U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2008
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 Number 333-138465
LA CORTEZ ENERGY, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
| Nevada | 1311 | 20-5157768 |
| (State of incorporation) | (Primary SIC Number) | (IRS Employer ID Number) |
1266 1st Street, Suite 4
Sarasota, FL 34236
(941)365-5081
(Address and telephone number of principal executive offices)
2260 El Cajon Blvd. #882
San Diego, CA 92104
(Former address of principal executive offices)
Indicate 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 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¨ | Accelerated filer¨ | Non-accelerated filer¨ | Smaller reporting companyx |
| | | | |
| | | (Do not check if a smaller Reporting company) | |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
There were 18,935,244 shares of Common Stock outstanding as of May 31, 2009.
EXPLANATORY NOTE
Our condensed financial statements for the three months ended March 31, 2008 and related disclosures in this Amendment No. 1 to the Quarterly Report on Form 10-Q/A have been restated in accordance with the changes described below:
In April 2009, we concluded that it was necessary to amend this Quarterly Report in order to restate our condensed financial statements for the three months ended March 31, 2008 to reflect the revaluation of 1,000,000 shares (restated for 5:1 forward stock split) of our common stock we issued to a consultant on February 7, 2008 at an original valuation of $0.01 per share (post-5:1 forward stock split), in exchange for services. Upon review and consideration of the requirements of EITF 96-18 “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” regarding the valuation of this stock, our management has concluded that the shares issued to the consultant should have been valued at $1.00 per share (post-5:1 forward stock split) based on the $1.00 per share stock price we received in our private placement that closed on March 14, 2008. As a result, we have recognized additional compensation expense of $990,000 and an increase in additional paid-in capital by a corresponding amount.
In the process of preparing this Amendment No. 1 to the March 31, 2008 10-Q, we noted the following other errors in the Form 10-Q as originally filed:
| | · | The Form 10-Q as previously filed did not include a condensed balance sheet as of the end of the most recent annual period (December 31, 2007). This financial statement has been added. |
| | · | The weighted average number of common shares outstanding in the Statement of Operations for the three months ended March 31, 2008 and 2007 had not been properly restated to reflect the 5:1 forward stock split which occurred on February 21, 2008. |
| | · | The condensed balance sheet as of December 31, 2007 had not been reclassified to properly reflect the 5:1 forward stock split which occurred on February 21, 2008. |
The condensed financial statements and other financial information included in this Amendment No. 1 to the March 31, 2008 10-Q have been restated accordingly. Our shareholders should no longer rely on our previously filed financial statements for the three months ended March 31, 2008. These matters have been discussed by our authorized executive officers and with our independent registered public accounting firm.
As a result of the above changes, management has changed its evaluation of the effectiveness of our disclosure controls and procedures.
This Amendment No. 1 reproduces only those sections of the original Form 10-Q that have been changed as a result of the restatement. This Amendment No. 1 is stated as of the file date of the Original Filing and does not reflect events occurring after the filing date of the Original Filing, or modify or update the disclosures therein in any way other than as required to reflect the amendment described above.
LA CORTEZ ENERGY, INC.
INDEX
| | | Page |
| Part I Financial Information | |
| | | |
| Item 1 | Financial Statements | |
| | | |
| | Condensed Balance Sheet (unaudited) (restated) | 1 |
| | | |
| | Condensed Statements of Operations (unaudited) (restated) | 2 |
| | | |
| | Condensed Statement of Changes in Shareholders' Equity (unaudited) (restated) | 3 |
| | | |
| | Condensed Statements of Cash Flows (unaudited) (restated) | 4 |
| | | |
| | Notes to the Unaudited Condensed Financial Statements | 5 |
| | | |
| Item 2 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 9 |
| | | |
| Item 4T | Controls and Procedures | 10 |
| | | |
| Part II Other Information | 11 |
| | | |
| Item 6 | Exhibits | 11 |
| | | |
| Signatures | | 12 |
| | | |
| Exhibit – Certification of Principal Executive Officer and Principal Financial Officer | |
| | | |
| Exhibit – Certification of Chief Executive Officer and Chief Financial Officer | |
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
La Cortez Energy, Inc.
