UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q/A
(Amendment No. 1)
(Mark One)
þ
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended October 31, 2011
   
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the transition period from ______________ to _____________

Commission file number:  000-49993
 
FORCE FUELS, INC.
 (Exact name of registrant as specified in its charter)
 
Nevada
  
56-2284320
(State or other jurisdiction of
  
(IRS Employer Identification No.)
incorporation or organization)
    
 
1503 South Coast Drive, Ste. 206
  
 
Costa Mesa, CA
  
92626
(Address of principal executive offices)
  
(Zip Code)
 
(949) 783-6723
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ No o
 
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 o No o  Not applicable.
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):
 
Large accelerated filer    o
Accelerated filer    o
Non-accelerated filer    o
Small reporting company    þ
 
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).  Yes þ No o
 
As of December 15, 2011, there were 13,544,375 shares of the issuer’s common stock outstanding.

 
 
 
 
EXPLANATORY NOTE
 
The purpose of this  Amendment No. 1 to the Company's  Quarterly  Report on Form 10-Q for the quarterly period ended October 31, 2011, filed with the Securities and Exchange  Commission on December 20, 2011 (the "Form 10-Q"),  is solely to furnish Exhibit 101 to the Form 10-Q. Exhibit 101 provides the financial  statements and related  notes  from  the  Form  10-Q  formatted  in XBRL  (Extensible  Business Reporting Language).
 
No other  changes have been made to the Form 10-Q.  This  Amendment No. 1 to the Form 10-Q  continues to speak as of the  original  filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures  made in the original Form 10-Q.
 
Pursuant to rule 406T of Regulation S-T, the  Interactive  Data Files on Exhibit 101  hereto  are  deemed  not  filed  or part  of a  registration  statement  or prospectus  for purposes of Sections 11 or 12 of the  Securities Act of 1933, as amended,  are deemed not filed for purposes of Section 18 of the  Securities Act of 1934,  as amended,  and  otherwise  are not subject to liability  under those sections.
 
Item 6. Exhibits

The following exhibits are filed herewith or incorporated herein pursuant to Regulation S-K, Item 601:
 
Exhibit
  
 
     
31.1*
  
Certifications Pursuant to 18 U.S.C. Section 1350-Section 302, signed by Thomas Hemingway, Chief Executive Officer.
     
31.2*
  
Certifications Pursuant to 18 U.S.C. Section 1350-Section 302, signed by Charles B. Mathews, Chief Financial Officer.
     
32*
  
Certification Pursuant to 18 U.S.C. Section 1350-Section 906, signed by Thomas Hemingway, Chief Executive Officer and Charles B. Mathews, Chief Financial Officer.
     
   101**   Interactive Data Files pursuant to Rule 405 of Regulation S-7
 
 
     
 
 *  Previously filed    
** Filed herewith
    
 

 
2
 

SIGNATURES

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


 
FORCE FUELS, INC.
 
(Registrant)
   
   
   
January 18, 2012
By /s/ Thomas Hemingway
 
Thomas Hemingway
 
Chief Executive Officer
   
   
   
January 18, 2012
By /s/ Charles B. Mathews
 
Charles B. Mathews
 
Chief Financial Officer

 
3
 

v2.4.0.6
Related Party Transactions
 3 Months Ended
Oct. 31, 2011
Related Party Transactions  
Related Party Transactions

Note 3 – Related Party Transactions

 

During the three months ended October 31, 2011, the Company borrowed $56,218 from related parties.  The additional borrowings were made up of $50,660 in cash, and $5,558 of Company expenses which were paid on behalf of the Company by related parties.  The notes payable are unsecured, bear no interest, and are due on demand.  Due the same period, the Company made $49,018 of cash payments against all outstanding notes payable due to related parties.  The Company owed $66,700 and $59,500 to related parties at October 31, 2011 and July 31, 2011, respectively. 

v2.4.0.6
Properties and Equipment, net
 3 Months Ended
Oct. 31, 2011
Properties and Equipment, net  
Properties and Equipment, net

Note 2 – Properties and Equipment, net

 

The Company’s property and equipment as of October 31, 2011 and October 31, 2010 are summarized as follows:

 

 

 

October 31,

 

 

July 31,

 

 

 

2011

 

 

2011

 

 

 

 

 

 

 

 

Well operating equipment

 

$

138,300

 

 

$

138,300

 

Less: accumulated depreciation

 

 

(30,056

)

 

 

(24,737

)

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

$

108,244

 

