UNITED STATES SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OF 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to _________
Platina Energy Group Inc.
____________________________________________________________
(Name of Small Business Issuer in its charter)
Delaware
____________________________________________________________
(State or other jurisdiction of incorporation or organization)
84-1080043IRS
____________________________________________________________
(Employer Identification No.)
200 W. 17th Street, Suite 240
Cheyenne, Wyoming 82001
____________________________________________________________
(Address of principal executive offices)
(307) 637-3900
____________________________________________________________
(Issuer's telephone number)
____________________________________________________________
(Former name, former address, and former fiscal year, if changed since last
report)
Indicate by check mark whether the Issuer (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date:
Common Stock, $.001 Par Value, 17,629,731 shares as of February 10, 2006.
(1)
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Platina Energy Group INC.
(Formerly Federal Security Protection Services, Inc.)
TABLE OF CONTENTS
Page PART I--FINANCIAL INFORMATION
Item 1. Financial Statements------------------------------------------ 3
Consolidated Balance Sheet--------------------------------------------- 3
Consolidated Statement of Operations----------------------------------- 5
Consolidated Statements of Cash Flows---------------------------------- 7
Notes to Financial Statements------------------------------------------ 9
Item 2. Management's Discussion and Analysis or Plan of Operation----- 17
Item 3. Controls and Procedures---------------------------------------- 19
PART II OTHER INFORMATION--------------------------------------------- 19
Item 1. Legal Proceedings------------------------------------------ 19
Item 2. Unregistered Sales of Equity Securities & Use of Proceeds-- 20
Item 3. Defaults Upon Senior Securities---------------------------- 20
Item 4. Submission of Matters to a Vote of Security Holders-------- 20
Item 5. Other Information------------------------------------------ 20
Item 6. Exhibits and Reports--------------------------------------- 20
Signatures------------------------------------------------------------- 21
(2)
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PART I--FINANCIAL INFORMATION
Item 1. Financial Statements.
PLATINA ENERGY GROUP INC.
CONSOLIDATED BALANCE SHEETS
December 31
-----------
2005
(Unaudited)
Assets
Current Assets
Cash and cash equivalents $ 5,116
_______
Total Current Assets 5,116
Property and equipment
Equipment 56,764
Accumulated depreciation (5,335)
_______
Property and equipment, net 51,429
Other assets
Deposits 1,312
Intangible assets not subject to amortization
Licensing rights 640,000
_______
Total other assets 641,312
Total assets $ 697,857
- Unaudited -
See accompanying notes to financial statements
(3)
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PLATINA ENERGY GROUP INC.
CONSOLIDATED BALANCE SHEETS - Continued
December 31
-----------
2005
(Unaudited)
Liabilities and Stockholders' deficit
Current liabilities
Accounts payable $ 98,399
Accrued expenses 21,354
Accrued compensation 257,000
Accrued interest - licensing note 9,453
Due to Related Parties 202,782
Notes payable - other 153,928
_______
Total current liabilities 742,916
Long-Term Debt
Note payable - licensing rights 214,963
Commitments and Contingencies
Stockholders' equity (deficit)
Convertible Preferred stock, par value of $.001,
20,000,000 shares authorized;
70,000 shares designated as Series A, with no
shares issued and outstanding at December 31,
2005. 0
100,000 shares designated as Series B with
20,000 shares issued and outstanding at December
31, 2005. Aggregate liquidation preference of
$2,000,000 at December 31, 2005. 20
10,000 shares designated as Series C with no
shares outstanding at December 31, 2005. 0
Common stock, par value $.001, 100,000,000 shares
authorized, 17,629,731 issued and outstanding at
December 31,2005.
