Eagle Ford Oil & Gas (ECCE) 10-Q 2014 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C., 20549

FORM 10-Q

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File No. 000-51656

EAGLE FORD OIL & GAS CORP.

(Exact name of registrant as specified in its charter)

Nevada	75-2990007
(State of other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)
2951 Marina Bay Dr., Ste 130-369
League City, TX	77573
(Address of Principal Executive Office)	(Zip Code)

Registrant’s telephone number, including area code: (281) 383-9648

Indicate by check mark whether the registrant (1) 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 such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☐  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 definition 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 company	☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

42,127,928 shares of the registrant’s common stock were outstanding as of November 18, 2014.

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION		Page
Item 1.	Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets at September 30, 2014 (unaudited) and December 31, 2013	3
	Condensed Consolidated Statement of Operations for three and nine months ended September 30, 2014 and 2013 (unaudited)	4
	Condensed Consolidated Statement of Changes in Stockholders’ Deficit for nine months ended September 30, 2014 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013 (unaudited)	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7-21
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22-26
Item 3.	Quantitative and Qualitative Disclosures about Market Risk
Item 4.	Controls and Procedures
PART II—OTHER INFORMATION
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	27
Item 6.	Exhibits.	27
	Signatures	28

EAGLE FORD OIL & GAS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2014 (Unaudited)			December 31,  2013
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	2,609		$	3,802
Accounts receivable - production		16,582			19,084
Prepaid expenses and other current assets		65,721			13,625
Total current assets		84,912			36,511
PROPERTY AND EQUIPMENT
Oil and gas properties, using full cost accounting
Costs not subject to amortization		—			6,464,436
Pipeline transmission properties		30,839			30,839
Less: accumulated depreciation and depletion		(16,250	)		(12,498	)
Total property and equipment, net		14,589			6,482,777
OTHER ASSETS
Deposits		125,000			150,000
TOTAL ASSETS	$	224,501		$	6,669,288
LIABILITIES AND SHAREHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts payable – trade	$	1,192,294		$	978,353
Accrued expenses		2,963,592			2,202,895
Accrued interest to related parties		243,381			225,190
Notes payable, current portion		8,742,709			8,805,491
Notes payable to related parties, current portion		981,155			897,500
Convertible debentures		611,000			545,000
Derivative liability – notes, current portions		44,848			—
Derivative liability – warrants, current portions		—			93,044
Total current liabilities		14,778,979			13,747,473
LONG-TERM LIABILITIES
Asset retirement obligations		24,802			24,802
Total long term liabilities		24,802			24,802
TOTAL LIABILITIES		14,803,781			13,772,275
SHAREHOLDERS’ DEFICIT
Preferred stock, undesignated, 10,000,000 shares authorized, none issued and outstanding		—			—
Common stock, $0.001 par value, 75,000,000 shares authorized, 42,127,995 and 40,102,947 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively		42,128			40,103
Additional paid-in-capital		7,039,690			6,740,465
Accumulated deficit		(21,661,098	)		(13,883,555	)
Total shareholders’ deficit		(14,579,280	)		(7,102,987	)
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT	$	224,501		$	6,669,288

See summary of significant accounting policies and notes to unaudited condensed consolidated financial statements.

3

EAGLE FORD OIL & GAS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
REVENUE	$	1,158		$	889			2,874		$	3,811
OPERATING EXPENSES
Lease operating expenses		1,145			2,599			5,376			8,968
General and administrative expenses		185,957			209,220			616,762			786,239
Depreciation, depletion and accretion		1,250			1,250			3,752			3,748
Impairment of oil and gas property		6,484,307			—			6,484,307			—
Total operating expenses		6,672,695			213,069			7,110,197			798,955
Net operating loss		(6,671,537	)		(212,180	)		(7,107,323	)		(795,144	)
OTHER INCOME (EXPENSES)
Interest expense		(290,877	)		(252,428	)		(784,597	)		(743,146	)
Gain on cancellation of accounts payable items		27,456			—			27,456			—
Gain (loss) on change in fair value of notes derivative liability		39,194			—			(6,123	)		—
Gain on change in fair value of warrant derivative liability		—			30,036			93,044			48,897
Total other income (expenses)		(224,227	)		(222,392	)		(670,220	)		(694,249	)
Net loss		(6,895,764	)		(434,572	)		(7,777,543	)		(1,489,393	)
Loss per common share (basic and diluted)	$	(0.16	)	$	(0.01	)	$	(0.19	)	$	(0.04	)
Weighted average common shares outstanding (basic and diluted):		42,074,870			39,447,852			41,586,348			39,121,548

See summary of significant accounting policies and notes to unaudited condensed consolidated financial statements.

4

EAGLE FORD OIL & GAS CORP.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ DEFICIT

For the Nine months ended September 30, 2014

(Unaudited)

	Common Stock				Additional					Total
	Shares		Par Value		Paid-in Capital		Accumulated Deficit			Shareholders’ Deficit
Balance, December 31, 2013		40,102,947	$	40,103	$	6,740,465	$	(13,883,555	)	$	(7,102,987	)
Common shares issued for cash		1,918,798		1,919		278,081		—			280,000
Common shares issued for expenses		106,250		106		21,144					21,250
Net loss		—		—		—		(7,777,543	)		(7,777,543	)
Balance, September 30, 2014		42,127,995	$	42,128	$	7,039,690	$	(21,661,098	)	$	(14,579,280	)

See summary of significant accounting policies and notes to unaudited condensed consolidated financial statements.

5

EAGLE FORD OIL & GAS CORP.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

	Nine months Ended September 30,
	2014			2013
Cash flows from operating activities:
Net loss	$	(7,777,543	)	$	(1,489,393	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation		—			108.000
Amortization of debt discount on convertible notes		38,762			—
Depreciation and depletion		3,752			3,748
Unrealized gain on change in derivative value		(86,958	)		(48,898	)
Amortization of original discount on notes		3,218			1,283
Stock issued for expenses		21,250			—
Gain on extinguishment of liabilities		(27,456	)		—
Write off of deposits		25,000			—
Impairment of oil and gas property		6,484,307			—
Changes in operating assets and liabilities:
Accounts receivable – production		2,502			5,158
Prepaid expenses and other current assets		(52,096	)		(7,857	)
Accounts payable – trade		241,527			197,723
Accrued expenses		778,758			742,872
Net cash used in operating activities		(344,977	)		(487,364	)
Cash flows from investing activities:
Purchase of oil and gas properties		(19,871	)		—
Net cash used in  investing activities		(19,871	)		—
Cash flows from financing activities:
Proceeds from issuance of notes payable to related parties		83,655			—
Proceeds from issuance of short term debt					60,000
Proceeds from sale of common stock		280,000			169,000
Net cash provided by financing activities		363,655			229,000
Net decrease in cash and cash equivalents		(1,193	)		(258,364	)
Cash and cash equivalents, at beginning of period		3,802			259,138
Cash and cash equivalents, at end of period	$	2,609		$	774
Supplemental cash flow information:
Interest paid	$	—		$	—
Income taxes paid	$	—		$	—
Non-cash investing and financial activities:
Common shares issued to settle notes payable	$	—		$	30,000
Debt discount on convertible notes	$	44,848		$	—
Notes payable reclass to convertible debenture	$	66,000		$	—

See summary of significant accounting policies and notes to unaudited condensed consolidated financial statements.

6

EAGLE FORD OIL & GAS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 and 2013

(Unaudited)

1. ORGANIZATION

Eagle Ford Oil & Gas Corp. (“Eagle Ford”, “ECCE”, “we”, “us” or the” Company”) is an independent oil and gas company organized in Nevada actively engaged in oil and gas development, exploration and production with properties and operational focus in the Texas and Louisiana-Gulf Coast Region. Eagle Ford’s strategy is to grow its asset base by purchasing or investing in oil and gas drilling projects in the Texas and Louisiana regions.

