UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/Amendment 1
(Mark One)
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
the quarterly period ended December 31, 2007
OR
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____________to _____________
Commission file number 333-137174
TAMM OIL AND GAS CORP.
(Exact name of small business issuer as specified in its charter)
Nevada | | 20-3773508 |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
Suite 460, 734 7 Ave SW, Calgary, AB, Canada T2P 3P8
(Address of principal executive offices)
403-975-9399
(Issuer’s telephone number)
HOLA COMMUNICATIONS, INC.
(Former name, former address and former fiscal year, if changed since last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 114,233,000 shares of common stock issued and outstanding as of February 14, 2008
Transitional Small Business Disclosure Format (Check one): Yes o No x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x No o
Tamm Oil and Gas, Inc., is referred to herein as “us”, “we”, “our” or the “Company”.
PART I - FINANCIAL INFORMATION
Pursuant to Rule 12b-15 of the Securities Exchange Act of 1934, as amended, this Amendment No. 1 includes updated certifications from our Chief Executive Officer and Chief Financial Officer.
Item 1. Financial Statements
Explanatory Note A
Although the disclosure contained in the originally filed Form 10-QSB was made under Regulation S-B, because Regulation S-B has since been eliminated, we have filed this amended quarterly report under Form 10-Q.
Explanatory Note B
This Amendment No. 1 to our Form 10-Q for the quarter ended December 31, 2007 is being filed:
| | (i) | To restate the value of the 21,533,000 shares issued in exchange for shares of another public company, Deep Well Oil and Gas, Inc. The price per share for the 21,533,000 shares issued as of December 27, 2007 should have been $2.52 per share or an increase in Additional Paid-in-Capital of $50,817,880. Because the investment fails to meet the standards set forth by SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the amount has been recorded to an impairment reserve. |
| | (ii) | To record shares issued after our quarter ended December 31, 2007 that related to a November 26, 2007 agreement providing for our issuance of a total of 4 million of our common stock shares in exchange for royalty agreement interests valued at $4,000,000. The per share price was $2.55 on November 26, 2007. Consequently, the shares have been recorded at a total of $10,200,000, with a corresponding charge to the impairment reserve of $6,200,000. |
As a result of charges to impairment reserve, for the quarter ended December 31, 2007, the net loss increased from $3,530,799, ($0.04) per share to $60,548,679, ($0.64) per share. For the nine months ended December 31, 2007, the net loss increased from $3,599,830, ($0.04) per share to $60,617,710, ($0.66) per share. In addition, total assets increased from $1,496,897 to $5,496,897.
This Amendment No. 1 does not amend, modify or update any other information or disclosures to reflect developments since the February 19, 2008 original filing of the Company's Form 10-QSB for the period ended December 31, 2007.
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions and applicable rules to Form 10-Q , and, therefore, do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders’ equity in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the three and nine months ended December 31, 2007 are not necessarily indicative of the results that can be expected for the year ending March 31, 2008.