Paid in capital 17,630
Additional Paid in capital 6,143,446
Accumulated deficit (6,421,118)
___________
Total shareholders' deficit (260,022)
Total liabilities and shareholders' deficit $ 697,857
- Unaudited -
See accompanying notes to financial statements
(4)
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PLATINA ENERGY GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended Nine Months Ended
December 31, December 31,
2004 2005
----------- -----------
(Unaudited) (Unaudited)
Revenues $ - $ 4,900
Operating Expenses
Testing costs associated with Thermal Pump - 109,242
General and administrative expenses 142,551 402,104
------- -------
Total operating expenses 142,551 511,346
Loss from Operations (142,551) (506,446)
Other Income (Expense)
Interest expense $ (16,404) $ (33,430)
Net Income (Loss) $ (158,955) $ (539,876)
--------- ---------
Basic and dilutive income (loss) per share $ (.019) $ (.033)
--------- ---------
Weighted average shares outstanding 8,485,756 16,529,822
- Unaudited -
See accompanying notes to financial statements
(5)
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PLATINA ENERGY GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Three Months Ended
December 31, December 31,
2004 2005
----------- -----------
(Unaudited) (Unaudited)
Revenues $ - $ -
Operating Expenses
General and administrative expenses 31,086 53,434
------- -------
Total operating expenses 31,086 53,434
Loss from Operations (31,086) (53,434)
Other Income (Expense)
Interest expense $ (5,587) $ (11,689)
Net Income (Loss) $ (36,673) $ (65,123)
--------- ---------
Basic and dilutive income (loss) per share $ (.004) $ (.004)
--------- ---------
Weighted average shares outstanding 8,506,733 17,629,731
See accompanying notes to financial statements
(6)
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PLATINA ENERGY GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended Nine Months Ended
December 31, December 31,
2004 2005
----------- -----------
(Unaudited) (Unaudited) June 30 June 30
Cash Flows from Operating Activities
Net Income (Loss) $ (158,955) $ (539,876)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 248 5,335
Common stock issued for services 132,000 22,000
Changes in operating assets and
liabilities
Deposits - (1,312)
Increase (decrease) in liabilities
Accounts payable (3,904) 90,598
Accrued expenses 15,888 21,354
Accrued compensation to related parties 89,000
Accrued interest on licensing note - 9,453
Accrued interest on short-term borrowings - 23,850
-------- --------
Net cash provided by (used in) operating activities (14,722) (279,598)
-------- --------
Cash Flows from Investing Activities
Cash advance for licensing purchase - (10,000)
Purchase of equipment - (56,764)
-------- ---------
Net cash provided by (used in) investing activities - (66,764)
-------- ---------
Cash Flows from Financing Activities
Proceeds from sale of common stock - 255,000
Offering costs - (21,450)
Advances from related parties 7,500 155,851
Repayment of related party advances - (62,000)
Net cash provided by (used in) financing activities 7,500 327,401
Net Decrease in Cash and Cash Equivalents (7,222) (18,961)
Cash, Beginning of Period 8,011 24,077
Cash, End of Period $ 789 $ 5,116
See accompanying notes to financial statements
(7)
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PLATINA ENERGY GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
Nine Months Ended Nine Months Ended
December 31, December 31,
2004 2005
----------- -----------
(Unaudited) (Unaudited)
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest $ - $ -
Income Taxes $ - $ -
Non-Cash investing and financing activity:
On April 6, 2005, the Company completed its purchase of rights and licenses
from Permian Energy Group LP in connection with the marketing of a certain
pump in the oil and gas industry. In consideration for the assets purchased,
the Company agreed to issue 2,250,000 shares of its common stock and pay
$250,000 evidenced by a promissory note. The Company valued the intangible
assets purchased at $640,000, which consists of $250,000 plus the value of
the 2,250,000 shares issued at May 19, 2005 and the 750,000 shares issued to
the consultant as discussed below.
On May 4, 2005, the Company issued a consultant 750,000 in connection with
the above-indicated asset purchase. The shares were valued at $187,500,
which was included in the value assigned to the intangible assets purchased.
On May 30, 2005, a note holder converted $10,070 of indebtedness due him by
the Company into 53,000 shares of the Company's common stock.
On June 23, 2005, a preferred stockholder converted 10,000 shares of Series
A preferred stock into 100,000 shares of the Company's common stock.
On June 23, 2005, a preferred stockholder converted 3,800 shares of Series C
preferred stock into 380,000 shares of the Company's common stock.
See accompanying notes to financial statements
(8)
<page>
PLATINA ENERGY GROUP, INC.
(Formerly Federal Security Protection Services, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Basis of Presentation and Organization
Organization and business
Platina Energy Group, Inc. ("the Company"), a Delaware Corporation,
was incorporated on January 19, 1988 as Windom, Inc. After several
failed business attempts, the Company changed its name to Federal
Security Protection Services, Inc. on March 12, 2002 and acquired
Iris Broadband, Inc. on September 6, 2002. The Company reversed its
merger with Iris Broadband, Inc. in 2003 and, as a result, discontinued
business operations. On June 15, 2005, the Company changed its name to
Platina Energy Group Inc.
On March 30, 2005, the Company formed Permian Energy Incorporated, a
Nevada Corporation and acquired all of its outstanding common stock. On
April 6, 2005, the Company completed its purchase of rights and licenses
from Permian Energy Services LP in connection with the marketing of a
certain proprietary thermal pulsing pump in the oil and gas industry. The
assets acquired from the LP was transferred into Permian Energy
International.
Basis of Presentation
The Company's financial statements are prepared using the accrual method
of accounting in accordance with accounting principles generally accepted in
the United States of America and have been prepared on a going concern
basis, which contemplates the realization of assets and the settlement of
liabilities in the normal course of business. The Company has sustained
operating losses since its inception (January 19, 1988). In addition, the
Company has used substantial amounts of working capital in its operations.