Eagle Ford continues to be a “smaller reporting company,” as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited interim financial statements have been prepared by the Company in accordance with the instructions to Form 10-Q of the Securities and Exchange Commission. The financial information has not been audited and should not be relied upon to the same extent as audited financial statements. Certain information and footnote disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Accordingly, these unaudited interim financial statements should be read in conjunction with the Company’s financial statements and related notes contained in the Form 10-K for the year ended December 31, 2013.

In the opinion of management, the unaudited interim financial statements reflect all adjustments, including normal recurring adjustments, necessary for fair presentation of the interim periods presented. The results of operations for the nine months ended September 30, 2014 are not necessarily indicative of the results of operations to be expected for the full year.

The Company’s unaudited condensed consolidated financial statements include all accounts of Eagle Ford (ECCE) and its subsidiaries: Eagle Ford – East Pearsall, Sandstone LLC and Eagle Ford Operating. All significant inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Eagle Ford’s unaudited condensed consolidated financial statements are based on a number of significant estimates, including oil and gas reserve quantities which are the basis for the calculation of depreciation, depletion and impairment of oil and gas properties; timing and costs associated with its asset retirement obligations; estimates for the realization of goodwill; and estimates of the value of derivative financial instruments.

Reclassifications

Certain reclassifications have been made to amounts in prior periods to conform to the current period presentation. All reclassifications have been applied consistently to the periods presented.

Cash and Cash Equivalents

Eagle Ford considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents.

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Oil and Gas Properties, Full Cost Method

Eagle Ford uses the full cost method of accounting for oil and gas producing activities. Costs to acquire mineral interests in oil and gas properties, to drill and equip exploratory wells used to find proved reserves, and to drill and equip development wells, including directly related overhead costs and related asset retirement costs, are capitalized. Under this method, all costs, including internal costs directly related to acquisition, exploration and development activities are capitalized as oil and gas property costs. Properties not subject to amortization consist of exploration and development costs which are evaluated on a property-by-property basis. Amortization of these unproved property costs begins when the properties become proved or their values become impaired. Eagle Ford assesses the realizability of unproved properties, if any, on at least an annual basis or when there has been an indication that impairment in value may have occurred. Impairment of unproved properties is assessed based on management’s intention with regard to future exploration and development of individually significant properties and the ability of Eagle Ford to obtain funds to finance such exploration and development. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is added to the capitalized costs to be amortized.

Costs of proved oil and gas properties, including future development costs, if any, are amortized using the units of production method over the estimated proved reserves.

In applying the full cost method, Eagle Ford performs an impairment test (ceiling test) at each reporting date, whereby the carrying value of property and equipment is compared to the “estimated present value,” of its proved reserves discounted at a 10-percent interest rate of future net revenues, based on current economic and operating conditions, plus the cost of properties not being amortized, plus the lower of cost or fair market value of unproved properties included in costs being amortized, less the income tax effects related to book and tax basis differences of the properties. If capitalized costs exceed this limit, the excess is charged as an impairment expense. The Company assessed the realizability of its oil and gas properties and determined that no impairment of its oil and gas properties was necessary as of September 30, 2014.

Depletion

Depletion is provided using the unit-of-production method based upon estimates of proved oil and natural gas reserves with oil and natural gas production being converted to a common unit of measure based upon their relative energy content. Investments in unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment (ceiling test) indicate that the properties are impaired, the amount of the impairment is deducted from the capitalized costs to be amortized. Once the assessment of unproved properties is complete and when major development projects are evaluated, the costs previously excluded from amortization are transferred to the full cost pool and amortization begins. The amortizable base includes estimated future development costs and where significant, dismantlement, restoration and abandonment costs, net of estimated salvage value.

In arriving at rates under the unit-of-production method, the quantities of recoverable oil and natural gas reserves are established based on estimates made by the Company’s geologists and engineers which require significant judgment, as does the projection of future production volumes and levels of future costs, including future development costs. In addition, considerable judgment is necessary in determining when unproved properties become impaired and in determining the existence of proved reserves once a well has been drilled. All of these judgments may have significant impact on the calculation of depletion expense.

Asset Retirement Obligations

The Company follows the provisions of the Accounting Standards Codification (“ASC”) 410 -Asset Retirement and Environmental Obligations. The fair value of an asset retirement obligation is recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The present value of the estimated asset retirement costs is capitalized as part of the carrying amount of the long-lived asset and is subject to amortization. The Company’s asset retirement obligations relate to the abandonment of oil and gas producing facilities. The amounts recognized are based upon numerous estimates and assumptions, including future retirement costs, future recoverable quantities of oil and gas, future inflation rates and the credit-adjusted risk-free interest rate.

8

The following table describes changes in our asset retirement obligation during the nine months ended September 30, 2014 and the year ended December 31, 2013.

	Nine months Ended September 30, 2014		For the Year Ended December 31, 2013
ARO liability at beginning of period, current and noncurrent	$	24,802	$	24,802
Liabilities incurred from  acquisitions		—		—
Accretion		—		—
ARO liability at end of period, current and noncurrent	$	24,802	$	24,802

Revenue and Cost Recognition

Eagle Ford uses the sales method of accounting for natural gas and oil revenues. Under this method, revenues are recognized based on the actual volumes of gas and oil sold to purchasers. The volume sold may differ from the volumes to which Eagle Ford is entitled based on our interest in the properties. Costs associated with production are expensed in the period incurred.

Loss per Share

Pursuant to FASB ASC Topic 260, Earnings per Share, basic net loss per share is computed by dividing the net loss attributable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the net loss attributable to common shareholders by the weighted-average number of common and common equivalent shares outstanding during the period. Common share equivalents included in the diluted computation represent shares issuable upon assumed exercise of stock options and warrants using the treasury stock and “if converted” method and conversion of preferred shares. For periods in which net losses are incurred, weighted average shares outstanding is the same for basic and diluted loss per share calculations, as the inclusion of common share equivalents would have an anti-dilutive effect.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at invoiced amount and generally do not bear interest. An allowance for doubtful accounts is established, as necessary, based on past experience and other factors which, in management’s judgment, deserve current recognition in estimating bad debts. Such factors include growth and composition of accounts receivable, the relationship of the allowance for doubtful accounts to accounts receivable and current economic conditions. The determination of the collectability of amounts due from customer accounts requires the Company to make judgments regarding future events and trends. Allowances for doubtful accounts are determined based on assessing the Company’s portfolio on an individual customer and on an overall basis. This process consists of a review of historical collection experience, current aging status of the customer accounts, and the financial condition of Eagle Ford’s customers. Based on a review of these factors, the Company establishes or adjusts the allowance for specific customers and the accounts receivable portfolio as a whole. At September 30, 2014 and December 31, 2013, an allowance for doubtful accounts was not considered necessary as all accounts receivable were deemed collectible.

Concentration of Credit Risk

Financial instruments that potentially subject Eagle Ford to concentration of credit risk consist of cash and accounts receivable. At September 30, 2014, cash balances in interest-bearing accounts are zero.

Sales to a single customer comprised 100% of Eagle Ford’s total oil and gas revenues for each of the nine months ended for both September 30, 2014 and 2013. At September 30, 2014 and December 31, 2013, Eagle Ford’s accounts receivable from its primary customer was $16,582 and $19,084, respectively. Eagle Ford believes that, in the event that its primary customer is unable or unwilling to continue to purchase Eagle Ford’s production, there are a substantial number of alternative buyers for its production at comparable prices.

