NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in the presentation of the accompanying unaudited condensed consolidated financial statements follows:
General
The interim condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) as promulgated in Item 210 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted pursuant to such SEC rules and regulations.
In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results from operations for the three and six month periods ended September 30, 2013, are not necessarily indicative of the results that may be expected for the year ending March 31, 2014. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto for the year ended March 31, 2013, included in the Company’s Form 10-K filed with the SEC on June 28, 2013.
Business and Basis of Presentation
TAMM Oil and Gas Corp., 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 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 (exploration) stage as defined by Accounting Standards Codification subtopic 915-10 Development Stage Entities (“ASC 915-10”) with its efforts principally devoted to developing oil and gas reserves. To date, the Company, has not generated sales revenues, has incurred expenses and has sustained losses. Consequently, its operations are subject to all the risks inherent in the establishment of a new business enterprise. For the period from inception through September 30, 2013, the Company has accumulated losses of $81,587,285.
The unaudited condensed consolidated financial statements include the accounts of the Company, including TAMM Oil and Gas Corp., its wholly-owned subsidiary, Union Energy, LLC. All significant intercompany balances and transactions have been eliminated in consolidation.
Revenue Recognition
Revenues from the sale of petroleum and natural gas will be recorded when title passes from the Company to its petroleum and/or natural gas purchaser and collectability is reasonably assured. The Company will begin recording revenue once it is determined there are proved reserves and production commences
TAMM OIL AND GAS CORP.
(An Exploration Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013
Estimates
The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Unconventional Oil Sands Properties
Acquisition, exploration and development of oil sands mining activities are capitalized when costs are recoverable and directly result in an identifiable future benefit, following the full cost method of accounting. Improvements that increase capacity or extend the useful lives of assets are capitalized. Maintenance and turnaround costs are expensed as incurred.
Oil sands properties are assessed, at minimum annually, or as economic events dictate, for potential impairment. Impairment is assessed by comparing the estimated net undiscounted future cash flows to the carrying value of the asset. If required, the impairment recorded is the amount by which the carrying value of the asset exceeds its fair value.
Capitalized costs are depleted and depreciated on the unit-of-production method based on the estimated gross proved reserves once determined by the independent petroleum engineers. Depletion and depreciation is calculated using the capitalized costs, including estimated asset retirement costs, plus the estimated future costs to be incurred in developing proved reserves, net of estimated salvage value.
Costs of acquiring and evaluating unproved properties and major development projects are excluded from the depletion and depreciation calculation if and until it is determined whether or not proved reserves can be assigned to such properties. Costs of unproved properties and major development projects are transferred to depletable costs based on the percentage of reserves assigned to each project over the expected total reserves when the project was initiated. These costs are assessed periodically to ascertain whether impairment has occurred.
Depletion and Amortization of Oil and Gas Properties
The Company follows the full cost method of accounting for oil and gas properties. Under this method, all direct costs and certain indirect costs associated with acquisition of properties and successful as well as unsuccessful exploration and development activities are capitalized. Depreciation, depletion, and amortization of capitalized oil and gas properties and estimated future development costs, excluding unproved properties, are based on the unit-of-production method based on proved reserves.
The Company periodically evaluates the carrying value of long-lived assets, including unproved properties, to be held and used in accordance with Accounting Standards Codification subtopic 360-10, Property, Plant and Equipment (“ASC 360-10”). ASC 360-10 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal.
TAMM OIL AND GAS CORP.
(An Exploration Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013
Foreign Currency Translation
The Company translates the foreign currency financial statements into US Dollars using the year or reporting period end or average exchange rates in accordance with the requirements of Accounting Standards Codification subtopic 830-10, Foreign Currency Matters (“ASC 830-10”). Assets and liabilities of these subsidiaries were translated at exchange rates as of the balance sheet date. Revenues and expenses are translated at average rates in effect for the periods presented. The cumulative translation adjustment is included in the accumulated other comprehensive income (loss) within shareholders’ equity. Foreign currency transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the consolidated results of operations.