At December 31, 2005, current liabilities exceeded current assets by
approximately $738,000, and the Company has a net deficit since its inception
amounting to approximately $6,420,000.
In view of these matters, the continuation of the Company's operations is
dependent on funds advanced by its management and the raising of capital
through the sale of its equity instruments or issuance of debentures.
Management has entered into an agreement to purchase certain rights
and licenses from Permian Energy Services LP in connection with the
marketing of a proprietary thermal pulsing pump in the oil and gas
industry. Although Management believes the marketing of the pump will
be successful and should generate sufficient revenue to fund the
Company's future operations, no assurances can be made that the marketing
of the pump will be successful or that the Company will be able to raise
capital through other sources enabling it to continue funding operations.
These financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets or liabilities that
might be necessary should the Company be unable to continue as a going
concern.
NOTE 2. Summary of Significant Accounting Policies
Interim Financial Statements
The unaudited financial statements have been prepared by the Company, pursuant
to the rules and regulations of the Securities and Exchange Commission. The
information furnished herein reflects all adjustments which are, in the
opinion of management, necessary to fairly present the operating results of
the respective periods presented. Certain information and footnote
disclosures normally present in the annual financial statements prepared in
accordance with U.S. generally accepted accounting principles have been
omitted pursuant to such rules and regulations. These financial statements
should be read in conjunction with the audited financial statements and
footnotes for the year ended March 31, 2005 included in the Company's
Annual Report on Form 10-KSB. The results for the three months and nine
months ended December 31, 2005 are not necessarily indicative of the results
to be expected for the full year ending March 31, 2006.
(9)
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Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Platina Energy Group Inc. and its wholly owned subsidiary, Permian Energy
Incorporated Inc. Intercompany transactions and balances have been eliminated
in consolidation.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Accordingly, actual results could differ from those
estimates.
Cash Equivalents
For purposes of the statements of cash flows, the Company considers cash
equivalents to include highly liquid investments with original maturities
of three months or less.
Property and equipment
Property and equipment are stated at cost. Major renewals and improvements
are charged to the asset accounts while replacements, maintenance, and
repairs that do not improve or extend the lives of the respective assets are
expensed. At the time property and equipment are retired or otherwise
disposed of, the asset and related accumulated depreciation accounts are
relieved of the applicable amounts. Gains or losses from retirements or
sales are credited or charged to income.
Equipment consisted of the Company's thermal pump (which was acquired in 2005)
and computer and phone equipment, which were depreciated over their estimated
useful lives using the straight-line method. Depreciation expense for the
nine months ended September 30, 2005 and 2004 amounted to $5,355 and $248,
respectively.
Long-Lived Assets
The Company accounts for its long-lived assets in accordance with SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets."
SFAS No. 144 requires that long-lived assets be reviewed for impairment
whenever events or changes in circumstances indicate that the historical
cost carrying value of an asset may no longer be appropriate. The Company
assesses recoverability of the carrying value of an asset by estimating the
future net cash flows expected to result from the asset, including eventual
disposition. If the future net cash flows are less than the carrying value
of the asset, an impairment loss is recorded equal to the difference between
the asset's carrying value and fair value or disposable value. As of December
31, 2005, the Company did not deem any of its long-term assets to be impaired.
Income taxes
The Company accounts for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes." Under SFAS No. 109, deferred tax assets and
liabilities are recognized for future tax benefits or consequences
attributable to temporary differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. A valuation allowance
is provided for significant deferred tax assets when it is more likely than
not that such assets will not be realized through future operations.
The Company has total net operating loss carryforwards at December 31, 2005
of approximately $6,420,000 for federal income tax purposes. These net
operating losses have generated a deferred tax asset of approximately
$2,066,000 on which a valuation allowance equaling the total tax benefit
has been provided due to the uncertain nature of it being realized. Net
operating loss carryforwards expire in various years through March 31,
2025 for federal tax purposes.
(10)
<page>
Net Loss per Share
The Company adopted the provisions of SFAS No. 128, "Earnings Per Share"
("EPS"). SFAS No. 128 provides for the calculation of basic and diluted
earnings per share. Basic EPS includes no dilution and is computed by
dividing income or loss available to common shareholders by the weighted
average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution of securities that could share in the
earnings or losses of the entity. For the three months and nine months
ended December 31, 2005 and 2004, basic and diluted loss per share are the
same, since the calculation of diluted per share amounts would result in
an anti-dilutive calculation that is not permitted and therefore not
included. If such shares were included in diluted EPS, they would have
resulted in weighted-average common shares of 24,304,731 and 14,700,263 for
the three-months ended December 31, 2005 and 2004, respectively and 23,393,913
and 14,700,237 for the nine months ended December 31, 2005 and 2004,
respectively.