TAMM OIL AND GAS CORP. |
(An Exploration Stage Company) |
Balance Sheets |
| ASSETS | | | | | |
| | | December 31, | | March 31, | |
| | | 2007 | | 2007 | |
| | | (Unaudited) | | | |
| CURRENT ASSETS | | (Restated) | | | |
| Cash | | $ | 961,860 | | $ | 3,866 | |
| Receivable from investment | | | 532,211 | | | — | |
| Prepaid expenses | | | 2,826 | | | — | |
| Total current assets | | | 1,496,897 | | | 3,866 | |
| | | | | | | | |
| Property and equipment, net | | | — | | | 35,000 | |
| Royalty agreements | | | 4,000,000 | | | — | |
| Total assets | | $ | 5,496,897 | | $ | 38,866 | |
| | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | |
| | | | | | | | |
| CURRENT LIABILITIES | | | | | | | |
| Accounts payable | | $ | 8,927 | | $ | 6,346 | |
| Advance from shareholder | | | 10,000 | | | — | |
| Total current liabilities | | | 18,927 | | | 6,346 | |
| | | | | | | | |
| COMMITMENTS AND CONTINGENCIES | | | | | | | |
| | | | | | | | |
| STOCKHOLDERS' EQUITY | | | | | | | |
| Preferred stock: $0.001 par value; 1,000,000 shares authorized, | | | | | | | |
| None issued and outstanding | | | — | | | — | |
| Common stock: $0.001 par value; 750,000,000 shares authorized, | | | | | | | |
| 118,233,000 and 90,000,000 issued and outstanding, respectively | | | 118,233 | | | 90,000 | |
| Additional paid-in capital | | | 66,048,927 | | | 14,000 | |
| (Deficit) accumulated during exploration stage | | | (60,689,190 | ) | | (71,480 | ) |
| Total stockholders' equity | | | 5,477,970 | | | 32,520 | |
| Total liabilities and stockholders' equity | | $ | 5,496,897 | | $ | 38,866 | |
| | | | | | | | |
| | | | | | | | |
See accompanying notes to the financial statements.
TAMM OIL AND GAS CORP. |
(An Exploration Stage Company) |
Statements of Operations |
(Unaudited) |
| | | | | | | | | | | For the period | |
| | | | | | | | | | | October 10, 2005 | |
| | | For the three months ended | | For the nine months ended | | (Inception) to | |
| | | December 31, | | December 31, | | December 31, | |
| | | 2007 | | 2006 | | 2007 | | 2006 | | 2007 | |
| | | (Restated) | | | | (Restated) | | | | (Restated) | |
| REVENUES | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | |
| | | | | | | | | | | | | | | | | |
| COSTS AND EXPENSES | | | | | | | | | | | | | | | | |
| Operating Expenses | | | | | | | | | | | | | | | | |
| General and administrative expenses | | | 75,519 | | | 8,213 | | | 119,550 | | | 43,885 | | | 190,230 | |
| (Loss) on impairment of investment in DWOG | | | 54,263,160 | | | — | | | 54,263,160 | | | — | | | 54,263,160 | |
| (Loss) on impairment of royalty agreements | | | 6,200,000 | | | | | | 6,200,000 | | | | | | 6,200,000 | |
| (Loss) on impairment property and equipment | | | 10,000 | | | — | | | 35,000 | | | — | | | 35,000 | |
| Total Operating Expenses | | | 60,548,679 | | | 8,213 | | | 60,617,710 | | | 43,885 | | | 60,688,390 | |
| | | | | | | | | | | | | | | | | |
| PROVISION FOR INCOME TAXES | | | — | | | 800 | | | — | | | 800 | | | 800 | |
| | | | | | | | | | | | | | | | | |
| NET (LOSS) | | $ | (60,548,679 | ) | $ | (9,013 | ) | $ | (60,617,710 | ) | $ | (44,685 | ) | $ | (60,689,190 | ) |
| | | | | | | | | | | | | | | | | |
| (LOSS) PER COMMON SHARE - | | | | | | | | | | | | | | | | |
| BASIC AND DILUTED | | $ | (0.64 | ) | $ | (0.00 | ) | $ | (0.66 | ) | $ | (0.00 | ) | | | |
| | | | | | | | | | | | | | | | | |
| WEIGHTED AVERAGE COMMON SHARES | | | | | | | | | | | | | | | | |
| OUTSTANDING - BASIC AND DILUTED | | | 94,336,217 | | | 90,000,000 | | | 91,728,844 | | | 90,000,000 | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
See accompanying notes to the financial statements.
