þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Texas | 75-2592165 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
3030 LBJ Freeway, Suite 1320 | 75234 | |
(Address of principal executive offices) | (Zip Code) |
Large | Accelerated Filer o | Non-Accelerated Filer o (Do not check if a smaller reporting company) | Smaller |
August 31, | February 28, | |||||||||||||||
2008 | November 30, | 2009 | November 30, | |||||||||||||
(Unaudited) | 2007 | (Unaudited) | 2008 | |||||||||||||
ASSETS | ||||||||||||||||
Current Assets | ||||||||||||||||
Cash | $ | 3,002 | $ | 23,821 | $ | 878 | $ | 2,506 | ||||||||
Oil and gas revenue receivable | 103,172 | 63,379 | 190,336 | 175,812 | ||||||||||||
Accounts receivable from affiliate | — | 21,824 | ||||||||||||||
Prepaid expense | 10,000 | 10,000 | ||||||||||||||
Inventory | 10,977 | 2,584 | 3,200 | — | ||||||||||||
Total current assets | 117,151 | 89,784 | 204,414 | 210,142 | ||||||||||||
Oil and gas properties (successful efforts method), net | 123,474 | 223,638 | 55,480 | 57,619 | ||||||||||||
Other | 6,211 | 6,211 | 6,211 | 6,211 | ||||||||||||
Total Assets | $ | 246,836 | $ | 319,633 | $ | 266,105 | $ | 273,972 | ||||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||||||||||
Current Liabilities | ||||||||||||||||
Trade accounts payable and accrued expenses | $ | 77,882 | $ | 64,543 | $ | 100,933 | $ | 90,789 | ||||||||
Accounts payable to and advances from affiliate | 89,269 | 869,192 | 280,029 | 173,786 | ||||||||||||
Asset retirement obligations — current portion | — | 29,964 | ||||||||||||||
Deferred revenue | 10,977 | 2,584 | 3,200 | — | ||||||||||||
Total current liabilities | 178,128 | 966,283 | 384,162 | 264,575 | ||||||||||||
Long-term Liabilities | ||||||||||||||||
Asset retirement obligations | 10,937 | 153,370 | 21,236 | 20,981 | ||||||||||||
Non-controlling Interest in Consolidated Subsidiary | 72,000 | 72,000 | 72,000 | 72,000 | ||||||||||||
Commitments and Contingencies (Note 8) | — | — | ||||||||||||||
Stockholders’ Deficit | ||||||||||||||||
Preferred stock- $.01 par value; authorized 10,000,000; no shares outstanding | — | — | — | — | ||||||||||||
Common stock- $.01 par value; authorized 100,000,000 shares; 4,027,442 shares issued and outstanding at August 31, 2008, 4,002,442 shares issued and outstanding at November 30, 2007 | 40,274 | 40,024 | ||||||||||||||
Common stock- $.01 par value; authorized 100,000,000 shares; 4,027,442 shares issued and outstanding at February 28, 2009, 4,027,442 shares issued and outstanding at November 30, 2008 | 40,274 | 40,274 | ||||||||||||||
Additional paid-in capital | 10,925,690 | 10,827,440 | 10,929,690 | 10,929,440 | ||||||||||||
Accumulated deficit | (10,980,193 | ) | (11,739,484 | ) | (11,181,257 | ) | (11,053,298 | ) | ||||||||
Total stockholders’ deficit | (14,229 | ) | (872,020 | ) | (211,293 | ) | (83,584 | ) | ||||||||
Total Liabilities and Stockholders’ Deficit | $ | 246,836 | $ | 319,633 | $ | 266,105 | $ | 273,972 | ||||||||
F-1
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
Aug. 31, 2008 | Aug. 31, 2007 | Aug. 31, 2008 | Aug. 31, 2007 | |||||||||||||
Revenues: | ||||||||||||||||
Oil and gas sales | $ | 53,607 | $ | 42,359 | $ | 210,888 | $ | 185,524 | ||||||||
Total revenues | 53,607 | 42,359 | 210,888 | 185,524 | ||||||||||||
Expenses: | ||||||||||||||||
Lease operating and taxes | 19,789 | 58,743 | 220,958 | 180,995 | ||||||||||||
General and administrative | 74,888 | 145,075 | 296,995 | 629,499 | ||||||||||||
Depreciation, depletion, amortization and accretion | 4,004 | 18,587 | 25,684 | 55,541 | ||||||||||||
Total expenses | 98,681 | 222,405 | 543,637 | 866,035 | ||||||||||||
Operating Loss | (45,074 | ) | (180,046 | ) | (332,749 | ) | (680,511 | ) | ||||||||
Other Income (Expense): | ||||||||||||||||
Gain on sale of oil and gas properties | — | — | 1,092,040 | 6,250 | ||||||||||||