(Formerly La Cortez Enterprises, Inc.)
(A Development Stage Company)
Condensed Balance Sheets
(Unaudited)
| | | March 31, 2008 (Restated) | | | December 31, 2007 (Restated) | |
| Assets | | | | | | |
| | | | | | | |
| Cash and cash equivalents | | $ | 2,352,915 | | | $ | 1,025 | |
| Deposit | | | 500 | | | | 500 | |
| | | | | | | | | |
| | | $ | 2,353,415 | | | $ | 1,525 | |
| | | | | | | | | |
| Liabilities and Shareholders’ Equity | | | | | | | | |
| | | | | | | | | |
| Liabilities: | | | | | | | | |
| Accounts payable | | $ | 10,915 | | | $ | - | |
| Accrued liabilities | | | 600 | | | | 1,000 | |
| Indebtedness to related party (Note 3) | | | 14,600 | | | | 14,600 | |
| | | | | | | | | |
| Total liabilities | | | 26,115 | | | | 15,600 | |
| | | | | | | | | |
| Shareholders’ equity (Note 4): | | | | | | | | |
| Common stock, $.001 par value; 300,000,000 and 300,000,000 shares authorized, respectively, 16,400,444 and 20,750,000 shares issued and outstanding, respectively | | | 16,400 | | | | 20,750 | |
| Additional paid-in capital | | | 3,473,322 | | | | 7,250 | |
| Deficit accumulated during development stage | | | (1,162,422 | ) | | | (42,075 | ) |
| | | | | | | | | |
| Total shareholders’ equity | | | 2,327,300 | | | | (14,075 | ) |
| | | | | | | | | |
| | | $ | 2,353,415 | | | $ | 1,525 | |
See accompanying notes to condensed financial statements
La Cortez Energy, Inc.
(Formerly La Cortez Enterprises, Inc.)
(A Development Stage Company)
Condensed Statements of Operations
(Unaudited)
| | | | | | | | | June 9, 2006 | |
| | | | | | | | | (Inception) | |
| | | Three Months Ended | | | Through | |
| | | March 31, | | | March 31, | |
| | | 2008 | | | 2007 | | | 2008 | |
| Operating expenses: | | (Restated) | | | (Restated) | | | (Restated) | |
| Professional fees | | $ | 108,117 | | | $ | 12,735 | | | $ | 137,800 | |
| Management fees | | | — | | | | 1,500 | | | | 7,500 | |
| Stock-based compensation | | | 1,000,000 | | | | — | | | | 1,000,000 | |
| Travel | | | 6,090 | | | | — | | | | 6,090 | |
| Rent | | | 600 | | | | 600 | | | | 4,200 | |
| Other | | | 5,970 | | | | 419 | | | | 7,262 | |
| Total operating expenses | | | 1,120,777 | | | | 15,254 | | | | 1,162,852 | |
| | | | | | | | | | | | | |
| Loss from operations | | | (1,120,777 | ) | | | (15,254 | ) | | | (1,162,852 | ) |
| | | | | | | | | | | | | |
| Non-operating income (expense): | | | | | | | | | | | | |
| Interest income | | | 652 | | | | — | | | | 652 | |
| Interest expense | | | (222 | ) | | | — | | | | (222 | ) |
| | | | | | | | | | | | | |
| Loss before income taxes | | | (1,120,347 | ) | | | (15,254 | ) | | | (1,162,422 | ) |
| | | | | | | | | | | | | |
| Income tax provision (Note 5) | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | |
| Net loss | | $ | (1,120,347 | ) | | $ | (15,254 | ) | | $ | (1,162,422 | ) |
| | | | | | | | | | | | | |
| Basic and diluted loss per share | | $ | (0.06 | ) | | $ | (0.00 | ) | | | | |
| | | | | | | | | | | | | |
| Basic and diluted weighted average common shares outstanding | | | 19,126,544 | | | | 20,750,000 | | | | | |
See accompanying notes to condensed financial statements
La Cortez Energy, Inc.