Fair Value of Financial Instruments
The Company's financial instruments consist of cash and cash equivalents,
accounts payable, accrued expenses, and notes payable. Pursuant to SFAS
No. 107, "Disclosures About Fair Value of Financial Instruments," the
Company is required to estimate the fair value of all financial instruments
at the balance sheet date. The Company considers the carrying values of
its financial instruments in the financial statements to approximate their
fair values.
Recent Accounting Pronouncements
In May 2005, the FASB issued FASB Statement 154, Accounting Changes and
Error Corrections. This Statement replaces APB Opinion No. 20, Accounting
Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim
Financial Statements, and changes the requirements for the accounting for
and reporting of a change in accounting principle. Opinion 20 previously
required that most voluntary changes in accounting principle be recognized
by including in net income of the period of the change the cumulative effect
of changing to the new accounting principle. This Statement requires
retrospective application to prior periods' financial statements of changes
in accounting principle, unless it is impracticable to determine either the
period-specific effects or the cumulative effect of the change. The
provisions in Statement 154 are effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15,
2005. The Company plans on adopting this statement on January 1, 2006,
and does not believe that it will have a significant impact on its
operations.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Non-Monetary
Assets, an amendment of APB Opinion 29, Accounting for Non-Monetary
Transactions." The amendments made by SFAS No. 153 are based on the principle
that exchanges of non-monetary assets should be measured based on the fair
value of the assets exchanged. Further, the amendments eliminate the narrow
exception for non-monetary exchanges of similar productive assets and replace
it with a broader exception for exchanges of non-monetary assets that do not
have "commercial substance." The provisions in SFAS No. 153 are effective
for non-monetary asset exchanges occurring in fiscal periods beginning after
June 15, 2005. Early application is permitted and companies must apply the
standard prospectively. The Company adopted this statement on January 1,
2005. The adoption of the statement did result in a significant change in
the current manner in which the Company accounts for its exchanges of non-
monetary assets.
(11)
<page>
The FASB has issued SFAS No. 123R, "Share-Based Payment." The new rule
requires that the compensation cost relating to share-based payment
transactions be recognized in the financial statements. That cost will
be measured based on the fair value of the equity or liability instruments
issued. This statement precludes the recognition of compensation expense
under APB Opinion No. 25's intrinsic value method. Public entities will
be required to apply Statement 123R in the first annual reporting period
that begins after June 15, 2005. Since the Company has been accounting for
its share-based compensation under SFAS No. 123, management believes SFAS
No. 123R should not have a significant impact on the way it accounts for its
stock-based compensation.
NOTE 3. Acquisition of Licensing Rights
On April 6, 2005, the Company completed its purchase of rights and licenses
from Permian Energy Services LP in connection with the marketing of a
certain pump in the oil and gas industry. In consideration for the assets
purchased, the Company agreed to issue 2,250,000 shares of its common stock
and pay $250,000 as evidenced by a promissory note with interest accruing at
an annual rate of 6%. Under the terms of the note, accrued interest is due
one year from the date of the note and all principal and additional accrued
interest is due two years from the date of the note. The Company valued the
intangible assets purchased at $640,000, which consists of the $250,000
obligation plus the fair value of the 2,250,000 shares issued the members of
the LP and the 750,000 shares issued to a consultant in connection with the
acquisition. The Company valued the shares issued as of April 6, 2005.
NOTE 4. Notes payable - other
The Company owed five individuals a total of $153,928 as of December 31,
2005, including accrued interest of $16,250. The loans are assessed
interest at an annual rate of 12% and are evidenced by five separate
promissory notes. Interest charged to operations on these obligations
during the nine months ended December 31, 2005 and 2004 totaled $13,911
and $12,312, respectively.
Under the terms of the modified loan agreements, until the loans and
accrued interest are paid in full, each holder has the right to convert
the obligation due them, including accrued interest, into shares of the
Company's common stock at a price per share equal to the average of the
bid price of the Company's common stock for the thirty day trading period
prior to the written notice of conversion. In May 2005, a note holder
converted $10,070 of indebtedness due him by the Company into 53,000 shares
of the Company's common stock.
(12)
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NOTE 5. Long-Term Debt
As discussed in Note 3, the Company completed its purchase of rights and
licenses from Permian on April 6, 2005. In consideration for the assets
purchased, the Company agreed to pay $250,000 evidenced by a promissory
note with interest accruing at an annual rate 6%. Under the terms of the
note, accrued interest is due one year from the date of the note and all
principal and additional accrued interest is due two years from the date
of the note. In March and April 2005, the Company made advances totaling
$35,000 to the LP prior to the asset acquisition. The Company credited the
advances made to the LP including accrued interest totaling $35,037 against
the $250,000 obligation due, thereby leaving a principal balance due on the
obligation at December 31, 2005 of $214,963. The accrued interest due
within one year is $9,453 and is reflected as a current liability.