TAMM OIL AND GAS CORP. |
(An Exploration Stage Company) |
Statements of Cash Flows |
(Unaudited) |
| | | | | | | For the period | |
| | | | | | | October 10, 2005 | |
| | | For the nine months ended | | (Inception) to | |
| | | December 31, | | September 30, | |
| | | 2007 | | 2006 | | 2007 | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | (Restated) | | | | (Restated) | |
| Net cash (used in) operating activities | | $ | (652,006 | ) | $ | (38,513 | ) | $ | (717,140 | ) |
| | | | | | | | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | | | |
| Purchases of property and equipment | | | — | | | (35,000 | ) | | (35,000 | ) |
| Net cash (used in) investing activities | | | — | | | (35,000 | ) | | (35,000 | ) |
| | | | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | | | |
| Proceeds from sale of common stock | | | 1,600,000 | | | — | | | 1,704,000 | |
| Proceeds from shareholder advances | | | 10,000 | | | — | | | 10,000 | |
| Net cash provided by financing activities | | | 1,610,000 | | | — | | | 1,714,000 | |
| | | | | | | | | | | |
| Net increase (decrease) in cash | | | 957,994 | | | (73,513 | ) | | 961,860 | |
| | | | | | | | | | | |
| Cash and cash equivalents, beginning of period | | | 3,866 | | | 103,975 | | | — | |
| | | | | | | | | | | |
| Cash and cash equivalents, end of period | | $ | 961,860 | | $ | 30,462 | | $ | 961,860 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | | | | | | | | | | |
| Cash paid for interest | | $ | — | | $ | — | | $ | — | |
| Cash paid for income taxes | | $ | — | | $ | 800 | | $ | 800 | |
| | | | | | | | | | | |
| NON-CASH FINANCING AND INVESTING ACTIVITIES: | | | | | | | | | | |
| Shares of common stock issued for investment in DWOG | | $ | 54,263,160 | | $ | — | | $ | 54,263,160 | |
| Shares of common stock issued for royalty agreements | | $ | 10,200,000 | | $ | — | | $ | 10,200,000 | |
| | | | | | | | | | |
| | | | | | | | | | | |
See accompanying notes to the financial statements.
TAMM OIL AND GAS CORP.
(An Exploration Stage Company)
Notes to Unaudited Financial Statements
December 31, 2007
Note 1 - Organization and Basis of Presentation
Organization
Tamm Oil and Gas Corporation, formerly Hola Communications, Inc., (the “Company”) was incorporated under the laws of the State of Nevada on October 10, 2005. The Company was formed to provide wireless broadband access in Northern Mexico and Southwestern California, starting in Tijuana, Mexico. The Company’s goal was to be one of the leading providers of broadband wireless access in several metropolitan markets in Northern Mexico and Southwestern California.
In October 2007, the Company decided to discontinue its efforts to develop its original business plan in the telecom industry and to re-direct its focus to the oil and gas Industry. In November 2007, the Company created a wholly owned Nevada subsidiary for the purpose of affecting a name change from Hola Communications, Inc. to Tamm Oil and Gas Corporation. To implement its current business plan, significant additional financing will be required and the Company will need to be successful in its efforts to identify, acquire and develop oil and gas reserves that are economically recoverable.
The Company is in the development stage. Through December 31, 2007, the Company had not commenced operations, and its activities have been limited primarily to organization, raising capital, and development of its business plan.
Note 2 - Interim Financial Statements
The balance sheet as of December 31, 2007, the statements of operations and cash flows for the three and nine months then ended and for the period October 10, 2005 (inception) to December 31, 2007, are unaudited and reflect all adjustments of a normal recurring nature which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The balance sheet as of March 31, 2007 was derived from the Company’s audited financial statements. Operating results for the interim periods presented are not necessarily indicative of results to be expected for the fiscal year ending March 31, 2008. These financial statements should be read in conjunction with the Company’s March 31, 2007 financial statements and notes thereto included in the Company’s Annual Report and filed on Form 10-KSB with the Securities and Exchange Commission.
Note 3 - Liquidity and Going Concern
During the period October 10, 2005 (inception) to December 31, 2007, no revenue was generated, and the Company incurred an accumulated deficit of $60,689,190. During this period the Company raised an aggregate of $1,714,000 through private placements of common stock and issuances of notes payable to related parties, and as of December 31, 2007, has a working capital balance of $1,477,970. In order for the Company to successfully implement its business plan, significant additional financing will be required. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. During the year ending March 31, 2008, the Company intends to raise additional equity financing to fund future operations and to provide for additional working capital.