(Formerly La Cortez Enterprises, Inc.)
(A Development Stage Company)
Condensed Statement of Changes in Shareholders' Equity
| | | Common Stock | | | Additional Paid-in | | | Deficit Accumulated During Development | | | | |
| | | Shares | | | Amount | | | Capital | | | Stage | | | Total | |
| | | | | | | | | | | | | | | | |
| Balance at June 9, 2006 (inception) | | | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | |
| July 2006, common stock sold to president/ | | | | | | | | | | | | | | | | | | | | |
| sole director at $.0008 per share (Note 3) | | | *11,250,000 | | | | 11,250 | | | | (2,250 | ) | | | — | | | | 9,000 | |
| December 2006, common stock sold pursuant | | | | | | | | | | | | | | | | | | | | |
| to a SB-2 registered offering at $.002/share (Note 4) | | | *9,500,000 | | | | 9,500 | | | | 9,500 | | | | — | | | | 19,000 | |
| Net loss, period ended December 31, 2006 | | | — | | | | — | | | | — | | | | (13,239 | ) | | | (13,239 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2006 | | | *20,750,000 | | | | 20,750 | | | | 7,250 | | | | (13,239 | ) | | | 14,761 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net loss, year ended December 31, 2007 | | | — | | | | — | | | | — | | | | (28,836 | ) | | | (28,836 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Balance at December 31, 2007 | | | *20,750,000 | | | | 20,750 | | | | 7,250 | | | | (42,075 | ) | | | (14,075 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| February 2008, common stock sold to an | | | | | | | | | | | | | | | | | | | | |
| officer at $.01 per share (unaudited) (Note 3) | | | *1,150,000 | | | | 1,150 | | | | 10,350 | | | | — | | | | 11,500 | |
| February 2008, common stock issued to a | | | | | | | | | | | | | | | | | | | | |
| consultant in exchange for services at $1.00 per share(unaudited) (Restated)(Notes 4 and 7) | | | *1,000,000 | | | | 1,000 | | | | 999,000 | | | | — | | | | 1,000,000 | |
| February 2008, cancellation of former officer's | | | | | | | | | | | | | | | | | | | | |
| shares (unaudited) (Note 3) | | | (9,000,000 | ) | | | (9,000 | ) | | | 9,000 | | | | — | | | | — | |
| February 2008, common stock issued in exchange | | | | | | | | | | | | | | | | | | | | |
| for extinguishment of debt and accrued interest at $.50 per share (unaudited) (Note 4) | | | 100,444 | | | | 100 | | | | 50,122 | | | | — | | | | 50,222 | |
| March 2008, common stock sold in private | | | | | | | | | | | | | | | | | | | | |
| placement offering at $1.00 per share (unaudited) (Note 4) | | | 2,400,000 | | | | 2,400 | | | | 2,397,600 | | | | — | | | | 2,400,000 | |
| Net loss, three months ended | | | | | | | | | | | | | | | | | | | | |
| March 31, 2008 (unaudited) (Restated)(Note 7) | | | — | | | | — | | | | — | | | | (1,120,347 | ) | | | (1,120,347 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Balance at March 31, 2008 (unaudited)(Restated)(Note7) | | | 16,400,444 | | | $ | 16,400 | | | $ | 3,473,322 | | | $ | (1,162,422 | ) | | $ | 2,327,300 | |
* Restated for 5:1 forward stock split (see Note 4)
See accompanying notes to condensed financial statements
La Cortez Energy, Inc.
(Formerly La Cortez Enterprises, Inc.)