Functional Currency
The functional currency of the Companies is the Canadian dollar and the unaudited condensed consolidated financial statements are reported as US dollar. When a transaction is executed in a foreign currency, it is re-measured into Canadian dollars based on appropriate rates of exchange in effect at the time of the transaction. At each balance sheet date, recorded balances that are denominated in a currency other than the functional currency of the Companies are adjusted to reflect the current exchange rate. The resulting foreign currency transactions gains (losses) are included in general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations.
Comprehensive Income (Loss)
The Company adopted Accounting Standards Codification subtopic 220-10, Comprehensive Income (“ASC 220-10”) which establishes standards for the reporting and displaying of comprehensive income and its components. Comprehensive income is defined as the change in equity of a business during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. ASC 220-10 requires other comprehensive income (loss) to include foreign currency translation adjustments and unrealized gains and losses on available for sale securities.
Net Income (Loss) per Share
The Company computes earnings per share under Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”). Net earnings (losses) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding during the period. Dilutive common stock equivalents consist of shares issuable upon the exercise of the Company's outstanding warrants (calculated using the treasury stock method). During the three and six months ended September 30, 2013 and 2012, outstanding warrants were not considered because the exercise prices exceeded the weighted average common stock price of the Company for the period because they would be anti-dilutive, thereby decreasing the net loss per common share.
Reliance on Key Personnel and Consultants
The Company has no full-time employees and no part-time employees. There are approximately 2 consultants performing various specialized services. The Company is heavily dependent on the continued active participation of these current executive officers, and key consultants. The loss of any of the senior management or key consultants could significantly and negatively impact the business until adequate replacements can be identified and put in place.
TAMM OIL AND GAS CORP.
(An Exploration Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013
Recent Accounting Pronouncements
There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
NOTE 2 – GOING CONCERN MATTERS
The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying unaudited condensed consolidated financial statements for the six months and inception to date periods ended September 30, 2013, the Company has incurred losses of $30,788 and $81,587,285, respectively. In addition, as of September 30, 2013, the Company had a working capital deficit of $406,614, and no revenue generating operations. These factors, among others, indicate that the Company may be unable to continue as a going concern.
The Company's existence is dependent upon management's ability to generate business opportunities, evaluate existing properties and surrounding lands, and initiate commercial production to develop profitable operations which will resolve its liquidity problems. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that may result should the Company be unable to continue as a going concern.
The Company is attempting to obtain financing for its operations. There can be no assurance that the Company will be successful in its effort to secure additional equity financing. If operations and cash flows continue to improve through these efforts, management believes that the Company can continue to successfully maintain operations. However, no assurance can be given that management's actions will result in profitable operations or the resolution of its liquidity problems.
NOTE 3 – OIL SANDS PROPERTIES
Union Energy, LLC
On June 12, 2009, the Company acquired Union Energy, LLC, a Colorado limited liability corporation, the sole asset of which was a 100% working interest in 5,120 acres of Oil Sands leases in the Province of Alberta in exchange for 1,000,000 shares of the Company’s common stock valued at $.80 per share, the fair market value on the date of acquisition, for a total investment of $800,000.
During the year ended March 31, 2011, the Company recorded an impairment loss of $800,000.
Peace River
The Company leases 21 sections of oil sands leases in the Peace River region held at $718,903.
TAMM OIL AND GAS CORP.
(An Exploration Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013
During the year ended March 31, 2012, the Company management performed an evaluation of its unproved properties for purposes of determining the implied fair value of the assets at March 31, 2012. The test indicated that the recorded remaining book value of its royalty agreement exceeded its fair value for the year ended March 31, 2012. As a result, upon completion of the assessment, management recorded a non-cash impairment charge of $372,721, net of tax, or $0.0 per share during the year ended March 31, 2012 to reduce the carrying value of 14 sections of Peace River leases to $-0-. Considerable management judgment is necessary to estimate the fair value. Accordingly, actual results could vary significantly from management’s estimates.