 

$

113,563

 

 

Depreciation expense for the three months ended October 31, 2011 and 2010 was $4,980 and $4,939, respectively.

v2.4.0.6
Condensed Consolidated Balance Sheets (USD $)
Oct. 31, 2011
Jul. 31, 2011
Current Assets:    
Cash $ 6,392 $ 2,624
Accounts receivable, net 2,009 0
Prepaid expenses 26,205 4,088
Notes receivable, related party 0 2,500
Total current assets 34,606 9,212
Deposits 12,638 12,638
Property, Plant & Equipment    
Oil and gas properties (full cost method) 909,671 909,671
Other property, plant and equipment 138,300 138,300
Total property, plant and equipment 1,047,971 1,047,971
Accumulated depletion, depreciation and amortization (30,056) (24,737)
Total property, plant and equipment, net 1,017,915 1,023,234
Total assets 1,065,159 1,045,084
Current liabilities:    
Accounts payable and accrued expenses 274,976 246,331
Accrued officer salaries 694,809 626,082
Convertible notes payable 105,000 135,300
Convertible notes payable - related party 59,500 29,200
Notes payable - related party 7,200 0
Notes payable 248,066 248,066
Total current liabilities 1,389,551 1,284,979
Asset retirement obligation 33,700 32,830
COMMITMENTS AND CONTINGENCIES (see Note 7)      
STOCKHOLDERS' DEFICIT    
Preferred stock, $0.001 par value; 1,000,000 shares authorized; no issued and outstanding, respectively. 0 0
Common stock, $0.001 par value; 100,000,000 shares authorized; 13,544,375 and 11,704,375 shares outstanding, respectively 13,544 11,704
Additional paid-in capital 3,636,333 3,517,373
Accumulated deficit (4,007,969) (3,801,802)
Total Stockholders' Deficit (358,092) (272,725)
Total Liabilities and Stockholders' Deficit $ 1,065,159 $ 1,045,084

v2.4.0.6
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
 3 Months Ended
Oct. 31, 2011
Oct. 31, 2010
Operating activities:    
Net loss $ (206,167) $ (605,780)
Adjustments to reconcile net income (loss) to net cash used in operating activities:    
Depletion, depreciation, amortization, and accretion 6,188 4,939
(Gain) loss on settlement of debt 0 225,000
Amortization of discount on debt 0 50,728
Expenses paid on behalf of the Company by a related party 5,558 0
Common stock issued for services and loan inducement 120,800 225,183
Changes in operating assets and liabilities:    
Accounts receivable (2,009) 7,451
Inventory 0 42,579
Deposits and prepaid expenses (19,617) (77,616)
Accounts payable and accrued expenses 28,644 (24,056)
Accrued salaries 68,728 103,093
Net cash provided by (used in) operating activities 2,125 (48,479)
Investing activities:    
Note receivable - related party 0 (23,363)
Net cash provided by (used in) investing activities 0 (23,363)
Financing activities:    
Proceeds from related party notes payable 50,660 0
Proceeds from notes payable 0 30,000
Repayment of related party notes payable (49,017) 0
Repayment of notes payable 0 (45,000)
Net cash provided by (used in) financing activities 1,643 (15,000)
Net increase (decrease) in cash 3,768 (86,842)
Cash, beginning of period 2,624 86,842
Cash, end of period $ 6,392 $ 0

v2.4.0.6
Description of the Business and Summary of Significant Accounting Policies
 3 Months Ended
Oct. 31, 2011
Description of the Business and Summary of Significant Accounting Policies  
Description of the Business and Summary of Significant Accounting Policies

Note 1 – Description of the Business and Summary of Significant Accounting Policies

 

The Company was incorporated as DSE Fishman, Inc. in the State of Nevada on July 15, 2002. On May 14, 2008 DSE Fishman changed its name to Force Fuels, Inc. (“the Company”).  At that time the primary focus of the Company became the development and marketing of a proprietary, zero emission hydrogen fuel cell/electric battery hybrid drive system for automotive utilization. In October 2009 the Company retained new management and began the process of exploring the feasibility of acquiring, developing and marketing of green energy products as well as regulated and standardized energy based products, including traditional hydrocarbon based oil and gas and solar and wind energy.

 

During the period ended October 31, 2011, the Company's principal business was the acquisition and management of oil, gas and alternative energy operations.  The Company's common shares are currently quoted on the OTC Pink market of OTC Markets Group, Inc. under the trading symbol “FOFU.”  As used in this Report, unless otherwise stated, all references to the “Company”, “we,” “our”, “us” and words of similar import, refer to Force Fuels, Inc.

