerce pipelines. Our transportation revenues decreased by $37,715 for the six months ended June 30, 2012, as compared to the same period in 2011. This decrease was primarily attributable to decreases of $188,856 in transportation revenues attributable to production declines on natural gas wells connected to our gathering systems. However, partially offsetting these declines were $151,141 of revenue contributions from our newly acquired Delmar and Commerce pipelines. Our Delmar pipeline delivers natural gas to a plant owned by Owens Corning in Delmar, New York and our Commerce pipeline, located in Commerce, Texas, delivers natural gas into an aluminum smelting plant owned by Hydro Aluminum Metal Products North America.
Revenues from reimbursable costs increased by $50,573 and $77,214 during the three and six months ended June 30, 2012, respectively, as compared to same period in 2011. This increase is attributable to increased operating costs which, pursuant to particular contractual arrangements, are reimbursed by our customers. These revenues will fluctuate as the related expenses increase or decrease.
We believe that transportation revenues from our gathering systems will continue to decrease through at least the third quarter of 2012 but may stabilize or even increase beginning in early 2013 due to drilling and workover activities planned by our customers, in particular those connected to our East Cameron Block 338 pipeline system. There are no assurances that such planned drilling and workover activities will ever contribute to revenues, as they are dependent on oil and gas prices, drilling rig availability and dry hole risk, among other factors.
Operating Margin
We define operating margin as fee revenues from the transportation of natural gas, plus revenues from the reimbursement of reimbursable costs, plus revenues from the sale of natural gas, net of the cost of purchased gas, less operating and maintenance expenses and reimbursable costs generated by our pipeline systems. Operating margin was $475,111 for the three months ended June 30, 2012, which was a decline from the $529,610 we recognized during the same period in 2011. For the six months ended June 30, 2012, our operating margin totaled $953,009, as compared to $1,022,160 for 2011.
Unregulated Distribution Systems
Operating margin contribution from our distribution systems was $294,454 during the three months ended June 30, 2012, a $54,813 increase compared to the $239,641 contribution during the same period in 2011. Our newly acquired Delmar and Commerce pipelines contributed $33,869 and $44,651 of operating margin, respectively, during the three months ended June 30, 2012. Our Tyson pipeline systems contributed $69,508 to operating margin during the three months ended June 30, 2012, an increase of $3,852 from the same period in 2011. Finally, our Waxahachie distribution system contributed $146,426 to operating margin during the three months ended June 30, 2012, a decrease of $27,559 compared to the same period in 2011.
15
Operating margin contribution from our distribution systems was $561,953 during the six months ended June 30, 2012, a $106,779 increase compared to the $455,174 contribution during the same period in 2011. Our newly acquired Delmar and Commerce pipelines contributed $62,523 and $59,217 of operating margin, respectively, during the six months ended June 30, 2012. Our Tyson pipeline systems contributed $138,599 to operating margin during the six months ended June 30, 2012, an increase of $17,173 from the same period in 2011. Finally, our Waxahachie distribution system contributed $301,614 to operating margin during the six months ended June 30, 2012, a decrease of $32,134 compared to the same period in 2011.
We expect operating margin from our distribution systems to increase in 2012 compared to 2011, as a result of our ownership of the Delmar pipeline for the entire year and the ownership of our newly acquired Commerce pipeline for the period beginning March 1, 2012.
Gathering Systems
Operating margin contribution from our gathering systems was $189,559 during the three months ended June 30, 2012, a $94,450, or 33.3%, decrease compared to the $284,009 contribution during the same period in 2011. For the six months ended June 30, 2012, operating margin contribution from our gathering systems was $391,056, a $161,267, or 29.2%, decrease compared to the $552,323 contribution during the same period in 2011.
These decreases were primarily attributable to production declines from existing oil and gas wells connected to these systems. We expect further decreases in operating margin from our gathering systems for the full year 2012 compared to 2011, primarily attributable to production declines from existing oil and gas wells connected to these systems.
General and Administrative Costs
General and administrative expenses were $325,404 for the three months ended June 30, 2012, which represented a decrease of $51,512, from the $376,916 in such expenses we recognized during the same period of 2011. This decrease was primarily attributable to lower employee compensation costs due to outsourcing and lower professional fees.