Income (Loss) Before Provision for Income Taxes | (45,074 | ) | (180,046 | ) | 759,291 | (674,261 | ) | |||||||||
Provision for income taxes | — | — | — | — | ||||||||||||
Net Income (Loss) | $ | (45,074 | ) | $ | (180,046 | ) | $ | 759,291 | $ | (674,261 | ) | |||||
Net Income (Loss) per Common Share, Basic | $ | (0.01 | ) | $ | (0.05 | ) | $ | 0.19 | $ | (0.17 | ) | |||||
Net Income (Loss) per Common Share, Diluted | $ | (0.01 | ) | $ | (0.05 | ) | $ | 0.18 | $ | (0.17 | ) | |||||
�� | ||||||||||||||||
Weighted Average Common Shares Outstanding: | ||||||||||||||||
Basic | 4,027,442 | 3,932,417 | 4,021,169 | 3,921,468 | ||||||||||||
Diluted | 4,027,442 | 3,932,417 | 4,124,533 | 3,921,468 | ||||||||||||
For the Three Months Ended | ||||||||
Feb. 28, 2009 | Feb. 29, 2008 | |||||||
Revenues: | ||||||||
Oil and gas sales | $ | 14,525 | $ | 90,977 | ||||
Total revenues | 14,525 | 90,977 | ||||||
Expenses: | ||||||||
Lease operating and taxes (including $0 for 2009 and $2,400 for 2008 to related party) | 11,760 | 155,235 | ||||||
General and administrative | 128,329 | 134,309 | ||||||
Depreciation, depletion, amortization and accretion | 2,395 | 14,060 | ||||||
Total expenses | 142,484 | 303,604 | ||||||
Loss Before Provision for Income Taxes | (127,959 | ) | (212,627 | ) | ||||
Provision for income taxes | — | — | ||||||
Net Loss | $ | (127,959 | ) | $ | (212,627 | ) | ||
Net Loss per Common Share, Basic and Diluted | $ | (0.03 | ) | $ | (0.05 | ) | ||
Weighted average common shares used in calculations: | ||||||||
Basic and Diluted | 4,027,442 | 4,008,486 | ||||||
F-2
For the Nine Months Ended | For the Three Months Ended | |||||||||||||||
Aug. 31, 2008 | Aug. 31, 2007 | Feb. 28, 2009 | Feb. 29, 2008 | |||||||||||||
Cash Flows From Operating Activities: | ||||||||||||||||
Net income (loss) | $ | 759,291 | $ | (674,261 | ) | |||||||||||
Adjustments to reconcile net income (loss) to net cash used for operating activities: | ||||||||||||||||
Gain on sale of oil and gas properties | (1,092,040 | ) | (6,250 | ) | ||||||||||||
Net loss | $ | (127,959 | ) | $ | (212,627 | ) | ||||||||||
Adjustments to reconcile net loss to net cash provided by (used for) operating activities: | ||||||||||||||||
Depreciation, depletion, amortization and accretion | 25,684 | 55,541 | 2,394 | 14,060 | ||||||||||||
Stock based compensation | 94,750 | 218,250 | 250 | 50,000 | ||||||||||||
Changes in operating assets and liabilities other than advances from affiliate: | ||||||||||||||||
Decrease (increase) in: | ||||||||||||||||
Oil and gas revenue receivable | (39,793 | ) | (16,761 | ) | (14,524 | ) | 39,279 | |||||||||
Accounts receivable from affiliate | 21,824 | — | ||||||||||||||
Inventory | (8,393 | ) | 12,710 | (3,200 | ) | (20,373 | ) | |||||||||
Increase (decrease) in: | ||||||||||||||||
Trade accounts payable and accrued expenses | 13,339 | (63,484 | ) | 10,144 | 82,390 | |||||||||||
Accounts payable to affiliate | 179,790 | — | — | 58,854 | ||||||||||||
Asset retirement obligations — current portion | (29,964 | ) | — | |||||||||||||
Deferred revenue | 8,393 | (12,710 | ) | 3,200 | 20,373 | |||||||||||
Net cash used for operating activities | (88,943 | ) | (486,965 | ) | ||||||||||||
Net cash provided by (used for) operating activities | (107,871 | ) | 31,956 | |||||||||||||
Cash Flows From Investing Activities: | ||||||||||||||||
Development of oil and gas properties | (28,461 | ) | — | — | (28,461 | ) | ||||||||||
Proceeds from sale of oil and gas properties | — | 6,250 | ||||||||||||||
Net cash provided by (used in) investing activities | (28,461 | ) | 6,250 | |||||||||||||
Net cash used in investing activities | — | (28,461 | ) | |||||||||||||
Cash Flows From Financing Activities: | ||||||||||||||||
Advances from affiliate | 92,835 | 472,951 | ||||||||||||||
Advances from affiliate-net | 106,243 | 9,235 | ||||||||||||||