9

Property and Equipment, other than Oil and Gas Properties

Property and equipment are stated at cost. Additions of new equipment and major renewals and replacements of existing equipment are capitalized. Repairs and minor replacements are charged to operations as incurred. Cost and accumulated depreciation and amortization are removed from the accounts when assets are sold or retired, and the resulting gains or losses are included in operations.

Depreciation of property and equipment is provided using the straight-line method applied to the expected useful lives of the assets:

	Estimated useful lives
Pipeline transmission properties	20 years
Machinery and equipment	3 – 7 years
Office furniture, fixtures and equipment	3 – 5 years

Income Taxes

The Company uses the liability method of accounting for income taxes. Under this method, it records deferred income taxes based on temporary differences between the financial reporting and tax bases of assets and liabilities and uses enacted tax rates and laws that the Company expects will be in effect when it recovers those assets or settles those liabilities, as the case may be, to measure those taxes. The Company reviews deferred tax assets for a valuation allowance based upon whether it is more likely than not that the deferred tax asset will be fully realized.

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. As of September 30, 2014, the Company did not identify any uncertain tax positions.

The Company’s policy is to include interest and penalties related to unrecognized tax benefits within the income tax expense (benefit) line item in the statement of operations.

Share-Based Compensation

The Company follows ASC 718 -Compensation - Stock Compensation under which the Company estimates the fair value of each stock option award at the grant date by using the Black-Scholes option pricing model and common shares based on the last quoted market price of the Company’s common stock on the date of the share grant. The fair value determined represents the cost for the award and is recognized over the vesting period during which an employee is required to provide service in exchange for the award. As share-based compensation expense is recognized based on awards ultimately expected to vest, the Company reduces the expense for estimated forfeitures based on historical forfeiture rates, if available. Previously recognized compensation costs may be adjusted to reflect the actual forfeiture rate for the entire award at the end of the vesting period. Excess tax benefits, as defined in ASC 718, if any, are recognized as an addition to paid-in capital.

10

Financial instruments

The accounting standards regarding fair value of financial instruments and related fair value measurements define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures.

The three levels are defined as follows:

• Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

• Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.  

• Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company has determined that the warrants outstanding as of the date of these financial statements include an exercise price “reset” adjustment that qualifies as derivative financial instruments under the provisions of ASC 815-40,Derivatives and Hedging – Contracts in an Entity’s Own Stock. See Note 6 for discussion of the impact the derivative financial instruments had on the Company’s unaudited condensed consolidated financial statements and results of operations.

Significant Level 3 inputs used to calculate the fair value of the warrants and derivative notes include the stock price on the valuation date, expected volatility, risk-free interest rate and management’s assumptions regarding the likelihood of a repricing of these warrants pursuant to the anti-dilution provision. See Note 6 for further discussion.

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2014. There were no transfers of financial assets between levels during the nine months ended September 30, 2014.

	Carrying Value at September 30, 2014		Fair Value Measurement at September 30, 2014
					Level 1		Level 2		Level 3
Derivative liability – Warrants	$	—	$	—	$	—	$	—
Derivative liability – Notes	$	44,848	$	—	$	—	$	44,848

The Company did not identify any other assets and liabilities that are required to be presented on the unaudited condensed consolidated balance sheet at fair value.

Contingencies

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein.

11

If the assessment of a loss contingency indicates that it is probable that a loss has been incurred and the amount of the liability can be reasonably estimated, then the estimated liability is accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed. The Company expenses legal costs associated with contingencies as incurred.

Environmental Expenditures

The Company is subject to extensive federal, state and local environmental laws and regulations. These laws regulate the discharge of materials into the environment and may require the Company to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites. Environmental expenditures are expensed or capitalized depending on their future economic benefit. Expenditures that relate to an existing condition caused by past operations and that have no future economic benefits are expensed.

Liabilities for expenditures of a non-capital nature are recorded when environmental assessment and/or remediation is probable, and the costs can be reasonably estimated. Such liabilities are generally undiscounted unless the timing of cash payments for the liability or component is fixed or reliably determinable. No such liabilities existed or were recorded at September 30, 2014 and December 31, 2013.

Recent Accounting Pronouncements

Eagle Ford does not expect the adoption of any recently issued accounting pronouncements will have a significant impact on its results of operations, financial position or cash flow.

3. LIQUIDITY AND GOING CONCERN

As shown in the accompanying unaudited condensed consolidated financial statements, for the nine months ended September 30, 2014, Eagle Ford incurred a net loss attributable to common shareholders of $7,777,543. During the nine months ended September 30, 2014, operating expenses included interest expenses and non cash expenses related to the derivative liability. At September 30, 2014 and December 31, 2013, the Company had a working capital deficit (current liabilities minus current assets) of $14,694,067 and $13,710,960, respectively, and held cash and cash equivalents of $2,609 and $3,802, respectively. These conditions raise substantial doubt as to our ability to continue as a going concern.

Management is working to improve its liquidity and its results from operations by raising additional capital and investing in the drilling of additional wells to improve future earnings and cash flow. Management is exploring various avenues to obtain such funding to develop our properties and pay existing debt including the issuance of new debt, issuance of securities, sales of properties and joint ventures. Management anticipates that additional financings and loans will be required to sustain operations in the future. ECCE is also actively looking for potential merger partners. There can be no assurance that the Company will be successful in raising the required capital.

The failure to raise sufficient capital through future debt or equity financings or otherwise may cause the Company to curtail operations, sell assets, or result in the failure of Eagle Ford’s business. The unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

12

4. OIL AND GAS PROPERTIES

The following table sets forth the Company’s costs incurred in oil and gas property acquisition, exploration and development activities for the nine months ended September 30, 2014. All of the Company’s oil and gas properties are located in the United States.

Well Description	December 31, 2013		Additions		Impairment/ Impairment		September 30, 2014
East Pearsall, Frio Co. TX	$	6,464,436	$	19,871	$	6,484,307	$	—
	$	6,464,436	$	19,871	$	6,484,307	$	—

EAST PEARSALL

On June 4, 2012, ECCE entered into an agreement though a special purpose entity named EFOGC – East Pearsall, L.L.C., a Texas limited liability company. ECCE owns 100% of the Class B Membership Interests in EFEP, while Medallion Oil Corp. (MOC) owns 100% of the Class A Membership Interest. EFEP completed the acquisition of 85% Working Interest in 3,683 acres in Frio County, Texas from Amac Energy, L.L.C. to drill and develop the Austin Chalk, Buda, Eagle Ford and Pearsall Shale The agreement with AMAC Energy was to purchase the 85% of the working interest on the East Pearsall lease. As part of the sales agreement, ECCE had to drill the one well on each of the three leases prior to 6 months of the expiration of the leases. Due to the fact that ECCE was unable to acquire drilling funds per the agreement prior to the agreed date, ECCE was required, as stated in the agreement, to reassign the leases back to AMAC Energy. As a result as stated in the settlement agreement, On July 8, 2014 the MOC-East Pearsall Board of Directors approved the release of all liens to AMAC and ECCE has been released from any obligation to AMAC Energy. As of September 30, 2014, an impairment charge of $6,464,436 was taken against this property.

MOC invested $7,000,000 into EFOGC – East Pearsall, LLC for the sole purpose of acquiring the AMAC leases, with MOC owning 100% of A series common stock and ECCE owning B series common stock as “designated operator”. Per the agreement with MOC, ECCE was required to acquire a minimum of $10,500,000 drilling capital by December 2012, however, ECCE was unsuccessful. MOC granted an extension for another six months, however ECCE was also unsuccessful in that attempt to raise funds as it was in all future periods. A part of the original agreement required that the East Pearsall, LLC return the original capital investment of $7,000,000 out of those funds, along with interest of 10% on that balance. As of September 30, 2014, the loan from MOC $7 million was outstanding against this property.