The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
TAMM OIL AND GAS CORP.
(An Exploration Stage Company)
Notes to Unaudited Financial Statements
December 31, 2007
Note 4 - Summary of Significant Accounting Policies
Use of Estimates
Preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates that affect some of the amounts reported. Actual results could differ from those estimates.
Property and Equipment
Property and equipment represents communications equipment purchased, but not yet placed in service as of December 31, 2007. Accordingly, no depreciation expense has been recognized to date related to this equipment. Due to the change in business focus of the Company an impairment charge of $35,000 was recorded during the nine months ended December 31,, 2007 in order to reduce the carrying value of the equipment to its estimated realizable value.
Loss per Common Share
Loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period. Diluted loss per share is equivalent to basic loss per share because there are no dilutive securities outstanding.
NOTE 5. Receivable from investment
During the quarter ended December 31, 2007, the Company paid $532,211 to participate in a drilling project. Subsequently, the project was cancelled and the funds were returned to the Company on February 8, 2008. Accordingly, the amount has been recorded as receivable from investment at December 31, 2007.
Note 6 - Advance from shareholder
During the period ended September 30, 2007, the Company received an advance from a stockholder officer of $10,000. There was no stated interest rate and the note becomes due upon demand.
Note 7 - Common Stock
In August 2007, the Company closed a private placement consisting of 1,500,000 post-split shares of the Company’s common stock for aggregate proceeds of $100,000. The shares were issued to a non-U.S. person in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933.
In November 2007, the Company completed a 15:1 forward stock split. The outstanding common stock increased from 6,100,000 to 91,500,000 and the authorized capital increased from 50,000,000 to 750,000,000. Accordingly, all share amounts and per share amounts have been restated to reflect the forward split.
On November 23, 2007, the Company closed the first tranche of a private placement consisting of 800,000 units at a price of US $1.25 per unit for aggregate proceeds of $1,000,000. Each unit consists of one post-split common share (a “Share”) and one share purchase warrant (a “Warrant”). Each Warrant shall be exercisable into one post-split common share (a “Warrant Share”) at a price of US $1.75 per Warrant Share until November 23, 2009.
On November 26, 2007, a letter of intent agreement was signed between the Company, Muzz Investments Inc. and 1004731 Alberta Ltd. to purchase all of their interests in certain Royalty Agreements in exchange for 4,000,000 shares of the Company. The terms of the agreement provided for a per share value of $1.00 per share. However, the trading price of the shares was $2.55 on November 26, 2007. The 4 million shares of Tamm common stock were issued and recorded effective November, 26, 2007 at $10,200,000. The difference between the fair value of the royalty agreements and the shares has been recorded to a reserve for impairment.
On December 20, 2007, the Company closed the second tranche of a private placement consisting of 400,000 units at a price of US $1.25 per Unit for aggregate proceeds of $500,000. Each Unit consists of one post-split common share (a “Share”) and one share purchase warrant (a “Warrant”). Each Warrant shall be exercisable into one post-split common share (a “Warrant Share”) at a price of US $1.75 per Warrant Share until December 20, 2009.
TAMM OIL AND GAS CORP.
(An Exploration Stage Company)
Notes to Unaudited Financial Statements
December 31, 2007
Outstanding and Exercisable Warrants
| Exercise Price | | Number of Shares | | Remaining Contractual Life (in years) | | Exercise Price times Number of Shares | | Weighted Average Exercise Price | |
| $1.75 | | | 1,200,000 | | | 2 | | $ | 2,100,000 | | $ | 1.75 | |
NOTE 8 - INVESTMENT IN DEEP WELL OIL & GAS, INC.
On December 27, 2007, 21,533,000 shares of common stock were issued in exchange for 21,533,000 shares of Deep Well Oil & Gas, Inc., a publicly traded company. The fair value of the Company shares on the date of issue was $54,263,160. This amount has been impaired. .