Exercise of common stock options | 3,750 | 7,500 | — | 250 | ||||||||||||
Net cash provided by financing activities | 96,585 | 480,451 | 106,243 | 9,485 | ||||||||||||
Net Increase (Decrease) in Cash | (20,819 | ) | (264 | ) | ||||||||||||
Net Increase (Decrease) In Cash | (1,628 | ) | 12,980 | |||||||||||||
Cash at beginning of period | 23,821 | 5,250 | 2,506 | 23,821 | ||||||||||||
Cash at end of period | $ | 3,002 | $ | 4,986 | $ | 878 | $ | 36,801 | ||||||||
Supplemental Non-Cash Activity: | ||||||||||||||||
Sale of oil and gas properties | $ | 106,430 | $ | — | ||||||||||||
Payables to and advances from affiliate | $ | (1,052,547 | ) | $ | — | |||||||||||
Asset retirement obligations settled | $ | (145,923 | ) | $ | — | |||||||||||
F-3
F-4
F-4
Proved oil and gas properties | $ | 809,659 | $ | 747,573 | ||||
Accumulated depreciation, depletion and amortization | (686,185 | ) | (692,093 | ) | ||||
$ | 123,474 | $ | 55,480 | |||||
F-5
F-5
ARO at November 30, 2007 | $ | 183,334 | ||||||
ARO at November 30, 2008 | $ | 20,981 | ||||||
Accretion expense | 3,490 | 255 | ||||||
Liabilities incurred | — | — | ||||||
Liabilities settled | (175,887 | ) | — | |||||
Changes in estimates | — | — | ||||||
ARO at August 31, 2008 | $ | 10,937 | ||||||
ARO at February 28, 2009 | $ | 21,236 | ||||||
F-6
Level 1 | Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access. | |
Level 2 | Inputs to the valuation methodology include: | |
- quoted prices for similar assets or liabilities in active markets; | ||
- quoted prices for identical or similar assets or liabilities in inactive markets; | ||
- inputs other than quoted prices that are observable for the asset or liability; | ||
- inputs that are derived principally from or corroborated by observable market data by correlation or other means. | ||
If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. | ||
Level 3 | Inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
F-7
a. | The operator of the East Texas oil and gas leases, Gulftex is an affiliate of TBX. Mr. Burroughs is a 50% stockholder and president of the Company. TBX | ||
b. | Gulftex | ||
c. | During the | ||
d. |
F-7
Weighted-Average | ||||||||
Shares | Exercise Price | |||||||
Outstanding December 1, 2007 | 100,000 | $ | 0.15 | |||||
Granted | 75,000 | $ | 0.15 | |||||
Exercised | (25,000 | ) | $ | 0.15 | ||||
Forfeited | (50,000 | ) | $ | 0.15 | ||||
Outstanding August 31, 2008 | 100,000 | $ | 0.15 | |||||
Options exercisable at August 31, 2008 | 100,000 | $ | 0.15 | |||||
Weighted-average fair value of options granted during this quarter | $ | 14,250 | ||
Weighted-average fair value of options granted during this year to date | $ | 94,750 | ||
F-8
Weighted-Average | ||||||||
Shares | Exercise Price | |||||||
Outstanding December 1, 2008 | 100,000 | $ | 0.15 | |||||
Granted | 25,000 | $ | 0.15 | |||||
Exercised | — | $ | 0.15 | |||||
Forfeited | (25,000 | ) | $ | 0.15 | ||||
Outstanding February 28, 2009 | 100,000 | $ | 0.15 | |||||
Options exercisable at February 28, 2009 | 100,000 | $ | 0.15 | |||||
Weighted-average fair value of options granted during this quarter | $ | 250 | ||||||
Average expected life in years | 1 | |||
Average interest rate | % | |||
Average volatility | % | |||
Dividend yield | 0 | % |
Weighted Average | Weighted Average | Weighted Average | Weighted Average | |||||||||||||||||||||
Grant Date | Grant Date | Grant Date | Grant Date | |||||||||||||||||||||
Shares | Fair Value per Share | Fair Value | Shares | Fair Value per Share | Fair Value | |||||||||||||||||||
Vested | 100,000 | $ | 1.24 | $ | 124,000 | 100,000 | $ | .5475 | $ | 54,750 | ||||||||||||||
Nonvested | — | — | — | — | — | — | ||||||||||||||||||
Total | 100,000 | $ | 1.24 | $ | 124,000 | 100,000 | $ | .5475 | $ | 54,750 | ||||||||||||||
F-9
F-9F-10
Gross | Net | Gross | Net | |||||||||||||
Producing | Producing | Producing | Producing | |||||||||||||