(A Development Stage Company)
Condensed Statements of Cash Flows
(Unaudited)
| | | | | | | | | June 9, 2006 | |
| | | | | | | | | (Inception) | |
| | | Three Months Ended | | | Through | |
| | | March 31, | | | March 31, | |
| | | 2008 | | | 2007 | | | 2008 | |
| Cash flows from operating activities: | | (Restated) | | | | | | (Restated) | |
| Net loss | | $ | (1,120,347 | ) | | $ | (15,254 | ) | | $ | (1,162,422 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | | | | | |
| Stock-based compensation (Note 4) | | | 1,000,000 | | | | — | | | | 1,000,000 | |
| Common stock issued in exchange for interest expense (Note 4) | | | 222 | | | | — | | | | 222 | |
| Changes in operating assets and liabilities: | | | | | | | | | | | | |
| Prepaid expenses | | | — | | | | (700 | ) | | | — | |
| Deposit | | | — | | | | — | | | | (500 | ) |
| Accounts payable | | | 10,915 | | | | (500 | ) | | | 10,915 | |
| Accrued liabilities | | | (400 | ) | | | (1,500 | ) | | | 600 | |
| Net cash used in operating activities | | | (109,610 | ) | | | (17,954 | ) | | | (151,185 | ) |
| | | | | | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | | | | | |
| Proceeds from the sale of common stock (Notes 2 and 4) | | | 2,411,500 | | | | — | | | | 2,439,500 | |
| Proceeds from issuance of note payable (Note 4) | | | 50,000 | | | | — | | | | 50,000 | |
| Proceeds from officer advances (Note 3) | | | — | | | | — | | | | 14,600 | |
| Net cash provided by financing activities | | | 2,461,500 | | | | — | | | | 2,504,100 | |
| | | | | | | | | | | | | |
| Net change in cash | | | 2,351,890 | | | | (17,954 | ) | | | 2,352,915 | |
| | | | | | | | | | | | | |
| Cash, beginning of period | | | 1,025 | | | | 19,861 | | | | — | |
| | | | | | | | | | | | | |
| Cash, end of period | | $ | 2,352,915 | | | $ | 1,907 | | | $ | 2,352,915 | |
| | | | | | | | | | | | | |
| Supplemental disclosure of cash flow information: | | | | | | | | | | | | |
| Cash paid during the period for: | | | | | | | | | | | | |
| Income taxes | | $ | — | | | $ | — | | | $ | — | |
| Interest | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | | | | | | |
| Non-cash financing transactions: | | | | | | | | | | | | |
| Common stock issued in exchange for extinguishment of note payable (Note 4) | | $ | (50,000 | ) | | $ | — | | | $ | (50,000 | ) |
See accompanying notes to condensed financial statements
LA CORTEZ ENERGY, INC.
(Formerly La Cortez Enterprises, Inc.)
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)
The condensed financial statements presented herein have been prepared by the Company in accordance with the accounting policies in its audited financial statements for the period ended December 31, 2007 as filed in its Form 10-KSB and should be read in conjunction with the notes thereto. The Company is in the development stage in accordance with Statement of Financial Accounting Standards (“SFAS”) No.7 “Accounting and Reporting by Development Stage Enterprises”.
In the opinion of management, the accompanying condensed financial statements contain all adjustments (consisting only of normal recurring adjustments) which are necessary to provide a fair presentation of operating results for the interim periods presented. Certain information and footnote disclosures, normally included in the financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted. The results of operations presented for the three months ended March 31, 2008 are not necessarily indicative of the results to be expected for the year. These condensed financial statements should be read in connection with the condensed financial statements and notes thereto included in the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2007.
Interim financial data presented herein are unaudited.
As described in Notes 4 and 7, these condensed financial statements as of March 31, 2008 and for the three months then ended have been restated to reflect the revaluation of 1,000,000 shares (restated for 5:1 forward stock split) of the Company’s common stock it issued to a consultant on February 7, 2008 at an original valuation of $0.01 per share (post-5:1 forward stock split), in exchange for services.
| (2) | Organization and Amended Articles of Incorporation |
As authorized by the sole director, on February 7, 2008, the name of the Company was changed from La Cortez Enterprises, Inc. to La Cortez Energy, Inc. and the capitalization of the Corporation was increased to 310,000,000 shares of which 300,000,000 are common stock with a par value of $0.001 and 10,000,000 shares are preferred stock with a par value $0.001 per share.
