U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
☒[X]       Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended June 30, 2017March 31, 2018
 
☐[  ]       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: 001-32624
 
 
FieldPoint Petroleum Corporation
(Exact name of small business issuer as specified in its charter)
 
Colorado

 
84-0811034

(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
609 Castle Ridge Road, Suite 335
                  Austin, Texas 78746                  
(Address of Principal Executive Offices) (Zip Code)
 
                           (512) 579-3560                           
(Issuer's Telephone Number, Including Area Code)
 

(former name, address and fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 ☒    X   No        ☐
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes ☒[ X ] No  ☐[ ]
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer☐Accelerated filer☐
Non-accelerated filer☐  (Do not check if a smaller reporting company)Smaller reporting company☒☐ 
  Emerging growth company☐☒
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§230.12-b2 of this chapter).
Emerging growth company   [X]
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuance to Section 13(a) of the Exchange Act. ☐[ ]
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes       ☐ No ☒   X   
 
As of AugustMay 10, 2017,2018, the number of shares outstanding of the Registrant's $.01 par value common stock was 10,674,229.
10,669,229.


PART I – FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
FieldPoint Petroleum Corporation
 
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
June 30,
 
 
December 31,
 
 
March 31,
 
 
December 31,
 
 
 2017 
 
 
 2016 
 
 
 2018 
 
 
 2017 
 
ASSETS
ASSETS
ASSETS
 
 
 
 
 
 
CURRENT ASSETS:
 
 
 
 
 
 
Cash and cash equivalents
 $367,924 
 $880,067 
 $326,673 
 $408,656 
Accounts receivable:
    
    
Oil and natural gas sales
  415,232 
  321,500 
  360,306 
  366,939 
Joint interest billings, less allowance for doubtful accounts of approximately $237,000 each period
  238,096 
  243,106 
  258,453 
  260,816 
Prepaid income taxes
  17,135 
  8,776 
Income tax receivable
  28,903 
  25,057 
Prepaid expenses and other current assets
  74,808 
  37,837 
  42,363 
  48,998 
Total current assets
  1,113,195 
  1,491,286 
  1,016,698 
  1,110,466 
    
    
PROPERTY AND EQUIPMENT:
    
    
Oil and natural gas properties (successful efforts method)
  40,086,021 
  41,288,964 
  33,753,833 
Other equipment
  117,561 
  111,750 
  117,561 
Less accumulated depletion, depreciation and impairment
  (33,322,141)
  (34,147,053)
  (27,526,406)
  (27,425,652)
Net property and equipment
  6,881,441 
  7,253,661 
  6,344,988 
  6,445,742 
    
    
OTHER ASSETS
  25,000 
  157,227 
    
    
Total assets
 $8,019,636 
 $8,769,947 
 $7,518,913 
 $7,713,435 
    
    
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY
    
    
CURRENT LIABILITIES:
    
    
Line of credit - current
 $4,363,333 
 $6,478,333 
 $2,761,632 
Accounts payable and accrued expenses
  958,365 
  1,139,596 
  883,230 
  897,101 
Oil and gas revenues payable
  442,245 
  461,227 
  430,981 
  427,859 
Asset retirement obligation - current
  80,821 
  41,438 
  146,066 
Total current liabilities
  5,844,764 
  8,120,594 
  4,221,909 
  4,232,658 
    
    
ASSET RETIREMENT OBLIGATION
  1,700,633 
  1,700,469 
  1,705,420 
  1,678,420 
Total liabilities
  7,545,397 
  9,821,063 
  5,927,329 
  5,911,078 
    
    
STOCKHOLDERS’ EQUITY:
    
    
Common stock, $.01 par value, 75,000,000 shares authorized;
Common stock, $.01 par value, 75,000,000 shares authorized;
    
Common stock, $.01 par value, 75,000,000 shares authorized;
    
11,596,229 and 11,153,947 shares issued, respectively, and 10,669,229 and 10,226,947 outstanding, respectively
  115,962 
  111,539 
11,596,229 and 10,669,229 shares issued and outstanding, respectively
  115,962 
Additional paid-in capital
  13,715,668 
  13,532,871 
  13,715,668 
Accumulated deficit
  (11,390,499)
  (12,728,634)
  (10,273,154)
  (10,062,381)
Treasury stock, 927,000 shares, each period, at cost
  (1,966,892)
  (1,966,892)
Total stockholders’ equity (deficit)
  474,239 
  (1,051,116)
Total stockholders’ equity
  1,591,584 
  1,802,357 
Total liabilities and stockholders’ equity
 $8,019,636 
 $8,769,947 
 $7,518,913 
 $7,713,435 
See accompanying notes to these unaudited condensed consolidated financial statements.
 