Alberta Crown
On September 24, 2009, the Company acquired a 100% working interest in 1,280 acres of oil sands leases with a 2% gross overriding royalty retained by the seller in exchange for 2,428,000 shares of the Company’s common stock. The value of these rights is recorded at $1,626,760. In addition, the Company acquired 100% working interest in 6,400 acres of petroleum and natural gas leases with a 2% gross overriding royalty retained by the seller in exchange for 14,572,000 shares of the Company’s common stock. These rights were recorded at $9,763,240.
On May 31, 2012 the Company entered binding letter of intent as combination of Oil sands leases in the Manning area consisting of 23 sections of Oil sand leases with CEC North Star Energy Ltd. The remaining 10 sections of P&NG leases part of the farm in with CEC North Star Energy Ltd. Tamm will transfer in escrow the tittle and leases to the Manning area properties it holds and the escrow forms part of the put and call agreement issued to Tamm by North Star and will be concluded within one year.
On or about August 1, 2012 the Company in review of the development plans decided to release 10 sections of P&NG leases back to the Province of Alberta. Those leases were then terminated by the Province of Alberta on September 4, 2012 and accordingly, the Company recorded an impairment of $10,259,918 to current period operations.
Farm In Agreement
The Company reached an Joint Venture agreement for a conventional industry farm in on the Manning properties with a private UK based Company with 61 sections of oil sands lease holdings in the Manning prospect area adjacent to the Company holdings. The agreements were ratified by the Board of Directors of TAMM on November 28, 2011.
The Company and Cougar Oil and Gas Canada, Inc. ("Cougar") terminated their previously announced farm-in agreement to negotiate a new agreement with the private Corporation. The private corporation has signed a multi-phase farm-in agreement with the Company to define and develop the Company's 47 section Manning area heavy oil prospect in parallel with the development of the private corporations 61 sections of land in the Manning area.
The first phase of the farm-in consists of the private corporation performing a $2.5million work program to earn a 30% working interest in the Company's heavy oil prospect. Subsequent year programs of $6.5 million dollars will earn an additional 20% working interest – this agreement has been assigned to CEC North Star Energy Inc by the private corporation.
Cougar was the designated operator in this agreement, however due to the Cougar receivership, Cougar has ceased operations and will not earn under this agreement and is no longer a participant in the agreement.
TAMM OIL AND GAS CORP.
(An Exploration Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013
The private corporation has a related party relationship to the Company due to family members serving on the board of directors of each company and a common director was added to both Board of Directors.
CEC North Star Energy Ltd. (“CEC”) the joint venture partner and operator of the Manning Projects – has surveyed and licensed three (3) wells for coring in Q1,2013. Those wells are on the CEC lands and two of the wells share the same geologic prospect as the TAMM Oil and Gas Corporation mineral rights. Two of the wells were cored by March 31, 2013 - one of which shared the same geologic prospect as the TAMM Oil and Gas Corporation. The results were published by CEC and a summary provided to the Company. The results were filed as an 8K as well as managements interpretation of those results. The joint venture partners are currently evaluating the next steps to develop the property. Those steps may include additional seismic over the joint lands, a horizontal test well in Q3/Q4 2013. Additional coring on the company’s mineral rights during the same program is also contemplated.
CEC North Star has licensed a horizontal test well on the Elkton structure which is expected to be drilled during Q4 2013.
NOTE 4 – CAPITAL STOCK
Preferred Stock
The Company has authorized the issuance of 1,000,000 shares of preferred stock, with a par value of $.001 per share. The Company’s Board of Directors has broad discretion to create one or more series of preferred stock and to determine the rights, preferences, and privileges of any such series.
Common stock
The Company initially authorized the issuance of 50,000,000 shares of common stock, par value $.001. On November 13, 2007, the Company declared a 15:1 forward split, and concurrently increased its authorized shares to 750,000,000 shares of common stock, par value $.001 per share. All share amounts have been restated as if the split had occurred October 10, 2005.
As of September 30, 2013 and March 31, 2013, there were 92,582,524 shares of common stock issued and outstanding.