Upon the resignation of the Company’s sole officer and director, effective February 25, 2008, a new Chairperson was appointed to serve on the Board until a successor is duly elected.
| (3) | Related Party Transactions |
Indebtedness to related party
On June 16, 2007, the sole officer and director advanced $10,000 to the Company for working capital. The advance is included in the accompanying condensed financial statements as “Indebtedness to related party.” The advance carries no interest rate and is due on demand.
On May 17, 2007, the sole officer and director advanced $2,600 to the Company for working capital. The advance is included in the accompanying condensed financial statements as “Indebtedness to related party.” The advance carries no interest rate and is due on demand.
On July 28, 2006, the sole officer and director advanced $2,000 to the Company for working capital. The advance is included in the accompanying condensed financial statements as “Indebtedness to related party.” The advance carries no interest rate and is due on demand.
Common stock sales
On February 7, 2008, the Company sold 1,150,000 (post-split) shares of its $.001 par value common stock to its newly appointed officer and sole director for $11,500, or $.01 (post-split) per share.
LA CORTEZ ENERGY, INC.
(Formerly La Cortez Enterprises, Inc.)
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)
On July 28, 2006, the Company sold 11,250,000 (post-split) shares of its $.001 par value common stock to its sole officer and director for $9,000, or $.0008 (post-split) per share.
Common stock split
On February 7, 2008, the Company’s Board of Directors approved a 5 for 1 forward stock split on each share of its common stock issued and outstanding at the close of business on February 21, 2008. Following the stock split the Company had 22,900,000 common shares issued and outstanding. Shares issued prior to February 21, 2008 have been retroactively restated to reflect the impact of the stock split.
Common stock issued for services
As further described in Note 7, on February 7, 2008, the Company issued 1,000,000 (post-split) shares of its common stock in exchange for consulting services, which included assisting the CEO in building the Board of Directors and senior management team for the Company. The Company revalued the stock issuance in accordance with EITF 96-18 “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,” resulting in a restatement of its condensed financial statements as of and for the three months ended March 31, 2008. Management estimated the revised fair value of the stock issued to the consultant at $1.00 (post-split) per share based on the stock price received in the private placement on March 14, 2008. This resulted in an increase of the stock-based compensation expense by 990,000, which was recognized in the accompanying condensed statement of operations for the three months ended March 31, 2008.
Common stock issued to extinguish debt
On February 8, 2008, the Company issued a promissory note to Milestone Enhanced Fund Ltd. (“Milestone”) in exchange for a $50,000 of working capital proceeds. The note was due within one year and carried a nine percent annual interest rate.
On February 25, 2008, the Company issued 100,444 shares of its common stock in exchange for full payment of the note and accrued interest. The transaction was valued at the fair value of the common stock issued, or $.50 per share, by the Company’s Board of Directors, representing the $50,000 note and $222 of interest expense.
Common stock sales
On February 19, 2008 the Company’s Board of Directors, via a consent of its sole director, authorized the Company to offer up to 2,000,000 shares of its common stock to a limited number of accredited investors at a price of $1.00 per share, in a private placement offering pursuant to the exemptions from registration provided by Rule 506 of Regulation D, Regulation S, and Section 4(2) under the Securities Act of 1933, as amended. On March 13, 2008, the Board further authorized to increase the size of the offering to up to 3,000,000 shares of its Common Stock. As of March 31, 2008, a total of 2,400,000 shares of common stock were sold for total proceeds of $2,400,000.
On December 12, 2006, the Company sold 9,500,000 (post-split) shares of its common stock at a price of $.002 (post-split) per share for total proceeds of $19,000. The offering was made pursuant to the company’s SB-2 registration statement that became effective on December 4, 2006. All sales were conducted through the Company’s officer and director.
The Company records its income taxes in accordance with SFAS No.109, “Accounting for Income Taxes.” The Company incurred net operating losses during all periods presented in a deferred tax asset, which was fully allowed for; therefore, the net benefit and expense resulted in $-0- income taxes.
LA CORTEZ ENERGY, INC.
(Formerly La Cortez Enterprises, Inc.)