The minimum future principal payments on long-term debt are as follows:
Year ending December 31,
2006 $ --
2007 $ 214,963
__________
Total $ 214,963
NOTE 6. Shareholders' Deficit
2005
Preferred Stock
On June 23, 2005, a preferred stockholder converted 10,000 shares of Series A
preferred stock into 100,000 shares of the Company's common stock.
On June 23, 2005, a preferred stockholder converted 3,800 shares of Series C
preferred stock into 380,000 shares of the Company's common stock.
Common Stock
On April 6, 2005, the Company issued 2,250,000 shares of its common stock in
connection with the acquisition of certain intangible assets from Permian
Energy Services, LP (see Note 3).
On May 5, 2005, the Company issued a consultant 750,000 shares of its common
stock in connection with the above-indicated asset purchase. The shares were
valued at $187,500, which was included in the value assigned to the intangible
assets purchased.
In May 2005, the Company issued 200,000 units through its private offering
for $40,000. Each unit consists of one share of the Company's common stock, a
warrant to purchase one share of common stock at $.50 per share and a warrant
to purchase one share of common stock at $1.00. The warrants expire two years
from date of issuance.
In May 2005, the Company issued 50,000 shares to consultants for services
rendered. The shares were valued at $10,000.
On May 25, 2005 the Company issued 60,000 shares for public relations
services. The shares were valued at $12,000.
In May 2005, the Company issued 53,000 shares of its common stock to a
creditor in exchange for the cancellation of $10,070 of indebtedness due
him.
(13)
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In June 2005, the Company issued 100,000 units through its private offering
for $20,000. Each unit consists of one share of the Company's common stock, a
warrant to purchase one share of common stock at $.50 per share and a warrant
to purchase one share of common stock at $1.00. The warrants expire two years
from date of issuance.
On June 23, 2005, a preferred stockholder converted 10,000 shares of Series
A preferred stock into 100,000 shares of the Company's common stock.
On June 23, 2005, a preferred stockholder converted 3,800 shares of Series C
preferred stock into 380,000 shares of the Company's common stock.
In June 2005, the Company issued 500,000 units through its private offering
for $100,000. Each unit consists of one share of the Company's common stock,
a warrant to purchase one share of common stock at $.50 per share and a
warrant to purchase one share of common stock at $1.00. The warrants expire
two years from date of issuance.
In July 2005, the Company issued 150,000 units through its private offering
for $30,000. Each unit consists of one share of the Company's common stock,
a warrant to purchase one share of common stock at $.50 per share and a
warrant to purchase one share of common stock at $1.00. The warrants expire
two years from date of issuance.
In August 2005, the Company issued 325,000 units through its private offering
for $65,000. Each unit consists of one share of the Company's common stock,
a warrant to purchase one share of common stock at $.50 per share and a
warrant to purchase one share of common stock at $1.00. The warrants expire
two years from date of issuance.
2004
Preferred Stock
On December 31, 2004, 50,000 shares of Series A preferred stock were
converted to 500,000 shares of common stock.
Issuance of Common Stock
On August 1, 2003, the Company cancelled $76,500 of accrued compensation
due its officers and former officers of Iris Broadband in exchange for the
issuance of 1,700,000 shares of its common stock.
In January 21, 2004, the Company issued 500,000 shares of its common stock
in exchange for $25,000.
On December 30, 2004, the Company issued 2,400,000 shares to corporate
officers in exchange for the cancellation of $144,000 of accrued compensation
due them.
On December 31, 2004, 50,000 shares of Series A preferred stock were converted
to 500,000 shares of common stock.
Stock Warrants
At March 31, 2005, there were total warrants outstanding to purchase 350,000
shares of common stock at $0.50, and 350,000 shares of common stock at $1.00.
In May 2005, the Company issued warrants to purchase 200,000 shares of the
Company's common stock at a price of $0.50 per share and to purchase 200,000
shares of common stock at $1.00. The warrants were issued in connection with
the Company's private offerings and expire two years from date of issuance.
In June 2005, the Company issued warrants to purchase 100,000 shares of the
Company's common stock at a price of $0.50 per share and to purchase 100,000
shares of common stock at $1.00. The warrants were issued in connection with
the Company's private offerings and expire two years from date of issuance.
In June 2005, the Company issued warrants to purchase 500,000 shares of the
Company's common stock at a price of $0.50 per share and to purchase 500,000
shares of common stock at $1.00. The warrants were issued in connection with
the Company's private offerings and expire two years from date of issuance.