 
2
 
FieldPoint Petroleum Corporation
 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
Three Months Ended
 
 
Six Months Ended
 
 
Three Months Ended
 
 
 June 30,  
 
 
  March 31,  
 
 
 2017 
 
 
 2016 
 
 
 2017 
 
 
 2016 
 
 
 2018 
 
 
 2017 
 
REVENUE:
 
 
 
 
 
 
Oil and natural gas sales
 $880,975 
 $751,035 
 $1,695,703 
 $1,319,774 
 $465,847 
 $814,728 
Well operational and pumping fees
  1,261 
  1,262 
  2,523 
  2,524 
  1,682 
  1,262 
Disposal fees
  17,455 
  28,283 
  39,891 
  42,995 
  25,433 
  22,436 
Total revenue
  899,691 
  780,580 
  1,738,117 
  1,365,293 
  492,962 
  838,426 
    
    
COSTS AND EXPENSES:
    
    
Production expense
  595,643 
  681,089 
  1,307,518 
  1,341,364 
  231,481 
  711,875 
Depletion and depreciation
  213,554 
  307,800 
  370,108 
  627,600 
  100,754 
  156,554 
Accretion of discount on asset retirement obligations
  26,000 
  27,000 
  52,000 
  54,000 
  27,000 
  26,000 
General and administrative
  279,934 
  289,365 
  563,942 
  664,802 
  309,627 
  284,008 
Total costs and expenses
  1,115,131 
  1,305,254 
  2,293,568 
  2,687,766 
  668,862 
  1,178,437 
    
    
OPERATING LOSS
  (215,440)
  (524,674)
  (555,451)
  (1,322,473)
  (175,900)
  (340,011)
    
    
OTHER INCOME (EXPENSE):
    
    
Interest income
  15 
  659 
  29 
  771 
  15 
  14 
Interest expense
  (64,277)
  (63,542)
  (133,331)
  (126,382)
  (34,888)
  (69,054)
Gain on sale of oil and natural gas property
  2,030,477 
  - 
  2,030,477 
  - 
Miscellaneous
  257 
  124 
  257 
  124 
Total other income (expense)
  1,966,472 
  (62,759)
  1,897,432 
  (125,487)
  (34,873)
  (69,040)
    
    
INCOME (LOSS) BEFORE INCOME TAXES
  1,751,032 
  (587,433)
  1,341,981 
  (1,447,960)
NET LOSS
 $(210,773)
 $(409,051)
    
    
INCOME TAX EXPENSE – CURRENT
  (3,846)
  - 
  (3,846)
  - 
TOTAL INCOME TAX PROVISION
  (3,846)
  - 
  (3,846)
  - 
    
NET INCOME (LOSS)
 $1,747,186 
 $(587,433)
 $1,338,135 
 $(1,447,960)
    
EARNINGS (LOSS) PER SHARE:
    
LOSS PER SHARE:
    
BASIC
 $0.16 
 $(0.07)
 $0.13 
 $(0.16)
 $(0.02)
 $(0.04)
DILUTED
 $0.16 
 $(0.07)
 $0.13 
 $(0.16)
 $(0.02)
 $(0.04)
    
    
WEIGHTED AVERAGE SHARES OUTSTANDING:
    
    
BASIC
  10,669,229 
  8,890,101 
  10,643,571 
  8,890,046 
  10,669,229 
  10,617,630 
DILUTED
  10,669,229 
  8,890,101 
  10,643,571 
  8,890,046 
  10,669,229 
  10,617,630 
    
 
See accompanying notes to these unaudited condensed consolidated financial statements.
3
 
FieldPoint Petroleum Corporation
 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
For the Six Months Ended
 
 
 June 30,
 
 
For the Three Months Ended
 
 
  2017  
 
 
 2016 
 
 
 March 31,
 
 
 
 
 
  2018  
 
 
 2017 
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
Net income (loss)
 $1,338,135 
 $(1,447,960)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
    
Net loss
 $(210,773)
 $(409,051)
Adjustments to reconcile net loss to net cash used in operating activities:
    
Depletion and depreciation
  370,108 
  627,600 
  100,754 
  156,554 
Accretion of discount on asset retirement obligations
  52,000 
  54,000 
  27,000 
  26,000 
Stock compensation expense
  - 
  13,750 
Gain on sale of oil and natural gas property
  (2,030,477)
  - 
Changes in current assets and liabilities:
    
    
Accounts receivable
  (88,722)
  94,112 
  8,996 
  (45,350)
Prepaid income taxes
  (8,359)
  (61)
  (3,846)
  (2,709)
Prepaid expenses and other current assets
  (36,971)
  (7,362)
  6,635 
  (20,854)
Accounts payable and accrued expenses
  20,425 
  117,642 
  3,223 
  222,299 
Oil and gas revenues payable
  (18,982)
  (3,867)
  3,122 
  5,300 
Net cash used in operating activities
  (402,843)
  (552,146)
  (64,889)
  (67,811)
    
    
CASH FLOWS FROM INVESTING ACTIVITIES:
    
    
Additions to oil and natural gas properties and other equipment
  (326,520)
  (79,469)
  (17,094)
  (262,148)
Proceeds from sale of oil and natural gas property
  2,145,000 
  - 
Net cash provided by (used in) investing activities
  1,818,480 
  (79,469)
Net cash used in investing activities
  (17,094)
  (262,148)
    