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)
On September 15, 2006, the Company entered into a Commercial Property Lease. The Lease commenced on November 1, 2006 and continues on a month-to-month basis until cancelled by either party. The Lease requires rental payments of $200 per month and a $500 deposit. As of March 31, 2008, the Company owed $600 for unpaid lease payments.
| (7) | Restatement of previously issued financial statements |
Summary of Restatement Items
The condensed financial statements for the three months ended March 31, 2008 and related disclosures in this Amendment No. 1 to the Quarterly Report on Form 10-Q/A have been restated in accordance with the changes described below:
In April 2009, the Company concluded that it was necessary to amend this Quarterly Report in order to restate its condensed financial statements for the three months ended March 31, 2008 to reflect the revaluation of 1,000,000 shares (restated for 5:1 forward stock split) of its common stock issued to a consultant on February 7, 2008 at an original valuation of $0.01 per share (post-5:1 forward stock split), in exchange for services. Upon review and consideration of the requirements of EITF 96-18 regarding the valuation of this stock, management has concluded that the shares issued to the consultant should have been valued at $1.00 per share (post-5:1 forward stock split) based on the $1.00 per share stock price the Company received in its private placement that closed on March 14, 2008. As a result, the Company has recognized additional compensation expense of $990,000 and increased additional paid-in capital by a corresponding amount during the three months ended March 31, 2008.
Impact on Statements of Operations
The impact of the above restatement on the Company’s condensed consolidated statements of operations for the three months ended March 31, 2008 and for the period from June 9, 2006 (Inception) through March 31, 2008 is summarized below.
| | | Three months ended March 31, 2008 | |
| | | As initially reported | | | Adjustment | | | As restated | |
| Operating expenses: | | | | | | | | | |
| Professional fees | | $ | 108,117 | | | $ | - | | | $ | 108,117 | |
| Stock-based compensation | | | 10,000 | | | | 990,000 | (a) | | | 1,000,000 | |
| Travel | | | 6,090 | | | | - | | | | 6,090 | |
| Rent | | | 600 | | | | - | | | | 600 | |
| Other | | | 5,970 | | | | - | | | | 5,970 | |
| Total operating expense | | | 130,777 | | | | 990,000 | | | | 1,120,777 | |
| | | | | | | | | | | | | |
| Loss from operations | | | (130,777 | ) | | | (990,000 | ) | | | (1,120,777 | ) |
| | | | | | | | | | | | | |
| Net other income | | | 430 | | | | - | | | | 430 | |
| | | | | | | | | | | | | |
| Net loss | | $ | (130,347 | ) | | $ | (990,000 | ) | | $ | (1,120,347 | ) |
| | | | | | | | | | | | | |
| Loss per share – basic and fully diluted | | $ | (0.01 | ) | | $ | (0.05 | )(b) | | $ | (0.06 | ) |
| Weighted average shares outstanding – basic and fully diluted | | | 9,475,222 | | | | 9,651,322 | (c) | | | 19,126,544 | |
| (a) | To record additional stock-based compensation for the valuation of common stock issued to a consultant. |
| (b) | To reflect basic and diluted loss per share based upon corrected net loss. |
| (c) | To reflect change in weighted average shares outstanding to properly reflect forward stock split. |
LA CORTEZ ENERGY, INC.
(Formerly La Cortez Enterprises, Inc.)