 

Going Concern

 

The Company’s Consolidated Financial Statements included elsewhere in this Report have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the ability of the Company to acquire oil and gas properties or obtain necessary financing to continue operations, and the attainment of profitable operations. At October 31, 2011, the Company had a working capital deficit of $1,354,945 and had accumulated losses of $4,007,969. These factors raise substantial doubt regarding the Company's ability to continue as a going concern. The Company’s Consolidated Financial Statements included elsewhere in this Report do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Interim Financial Information

 

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial information and with the instructions to Form 10-Q.  Accordingly, they do not include all of the information required to be included in a complete set of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP).  In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s 2011 Annual Report filed with the SEC on Form 10-K on November 15, 2011.

 

Basis of Presentation, Fiscal Year, and Principles of Consolidation

 

These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. dollars. These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries Force Fuels Services, Inc., Great American Coffee Company, and Cheetah Motor Corp. All intercompany transactions and balances have been eliminated. The Company has elected a fiscal year-end of July 31.

 

Use of Estimates

 

The preparation of these consolidated financial statements in accordance with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents. As of October 31, 2011, the Company had a cash balance of $6,392. As of July 31, 2011, the Company had a cash balance of $2,624. As of October 31, 2011 and July 31, 2011, the Company had no cash equivalents.

 

Property and Equipment, net

 

Property and equipment is recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of 7 years. The cost of assets sold or retired and the related amounts of accumulated depreciation are removed from the accounts in the year of disposal. Any resulting gain or loss is reflected in current operations. Expenditures for maintenance and repairs are charged to operations as incurred. The capitalized cost of the oil properties will be amortized based on the units-of-production method.  Costs incurred for property acquisition and further development activity will be capitalized and amortized as previously noted.

 

Financial Instruments and Concentrations

 

The fair values of financial instruments, which include cash, accounts payable, accrued liabilities, and convertible notes, were estimated to approximate their carrying values due to the immediate or short-term maturity of these financial instruments. Financial instruments that potentially subject the Company to credit risk consist principally of cash. Cash is deposited with a high quality financial institution.

 

Oil and Gas Properties, Full Cost Method

 

The Company uses the full cost method of accounting for oil and natural gas properties. Under this method, all acquisition, exploration and development costs, including certain payroll, asset retirement costs, other internal costs, and interest incurred for the purpose of finding oil and natural gas reserves, are capitalized. Internal costs that are capitalized are directly attributable to acquisition, exploration and development activities and do not include costs related to production, general corporate overhead or similar activities. Costs associated with production and general corporate activities are expensed in the period incurred. Proceeds from the sale of oil and natural gas properties are applied to reduce the capitalized costs of oil and natural gas properties unless the sale would significantly alter the relationship between capitalized costs and proved reserves, in which case a gain or loss is recognized.

 

Capitalized costs associated with impaired properties and capitalized costs related to properties having proved reserves, plus the estimated future development costs, and asset retirement costs under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 410 “Asset Retirement and Environmental Obligations” (FASB ASC 410), are amortized using the unit-of-production method based on proved reserves. Capitalized costs of oil and natural gas properties, net of accumulated amortization and deferred income taxes, are limited to the total of estimated future net cash flows from proved oil and natural gas reserves, discounted at ten percent, plus the cost of unevaluated properties. The estimated future net cash flows at October 31, 2011 and July 31, 2011 were determined using a price estimate of $66 per barrel. Under certain specific conditions, companies could elect to use subsequent prices for determining the estimated future net cash flows. The use of subsequent pricing is no longer allowed. See “New Pronouncements” below for additional detail regarding the new rules. There are many factors, including global events that may influence the production, processing, marketing and price of oil and natural gas. A reduction in the valuation of oil and natural gas properties resulting from declining prices or production could adversely impact depletion rates and capitalized cost limitations. Capitalized costs associated with properties that have not been evaluated through drilling or seismic analysis, including exploration wells in progress at October 31, 2011 and July 31, 2011, are excluded from the unit-of-production amortization. Exclusions are adjusted annually based on drilling results and interpretative analysis.

 

Sales of oil and natural gas properties are accounted for as adjustments to the net full cost pool with no gain or loss recognized, unless the adjustment would significantly alter the relationship between capitalized costs and proved reserves. If it is determined that the relationship is significantly altered, the corresponding gain or loss will be recognized in the consolidated statements of operations.