In July and August 2005, the Company issued warrants to purchase 475,000
shares of the Company's common stock at a price of $0.50 per share and to
purchase 475,000 shares of common stock at $1.00. The warrants were issued
in connection with the Company's private offerings and expire two years from
date of issuance.
At December 31, 2005, there were total warrants outstanding to purchase
1,625,000 shares of common stock at $0.50, and 1,625,000 shares of common
stock at $1.00.
(14)
<page>
Employee Stock Option Plan
On March 25, 2005, the Company established a stock option plan for officers,
directors, employees and consultants. Under the plan, certain options
issued will constitute "Incentive Stock Options" within the meaning of section
422A of the Internal Revenue Code, and other options issued will be deemed
nonstatutory. The Company's Board of Directors is responsible for the plan
and the granting of the options. The number of common shares reserved to
be issued through the plan is 3,000,000. Options are exercisable for as period
up to ten years from the date of grant. The Company's Board of Directors
decides the actual term of each option. Options granted to employees are
subject to a vesting schedule based upon the number of years of continuous
service that the employee has with the Company from the grant date of the
respective option. After three years of continuous service from the date of
grant, the respective options held by an employee are fully vested. The
price for shares issued through the exercise of incentive stock options are
at fair market value for all employees with the exception of employees who
are significant shareholders, who will pay no less than 110% of market value.
The price for shares issued through the exercise of nonstatutory options
shall be decided by the Company's Board, but at a price no less than 100% of
the shares market value at date of grant.
As of December 31, 2005, the Company had outstanding stock options granted to
its management to purchase 3,525,000 shares of the Company's common stock at a
price of $.15 per share. The options expire in April 2007.
Option activity for the three-months ended December 31, 2005 is as follows:
Options
Outstanding
Balance - Sept. 30, 2005 6,225,000
Options cancelled (2,700,000)
Balance - Dec. 31, 2005 3,525,000
NOTE 7. Related Parties
Short-Term Borrowings
As of December 31, 2005, the Company owed its President $153,142 under
various loan obligations, including accrued interest of $4,334. The
loans are assessed interest at an annual rate of 12% and are evidenced by
a promissory note. Interest charged to operations for the nine months
ended December 31, 2005 and 2004 on these loans totaled $10,066 and $8,235,
respectively. In addition, under the terms of the loans, until the
principal loans balance and accrued interest are paid in full, the President
has the right to convert the obligation due him, including accrued interest,
into shares of the Company's common stock at a price per share equal to the
average of the bid price of the Company's common stock for the thirty day
trading period prior to the written notice of conversion.
As of December 31, 2005, the Company owed its President $25,250 under a
separate obligation, including accrued interest of $250, evidenced by an
unsecured promissory note dated August 31, 2005. The loan accrues interest
at an annual rate of 12% and all principal and accrued interest is payable
in full on or before November 29, 2005. Under the terms of the loans, the
interest rate on the note may be increased to 18% in the event of default.
During the nine months ended December 31, 2005, the Company's President
advanced it a total of $137,461 and received repayments of advances totaling
$62,000.
During the nine months ended December 31, 2005, a company wholly-owned by
the Company's President advanced it a total of $24,390 towards the purchase
of equipment.
(15)
<page>
Stock Options
The Company had granted stock options to related parties to purchase shares
of the Company common stock. As of December 31, 2005, the 3,525,000 stock
options outstanding were all issued to related parties.
Noncash transactions
For the nine months ended December 31, 2005 and 2004, the Company accrued
$94,534 and $132,000, respectively, for compensation due its officers for
services.
Acquisition of Intangible Assets from Permian Energy Services LP
The Company's President is a sole shareholder of a corporation which is a
member of Permian Energy Services LP.
NOTE 8. Commitments and Contingencies
Operating Leases
The Company leases office space for its Cheyenne office on a one-year lease at
a rate of $1,312 per month. The Company lease pertaining to its Denver
office expired in September 2005 and was not renewed. Rent expense for
nine months ended December 31, 2005 was $16,403. Future minimum lease
payments on these agreements are as follows:
Twelve Months ending December 31, 2006 $9,184
On March 29, 2005, the Company entered into a consulting agreement for
services to be provided in connection with the Company's shareholder and
broker relations program. Under the terms of the agreement, the Company pays
the consultant a monthly fee consisting of $1,500 and 20,000 shares of its
common stock. The agreement is cancelable by either party for any reason on
sixty days notice. During the nine months ended December 31, 2005, the
Company paid $4,500 and issued 60,000 shares, valued at $12,000, in
exchange for services provided under the consulting agreement. This
agreement was cancelled in June 2005 and the Company has no further
obligations relating thereto.