NOTE 5 – OPTIONS AND WARRANTS
Warrants
The following table summarizes the changes in warrants outstanding and related prices for the shares of the Company’s common stock issued to shareholders at September 30, 2013:
Exercise Price | | | Number Outstanding | | | Warrants Outstanding Weighted Average Remaining Contractual Life (years) | | | Weighted Average Exercise Price | | | Number Exercisable | | | Warrants Exercisable Weighted Average Exercise Price | |
| $ | 0.25 | | | | 1,200,000 | | | | 0.65 | | | $ | 0.25 | | | | 1,200,000 | | | $ | 0.25 | |
| $ | 0.30 | | | | 5,301,264 | | | | 0.48 | | | $ | 0.30 | | | | 5,301,264 | | | $ | 0.30 | |
| | | | | | 6,501,264 | | | | 0.51 | | | | | | | | 6,501,264 | | | $ | 0.29 | |
TAMM OIL AND GAS CORP.
(An Exploration Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013
Transactions involving the Company’s warrant issuance are summarized as follows:
| | | Stock Warrants | |
| | | | | | Weighted | |
| | | | | | Exercise | |
| | | Shares | | | Price | |
| Outstanding at March 31, 2012 | | | 7,033,643 | | | $ | 0.29 | |
| Granted | | | — | | | | — | |
| Canceled | | | (532,379 | ) | | | (0.30 | ) |
| Expired | | | — | | | | — | |
| Exercised | | | — | | | | — | |
| Outstanding at March 31, 2013 | | | 6,501,264 | | | | 0.29 | |
| Granted | | | — | | | | — | |
| Canceled | | | — | | | | — | |
| Expired | | | — | | | | — | |
| Exercised | | | — | | | | — | |
| Outstanding at September 30, 2013 | | | 6,501,264 | | | $ | 0.29 | |
Options
As of September 30, 2013 and March 31, 2013, the Company had no outstanding options.
NOTE 6 – CONTINGENCIES
Operating leases
The Company is provided operating facilities from an affiliated entity at no cost.
Consulting agreements
The Company has consulting agreements with outside contractors, certain of whom are also Company stockholders. The Agreements are generally month to month.
Material Contracts
On May 31, 2012, the Company reached a binding agreement with CEC North Star Energy Ltd (ÇEC North Star”) of Calgary Alberta to transfer the oilsands leases it holds in the Manning Area in escrow pending a series of events being completed. CEC North Star will issue shares in escrow North Star common voting shares at the agreed value per shares issued from Treasury of Thirty Two Dollars ($32.00) Cdn. for a total of 5,062,500 shares. Due to family relationships between CEC North Star Energy and the Company, Mr. Tighe abstained from voting on the transaction. Due to a common board position on both companies, Mr. Hilekes abstained from voting on the transaction. North Star will be responsible for rental costs of the Manning lands going forward. Tamm acknowledges and consents to CEC transferring the balance of the farm in agreement that would apply to the P&NG leases, to North Star. The GORR in place on the Tamm leases will remain the obligation of Tamm under this arrangement The transaction has two key requirements to close – the put/call – 1. TAMM is to re-domicile to Alberta based on a shareholder vote at the next AGM and required documentation, regulatory requirements being completed. 2. Post the re-domicile, approval of the majority of the TAMM shareholders of the transaction at the same AGM would be required. Upon signing this agreement, Mr. Hilekes is appointed to the Board of Directors of CEC North Star and Mr. Tighe is appointed as COO of CEC North Star.
TAMM OIL AND GAS CORP.
(An Exploration Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2013
Litigation
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Except as described below, we are currently not aware of any such legal proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.
NOTE 7 – RELATED PARTY TRANSACTIONS
Other receivable, related party is held by CEC Northstar, a Company with a board member and officer whom also are board members of the Company.
Farm In Agreement
The Company reached an Joint Venture agreement for a conventional industry farm in on the Manning properties with a private UK based Company with 61 sections of oil sands lease holdings in the Manning prospect area adjacent to the Company holdings. The agreements were ratified by the Board of Directors of TAMM on November 28, 2011.
The first phase of the farm-in consists of the private corporation performing a $2.5million work program to earn a 30% working interest in the Company's heavy oil prospect. Subsequent year programs of $6.5 million dollars will earn an additional 20% working interest.