Note 9 - Subsequent Events and Commitments
In connection with the decision to enter into the oil and gas industry, in October 2007, the Company entered into a Letter of Intent to acquire all of the issued and outstanding shares of 1132559 Alberta Ltd. 1132559 Alberta Ltd. holds a 10% interest in 57 contiguous sections of oil sands leases and 6.5 sections of oil sands permits in the Sawn Lake area of Alberta’s Peace River oil. The agreement has not been finalized.
Subsequent to December 31, 2007, the Company acquired from the Alberta government, a one-hundred (100) percent interest in 21 sections of lease parcels in the Peace River Oil Sands Area in Alberta, Canada, at an Alberta Crown Land Sale, in exchange for payment, in full, of $715,292.
Note 10 - Correction of an Error
This Amendment No. 1 to Form 10-Q for the quarter ended December 31, 2007 of Tamm Oil and Gas Corp. (the "Company") is being filed:
| (i) | To restate the value of the 21,533,000 shares issued in exchange for shares of another public company. The price per share for the 21,533,000 shares issued as of December 27, 2007 should have been $2.52 per share or an increase in Additional Paid-in-Capital of $50,817,880. Because the investment fails to meet the standards set forth by SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the amount has been recorded to an impairment reserve. |
| (ii) | To record shares issued after the quarter ended December 31, 2007 that related to a November 26, 2007 agreement providing for our issuance of a total of 4 million of our common stock shares in exchange for royalty agreement interests valued at $4,000,000. The per share price was $2.55 on November 26, 2007. Consequently, the shares have been recorded at a total of $10,200,000, with a corresponding charge to the impairment reserve of $6,200,000. |
For the quarter ended December 31, 2007, the net loss increased from $3,530,799, ($0.04) per share to $60,548,679, ($0.64) per share. For the nine months ended December 31, 2007, the net loss increased from $3,599,830, ($0.04) per share to $60,617,710, ($0.66) per share. In addition, total assets increased from $1,496,897 to $5,496,897.
This Amendment No. 1 does not amend, modify or update any other information or disclosures to reflect developments since the February 19, 2008 original filing of the Company's Form 10-Q for the period ended December 31, 2007.
Item 2. Management’s Discussion and Analysis or Plan of Operation.
FORWARD-LOOKING STATEMENTS
This amended Form 10-Q report for the quarterly period ended December 31, 2007 contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the following: (a) we have a history of losses and no revenue to date; if this trend continues, it may negatively affect our ability to implement our Plan of Operations; (b) because we are an exploration company with little operating history, it will be difficult for you to assess our future prospects; (c) should we fail to successfully identify, acquire and develop oil and gas properties on an economically recoverable basis, our results of operations will be negatively effected; (d) our business is dependent upon our management team; should we lose any of their services, we may not find suitable and capable replacements and our operations may be negatively effected; (e) our operational plan, we will require substantial expenses which will require financing; should we be unable to obtain the required financing our operational plan will be negatively effected; (f) we anticipate issuing additional shares for financing needs as well as payment to consultants and others providing services to us; these issuances will dilute the value of your investment; (g) we are subject to substantial costs for environmental and other compliance and possible future regulatory changes, costs of which may adversely affect our ability to implement components of our business plan and will negatively effect our results of operations, and possible delays in our operations; (h) we face significant competition from oil and natural gas companies and other individual producers and operators that have longer operating histories, greater financial and technological resources, and access to capital, than we do; and (i) because the majority of our assets our located in Alberta, Canada and our officers and directors are located outside the United States, investors may encounter difficulties in enforcing legal actions against us or our officers or directors.
This list is not an exhaustive list of the factors that may affect any of our forward-looking statements. These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements.
Forward looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
In this amended quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common shares" refer to the common shares in our capital stock. As used in this quarterly report, the terms "we", "us", "our", and "Tamm" mean Tamm Oil and Gas Corp. (formerly Hola Communications, Inc.), unless the context clearly requires otherwise.