General and administrative expenses were $714,350 for the six months ended June 30, 2012, which represented a decrease of $28,308, from the $742,658 in such expenses we recognized during the same period of 2011. This decrease was primarily attributable to lower employee compensation costs partially offset by higher professional fees between the two periods.
We expect general and administrative expenses during 2012 to continue to be comparable to those realized in 2011, as we continue to manage our overall level of fixed costs.
Acquisition Costs
We incurred acquisition related costs of $17,988 during the six months ended June 30, 2012, related to the acquisition of our Commerce pipeline completed on February 29, 2012.
Asset Retirement Obligation Accretion
During 2011, we established an estimated asset retirement obligation of $1,013,279, on a discounted basis, with respect to our offshore Gulf of Mexico gathering systems. This liability is being accreted to our total undiscounted estimated liability over future periods until the date of such abandonment. During the three and six months ended June 30, 2012, we recognized $25,632 and $50,655 of such accretion expense, respectively.
Depreciation and Amortization
During the three months ended June 30, 2012, our depreciation, depletion and amortization expense decreased $35,399, to $132,688, as compared to $168,087 for the same period during 2011. During the six months ended June 30, 2012, our depreciation, depletion and amortization expense decreased $79,992, to $258,074, as compared to $338,066 for the same period during 2011. These decreases were primarily as a result of a lower average depreciable balance attributable to the asset impairments recorded in 2011.
16
Liquidity and Capital Resources
We are actively exploring our capital needs to allow us to fund a combination of debt service and asset retirement obligations and to accelerate the implementation of our growth strategy. Any new capital may take several forms. There is no guarantee that we will be able to raise outside capital.
We had available cash of $182,122 at June 30, 2012.
Net cash provided by operating activities totaled $158,846 for the six months ended June 30, 2012, as compared to $434,270 for the six months ended June 30, 2011. This decrease was primarily attributable to our having recognized, in the six months ended June 30, 2011, the return of a $250,000 natural gas purchase security deposit.
We used $1,025,429 of cash in investing activities during the six months ended June 30, 2012, primarily attributable to our acquisition of the Commerce pipeline. The Company’s 2011 investing activities consisted of equipment purchases.
We were provided $494,651 of net cash from financing activities during the six months ended June 30, 2012, primarily attributable to borrowings on our credit facility to acquire the Commerce pipeline, partially offset by required repayments of indebtedness. During the six months ended June 30, 2011, we used $59,076 of cash in financing activities to repay indebtedness.
On December 7, 2009, we entered into a Credit Agreement (the “Loan Agreement”) with Meridian Bank (“Meridian”) regarding a revolving credit facility. The original borrowing base under the Loan Agreement had been established at $3.0 million, which originally could be increased at the discretion of Meridian to an amount not to exceed $6.0 million. The Loan Agreement is secured by all of our assets and had an original term of 39 months maturing on April 30, 2012. In 2011, the First and Second Amendments to the Loan Agreement shortened the maturity date to November 30, 2011, in consideration of Meridian refraining to institute a minimum commitment reduction. On December 9, 2011, we further amended the Loan Agreement to extend the maturity date to April 30, 2012, setting the loan amount at $2,300,000, and interest on outstanding balances accruing at The Wall Street Journal prime rate, plus one and a half percent, with a minimum rate of 6.0% per annum, payable monthly. Unused borrowing base fees are 0.50% per year and the Loan Agreement contains financial covenants defining various financial measures and levels of these measures.