The private corporation has a related party relationship to the Company due to family members serving on the board of directors of each company and a common director was added to both Board of Directors.
CEC North Star Energy Ltd. (“CEC”) the joint venture partner and operator of the Manning Projects – has surveyed and licensed three (3) wells for coring in Q1,2013. Those wells are on the CEC lands and two of the wells share the same geologic prospect as the TAMM Oil and Gas Corporation mineral rights. Two of the wells were cored by March 31, 2013 - one of which shared the same geologic prospect as the TAMM Oil and Gas Corporation. The results were published by CEC and a summary provided to the Company. The results were filed as an 8K as well as managements interpretation of those results. The joint venture partners are currently evaluating the next steps to develop the property. Those steps may include additional seismic over the joint lands, a horizontal test well in Q3/Q4 2013. Additional coring on the company’s mineral rights during the same program is also contemplated.
CEC North Star has licensed a horizontal test well on the Elkton structure which is expected to be drilled during Q4 2013.
NOTE 8 – SUBSEQUENT EVENTS
In October 2013, the Company successfully drilled its test well and is currently being tested at the time of filing.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations TAMM Oil and Gas Corp. is referred to hereinafter as “we”, “our”, or “us”.
Overview
We are a petroleum exploration company in the development stage that seeks to identify, acquire and develop working interests in Canada based oil sands prospects. Oil sands properties are characterized by deposits of bitumen, a form of viscous (relatively high resistance to flow) crude oil. We have generated no revenues since our inception and from our inception, we have not been profitable. We have financed our operations to date through equity placements to accredited investors and borrowings from related parties.
Uncertainties and Trends
Our revenues are dependent in the future, upon the following factors:
| | ● | price volatility in worldwide oil prices, which is affected by: (a) interest rates; (b) currency exchange rates (c) inflation or deflation; (d) speculation and (e) production levels; |
| | ● | global and regional supply and demand for oil; |
| | ● | political and economic conditions; |
| | ● | changes in the regulatory environment, which may lead to increased costs of doing business; |
| | ● | our ability to raise adequate working capital; |
| | ● | success of our development and exploration; |
| | ● | level of our competition; |
| | ● | our ability to attract and maintain key management and employees; and |
| | ● | our ability to efficiently explore, develop and produce sufficient quantities of marketable natural gas or oil in a highly competitive and speculative environment while maintaining quality and controlling costs. |
The following discussion and analysis should be read in conjunction with our Financial Statements and notes thereto.
(a) Liquidity and capital resources – September 30, 2013 and March 31, 2013
(a) (1) Continuing working capital deficit
Our working capital deficit has limited our ability to expand our operations and pursue our business plan. The following table sets forth our continuing working capital at September 30, 2013 and March 31, 2013.
| | | September 30, 2013 | | | March 31, 2013 | |
| Current Assets | | $ | 26,245 | | | $ | 64,114 | |
| Current Liabilities | | | 432,859 | | | | 430,026 | |
| | | | | | | | | |
| Working Capital Deficit | | $ | (406,614 | ) | | $ | (365,912 | ) |
Our current assets decreased by $37,869 from $64,114 as of March 31, 2013 to $26,245 at September 30, 2013. The decrease was primarily from changes in our other receivables.
Our working capital deficit increased by $40,702 to $406,614 as of September 30, 2013, from $365,912 at March 31, 2013. Accounts payable and accrued expenses increased from $430,026 as of March 31, 2013 to $432,859 as of September 30, 2013 from operations.
We continue to focus on conserving cash, setting priorities for our most important obligations and seeking other means to pay or defer any obligations as necessary.
(a) (2) Property and equipment
We do not have any property and equipment as of September 30, 2013 and March 31, 2013.
(a) (3) Capital commitments
We do not have any long term debt, capital lease obligations, operating or purchase obligations at September 30, 2013.
(a) (4) Derivative liability – Not applicable.
(a) (5) Equity
Stockholders’ equity increased to $2,304,948 as of September 30, 2013, from $2,304,596 as of March 31, 2013. The primary reason for the increase is change in currency translation net with our incurred year to date net loss of $30,788, net with incurred losses.