Name of Field or Well | Well Count | Well Count | Well Count | Well Count | ||||||||||||
Newark East, Working Interest | 2 | 0.65 | 2 | 0.74 | ||||||||||||
Newark East, Override Interest | 8 | 0.03 | 8 | 0.03 | ||||||||||||
Camargo NW Field | 2 | 0.03 | 2 | 0.42 | ||||||||||||
Harmon SE Field | 1 | 0.01 | 1 | 0.01 |
Total | Net | Total | ||||||||||||||||||||||||||||||||||||||||||||||
Net | Net | Total Gross | Total Net | Net | Gross | Productive | Gross | Total Net | ||||||||||||||||||||||||||||||||||||||||
Total Gross | Productive | Total Gross | Productive | Developed | Developed | Total Gross | Productive | Gass | Gass | Developed | Developed | |||||||||||||||||||||||||||||||||||||
Geographic Area | Oil Wells | Oil Wells | Gass Wells | Gass Wells | Acres | Acres | Oil Wells | Oil Wells | Wells | Wells | Acres | Acres | ||||||||||||||||||||||||||||||||||||
Wise County | — | — | 2 | .65 | 224 | 73.18 | — | — | 4 | .74 | 224 | 83.14 | ||||||||||||||||||||||||||||||||||||
Denton County | — | — | 6 | .02 | 566 | 2.26 | — | — | 6 | .03 | 566 | 18.11 | ||||||||||||||||||||||||||||||||||||
Anadarko Basin | 3 | .05 | — | — | 480 | 7.70 | 3 | .44 | — | — | 480 | 69.75 |
Notes:
3
ANADARKO BASIN- WESTERN OKLAHOMA We currently hold a minor interest in three producing natural gas wells. Although the wells are currently producing natural gas there can be no assurance that they will continue to do so. In addition to the above described wells we own working interests in two lease tracts; one located in Ellis County, Oklahoma with a gross acreage interest of 27.5% in 1,505 acres and the second located in Canadian County, Oklahoma, constituting a gross acreage interest of 20% in 240 acres. The Company also has a 3% interest in 640 acres in Beckham County, Oklahoma. The Company sold its interest in the Ellis County properties effective March 31, 2009. OIL AND GAS PARTNERSHIP INTERESTS We currently own a 57.50% partnership CRITICAL ACCOUNTING POLICIES A summary of significant accounting policies is included in Note 2 to the audited financial statements included on Form The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. OVERVIEW Going Concern and Liquidity Problems Our auditors have included an explanatory paragraph in their audit opinion with respect to our consolidated financial statements at November 30, Our company has experienced operating losses over the past several years. We do not have sufficient working capital to sustain our operations. We have been unable to generate sufficient revenues to sustain our operations. If no additional funds are received, we will be forced to rely on existing oil and gas revenue and upon additional funds which may or may not be loaned by an affiliate to preserve the integrity of the corporate entity. No formal commitments or arrangements currently exist with the affiliate to advance or loan funds to the Company. In the event we are unable to acquire sufficient funds, the Company’s ongoing operations will be negatively impacted and we may not be able to continue as a going concern and we may have to curtail or terminate our operations and liquidate our business. 4 RESULTS OF OPERATIONS For the The average price per MBTU
As the above table shows, gas revenue
Expenses-The components of our expenses for the
Lease operating expenses decreased General and administrative expenses decreased Depreciation, depletion, amortization and