PLAN OF OPERATION
Overview
We are a petroleum exploration company that seeks to identify, acquire and develop working interests in Canada based oil sands prospects. Oil sand properties are characterized by deposits of bitumen, a form of viscous (relatively high resistance to flow) crude oil.
Our Plan of Operations to Date
To date, we have accomplished the following in our Plan of Operations:
Oil Sands Interests
We have the following oil sands interests:
Peace River - Oil Sands Leases
After our financial quarter ending December 31, 2007, we acquired a 100% interest in 21 sections of oil sands leases in the Peace River Oil Sands Area at an Alberta Crown Land Sale for $718,903.
Sawn Lake Oilsands - Letter Agreement
We entered into a letter agreement with Vendors, 1004731 Alberta Ltd. and Muzz Investments Inc., dated November 26, 2007, whereby the Vendors agreed to sell, assign and transfer to us, their entire right, title and interest in a royalty agreement made between Mikwec Energy Canada Ltd. and Nearshore Petroleum Corporation dated December 12, 2003 in consideration of the issuance of 4,000,000 shares of our common stock.
Letter of Intent with Selling Stockholders of 1132559 Alberta Ltd.
We have entered into a Letter of Intent with the Selling Stockholders of 1132559 Alberta Ltd , which provides that the Selling Stockholders agree to transfer to us all of the issued and outstanding shares held by them in return of our agreeing to, among other things:
(i) issue 15,000,000 shares of our common stock to the Selling Stockholders
(ii) complete a 15:1 forward stock split
(iii) complete a financing of up to $3,250,000
(iv) change our name to "Tamm Oil and Gas Corp."
(v) appoint two nominees of the Selling Stockholders to our Board of Directors; William Tighe was nominated and elected to the Board on November 27,2007
The Letter of Intent is further subject to our principal stockholder submitting 34,000,000 (post split) shares for cancellation at closing. Closing of the transactions contemplated in the Letter of Intent is subject to:
(i) the satisfactory completion of the parties due diligence investigations
(ii) 1132559 Alberta Ltd. preparing financial statements required under applicable securities laws
(iii) the parties entry into a definitive agreement containing customary terms and representations for such agreements
1132559 Alberta Ltd. is a private company incorporated under the laws of Alberta and holds a direct working interest of 10% in 63 sections of Oil sands leases in the Sawn Lake area in Northern Alberta.
Our Plan of Operations Going Forward
We intend to further expand our interests in oil sands properties through Alberta Crown Land Sales and/or purchasing interests from other companies that currently hold interests in oil sands properties. To assess our prospects and out acquisitions, we will contractually engage geologists and geophysicists to provide geological evaluations. Presently, our costs are uncertain because they are contingent upon the results of our information and data/collection to confirm whether we have a viable prospect, which will be determined by: (a) our contracted geologists and geophysicists that provide geological evaluations; (b) geological data results and related information/data that we obtain through: (i) the public domain; (ii) our acquisition of data from private firms; and (c) field activities, for example, seismic surveys, that we may engage in to gather specific information, for the purpose of modeling the underlying geological structure.
We will continually adjust our Plan of Operations based on this comprehensive analysis, the extent and quality of the available data, and other factors, such as applying risk assessment and cost analyses, to determine which of the following activities we will engage in:
Geological study of the earth’s crust in search for structural or stratigraphic traps that are favorable for the accumulation of hydrocarbons and ultimately determine locations for drilling.
The accurate measurement and recording of certain physical quantities of the Earth’s crust; geophysical methods, such as seismic, to locate probable reservoir structures capable of producing commercial quantities of natural gas and/or crude oil.
Surveys to gather and record the patterns of induced shock wave reflections from underground layers of rock. Seismic surveys are used to create detailed models of the underlying geological structure used in the exploration and development of hydrocarbons.