(a) (6) Off-balance sheet arrangements.
NONE
(a) (7) Results of operations.
Three month summary:
The following sets forth certain information regarding our results of operations for the three months ended September 30, 2013 and 2012:
| Three months ended September 30, | | 2013 | | | 2012 | |
| General and administrative | | $ | 15,662 | | | $ | 25,337 | |
| Impairment of oil and gas properties | | | - | | | | 10,259,918 | |
| Operating (loss) | | | (15,662 | ) | | | (10,285,255 | ) |
| Other income (expense) | | | - | | | | (720 | ) |
| Loss on settlement of debt | | | - | | | | (612,514 | ) |
| Net (loss) | | | (15,662 | ) | | | (10,898,489 | ) |
| Net (loss) per share - basic and diluted | | | (0.00 | ) | | | (0.12 | ) |
| Weighted average shares - basic and diluted | | | 92,582,523 | | | | 92,582,523 | |
Our operations have resulted in significant losses and negative cash flow as we have exchanged in our property lease interests against debt. During three months ended September 30, 2012, we incurred a loss on settlement of debt of $612,514 and decided to release 10 sections of P&NG leases back to the Province of Alberta, incurring a $10,259,918 impairment loss.
Exploration & development. Exploration and mine development costs was $0 during the three months ended September 30, 2013 and 2012.
General and administrative expenses. Our general and administrative expenses decreased by $9,675 , or 38%, to $15,662 during three months ended September 30, 2013 from $25,337 during same period last year. We attribute the decrease in our general and administrative expenses to professional and legal fees.
Depreciation. Depreciation was $nil for the three months ended September 30, 2013 and 2012.
Net loss. Our net loss for the three months ended September 30, 2013 was $15,662 compared to $10,898,489 for the three months ended September30, 2012 primarily from loss on impairment of oil and gas properties and settlement of debt for the three months ended September 30, 2012.
Six month summary:
The following sets forth certain information regarding our results of operations for the six months ended September 30, 2013 and 2012:
| Six months ended September 30, | | 2013 | | | 2012 | |
| General and administrative | | $ | 62,331 | | | $ | 56,294 | |
| Impairment of oil and gas properties | | | - | | | | 10,259,918 | |
| Operating (loss) | | | (62,331 | ) | | | (10,316,212 | ) |
| Other income (expense) | | | - | | | | (1,440 | ) |
| Gain (loss) on settlement of debt | | | 31,543 | | | | (612,514 | ) |
| Net (loss) | | | (30,788 | ) | | | (10,930,166 | ) |
| Net (loss) per share - basic and diluted | | | (0.00 | ) | | | (0.12 | ) |
| Weighted average shares - basic and diluted | | | 92,582,523 | | | | 92,582,523 | |
Our operations have resulted in significant losses and negative cash flow as we have exchanged in our property lease interests against debt. During six months ended September 30, 2012, we incurred a loss on settlement of debt of $612,514 and decided to release 10 sections of P&NG leases back to the Province of Alberta, incurring a $10,259,918 impairment loss as compared to a gain of $31,543 during six months ended September 30, 2013.
Exploration & development. Exploration and mine development costs was $0 during the six months ended September 30, 2013 and 2012.
General and administrative expenses. Our general and administrative expenses increased by $6,037 , or 11%, to $62,331 during six months ended September 30, 2013 from $56,294 during same period last year. We attribute the increase in our general and administrative expenses to professional and legal fees.
Depreciation. Depreciation was $nil and $77 for the six months ended September 30, 2013 and 2012, respectively.
Net loss. Our net loss for the six months ended September 30, 2013 was $30,788 compared to $10,930,166 for the six months ended September30, 2012 primarily from loss on impairment of oil and gas properties and settlement of debt for the six months ended September 30, 2012.