We have not recorded any income taxes for the LIQUIDITY AND CAPITAL RESOURCES The Company had a cash balance of PLAN OF OPERATION FOR THE FUTURE In the past we have primarily acquired producing oil and gas properties with opportunities for future development and contracted well operations to contractors. Currently, our primary focus is to secure additional capital through business alliances with third parties or other debt/equity financing arrangements to acquire producing oil and gas leases and wells, acquire additional oil and gas prospect leases and to acquire an exploration company that can also act as an operator of our wells. However, we cannot assure you that we will be able to raise sufficient funds to execute our plans or that if successful in securing the funds our actual results will improve. We expect that the principal source of funds in the near future will be from oil and gas revenues and advances from an affiliate. We have not yet established an ongoing source of revenue sufficient to cover our operating costs and continue as a going concern. Management’s plan is to obtain operating loans from an affiliate to meet its minimal operating expenses (no formal commitments or arrangements currently exist
with the affiliate to advance or loan funds to the Company) and seek equity and/or debt financing. Any such additional funding will be done on an “as needed” basis and will only be done in those instances in which we believe such additional expenditures will increase our profitability. However, actual results may differ from management’s plan and the amount may be material. Our ability to acquire additional properties or equipment is strictly contingent upon our ability to locate adequate financing or equity to pay for these additional properties or equipment. There can be no assurance that we will be able to obtain the opportunity to buy properties or equipment that are suitable for our investment or that we may be able to obtain financing or equity to pay for the costs of these additional properties or equipment at terms that are acceptable to us.. Additionally, if economic conditions justify the same, we may hire additional employees although we do not currently have any definite plans to make additional hires. The oil and gas industry is subject to various trends. In particular, at times crude oil prices increase in the summer, during the heavy travel months, and are relatively less expensive in the winter. Of course, the prices obtained for crude oil are dependent upon numerous other factors, including the availability of other sources of crude oil, interest rates, and the overall health of the economy. We are not aware of any specific trends that are unusual to our company, as compared to the rest of the oil and gas industry. ITEM 3. QUANTITATIVE AND QUALATIVE DISCLOSURES ABOUT MARKET RISK. Not required for smaller reporting companies. ITEM Disclosure Controls and Procedures 6 Our management evaluated, with the participation of Tim Burroughs our Chief Executive Officer (CEO)/Chief Financial Officer (CFO), the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the quarter covered by this quarterly report on Form 10-Q. Based on this evaluation, management has concluded that, as of Internal Control Over Financial Reporting There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. As a result, no corrective actions were required or undertaken. Limitations on the Effectiveness of Controls.The Company’s management, including the CEO/CFO, does not expect that it’s Disclosure Controls or its Internal Controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures
may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS Item 2. CHANGES IN SECURITIES None. Item 3. DEFAULTS UPON SENIOR SECURITIES None. 7 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS: None. Item 5. OTHER INFORMATION None. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS: 31.1 Certification of Chief Executive Officer/Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Chief Executive Officer/Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) REPORTS ON FORM
SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed by the undersigned, hereunto duly authorized. TBX RESOURCES, INC. DATE: December 18, 2009
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