A drilling operation to obtain continuous cylinders of rock, usually from two to four inches in diameter, cut from the bottom of a well-bore; cores are cut during the drilling of a well and are used in the study of underground formations.
| · | Exploratory Well Drilling |
A well drilled either in search of new and yet undiscovered accumulations of oil and gas, or in an attempt to significantly extend the limits of a known reservoir
Results of Operations
Third Quarter and Nine Month Summary
| | | Third Quarter Ended | | Nine Months Ended | |
| | | December 31 | | December 31 | |
| | | 2007 | | 2006 | | 2007 | | 2006 | |
| | | | | | | | | | |
| Revenue | | $ | 0 | | $ | 0 | | $ | 0 | | $ | 0 | |
| Operating Expenses | | | 60,548,679 | | | 8,213 | | | 60,617,710 | | | 43,885 | |
| Interest and Dividend Income | | | 0 | | | 0 | | | — | | | 0 | |
| Income Taxes | | | — | | | 800 | | | | | | | |
| Net Loss | | $ | (60,548,679 | ) | $ | (9,013 | ) | $ | (60,617,710 | ) | $ | (44,685 | ) |
Our increases in operating expenses and net loss are primarily a result of a $54,263,160 loss on impairment of our investment in Deep Well Oil and Gas Inc., a publicly traded company (“Deep Well”), and $6,200,000 related to the purchase of royalty agreements. .
Revenue
We are currently a development stage company conducting exploration activities and we have not earned any revenues since our inception. We do not anticipate earning revenues until such time as we have entered into commercial production of our oil and gas projects, if ever. Even if we discover such commercially exploitable resources, we will have to determine whether the project is economically feasible.
Capital Expenditures and Requirements
At the present time, we have no capital commitments or expenditures, although we anticipate that we will have both expenditures at certain stages of our operational plan.
Expenses
Our operating expenses for the nine months ended December 31, 2007 increased to $60,617,710 from $43,885 for the comparable nine-month period. This increase is primarily a result of a $54,263,160 loss on impairment of our investment in Deep Well , and $6,200,000 related to the purchase of royalty agreements.
Three Months ended December 31, 2006 and 2007
We had no revenues in either of our 2006 or 2007 third quarters. Our operating expenses increased to $60,548,679 from $8,213 for the period ending December 31, 2006. Our income taxes decreased by 100%, to $0 during the 2007 third quarter, from $800 for the 2006 third quarter. This increase is primarily a result of a $54,263,160 loss on impairment of our investment in Deep Well and $6,200,000 related to the purchase of royalty agreements.
We are subject to the following trends and uncertainties:
| | · | Adverse weather conditions that will effect our ability to conduct our exploration activities; |
| | · | General economic conditions, including supply and demand for petroleum based products in Canada, the United States, and remaining parts of the world; |
| | · | Political instability in the Middle East and other major oil and gas producing regions; |
| | · | Domestic and foreign tax policy; |
| | · | Price of oil and gas foreign imports; |
| | · | Cost of exploring for, producing, and delivering oil and gas; |
| | · | Overall supply and demand for oil and gas; |
| | · | Availability of alternative fuel sources; |
| | · | Discovery rate of new oil and gas reserves; and |
| | · | Pace adopted by foreign governments for the exploration, development and production of their national reserves. |
Liquidity and Capital Resources
Current Assets, Current Liabilities, and Working Capital
Our current assets and current liabilities for the nine months ended December 31, 2007 have increased by 386% and 66%, respectively. Our working capital has increased by 596% since our fiscal year ended March 31, 2007.