(a) (8) Cash flow
We have been able historically to meet our working capital obligations and cover our net loss through the collection of our receivable from related party, net of repayments of related party notes and sale of common stock. Net cash flows provided (used) by our financing activities was $-0- for the six months ended September 30, 2013 and 2012. Cash remained at $-0- as of September 30, 2013 and at March 31, 2013.
| Net cash flows for the six months ended September 30: | | 2013 | | | 2012 | |
| Net (loss) | | $ | (30,788 | ) | | $ | (10,930,166 | ) |
| Net cash flows (used in) operating activities | | | - | | | | (2,873 | ) |
| Net cash flows provided by investing activities | | | - | | | | - | |
| Net cash flows (used in) provided by financing activities | | | - | | | | - | |
| Effect of currency change on cash | | | - | | | | 2 | |
| Net decrease in cash and cash equivalents | | | - | | | | (2,871 | ) |
| Cash and cash equivalents at beginning of the period | | | - | | | | 2,871 | |
| Cash and cash equivalents at end of period | | | - | | | | - | |
We have used our equity to raise cash necessary to acquire property leases, expenses, and for payment of services. Our ability to continue to use our equity for those purposes is dependent on the price and trading volume of our common stock, both of which are volatile, and our ability to comply with federal and applicable state securities laws.
Although we have been successful in obtaining funds to date, there can be no assurance that we will be able to continue to be successful in doing so. Our ability to finance our operations will, in the end, be dependent on our ability to generate cash flow from operations, of which there can be no assurance.
By adjusting our operations and development to the level of capitalization, we believe we have sufficient capital resources to meet projected cash flow deficits. However, if during that period or thereafter, we are not successful in generating sufficient liquidity from operations or in raising sufficient capital resources, on terms acceptable to us, this could have a material adverse effect on our business, results of operations liquidity and financial condition.
Our registered independent certified public accountants have stated in their report dated June 28, 2013, that we have incurred operating losses in the last two years, and that we are dependent upon management’s ability to develop profitable operations and raise additional capital. These factors among others may raise substantial doubt about our ability to continue as a going concern.
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 unaudited condensed consolidated 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 unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Going Concern
During the period October 10, 2005 (inception) to September 30, 2013, we generated no revenue and we had an accumulated deficit of $81,587,285. We will need significant financing to implement our business plan. Our unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern.
The accompanying unaudited condensed consolidated 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. Quantitative and Qualitative Disclosures about Market Risk.
The Company is a smaller reporting company as defined by Rule 12b-2 under the Exchange Act and is not required to provide the information required under this item.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed under the Securities Exchange Act of 1934, as amended, or 1934 Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to our management, including our chief executive officer/chief financial officer (principal financial officer) as appropriate, to allow timely decisions regarding required disclosure. During the quarter ended September 30, 2013 we carried out an evaluation, under the supervision and with the participation of our management, including the principal executive officer and the principal financial officer (principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) under the 1934 Act. Based on this evaluation, because of the Company’s limited resources and limited number of employees, management concluded that our disclosure controls and procedures were ineffective as of September 30, 2013.
Limitations on Effectiveness of Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer (principal financial officer), does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all 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. Because of 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, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Internal Controls over Financial Reporting
During the quarter ended September 30, 2013, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.
PART II - OTHER INFORMATION
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.
Item 2. Recent Sales of Unregistered Securities and Use of Proceeds
None.
Item 3. Defaults on Senior Securities
None.
Not applicable.
None.
The following exhibits, required by Item 601 of Regulation S-K, are being filed as part of this quarterly report, or are incorporated by reference where indicated:
| Exhibit No. | | Description |
| | | |
| 31.1* | | |
| | | |
| 32.1* | | |
| 101.INS | XBRL Instance Document ** |
| 101.SCH | XBRL Taxonomy Extension Schema Document ** |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase ** |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document ** |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document ** |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document ** |
** 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 a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, and otherwise are not subject to liability under those sections
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, in the capacities and the dates indicated, thereunto duly authorized.
| | TAMM OIL AND GAS CORP. |
| | |
| Date: November 8, 2013 | By: | /s/ William S. Tighe |
| | Name: William S. Tighe, Title: Chairman of the Board/Principal Financial Officer/Secretary/Treasurer |