 

Costs of oil and gas properties are amortized using the units of production method. For the three months ended October 31, 2011, the Company recorded $339 in depletion expense associated with production.

 

Ceiling Test

 

In applying the full cost method, the Company 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 at the end of the period, 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. During the periods ended October 31, 2011 and 2010, no impairment of oil and gas properties was recorded.

 

Fair Value of Financial Instruments

 

The fair value accounting guidance defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.”  The definition is based on an exit price rather than an entry price, regardless of whether the entity plans to hold or sell the asset.  This guidance also establishes a fair value hierarchy to prioritize inputs used in measuring fair value as follows:

 

Level 1: Observable inputs such as quoted prices in active markets;

 

Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

 

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

 

The carrying value of accounts payable and accrued liabilities are considered to approximate their fair value due to their short-term nature.

 

Asset Retirement Obligations

 

The Company records the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. The liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. If the liability is settled for an amount other than the recorded amount, a gain or loss is recognized.

 

Revenue Recognition

 

The Company recognizes revenues from the sale of crude oil using the sales method of accounting. Under this method, the Company recognizes revenues when oil is delivered and title transfers.

 

Basic and Diluted Net Income (Loss) per Share

 

FASB Codification Topic 260, Earnings per share, requires dual presentation of basic and diluted earnings per share (EPS) with a reconciliation of the numerator and denominator of the EPS computations. Basic earnings per share amounts are based on the weighted average number of shares of common stock outstanding. If applicable, diluted earnings per share would assume the conversion, exercise or issuance of all potential common stock instruments such as options, warrants and convertible securities, unless the effect is to reduce a loss or increase earnings per share. Diluted net income (loss) per share on the potential exercise of the equity-based financial instruments is not presented where anti-dilutive.

The table below shows the earnings (loss) per share, basic and diluted, for three months ended October 31, 2011 and 2010:

 

 

 

 

For the Three Months Ended

 

 

 

October 31,

 

 

 

2011

 

 

2010

 

 

 

 

 

 

 

 

Net loss

 

$

(206,167

)

 

$

(605,780

)

Weighted average common shares outstanding

 

 

12,335,144

 

 

 

6,856,389

 

Earnings per share:

 

 

 

 

 

 

 

 

Basic and diluted income per share from continuing operations

 

$

(0.02

)

 

$

(0.09

)

  

Income Taxes

 

Income taxes are provided in accordance with FASB Codification Topic 740, Accounting for Income Taxes. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss-carry forwards.

 

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.

 

Recently Issued Accounting Pronouncements

 

We have implemented all new accounting pronouncements that are in effect and that may impact our financial statements and do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations.

 

Reclassification of Financial Statement Accounts

 

Certain amounts in the October 31, 2010 condensed consolidated financial statements have been reclassified to conform to the presentation in the October 31, 2011 condensed consolidated financial statements.

v2.4.0.6
Condensed Consolidated Balance Sheets Parentheticals (USD $)
Oct. 31, 2011
Jul. 31, 2011
Preferred Stock, par value $ 0.001 $ 0.001
Preferred Stock, shares authorized 1,000,000 1,000,000
Common Stock, par value $ 0.001 $ 0.001
Common Stock, shares authorized 100,000,000 100,000,000
Common Stock, shares outstanding 13,544,375 11,704,375

v2.4.0.6
Document and Entity Information
 3 Months Ended
Oct. 31, 2011
Dec. 15, 2011
Document and Entity Information    
Entity Registrant Name FORCE FUELS INC.  
Document Type 10-Q  
Document Period End Date Oct. 31, 2011  
Amendment Flag false  
Entity Central Index Key 0001182011  
Current Fiscal Year End Date --07-31  
Entity Common Stock, Shares Outstanding   13,544,375
Entity Filer Category Smaller Reporting Company  
Entity Current Reporting Status Yes  
Entity Voluntary Filers No  
Entity Well-known Seasoned Issuer No  
Document Fiscal Year Focus 2012  
Document Fiscal Period Focus Q1  