Legal
In connection with the asset acquisition of the rights and licenses to
marketing a certain proprietary thermal pulsing pump for utilization in the
oil and gas industry from Permian Energy Services LP ("LP"), the Company
appointed the managing member of the LP as Permian Energy International's
President and CEO. In August 2005, Permian Energy International's President
resigned his position as President and Director. At the time of resignation,
the President was in possession of Company equipment, but returned it to the
Company in August 2005. On August 15, 2005, the Company and its subsidiary,
Permian Energy International, Inc., (the "Plaintiffs") filed an action in
the District Court for the City and County of Denver, State of Colorado as
plaintiffs versus Permian Energy Services, L.P. and Robert Clark (the
"Defendants') as the defendants. The parties to the lawsuit have executed
a mutual release and settlement agreement on February 6, 2006 to settle all
matters set forth in the lawsuit with finalization of the settlement due
February 21, 2006.
NOTE 9. Reclassification
Certain reclassifications have been made to conform the December 31, 2004
amounts to the December 31, 2005 presentation for comparative purposes.
(16)
<page>
Item 2. Management's Discussion and Analysis or Plan of Operation
The following discussion of our results of operations and financial condition
should be read in conjunction with our consolidated financial statements
and related notes included elsewhere in this Form 10-QSB. Unless specified
otherwise as used herein, the terms "we", "us" or "our" refer to Platina
Energy Group Inc.
The following Management's Discussion and Analysis or Plan of Operation
contains certain forward-looking statements regarding future financial
condition and results of operations and the company's business operations.
We have based these statements on our expectations about future events.
The words "may," "intend," "will," "expect," "anticipate," "objective,"
"projection," "forecast," "position" or negatives of those terms or other
variations of them or comparable terminology are intended to identify
forward-looking statements. We have based these statements on our current
expectations about future events. Although we believe that our expectations
reflected in or suggested by our forward-looking statements are reasonable, we
cannot assure you that these expectations will be achieved. Our actual
results may differ materially from what we currently expect. Important
factors which could cause our actual results to differ materially from
the forward-looking statements include, without limitation: (1) general
economic and business conditions, (2) effect of future competition, and
(3) failure to raise needed capital.
OVERVIEW
Platina Energy Group Inc. ("the Company"), a Delaware Corporation, was
incorporated on January 19, 1988 as Windom, Inc. After several failed
business attempts, the Company changed its name to Federal Security
Protection Services, Inc. on March 12, 2002 and acquired Iris Broadband,
Inc. on September 6, 2002, allowing the Company to become a full-service
managed security services company and a secure Internet Protocol
("IP") network services provider. In 2003, the Company reversed its
merger with Iris Broadband, Inc. and, as a result, discontinued business
operations. On June 15, 2005, the Company changed its name to Platina
Energy Group Inc. after acquiring the rights and licenses to marketing
a certain proprietary thermal pulsing pump which will be utilized in
the oil and gas industry.
The Company's corporate headquarters is 200 W. 17th Street, Suite 240,
Cheyenne, Wyoming 82001 and its operating office is located at the same
address.
RESULTS OF OPERATIONS
Three Months Ended December 31, 2005 and 2004
There were no revenues for the three-months ended December 31, 2005 and for
the three-months ended December 31, 2004.
Operating expenses for the three-months ended December 31, 2005 totaled
$53,434, which included only general and administrative expenses. Included
in general and administrative expenses for the three months period
were accrued compensation to its officers totaling $18,000, salaries
and wages of $13,000, accounting and legal fees of $10,189, transportation
expenses of $2,250, office rent of $3,936,and other general and administrative
expenses totaling $6,059.
(17)
<page>
Operating expenses for the three-months ended December 31, 2004 totaled
$31,086, which primarily consisted of accrued compensation to its officers.
Interest charged to operations for the three-months ended December 31,
2005 and 2004 amounted to $11,689 and $5,587, respectively, all of which
was accrued with no interest payments actually made during the three-month
period.
Nine Months Ended December 31, 2005 and 2004
Revenues for the nine months ended December 31, 2005 totaled $4,900 as
compared to $0 for the Nine months ended December 31, 2004. The revenues
generated in 2005 were derived from the utilization of its thermal pump.
Operating expenses for the nine months ended December 31, 2005 totaled
$511,346, of which $109,242 pertains to costs incurred in testing and
evaluating the thermal pump. General and administrative expenses for
the nine months ended December 31, 2005 was $402,104, which consisted
of accrued compensation to its officers totaling $89,000, salaries
and wages of $59,082, consulting fees of $42,893, accounting fees of
$36,492, public relations expense of $14,484, legal fees of $33,593,
equipment rental of $18,551, transportation expenses of $9,341,
insurance expense of $7,799, supplies of $8,786, office rent of
$16,403, contract labor of $10,620, travel expenses of $8,839, and
other general and administrative expenses totaling $46,221.