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)
| | | Inception through March 31, 2008 | |
| | | As initially reported | | | Adjustment | | | As restated | |
| Operating expenses: | | | | | | | | | |
| Professional fees | | $ | 137,800 | | | $ | - | | | $ | 137,800 | |
| Management fees | | | 7,500 | | | | - | | | | 7,500 | |
| Stock-based compensation | | | 10,000 | | | | 990,000 | (a) | | | 1,000,000 | |
| Travel | | | 6,090 | | | | - | | | | 6,090 | |
| Rent | | | 4,200 | | | | - | | | | 4,200 | |
| Other | | | 7,262 | | | | - | | | | 7,262 | |
| Total operating expense | | | 172,852 | | | | 990,000 | | | | 1,162,852 | |
| | | | | | | | | | | | | |
| Loss from operations | | | (172,852 | ) | | | (990,000 | ) | | | (1,162,852 | ) |
| | | | | | | | | | | | | |
| Net other income (expense) | | | 430 | | | | - | | | | 430 | |
| | | | | | | | | | | | | |
| Net loss | | $ | (172,422 | ) | | $ | (990,000 | ) | | $ | (1,162,422 | ) |
| (a) | To record additional stock-based compensation for the valuation of common stock issued to a consultant. |
Balance sheet impact
The following table sets forth the effects of the restatement adjustments on the Company’s condensed balance sheet as of March 31, 2008 as compared to the balance sheet initially filed in the March 31, 2008 Form 10-Q.
| | | March 31, 2008 | |
| | | As initially reported | | | Adjustment | | | As restated | |
| | | | | | | | | | |
| Current assets | | $ | 2,353,415 | | | $ | - | | | $ | 2,353,415 | |
| Total assets | | | 2,353,415 | | | | - | | | | 2,353,415 | |
| | | | | | | | | | | | | |
| Current liabilities | | | 26,115 | | | | - | | | | 26,115 | |
| | | | | | | | | | | | | |
| Shareholders’ equity: | | | | | | | | | | | | |
| Common stock | | | 16,400 | | | | - | | | | 16,400 | |
| Additional paid-in capital | | | 2,483,322 | | | | 990,000 | (a) | | | 3,473,322 | |
| Deficit accumulated during development stage | | | (172,422 | ) | | | (990,000 | )(b) | | | (1,162,422 | ) |
| Total shareholders’ equity | | | 2,327,300 | | | | - | | | | 2,327,300 | |
| | | | | | | | | | | | | |
| Total liabilities and shareholders’ equity | | $ | 2,353,415 | | | $ | - | | | $ | 2,353,415 | |
| (a) | To correct additional paid-in capital for restated valuation of common stock issued to consultant. |
| (b) | To reflect aggregate effect of statement of operations adjustment. |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Statement Regarding Forward-Looking Information
This report contains forward-looking statements. All statements other than statements of historical facts included in this Quarterly Report on Form 10-Q, including without limitation, statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations regarding our financial position, estimated working capital, business strategy, the plans and objectives of our management for future operations and those statements preceded by, followed by or that otherwise include the words “believe”, “expects”, “anticipates”, “intends”, “estimates”, “projects”, “target”, “goal”, “plans”, “objective”, “should”, or similar expressions or variations on such expressions are forward-looking statements. We can give no assurances that the assumptions upon which the forward-looking statements are based will prove to be correct. Because forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. There are a number of risks, uncertainties and other important factors that could cause our actual results to differ materially from the forward-looking statements, including, but not limited to, our ability to identify and exploit available business opportunities in the energy sector in South America, our ability to raise sufficient capital to successfully participate in projects in our field of operations and our ability to build a management infrastructure sufficient for our operational needs.
Except as otherwise required by the federal securities laws, we disclaim any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this Quarterly Report on Form 10-Q to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
OVERVIEW
We were incorporated in the State of Nevada on June 9, 2006. We recently decided to redirect our efforts towards identifying and pursuing a business strategy in the energy sector and related opportunities in South America, with an initial focus on opportunities in Colombia.
More specifically, we expect to explore investment opportunities in one or more of the following areas: oil and gas exploration and development, hydrocarbon production and investments in infrastructure associated therewith (e.g., storage tanks, processing facilities and/or pipelines). The scope of our activities in this regard may include, but not be limited to, the acquisition of or assignment of rights to develop exploratory acreage under concessions with government authorities and private landowners, the purchase of oil and gas producing properties, farm-in and farm-out opportunities (i.e., the assumption of or assignment of obligations to fund the cost of drilling and development), and/or the purchase of debt or equity in, and/or assets of, existing oil and gas exploration and development companies currently conducting activities in Colombia.