v2.4.0.6
Condensed Consolidated Statements of Operations (Unaudited) (USD $)
 3 Months Ended
Oct. 31, 2011
Oct. 31, 2010
REVENUES    
Crude oil $ 7,032 $ 32,849
COST OF GOODS SOLD 0 42,579
GROSS PROFIT (LOSS) 7,032 (9,730)
EXPENSES    
Lease operating expense 316 15,394
Salary and wages - officers 103,212 100,832
General and administrative 97,898 187,646
Depletion, depreciation, amortization, and accretion 6,188 4,939
Total expenses 207,614 308,811
NET LOSS FROM OPERATIONS (200,582) (318,541)
OTHER INCOME (EXPENSE)    
Gain (loss) on settlement of debt 0 (225,000)
Interest expense (5,585) (62,239)
Total other income (expense) (5,585) (287,239)
NET LOSS $ (206,167) $ (605,780)
Basic and diluted income (loss) per share, from continuing operations $ (0.02) $ (0.09)
Weighted average shares outstanding - basic and diluted 12,335,144 6,856,389

v2.4.0.6
Contingent Liabilities
 3 Months Ended
Oct. 31, 2011
Contingent Liabilities  
Contingent Liabilities

Note 6 – Contingent Liabilities

 

On May 23, 2011, the Company received a complaint from Oscar Luppi, former Chairman, President, Chief Executive Officer, and Treasurer of the Company. The complaint seeks contractual damages in the amount of $1,142,739, or alternatively the fair value of services of plaintiff of $413,973, or greater, plus interest.  The principal causes of action are breach of contract; and, common count for services rendered arising out of claims for allegedly unpaid wages and future wages. As of July 31, 2011, the Company has accrued $435,947 related to Mr. Luppi’s service to the Company which is recorded as accrued officers salaries on the accompanying balance sheet.

v2.4.0.6
Contingencies, Environmental and Other
 3 Months Ended
Oct. 31, 2011
Contingencies, Environmental and Other  
Contingencies, Environmental and Other

Note 5 – Contingencies, Environmental and Other

 

The Company’s operations and earnings may be affected by various forms of governmental action in the United States. Examples of such governmental action include, but are by no means limited to: tax increases and retroactive tax claims; royalty and revenue sharing increases; import and export controls; price controls; currency controls; allocation of supplies of crude oil and petroleum products and other goods; expropriation of property; restrictions and preferences affecting the issuance of oil and gas or mineral leases; restrictions on drilling and/or production; laws and regulations intended for the promotion of safety and the protection and/or remediation of the environment; governmental support for other forms of energy; and laws and regulations affecting the Company’s relationships with employees, suppliers, customers, stockholders and others. Because governmental actions are often motivated by political considerations and may be taken without full consideration of their consequences, and may be taken in response to actions of other governments, it is not practical to attempt to predict the likelihood of such actions, the form the actions may take or the effect such actions may have on the Company.

 

Companies in the oil and gas industry are subject to numerous federal, state, local and regulations dealing with the environment. Violation of federal or state environmental laws, regulations and permits can result in the imposition of significant civil and criminal penalties, injunctions and construction bans or delays. A discharge of hazardous substances into the environment could, to the extent such event is not insured, subject the Company to substantial expense, including both the cost to comply with applicable regulations and claims by neighboring landowners and other third parties for any personal injury and property damage that might result.

 

The Company currently leases properties at which hazardous substances could have been or are being handled. In addition, many of these properties have been operated by third parties whose treatment and disposal or release of hydrocarbons or other wastes were not under the Company’s control. Under existing laws the Company could be required to remove or remediate previously disposed wastes (including wastes disposed of or released by prior owners or operators), to clean up contaminated property (including contaminated groundwater) or to perform remedial plugging operations to prevent future contamination. The Company is investigating the extent of any such liability and the availability of applicable defenses and believes costs related to these sites will not have a material adverse affect on the Company’s net income, financial condition or liquidity in a future period.

 

The Company’s liability for remedial obligations includes certain amounts that are based on anticipated regulatory approval for proposed remediation of former refinery waste sites. Although regulatory authorities may require more costly alternatives than the proposed processes, the cost of such potential alternative processes is not expected to be a material amount. Certain environmental expenditures are likely to be recovered by the Company from other sources, primarily environmental funds maintained by certain states. Since no assurance can be given that future recoveries from other sources will occur, the Company has not recorded a benefit for likely recoveries.

 

There is the possibility that environmental expenditures could be required at currently unidentified sites, and new or revised regulations could require additional expenditures at known sites. However, based on information currently available to the Company, the amount of future remediation costs incurred at known or currently unidentified sites is not expected to have a material adverse effect on the Company’s future net income, cash flows or liquidity. The Company has recorded $33,700 and $32,830 for its estimated asset retirement obligation as of October 31, 2011 and 2010, respectively.

v2.4.0.6
Subsequent Events
 3 Months Ended
Oct. 31, 2011
Subsequent Events  
Subsequent Events

Note 9 – Subsequent Events

 

On December 14, 2011, the Company filed a Form S-8 Registration Statement to register 3,000,000 shares of common stock under the Company’s 2011 Stock Incentive Plan.