Operating expenses for the nine months ended December 30, 2004 totaled
$142,551, which primarily consisted of accrued compensation to its officers
totaling $136,000, and other general and administrative expenses totaling
$10,551.
Interest charged to operations for the nine months ended December 31, 2005
and 2004 amounted to $33,430 and $16,404, respectively.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2005, the Company had current assets of $5,116, consisting
solely of cash and cash equivalents. The Company also had equipment with a
net book value of $51,429, deposits of $1,312 and licensing rights totaling
$640,000. Total assets at June 30, 2005 were $697,857.
As of December 31, 2005, the Company had current liabilities of $742,916 and
long-term debt of $214,963.
As of December 31, 2004, the Company had current assets of $789, consisting
solely of cash and cash equivalents. Total assets were $789.
As of December 31, 2004, the Company had current liabilities of $387,758 and
no long-term liabilities.
During the nine months ended December 31, 2005, the Company received a total
of $255,000 through the sale of 1,275,000 shares of the Company's common
stock and $155,851 in advances from its President and his wholly owned
corporation. During the same period, the Company paid $279,598 in its
operations, paid an advance of $10,000 for its licensing purchase, purchased
equipment totaling $56,764, paid $21,450 in costs associated with its private
offerings, received $155,851 in loans from related parties and made loan
repayments to related parties of $62,000.
During the nine-months ended December 31, 2004, the Company
received a total of $7,500 in advances from its president. Cash used in
operations for the nine-month period ended December 31, 2004 totaled
$14,722.
(18)
<page>
Item 3. Controls and Procedures
Within 90 days prior to the date of filing of this report, we carried out
an evaluation, under the supervision and with the participation of our
officers and directors, including our Chief Executive Officer and Chief
Financial Officer, of the design and operation of our disclosure controls
and procedures. Based on this evaluation, our Chief Executive Officer and
Chief Financial Officer have concluded that our disclosure controls and
procedures are effective for the gathering, analyzing and disclosing the
information we are required to disclose in the reports we file under the
Securities Exchange Act of 1934, within the time periods specified in the
SEC's rules and forms. There have been no significant changes in our internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of this evaluation.
Our management does not expect that our disclosure controls or internal
controls over financial reporting will prevent all errors or all instances of
fraud. A control system, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance that the control system's objectives
will be 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 our company
have been detected. These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur
because of simple error or mistake. Because of the inherent limitation of
a cost-effective control system, misstatements due to error or fraud may
occur and not be detected.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In connection with the asset acquisition of the rights and licenses to
marketing a certain proprietary thermal pulsing pump for utilization in
the oil and gas industry from Permian Energy Services LP ("LP"), the
Company appointed the managing member of the LP as Permian Energy
International's President and CEO. In August 2005, Permian Energy
International's President resigned his position as President and
Director. At the time of resignation, the President was in possession
of Company equipment, but returned it to the Company in August 2005. On
August 15, 2005, the Company and its subsidiary, Permian Energy International,
Inc., (the "Plaintiffs") filed an action in the District Court for the City
and County of Denver, State of Colorado as plaintiffs versus Permian Energy
Services, L.P. and Robert Clark (the "Defendants") as the defendants.
On August 15, 2005, the Company and its subsidiary, Permian Energy
International, Inc., (the "Plaintiffs") filed an action in the
District Court for the City and County of Denver, State of Colorado
as plaintiffs versus Permian Energy Services, L.P. and Robert Clark
(the "Defendants") as the defendants.
The claims in this case assert that the Defendants have improperly
used intellectual property they transferred to Platina Energy Group,
Inc. pursuant to an Asset Purchase Agreement; that defendants improperly
interfered with an exclusive distributorship opportunity Platina
Energy Group, Inc. and Permian Energy International, Inc. were in the
process of negotiating; and that Permian Energy Services, L.P. converted
certain equipment belonging to Platina Energy Group, Inc. and Permian
Energy International, Inc.
The Plaintiffs seek an injunction preventing Defendants from using their
intellectual property and from interfering with their distributorship
opportunity and return of their equipment. Additionally, the Plaintiffs
seek any damages caused by Defendants' alleged improper actions. The parties
to the lawsuit have executed a mutual release and settlement agreement on
February 6, 2006 to settle all matters set forth in the lawsuit with
finalization of the settlement due February 21, 2006.
(19)
<page>
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
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 thereto duly authorized.
Date: February 14, 2006 PLATINA ENERGY GROUP, INC.
(Registrant)
Blair Merriam
Chief Executive Officer, President, Chief Financial Officer,
(Principal Accounting Officer) and Director
(20)
<page>
Item 6. Exhibits and Reports on Form 10-QSB
(a) Exhibit 31 - Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
(b) Exhibit 32 - Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002