Because we are initially interested in opportunities in Colombia, we have established a subsidiary, La Cortez Energy Colombia, E.U. (“La Cortez Colombia”), with offices in Bogota, Colombia.
To provide us with working capital to enable us to begin to pursue our business plan in the energy sector in South America, we closed a private offering (the “Offering”), on March 14, 2008, of 2,400,000 shares of our common stock at a price of $1.00 per share for an aggregate of $2,400,000, as further described on our Form 8-k filed with the Securities and Exchange Commission (the “SEC”) on March 20, 2008.
RESULTS OF OPERATIONS
We are still in our development stage and have generated no revenues to date.
We incurred total expenses of $1,120,777 for the three month period ended March 31, 2008 compared to $15,254 for the three month period ended March 31, 2007. These expenses consisted of general operating expenses incurred in connection with the day to day operation of our business and the preparation and filing of our periodic reports. The increase in expenses for the three month period ended March 31, 2008 is attributable primarily to increased legal expenses incurred in connection with the our new business activities and the Offering and increased stock-based compensation related to the issuance of common stock to a consultant.
Our net loss for the three months ended March 31, 2008 was $1,120,347 compared to $15,254 for the three month period ended March 31, 2007.
Our auditors have expressed their doubt about our ability to continue as a going concern unless we are able to generate profitable operations.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2008, we had a cash balance of $2,352,915 as a result of the Offering. We expect that this amount of cash should provide sufficient working capital to fund our operations for approximately the next twelve months without having to raise additional funds or seek bank loans.
We currently are staffing La Cortez Colombia and our plans may include the hiring of additional employees in the next twelve months to operate this business.
We will continue to evaluate possible acquisitions of or investments in the energy sector in South America that are complimentary to our business objectives. These may require that we seek additional financing. We may sell equity or debt securities or seek credit facilities to fund acquisition-related or other business costs. Sales of equity or convertible debt securities may result in dilution to our stockholders. We may also need to raise additional funds to support a more rapid expansion of our business, respond to competitive pressures, or take advantage of unanticipated opportunities. Our future liquidity and capital requirements will depend upon numerous factors, including the success of our energy ventures in South America.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
ITEM 4T. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer (who joined the Company as principal executive officer in June 2008) and principal financial officer (who joined the Company in February 2008 and became principal financial officer in June 2008), of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2008. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2008, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In particular, we concluded that internal control weaknesses in our accounting policies and procedures relating to our equity transactions, financial statement disclosures and segregation of duties were material weaknesses.
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our condensed financial statements included in this Form 10-Q/A accurately reflects our financial condition, results of operations and cash flows for the periods presented. In addition, we engaged independent accounting consultants to assist us with our accounting functions and in performing the additional analyses referred to above. Accordingly, management believes that the condensed financial statements included in this Form 10-Q/A fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.
Changes in Internal Control Over Financial Reporting
Subsequent to December 31, 2008, management has engaged consultants to assist the Company in ensuring that accounting policies and procedures are consistent across all the organization and that we have adequate control over financial statement disclosures. In addition, the Company continues to increase its workforce in preparation for leaving the development stage and beginning operations. We also intend to hire an experienced Chief Financial Officer with an oil and gas industry background. We believe that these combined actions will remedy the material weaknesses in our current system of internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS
The following exhibits are filed as part of (or are furnished with, as indicated below) this Quarterly Report Amendment No.1:
| Exhibit No. | | Description |
| | | |
| 31.1 | | Certification of Principal Executive Officer, pursuant to SEC Rules 13a-14(a) and 15d-14(a), adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| | | |
| 31.2 | | Certification of Interim Principal Financial Officer, pursuant to SEC Rules 13a-14(a) and 15d-14(a), adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| | | |
| 32.1 | | Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* |
| | | |
| 32.2 | | Certification of Interim Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* |
* This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.
SIGNATURES
In accordance with the requirements of Section 13(a) or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: June 1, 2009 | LA CORTEZ ENERGY, INC. |
| | |
| | By: | /s/ Andres Gutierrez |
| | | Name: | Andres Gutierrez |
| | | Title: | Principal Executive Officer |