 

In accordance with ASC 855, Company management has reviewed all material events through the date of this report and there are no additional subsequent events to report other than those events listed above.

v2.4.0.6
Oil and Gas Properties
 3 Months Ended
Oct. 31, 2011
Oil and Gas Properties  
Oil and Gas Properties

Note 7 – Oil and Gas Properties

 

Oil and gas properties are stated at cost. The Company recognized $339 in depletion during the three months ended October 31, 2011. The Company did not recognize any depletion during the three months ended October 31, 2010. Gains and losses on sales and disposals are included in the statements of operations. As of October 31, 2011 and July 31, 2011, oil and gas properties consisted of the following:

 

 

 

October 31,

 

 

July 31,

 

 

 

2011

 

 

2011

 

Producing Activities

 

 

 

 

 

 

Proved properties

 

$

909,671

 

 

$

909,671

 

Accumulated depletion

 

 

(339

)

 

 

-

 

 

 

 

 

 

 

 

 

 

    Net Oil and Gas Properties

 

$

909,332

 

 

$

909,671

 

 

Capitalized Costs for Oil and Gas:

 

 

 

October 31,

 

 

July 31,

 

 

 

2011

 

 

2011

 

Costs Incurred in Oil and Gas Acquisition and Development Activities

 

 

 

 

 

 

Produced properties

 

$

909,671

 

 

$

909,671

 

Accumulated depletion

 

 

(339

)

 

 

-

 

 

 

 

 

 

 

 

 

 

Total

 

$

909,332

 

 

$

909,671

 

v2.4.0.6
Supplemental Cash Flow Information
 3 Months Ended
Oct. 31, 2011
Supplemental Cash Flow Information  
Supplemental Cash Flow Information

Note 8 – Supplemental Cash Flow Information

 

Non-cash investing and financing activities for the year ended July 31, 2011 included the following:

 

 

 

For the Three Months Ended

 

 

 

October 31,

 

 

 

2011

 

 

2010

 

Cash paid for:

 

 

 

 

 

 

Interest

 

$

-

 

 

$

-

 

Income taxes

 

$

-

 

 

$

-

 

 

 

 

 

 

 

 

 

 

Non cash financing activities:

 

 

 

 

 

 

 

 

Issuance of common stock for prepaid expenses

 

$

-

 

 

$

100,000

 

v2.4.0.6
Condensed Consolidated Statements of Changes in Stockholders' Deficit (Unaudited) (USD $)
Common Stock Shares
Common Stock Amount
USD ($)
Preferred Stock Shares
Preferred Stock Amount
USD ($)
Additional Paid-in Capital
USD ($)
Accumulated Deficit
USD ($)
Total Stockholders' Deficit
USD ($)
Balance at Jul. 31, 2010 6,475,129 6,475 0 0 2,543,518 (3,051,645) (501,652)
Common stock issued for services 4,481,746 4,482 0 0 735,002 0 739,484
Common stock issued for extension of notes payable 200,000 200 0 0 23,800 0 24,000
Common stock issued for inducement of loan 60,000 60 0 0 15,540 0 15,600
Common stock issued upon default of note 500,000 500 0 0 224,500 0 225,000
Cancellation of common stock (12,500) (13) 0 0 (24,987) 0 (25,000)
Net loss.   $ 0   $ 0 $ 0 $ (750,157) $ (750,157)
Balance at Jul. 31, 2011 11,704,375 11,704 0 0 3,517,373 (3,801,802) (272,725)
Common stock issued for services. 1,840,000 1,840 0 0 118,960 0 120,800
Net loss..   $ 0   $ 0 $ 0 $ (206,167) $ (206,167)
Balance at Oct. 31, 2011 13,544,375 13,544 0 0 3,636,333 (4,007,969) (358,092)

v2.4.0.6
Stockholders' Deficit
 3 Months Ended
Oct. 31, 2011
Stockholders' Deficit  
Stockholders' Deficit

Note 4 – Stockholders’ Deficit

 

Common Stock

 

During the three months ended October 31, 2011, the Company issued 1,840,000 shares of common stock for services valued at $120,800 in the aggregate.