| | | As at December 31, 2007 | | As at March 31, 2007 | | Percentage Increase | |
| | | | | | | | |
| Current Assets | | $ | 1,496,897 | | $ | 3,866 | | | 38620 | % |
| Current Liabilities | | $ | 18,927 | | $ | 6,346 | | | 198 | % |
| Working Capital (Deficit) | | $ | 1,477,970 | | $ | (2,480 | ) | | 59696 | % |
Cash Flows
| | | Nine Months Ended | | Nine Months Ended | |
| | | December 31, 2007 | | December 31, 2006 | |
| Cash Flows used in Operating Activities | | $ | (652,006 | ) | $ | (38,513 | ) |
| Cash Flows used in Investing Activities | | $ | 0 | | $ | (35,000 | ) |
| Cash Flows provided by Financing Activities | | $ | 1,610,000 | | $ | 0 | |
| Net Increase (Decrease) in Cash During Period | | $ | 957,994 | | | (73,513 | ) |
We will require additional financing to proceed with our Plan of Operations over the next twelve months. Our cash requirements are in excess of our current cash and working capital resources. Accordingly, we will require additional financing in order to continue operations. There is no assurance that any party will advance additional funds to us or we will be able to raise sufficient funds from an equity financing to enable us to sustain our Plan of Operations.
We anticipate our operating expenses will increase as we undertake our plan of operations. The increase will be attributable to the expansion of our oil and gas business. We anticipate our operating expenses will also increase as a result of our ongoing reporting requirements under the Exchange Act.
Future Financings
We will have to secure additional financing in the next 12 months in order to complete our Plan of Operations, which we may be unable to secure. We presently do not have any arrangements for additional financing and we have no potential lines of credit or sources of financing are currently available for the purpose of proceeding with our plan of operations. We will likely rely on equity sales of our common stock to fund our operations, resulting in dilution to our existing stockholders.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies
The preparation of financial statements in conformity with generally accepted accounting principles requires our management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from
Going Concern
During the period October 10, 2005 (inception) to December 31, 2007, we generated no revenue and we had an accumulated deficit of $60,689,190. We will need significant financing to implement our business plan. Our financial statements have been prepared assuming that we will continue as a going concern.
The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from our possible inability to continue as a going concern.
Item 3. Controls and Procedures.
Under the supervision and with the participation of our management, including the President/Principle Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the President/Principle Financial Officer have concluded that these disclosure controls and procedures are effective.
There were no changes in our internal control over financial reporting during the three months ended December 31, 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On November 23, 2007, we closed the first tranche of a private placement consisting of 800,000 units at a price of US $1.25 per Unit for aggregate proceeds of $1,000,000. Each Unit consists of one common share (a “Share”) and one share purchase warrant (a “Warrant”). Each Warrant shall be exercisable into Warrant at a price of US $1.75 per Warrant Share until November 23, 2009. We issued the Units to a subscriber based on their representation that they are not a U.S. person (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933.
On December 20, 2007, we closed the second tranche of a private placement consisting of 400,000 units of our securities (the “Units”) at a price of US $1.25 per Unit for aggregate proceeds of $500,000. Each Unit consists of one common share (a “Share”) and one share purchase warrant (a “Warrant”). Each Warrant shall be exercisable into one common share (a “Warrant Share”) at a price of US $1.75 per Warrant Share until December 20, 2009. We issued the Units to a subscriber based on their representation that they are not a U.S. person (as that term is defined in Regulation S of the Securities Act of 1933) in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933.
On December 27, 2007, we issued 21,533,000 shares of our common stock to three shareholders of Deep Well in exchange for 21,533,000 shares of Deep Well . The fair value of our shares on the date of issue was $54,263,160. As noted in note 8 to our financial statements, this amount has been impaired.
Item 3. Default upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None
Item 6 Exhibits.
The following exhibits, required by Item 601 of Regulation S-B, are being filed as part of this quarterly report, or are incorporated by reference where indicated:
Exhibit No. | Description |
| | |
| 10.1 | Letter Agreement dated November 7, 2007 with 1004731 Alberta Ltd. And Muzz Investments incorporated by reference (filed with Form 8-K dated November 27, 2007) |
| | |
| 31.1* | Certification pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended (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 (Principal Executive Officer and Principal Financial Officer). |
| | |
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | |
| | TAMM OIL AND GAS CORP. |
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| Date: July 17, 2008 | By: | /s/ Wiktor Musial |
| |
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| | Name: Wiktor Musial Title: President/Principal Executive Officer/Principal Financial Officer |
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