With the leases being reassigned to AMAC Energy and the subsequent agreement with MOC to close East Pearsall, LLC, the entity of EFOGC – East Pearsall is currently “winding down” and will be closed as an operating entity in the state of Texas. With this winding down, ECCE will no longer have any liability relative to EFOGC – East Pearsall and the East Pearsall leases. We anticipate completing this closure within a month of this report.

LIVE OAK COUNTY, TEXAS

In August 2010, ECCE purchased a farm-in of a 1% working interest in 2,400 acres and the drilling of two wells in the Eagle Ford Shale formation located in Live Oak County in South Texas for $250,000. The Dena Forehand #2H, the Kellam #2H and the Hammon 1H were drilled and completed and production began during late 2010 and early 2011 and classified as proved reserves. Subsequent production has proven to be well below expectations, and ECCE does not intend to pursue additional investments in this field. As of the date of this report, the wells in Live Oak County continue to have minimal gas production.

In October 2014, ECCE transferred ownership of these three wells to the convertible bond holders. The original loan agreement contained the stipulation that should the notes be in default, then the property would be transferred to those note holders. As of the date of filing, ECCE does not have ownership or control of these wells.

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OHIO PIPELINE

In October 2008, ECCE acquired a gas pipeline (“Pipeline”) approximately 13 miles in length located in Jefferson and Harrison Counties, Ohio. The Pipeline was purchased from M- J Oil Company of Paris, Ohio, an unaffiliated third party, by issuing a mortgage note for $1,000,000. The mortgage note bears an 8% annual interest rate. The mortgage is secured by the Pipeline assets. The mortgage was due on March 31, 2010, at which time, the entire unpaid balance of principal and accrued interest was to have been paid. The pipeline services oil and gas properties owned by Samurai Corp, an affiliated company.

On February 27, 2009, ECCE entered into an agreement to buy oil and gas producing properties in Ohio, from Samurai Corp, an affiliated company owned by Sam Skipper, who was President of ECCE at that time. Upon further review, due to market conditions pertaining to the price of oil and gas, both Samurai and ECCE decided that the transaction was not in the best interest of shareholders of either company. Therefore, on April 13, 2009 the Board of Directors of both companies decided to terminate the transaction.

A review of the pipeline valuation was performed by management. This was necessary as the asset was not an income producing asset during 2010. A comparison of replacement cost, comparable market value and comparable earnings potential to other pipelines, showed that the expected realizable value of the asset at December 31, 2009 was $100,000. An impairment charge of $900,000 was recorded during the year ended December 31, 2009.

Due to the failure to complete the transfer of assets from Samurai to ECCE, the covenants of the Pipeline purchase were violated. On February 28, 2009 M-J Oil Company Inc, of Paris Ohio, obtained a judgment against ECCO Energy for non-compliance with covenants in the original mortgage relating to the purchase of the M-J Oil Company pipeline (“Pipeline”). We are in negotiations with the M-J Oil Company to remove the judgment and to adjust the mortgage terms, which required full payment on March 31, 2009. As of this date, we have not reached a satisfactory agreement with the lender. M-J Oil Company has taken legal action to pursue the judgment in the State of Texas, filing a lawsuit in the State of Texas in April, 2014. As of the filing date of this report, negotiations with MJ Oil are underway in order to remove the judgment and settle the obligation.

BAYOU CHOCTAW

On August 5, 2011, ECCE, entered into an agreement to purchase 1.5% Working Interest in the Bayou Choctaw Project located in Iberville Parish, Louisiana from GFX Energy, Inc. (GFX). Prior to December 31, 2011, ECCE decided to not further participate in the Bayou Choctaw development. ECCE and GFX decided to use the $100,000 deposited for Bayou Choctaw as a deposit on a future, undetermined endeavor relating to the exploration of oil and gas. ECCE remains in discussion about this investment with GFX Energy, Inc., and anticipates using this balance in a future, undetermined activity.

HARDIN COUNTY/MERIDIAN CAPITAL VENTURES

During the year ended December 31, 2013, the Company was in the process of making an offer on some property in Hardin County, TX. Meridian Capital Ventures intended to fund the acquisition. During the quarter, Vanguard Energy received a higher offer than ECCE was prepared to bid and the property was sold to another company. As of September 30, 2014 the agreement to fund the acquisition has been cancelled and the amounts payable to Meridian Capital Ventures has been voided.

Eagle Ford Oil & Gas Operating Company

During March, 2014, ECCE began the process of registering a new subsidiary, Eagle Ford Oil & Gas Operating Company. The new subsidiary will be responsible for any drilling and related production activities of the company. As of the date of this report, the subsidiary has no assets or liabilities. Further, the Company is in the process of closing this subsidiary.

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5. DEBT

Notes Payable – Related Parties

	September 30, 2014		December 31, 2013
Promissory note to TDLOG – 8% interest; due September 30, 2014; unsecured (1)	$	817,500	$	817,500
Promissory note to Michael Munsey – 4% interest; due December 31, 2014: unsecured (2)		20,155		—
Promissory note to TDLOG – 8% interest; due December 31, 2014; unsecured (1)		63,500		—
Promissory note to TDLOG – 8% interest; due September 30, 2014; unsecured (1) Total:		80,000		80,000
Notes Payable – Related Parties	$	981,155	$	897,500

(1)

TDLOG, LLC is controlled by Thomas E. Lipar, Chairman of the Board of Eagle Ford. Note due date was changed to September 30, 2014 from September 30, 2013. As of the filing date, the notes are in default. Additional loans totaling $63,500 were made during the three quarters ending September 30, 2014. These notes will be consolidated into one note during the quarter ending December 31, 2014. These new notes are to provide short term funding to ECCE.

(2)

Michael Munsey is Vice-President of Operations and Exploration of Eagle Ford.

Accrued interest expenses on the above notes to the related party as of September 30, 2014 and December 31, 2013 is $243,381 and $225,190, respectively.

Interest expenses to related party for the three months ended September 30, 2014 and 2013 is $19,363 and $17,950, respectively.

Interest expenses to related party for the nine months ended September 30, 2014 and 2013 is $55,634 and $53,850, respectively.

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Notes Payable – Non-Related Parties

	September 30, 2014			December 31, 2013
Promissory note – 12% interest; due March 31, 2009; not secured (1)	$	328,578		$	328,578
Promissory note – 5% interest; due January 1, 2012; not secured (2).		227,131			227,131
Pipeline mortgage – 8% interest; due September 30, 2009; secured by pipeline (3)		1,000,000			1,000,000
Promissory notes – 6% interest; due April 1, 2011; not secured (2)		112,000			112,000
Promissory notes – 5% interest; due October 15, 2010; not secured (4)		50,000			50,000
Promissory note to a former Director – 8% interest; due July 1, 2010; unsecured. (5)		25,000			25,000
Promissory note – Medallion Investment- 10% interest (6)		7,000,000			7,000,000
Promissory note – 12% interest with $3,000 OID; due July 14, 2014 (7)		—			33,000
Promissory note – 12% interest with $3,000 OID; due July 14, 2014 (7)		—			33,000
Total notes payable		8,742,709			8,808,709
Less: Unamortize debt discount portion		—			(3,218	)
Total notes payable, net		8,742,709			8,805,491
Less: current portion of notes payable		(8,742,709	)		(8,805,491	)
Total notes payable – long term	$	—		$	—

Accrued and unpaid interest for notes payable to non-related parties at September 30, 2014 and December 31, 2013 was $2,237,538 and $1,825,482 respectively, and is included in accrued expenses on the accompanying unaudited condensed consolidated balance sheets.