On February 29, 2012, in connection with our acquisition of the Commerce pipeline asset, we entered into a
Fourth Amendment to the Loan Agreement, pursuant to which:
· Our borrowings under the Loan Agreement were limited solely to a term loan of $2,995,000 (the “Term Note”), all of which was advanced on or before February 29, 2012 (in addition to an outstanding letter of credit obligation of $137,500);
· Commencing in each calendar quarter ending June 30, 2012, we are required to make a payment to Meridian to reduce the outstanding principal balance owing under the Term Note equal to seventy five percent (75%) of our net cash provided by operating activities, less cash used in investing activities (excluding acquisitions and growth projects), less required monthly payments of principal and interest payments on the Term Note;
· The pipeline acquired from Commerce Pipeline and certain other collateral was pledged as security for the Term Note;
· We are required to maintain a debt to tangible net worth ratio of 1.90 to 1.00, a current ratio of 1.25 to 1.00 and a debt service coverage ratio of 1.50 to 1.00, as defined in the Loan Agreement;
· We are required to pay a principal and interest payment of $58,000 per month under the Term Note; and
· The Term Note has a maturity date of June 30, 2013.
17
At June 30, 2012, we were not in compliance with the current ratio covenant of the Loan Agreement. We received a waiver, through September 29, 2012, of this non-compliance from Meridian. We are currently in discussions with Meridian to amend its covenants and principal amortization requirements, but there are no assurances that such amendments will be obtained.
Off-Balance Sheet Arrangements
The Company had no off-balance sheet arrangements at June 30, 2012.
Non-GAAP Financial Measure
We evaluate our operations using operating margin, which we define as revenues less cost of purchased gas, operating and maintenance expenses and reimbursable costs. Such amounts are before asset impairments, general and administrative expense, depreciation and amortization expense, interest income or expense or income taxes. Operating margin is not a GAAP measure but the components of operating margin are computed by using amounts that are determined in accordance with GAAP. A reconciliation of operating margin to net loss, which is its nearest comparable GAAP financial measure, is included in the table below.
For the Three Months Ended June 30, |
For the Six Months Ended June 30, | ||||||||||
2012 |
2011 |
2012 |
2011 | ||||||||
Operating Margin |
$ 475,111 |
$ 529,610 |
$ 953,009 |
$ 1,022,160 | |||||||
Less: |
|||||||||||
Depreciation and amortization |
132,688 |
168,087 |
258,074 |
338,066 | |||||||
Asset retirement obligation accretion |
25,632 |
- |
50,655 |
- | |||||||
General and administrative expenses |
325,404 |
376,916 |
714,350 |
742,658 | |||||||
Acquisition costs |
(12,654) |
47,867 |
17,988 |
47,867 | |||||||
Interest expense, net |
50,015 |
43,329 |
84,354 |
83,981 | |||||||
Other income (expense), net |
(1,866) |
(4,041) |
12,722 |
4,744 | |||||||
Plus: |
|||||||||||
Income tax benefit |
11,271 |
30,734 |
55,520 |
58,203 | |||||||
Net loss |
$ (32,837) |
$ (71,814) |
$ (129,614) |
$ (136,953) | |||||||
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Management’s Report on Disclosure Controls and Procedures
18
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our President and Chief Executive Officer (our Principal Executive Officer and Principal Financial Officer) to allow for timely decisions regarding required disclosure.
As of June 30, 2012, the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our President and Chief Executive Officer (our Principal Executive Officer and Principal Financial Officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our President and Chief Executive Officer (our Principal Executive Officer and Principal Financial Officer) concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during our quarter ended June 30, 2012, that have materially affected or are reasonably likely to materially affect, our internal controls over financial reporting.
Part II – OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 1A. Risk Factors
There are no material changes from the risk factors as previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
None
Item 3. |
Defaults Upon Senior Securities |
At June 30, 2012, the Company was not in compliance with the current ratio covenant of the Loan Agreement. The Company received a waiver, through September 29, 2012, of this non-compliance from Meridian. We are currently in discussions with Meridian to amend its covenants and principal amortization requirements, but there are no assurances that such amendments will be obtained.
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other Information
None
19
Item 6. Exhibits
Exhibit Description of Document
31.1* |
Certification pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer and Principal Financial Officer |
32.1* |
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer and Principal Financial Officer |
101** |
Interactive Data Files pursuant to Rule 405 of Regulation S-T |
101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE |
101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document |
* Filed herewith
** Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
GATEWAY ENERGY CORPORATION
August 13, 2012 |
|
/s/ Frederick M. Pevow |
(Date) |
|
President and Chief Executive Officer |
|
|
(Principal Executive Officer and Principal Financial Officer) |
21