Interest expenses to non-related party for the nine months ended September 30, 2014 and 2013 is $637,675 and $628,339, respectively and Interest expenses to non-related party for the three months ended September 30, 2014 and 2013 is $212,937 and $206,399, respectively.

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(1)	Pursuant to the Reverse Acquisition, the Company assumed these notes payable totaling $328,578. All principal and interest became due September 30, 2009 for 12% notes. This note has not been repaid and is in default. No demand has been made for payment. Eagle Ford is continuing to accrue interest on this note at the stated rate.
(2)	Pursuant to the Reverse Acquisition, the Company assumed two notes payable (i) $227,131 due on January 1, 2012 for 5% and (ii) $142,000 due on April 1, 2011 for 6% interest for drilling on the Wilson Field lease and for general corporate purposes. Neither of these notes has been repaid in cash and is in default. Eagle Ford is continuing to accrue interest on these notes at the stated rate. During the year ended December 31, 2013, the note holder agreed to convert $30,000 of note on issuance of 81,081 shares of common stock. On March 12, 2014, the note holder demanded payment on the outstanding portion of the note totaling $339,131 (see Note 8). The note holder has demanded payment, and we are currently in negotiations regarding a settlement.
(3)	The entire unpaid balance of principal and accrued interest was due on September 30, 2009. No payments have been made and this mortgage note is in default. There has been a judgment rendered against Eagle Ford in the amount of the mortgage (see Note 8). Eagle Ford is in discussions with the lender to restructure the mortgage. Eagle Ford is continuing to accrue interest on this note at the stated rate.  In April, 2014, the note holder began the process to move the judgment to Texas courts.
(4)	Pursuant to the Reverse Acquisition, the Company assumed these notes payable totaling $50,000 from two different note holders for drilling on the Wilson Field lease and for general corporate purposes. Neither of these notes has been repaid in cash and is in default. One party has demanded payment on a $25,000 note. Eagle Ford is continuing to accrue interest on these notes at the stated rate (see Note 8).
(5)	Prior to the Reverse Acquisition, Eagle Ford borrowed $25,000 from a related party for general corporate purposes. The note is in default and due on demand. Eagle Ford continued to accrue interest on these notes at the stated rate. From July 20, 2011 this note holder is no longer a related party.
(6)	East Pearsall On June 4, 2012, ECCE entered into an agreement though a special purpose entity named EFOGC – East Pearsall, L.L.C., a Texas limited liability company. ECCE owns 100% of the Class B Membership Interests in EFEP, while Medallion Oil Corp. (MOC) owns 100% of the Class A Membership Interest. EFEP completed the acquisition of 85% Working Interest in 3,683 acres in Frio County, Texas from Amac Energy, L.L.C. to drill and develop the Austin Chalk, Buda, Eagle Ford and Pearsall Shale The agreement with AMAC Energy was to purchase the 85% of the working interest on the East Pearsall lease. As part of the sales agreement, ECCE had to drill the one well on each of the three leases prior to 6 months of the expiration of the leases. Due to the fact that ECCE was unable to acquire drilling funds per the agreement prior to the agreed date, ECCE was required, as stated in the agreement, to reassign the leases back to AMAC Energy. As a result as stated in the settlement agreement, On July 8, 2014 the MOC-East Pearsall Board of Directors approved the release of all liens to AMAC and ECCE has been released from any obligation to AMAC Energy. As of September 30, 2013, an impairment charge of $6,464,436 was taken against this property. MOC invested $7,000,000 into EFOGC – East Pearsall, LLC for the sole purpose of acquiring the AMAC leases, with MOC owning 100% of A series common stock and ECCE owning B series common stock as “designated operator”. Per the agreement with MOC, ECCE was required to acquire a minimum of $10,500,000 drilling capital by December 2012, however, ECCE was unsuccessful. MOC granted an extension for another six months, however ECCE was also unsuccessful in that attempt to raise funds as it was in all future periods. A part of the original agreement required that the East Pearsall, LLC return the original capital investment of $7,000,000 out of those funds, along with interest of 10% on that balance. With the leases being reassigned to AMAC Energy and the subsequent agreement with MOC to close East Pearsall, LLC, the entity of EFOGC – East Pearsall is currently “winding down” and will be closed as an operating entity in the state of Texas. With this winding down, ECCE will no longer have any liability relative to EFOGC – East Pearsall and the East Pearsall leases. We anticipate completing this closure within a month of this report
(7)	As these notes has conversion features, please see the discussion in convertible notes (refer below for further details).   These notes are in default as of the date of filing of this report.

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Convertible Debentures and Notes Payable

	September 30, 2014			December 31, 2013
Convertible debentures (1)	$	545,000		$	545,000
Convertible notes payable (2)		66,000			—
Total convertible debentures and notes payable		611,000			545,000
Unamortized debt discount on convertible notes payable		—			—
Total: Convertible debentures and notes payable – net		611,000			545,000
Less: current portion of convertible debentures and notes payable		(611,000	)		(545,000	)
Total convertible debentures and notes payable – long term	$	—		$	—

(1) On June 20, 2011, the Company assumed the liability for $545,000 of Secured Convertible Debentures as a result of the Reverse Acquisition. The Secured Convertible Debentures matured on July 26, 2011, and earned interest at a rate of 12%, payable quarterly in 3,000 shares of common stock for each debenture. The Company is in default. There have been no shares issued for the interest payable as of September 30, 2014, nor have the Debentures been repaid. The interest for these debentures is accrued at the 12% rate and is included in accrued expenses. The Debentures are secured by a 1.5% interest in three oil and gas producing wells that are in a 2,400 acre lease in Live Oak County, Texas. The Debentures are convertible at the holders’ option into Eagle Ford restricted common stock at a fixed conversion rate of $0.90 per common share. The Debentures may also be satisfied by transferring the lease to the investors. ECCE transferred the property to these note holders during October 2014. Accrued and unpaid interest was $271,755 and $224,705 at September 30, 2014 and December 31, 2013, respectively related to the convertible debentures. Interest expenses on convertible debenture for the three months ended September 30, 2014 and 2013 is $16,350 for each quarter.

In October, 2014, ECCE transferred ownership of these wells to the debt holders. The original agreement provided the option to transfer ownership should the notes be in default.

(2) On July 18, 2013, ECCE issued two Notes Payable of $33,000 each, for a combined total of $66,000 to two individuals. The notes contained a $3,000 or $6,000 total original issue discount. The notes are due on July 14, 2014, and if they were repaid within ninety days from date of issue, then no interest would accrue. If they were paid after 90 days, then they accrued interest at a rate of twelve percent per annum, due on that date. The notes could be converted into common stock after 180 days, which occurred on January 14, 2014 The Conversion Price is the lesser of $0.39 per share or 60% of the lowest trade in the 25 trading days previous to the conversion. The Note accrues interest at a rate of 12% per annum and matured on July 13, 2014.  The notes were not paid or converted and are now in default.

The Company identified embedded derivatives related to the Convertible Note entered into on January 13, 2014.  These embedded derivatives included certain conversion features.  The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date.  At the inception of the Convertible Note, the Company determined a fair value of $38,762 of the embedded derivative.  The fair value of the embedded derivative was determined using intrinsic value.

The initial fair value of the embedded debt derivative of $38,762 was allocated as a debt discount and derivatives liability.

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The fair value of the described embedded derivative of $44,848 at September 30, 2014 was determined using the Black-Scholes Model with the following assumptions:

(1) risk free interest rate of	0.28%;
(2) dividend yield of	0%;
(3) volatility factor of	183%;
(4) an expected life of the conversion feature of	6 months, and
(5) estimated fair value of the company’s common stock of	$0.25 per share.

At September 30, 2014, the Company adjusted the recorded fair value of the derivative liability to market resulting in non-cash, non-operating loss of $39,144 and ($6,123) for the three and nine months ended September 30, 2014.

During the three and nine months ended September 30, 2014, the Company amortized $16,490 and $38,762 of debt discount to current period operations as financing expense.

Activity for the derivative liability- convertible note during the nine months ended September 30, 2014 was:

	December 31, 2013		Activity During the Period		Decrease in Fair Value		September 30, 2014
Derivative convertible notes	$	—	$	44,848	$	—	$	44,848
Total	$	—	$	44,848	$	—	$	44,848

6. DERIVATIVE LIABILITY- WARRANTS

In connection with the Reverse Acquisition, the Company assumed 1,000,000 warrants which were issued by Eagle Ford prior to the Reverse Acquisition in connection with the conversion of Eagle Ford’s convertible preferred shares, which also occurred prior to the Reverse Acquisition. The Company determined that the warrants contained provisions that protect the holders from declines in the Company’s stock price that could result in modification of the exercise price under the warrant based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under ASC 815 – 40. As a result, these warrants were not indexed to the Company’s own stock. The fair value of these warrants was recognized as derivative warrant instruments and will be measured at fair value at each reporting period. As of June 20, 2011, the Company determined that, using a lattice model, the fair value of the warrants was $438,680, which had been reduced to $93,044 by December 31, 2013. As of September 30, 2014, the warrants expired and determined the fair value to be $-0-. The decrease in fair value has been recognized as an unrealized gain on the change in derivative value of $93,044 and $48,897 for the nine months ended September 30, 2014 and September 30, 2013, respectively and the decrease in fair value has been recognized as an unrealized gain on the change in derivative value of $0 and $30,036 for the three months ended September 30, 2014 and 2013, respectively.

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Activity for the derivative warrant during the nine months ended September 30, 2014 was:

	December 31, 2013		Activity During the Period		Decrease in Fair Value		September 30, 2014
Derivative warrant instruments	$	93,044	$	—	$	93,044	$	—
Total	$	93,044	$	—	$	93,044	$	—

7. SHAREHOLDERS’ EQUITY

As of September 30, 2014 and December 31, 2013, there were 42,127,995 and 40,102,947 shares of common stock issued and outstanding, respectively.

Common stock sales

On January 14, 2014, ECCE sold 183,488 shares of common stock to several individuals for $0.1635 per share.

On March 12, 2014, ECCE sold 1,735,310 shares of common stock to several individual for $0.144 per share.

On August 15, 2014, ECCE issued 106,250 shares of restricted common stock to an employee as part of a compensation package for $0.20 per share.

All proceeds from stock sales were used for general corporate purposes.

Warrants

Warrant activity during the nine months ended September 30, 2014 is as follows:

	Warrants		Weighted- Average Exercise Price		Aggregate Intrinsic Value
Outstanding at January 1, 2014		1,000,000	$	0.50	$	—
Granted		—		—		—
Exercised		—		—		—
Expired		1,000,000		0.50		—
Outstanding and exercisable at September 30, 2014		—	$	—	$	—

The fair value of these warrants was recognized as derivative warrant instruments and had been measured at fair value at each reporting period. See Note 6. As of September 30, 2014, all warrants had expired with no value.

8. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

On February 28, 2009 M-J Oil Company Inc, of Paris Ohio, obtained a judgment of $1,000,000 against Eagle Ford (f/k/a ECCO Energy) for non-compliance with covenants in the original mortgage relating to the purchase of the M-J Oil Company pipeline (“Pipeline”). Eagle Ford is in negotiations with the M-J Oil Company to remove the judgment and to adjust the mortgage terms, which required full payment on March 31, 2009. As of the date of this filing, the Company has not reached a satisfactory agreement with the lender, although a settlement is being actively pursued. In April, 2014, M-J commenced legal action to move the judgment from Ohio to Texas courts.

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Eagle Ford has not paid property taxes for 2007, 2008 or 2009 on the Wilson Field in Nueces County, Texas. Samurai Corp. agreed to assume the liabilities for property taxes for 2010 when it acquired the property. The County has initiated legal proceedings to collect those taxes by placing tax liens on the property. As of September 30, 2014, Eagle Ford owed $43,452 for these property taxes. ECCE is currently in negotiations to settle this liability.

On March 12, 2014, one of the note holders sent a letter asking for payment on four notes totaling $339,130. We are in discussion with this note holder about a settlement.

On March 17, 2014, a note holder sent a letter asking for payment on a $25,000 note. ECCE is in discussions with this note holder about a settlement.

Operating Leases

The rental contract at 1110 NASA Parkway for 1,379 sq. ft. commenced July 1, 2010 and terminated on August 31, 2014. On August 31, 2013, ECCE renewed the lease for the next year at a rate of $2,011 per month. On August 1, 2014 the lease expired. ECCE is currently negotiating the renewal and is on a month to month basis at the date of filing.

9. SUBSEQUENT EVENTS

In order to improve the Balance Sheet and make the company more appealing to new investment as well as conserving cash flow, on October 1, 2014 the Board of Directors initiated a thorough review of all debt and service contracts in order to control future expenses and to reduce those current obligations for payables, interest and other debt instruments. ECCE will be reviewing all such items and will attempt to settle them at a reduced amount. The Chairman of the Board, Thomas Lipar agreed to advance ECCE an as yet undetermined amount in order to satisfy immediate financial needs of the company. He also agreed to fund an undetermined amount to settle such AP and Notes Payable settlements. The funds to settle the open payable and notes payable will be determined on a case by case basis, and will be decide within 60 days of the filing. The Board reserves the right to end this endeavor at any time.

EAST PEARSALL

On June 4, 2012, ECCE entered into an agreement though a special purpose entity named EFOGC – East Pearsall, L.L.C., a Texas limited liability company. ECCE owns 100% of the Class B Membership Interests in EFEP, while Medallion Oil Corp. (MOC) owns 100% of the Class A Membership Interest. EFEP completed the acquisition of 85% Working Interest in 3,683 acres in Frio County, Texas from Amac Energy, L.L.C. to drill and develop the Austin Chalk, Buda, Eagle Ford and Pearsall Shale The agreement with AMAC Energy was to purchase the 85% of the working interest on the East Pearsall lease. As part of the sales agreement, ECCE had to drill the one well on each of the three leases prior to 6 months of the expiration of the leases. Due to the fact that ECCE was unable to acquire drilling funds per the agreement prior to the agreed date, ECCE was required, as stated in the agreement, to reassign the leases back to AMAC Energy. As a result as stated in the settlement agreement, On July 8, 2014 the MOC-East Pearsall Board of Directors approved the release of all liens to AMAC and ECCE has been released from any obligation to AMAC Energy. As of September 30, 2013, an impairment charge of $6,464,436 was taken against this property.

MOC invested $7,000,000 into EFOGC – East Pearsall, LLC for the sole purpose of acquiring the AMAC leases, with MOC owning 100% of A series common stock and ECCE owning B series common stock as “designated operator”. Per the agreement with MOC, ECCE was required to acquire a minimum of $10,500,000 drilling capital by December 2012, however, ECCE was unsuccessful. MOC granted an extension for another six months, however ECCE was also unsuccessful in that attempt to raise funds as it was in all future periods. A part of the original agreement required that the East Pearsall, LLC return the original capital investment of $7,000,000 out of those funds, along with interest of 10% on that balance.

With the leases being reassigned to AMAC Energy and the subsequent agreement with MOC to close East Pearsall, LLC, the entity of EFOGC – East Pearsall is currently “winding down” and will be closed as an operating entity in the state of Texas. With this winding down, ECCE will no longer have any liability relative to EFOGC – East Pearsall and the East Pearsall leases. We anticipate completing this closure within a month of this report.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The statements included or incorporated by reference in this Quarterly Report, other than statements of historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended. In some cases, you can identify forward-looking statements by the words “anticipate,” “estimate,” “expect,” “objective,” “projection,” “forecast,” “goal,” and similar expressions. Such forward-looking statements include, without limitation, the statements herein and therein regarding the timing of future events regarding the operations of the Company and its subsidiaries. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors including without limitation the following risk factors:

- the cyclical nature of the natural gas and oil industries to meet our obligations, finance operating deficits and fund acquisitions, exploration and development and continue as a going concern

- our ability to obtain additional financing

- our ability to successfully and profitably find, produce and market oil and natural gas

- uncertainties associated with the United States and worldwide economies

- substantial competition from larger companies

- the loss of key personnel

- operating interruptions (including weather, leaks, explosions and lack of rig availability)

- the cyclical nature of the natural gas and oil industries

BUSINESS OPERATIONS

We (“Eagle Ford” or the “Company”) are an independent oil and gas company actively engaged in oil and gas development, exploration and production with properties and operational focus in the Texas-Louisiana Gulf Coast Region. Our strategy is to grow our asset base by investing in oil and gas drilling and production in various locations in that region. Our shares of common stock are traded on the Over-the-Counter Bulletin Board, with the symbol ECCE.

RECENT DEVELOPMENTS

Business Acquisitions

On June 20, 2011, pursuant to a Purchase Agreement, Eagle Ford acquired all of the membership interests of Sandstone Energy, L.L.C. (“Sandstone”) in exchange for 17,857,113 shares of common stock of Eagle Ford (the “Reverse Acquisition”). Following the Reverse Acquisition, the shares issued to the former owners of Sandstone constituted 82% of the Company’s common stock. Sandstone Energy, L.L.C.’s principal assets at the date of the Acquisition were 50% membership interests in each of Sandstone Energy Partners I, L.L.C. (“SSEP1”), Sandstone Energy Partners II, L.L.C. (“SSEP2”) and Sandstone Energy Partners III, L.L.C. (“SSEP3”). On August 8 and August 11, 2011, Eagle Ford acquired the remaining 50% interests in each of SSEP1, SSEP2 and SSEP3 with an accumulated deficit of $1,443,302 in exchange for 8,970,120 shares of Eagle Ford common stock. Eagle Ford now owns 100% of the interests in these ventures. Subsequent to the merger, SSEP1, SSEP2 and SSEP3 were closed.

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The Reverse Acquisition was accounted for as a “reverse acquisition” in which Sandstone is deemed to be the accounting acquirer (“Acquirer”) and Eagle Ford is deemed to be the accounting acquiree (“Acquiree”). Consequently, the assets and liabilities and the historical operations reflected in the accompanying consolidated financial statements prior to the Reverse Acquisition are those of Sandstone and are recorded at the historical cost basis of Sandstone. The consolidated financial statements after completion of the Reverse Acquisition include the assets and liabilities of Sandstone and the Acquiree and the historical operations of Sandstone and the Acquiree and its subsidiaries from the closing date of the Reverse Acquisition. In accordance with ASC 805, the assets and liabilities of the Acquiree at the date of the acquisition have been recorded at fair value.

Oil & Gas Properties

Prior to the Reverse Acquisition, in August 2010, Eagle Ford purchased a farm-in of a 1% working interest in 2,400 acres and the drilling of three wells in the Eagle Ford Shale formation located in Live Oak County in South Texas for $250,000 plus potential additional expenses related to the drilling. The wells were drilled and completed and production began during November and December 2010 and classified as proved reserves. As of September 30, 2014 the wells in Live Oak County continue to have minimal oil and gas production. We do not anticipate any further drilling in this field, but may owe some currently undetermined amounts for past and future maintenance and repairs. In October 2014, the ownership of these wells were transferred to the note holders in lieu of debt payment.

On August 5, 2011, ECCE, entered into an agreement to purchase 1.5% Working Interest in the Bayou Choctaw Project located in Iberville Parish, Louisiana from GFX Energy, Inc. (GFX). Prior to December 31, 2011, ECCE decided to not further participate in the Bayou Choctaw development. ECCE and GFX decided to use the $100,000 deposited for Bayou Choctaw as a deposit on a future, undetermined endeavor relating to the exploration of oil and gas. Negotiations are underway as how to proceed with this deposit.

On June 4, 2012, ECCE entered into an agreement though a special purpose entity named EFOGC – East Pearsall, L.L.C. (“EFEP”), a Texas limited liability company. ECCE owns 100% of the Class B Membership Interests in EFEP. EFEP completed the acquisition of 85% Working Interest in 3,683 acres in Frio County, Texas from Amac Energy, L.L.C. to develop the Austin Chalk, Buda, Eagle Ford and Pearsall Shale reservoirs. ECCE is attempting to raise funds in order to develop this field. The total investment to date in this field totals $6,484,307. At the date of this filing, ECCE has returned the leased property to AMAC and is negotiating the closing of the East Pearsall subsidiary with MOC.

The Company also plans to acquire additional leases and other oil and gas properties or interests in the Texas-Louisiana Gulf Coast region and in the Eagle Ford producing zones in Texas. ECCE is also attempting to explore the possibility of a merger with other Energy firms.

Personnel

ECCE agreed to set up a compensation for Michael Munsey for his services as a technical advisor in examining and selecting potential and existing oil and gas properties. The Board of Directors agreed to grant 425,000 shares of restricted stock to Michael Munsey, which is to be issued in four equal amounts at the end of every nine months. The first installment of 106,250 shares was issued on August 15, 2014. Mr. Munsey also agreed to accept the position of Vice-President of Operations and Exploration.

RESULTS OF OPERATIONS

We have incurred recurring losses to date. Over the next twelve months, our strategy is to grow our asset base by investing in oil and gas drilling and production in the Texas-Louisiana Gulf Coast region. Although we do not currently operate any of our wells, we desire to acquire operated as well as non-operated properties that meet or exceed our rate of return criteria. For acquisitions of properties with additional development, exploitation and exploration potential, our focus has been on acquiring operated properties so that we can better control the timing and implementation of capital spending. We will sell properties when management is of the opinion that the sale price realized will provide an above average rate of return for the property or when the property no longer matches the profile of properties we desire to own.

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The execution of our growth strategy is dependent on a number of factors including oil and gas prices, the availability of oil and gas properties that meet our economic criteria and the availability of funds on terms that are acceptable to us, if at all. There is no assurance that these factors will occur. We will require substantial additional capital to meet our current obligations and long term operating requirements and acquisition objectives.

Nine months Ended September 30, 2014 Compared to Nine months Ended September 30, 2013

For the nine months ended September 30, 2014, Eagle Ford recognized revenue of $2,874, a decrease of $937 compared to revenue of $3,811 during the nine months ended September 30, 2013. The decrease in revenues for the nine months ended September 30, 2014 is primarily due to the net decreased production from the Live Oak County Wells, despite an increase in price received per mcf. During the nine months ended September 30, 2014, we sold no barrels of oil and 800 Mcf of natural gas at an average price of $4.02 per Mcf. During the nine months ended September 30, 2013, we sold no oil and approximately 1,186 mcf of natural gas at an average price of $3.99 per Mcf.

For the nine months ended September 30, 2014, we incurred operating expenses of $7,110,197, an increase of $6,311,242 compared to $798,555 for the nine months ended September 30, 2013. The increase was due to lower the impairment of the East Pearsall property which was partially offset by lower administrative costs.

Other expenses decreased by $24,029 in total, to $670,220 from $694,249 for the nine months ended September 30, 2014 and 2013, respectively. The decrease in other expenses is due to a gain on change in derivative value and on the warrant derivative expiration. Interest expense increased by $41,451 to $$784.597 on September 30, 2014, up from $743,146 on September 30, 2013.

Our net loss for the nine months ended September 30, 2014 was $7,777,543, an increased loss of $6,288,150 compared to a net loss of $1,489,393 for the nine months ended September 30, 2013, due to the reasons noted above, primarily due to the impairment charge on the East Pearsall property. 

Three months Ended September 30, 2014 Compared to Three months Ended September 30, 2013

For the three months ended September 30, 2014, Eagle Ford recognized revenue of $1,158, an increase of $269 compared to revenue of $889 during the three months ended September 30, 2013. The decrease in revenues for the three months ended September 30, 2014 is primarily due to the minor increased production from the Live Oak County Wells along with an increase in the price received per mcf. During the three months ended September 30, 2014, we sold no barrels of oil and 302 Mcf of natural gas at an average price of $3.64 per Mcf. During the three months ended September 30, 2013, we sold no oil and approximately 401 mcf of natural gas at an average price of $3.24 per Mcf.

For the three months ended September 30, 2014, we incurred operating expenses of $6,672,695, an increase of $6,459,626 compared to $213,069 for the three months ended September 30, 2013. Administrative costs decreased by $23,263 due to lower legal and technical items. The impairment charge of $6,484,343 was the primary reason for the increase in operating expenses.

Other expenses increased by $1,835 in total, to $224,227 from $223,392 for the three months ended September 30, 2014 and 2013, respectively. The decrease in other expenses is due to a change in derivative value calculation which were offset by a $38,449 increase in interest expense due to additional loans.

Our net loss for the three months ended September 30, 2014 was $6,895,764, an increase of $6,461,192 compared to a net loss of $434,572 for the three months ended September 30, 2013, due to the reasons noted above, primarily due to the impairment charge on the East Pearsall field, which were slightly offset by a decrease in administrative costs and the change in derivative valuations..

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LIQUIDITY AND CAPITAL RESOURCES

Nine Month Period Ended September 30, 2014

At September 30, 2014, our current assets were $84,912 and our current liabilities were $14,778,979, which resulted in a working capital deficiency of $14,694,067. At September 30, 2014, our total liabilities were $14,803,781 consisting of: (i) $1,192,294 in accounts payable - trade; (ii) $2,963,592 in accrued expenses; (iii) $243,381 in accrued interest – related party; (iv) $8,742,709 in notes payable to third parties, short term; (v) $981,155 in short-term debt – related parties; (vi) $611,000 in convertible debt; (vii) $44,848 in derivative liabilities for notes; and (ix) $24,802 in asset retirement obligations.

Stockholders’ deficit increased from $7,102,987 at December 31, 2013 to a deficit of $14,579,280 as of September 30, 2014. This deficit was increased by the loss from operations for the first nine months of 2014.

Cash Flows

Cash Flows from Operating Activities

Cash used in operations equaled $344,977 during the nine months ended September 30, 2014, compared to net cash used in operations of $487,364 during the prior year period, which was a decrease in cash used in operations of $142,387, primarily due to lower cash paid out for administrative expenses.

Cash Flows from Investing Activities

The Company used net cash for investing activities of $19,871 during the nine months ended September 30, 2014, compared to net cash used in investing activities of $0 during the prior year period. The $19,871 represented the cost of a site survey on the East Pearsall property.

Cash Flows from Financing Activities

The Company received cash from financing activities of $363,655 during the nine months ended September 30, 2014, compared to net cash received from financing activities of $229,000 during the prior year period, which was an increase from financing activities of $134,655.

Our Existence and Success Depend upon Future Financings/Going Concern Issues

The independent auditor’s report on our December 31, 2013 financial statements states that our recurring losses raise substantial doubts about our ability to continue as a going concern.

At September 30, 2014, we had a working capital deficit of $14,694,067. We will need to raise additional capital during 2014 to fund general corporate working capital needs, which includes principal and accrued interest on current and past due notes payable and convertible bonds totaling $13,350,338. We will also need to raise funds to purchase additional property.

We anticipate that additional financings and loans will be required to sustain operations in the future. There can be no assurance that the Company will be successful in raising the required capital. Management is exploring various avenues to obtain such funding to develop our properties and pay existing debt including the issuance of new debt, issuance of securities, sales of properties and joint ventures. The Company also intends to continue to negotiate with holders of its current debt to convert such debt into equity or otherwise restructure such debt.

As we have no debt or equity funding commitments, we will need to rely upon best efforts financings. The Company is conducting ongoing discussions with potential lenders, investors and merger partners and acquisition candidates. There can be no assurance that the Company will be successful in raising the required capital in the private placement or from any other source.

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The failure to raise sufficient capital through future debt or equity financings or otherwise may cause the Company to curtail operations, sell assets, or result in the failure of our business. We anticipate that our working capital requirements will continue to be funded through a combination of our future revenues, existing funds, loans and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business. We anticipate that additional financings and loans will be required to sustain operations in the future. In addition, we anticipate that for the foreseeable future such financings are likely to rely heavily on the issuance of equity. There can be no assurances that such equity issuances will be at dilution levels that will be highly dilutive to existing holders or our common stock or other stakeholders.

On August 4, 2014, the Board of Directors instructed ECCE Management to undertake a program to offer to settle open notes payable and other payables at a discounted rate. The Chairman of the Board agreed to fund such discounted obligations in 60 days, upon the successful renegotiation of a significant and material amount of such debt.

There can be no assurance that we will be successful in raising the required capital. The failure to raise sufficient capital through future debt or equity financings or otherwise will cause the Company to curtail operations, sell assets, or result in the failure of our business. ECCE will also attempt to seek merger partners for any possible future endeavors.

PURCHASE OF SIGNIFICANT EQUIPMENT

We do not intend to purchase any significant equipment during the next twelve months, outside of any items related to the drilling or completion of any future acquisitions.

OFF-BALANCE SHEET ARRANGEMENTS

As of September 30, 2014, 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 are material to investors

Critical accounting policies

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition and accounts receivable allowances. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 1 to our audited consolidated financial statements for 2013 appearing in our Annual Report on Form 10-K for the year ended December 31, 2013.

Recent accounting pronouncements

The recent accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our unaudited condensed consolidated financial statements upon adoption.

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PART II—OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On January 14, 2014, ECCE sold 183,488 shares of common stock to several individuals for $0.1635 per share.

On March 12, 2014, ECCE sold 1,735,310 shares of common stock to several individual for $0.144 per share.

On August 15, 2014, ECCE issued 106,250 shares of restricted common stock to an employee as part of a compensation package for $0.20 per share.

The shares were exempt from registration under Section 4(2) of the Securities Act of 1933 because they were issued in a privately negotiated transaction with persons with whom we had prior material business relations and were restricted from resale or other applicable exemptions from registration.

Item 6. Exhibits.

Exhibit Number	Description
31.1	Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certifications pursuant to Securities Exchange Act of 1934 Rule 13a-14(b) or 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	EAGLE FORD OIL & GAS CORP.
Date: November 19, 2014	By:	/s Paul L. Williams Jr.
		Paul L. Williams Jr.
		Title: Chief Executive Officer
Date: November 19, 2014	By:	/s/ N. Wilson Thomas
		N. Wilson Thomas
		Title: Chief Financial Officer

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