    
CASH FLOWS FROM FINANCING ACTIVITIES:
    
    
Payments on long term debt
  (2,115,000)
  - 
Net proceeds from issuance of common stock
  187,220 
  - 
  - 
  187,220 
Net cash used in financing activities
  (1,927,780)
  - 
Net cash provided by financing activities
  - 
  187,220 
    
    
NET CHANGE IN CASH AND CASH EQUIVALENTS
  (512,143)
  (631,615)
  (81,983)
  (142,739)
    
    
CASH AND CASH EQUIVALENTS, beginning of the period
  880,067 
  1,467,279 
  408,656 
  880,067 
    
    
CASH AND CASH EQUIVALENTS, end of the period
 $367,924 
 $835,664 
 $326,673 
 $737,328 
    
    
SUPPLEMENTAL INFORMATION:
    
    
Cash paid during the period for interest
 $136,471 
 $128,308 
 $- 
 $67,574 
Cash paid during the period for income taxes
 $8,359 
 $1,343 
 $3,845 
 $2,709 
Change in accrued capital expenditures
 $113,434 
 $57,299 
 $17,094 
 $115,800 
See accompanying notes to these unaudited condensed consolidated financial statements.
4
FieldPoint Petroleum Corporation
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
1.   
Nature of Business, Organization and Basis of Preparation and Presentation
 
FieldPoint Petroleum Corporation (the “Company”, “FieldPoint”, “our”, or “we”) is incorporated under the laws of the state of Colorado. The Company is engaged in the acquisition, operation and development of oil and natural gas properties, which are located in Louisiana, New Mexico, Oklahoma, Texas, and Wyoming.
 
The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. However, in the opinion of management, all adjustments (which consist only of normal recurring adjustments) necessary to present fairly the financial position and results of operations for the periods presented have been made. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Form 10-K filing for the year ended December 31, 2016.2017.
 
2.  
Liquidity and Going Concern
 
Our condensed consolidated financial statements for the sixthree months ended June 30,March 31, 2018 and 2017, and 2016, were prepared assuming that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of issuance of these consolidated financial statements. Continued low oil and natural gas prices during 20162017 and 20172018 have had a significant adverse impact on our business, and as a result of our financial condition, substantial doubt exists that we will be able to continue as a going concern.
 
As of June 30, 2017,March 31, 2018, and December 31, 2016,2017, the Company has a working capital deficit of approximately $4,732,000$3,205,000 and $6,629,000,$3,122,000, respectively, primarily due to the classification of our line of credit as a current liability. Citibank is in a first lien position on all of our properties. On December 1, 2015, Citibank lowered our borrowing base from $11,000,000 to $5,500,000 and lowered it again to $2,761,632 on December 29, 2017. The line of credit provides for certain financial covenants and ratios measured quarterly which include a current ratio, leverage ratio, and interest coverage ratio requirements.  The Company is out of compliance with all three ratios as of June 30, 2017,March 31, 2018, and we do not expect to regain compliance in 2017.2018.  A Forbearance Agreement was executed in October 2016 and amended on December 29, 2017, and March 30, 2018, as discussed below.
Citibank is in a first lien position on all our properties. We are current on all interest payments but Citibank lowered our borrowing base from $11,000,000 to $5,500,000 on December 1, 2015. During the three months ended June 30, 2017, the Company sold non-producing and non-economic assets in Lea County, New Mexico, and used $2,115,000 of the proceeds to pay toward the principal balance of our line of credit to cure our borrowing base deficiency. Our loan balance is $4,363,333 as of June 30, 2017.
 
In October 2016, we executed a sixth amendment to the original loan agreement, which provides for Citibank’s forbearance from exercising remedies relating to the current defaults including the principal payment deficiencies. The Forbearance Agreement runsran through January 1, 2018, and requiresrequired that we make a $500,000 loan principal pay down by September 30, 2017, and adhere to other requirements including weekly cash balance reports, quarterly operating reports, monthly accounts payable reports and that we pay all associated legal expenses. Furthermore, under the agreement Citibank may sweep any excess cash balances exceeding a net amount of $800,000 less equity offering proceeds, which will be applied towards the outstanding principal balance. The Company paid $2,115,000 toward
5
FieldPoint Petroleum Corporation
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On December 29, 2017, we executed a seventh amendment to the original loan agreement and first amendment to the forbearance, which reduced our borrowing base to our current loan balance of $2,761,632 and it provided for Citibank’s forbearance from exercising remedies relating to the current defaults including the principal balance inpayment deficiencies. The Forbearance Agreement ran through March 31, 2018, and required that we adhere to certain reporting requirements such as weekly cash reports and pay all of the fees and expenses of the Lender’s counsel invoiced on or before the effective date. On March 30, 2018, we executed an eighth amendment to the original loan agreement and second amendment to the forbearance which extends it to June 2017.

30, 2018. The terms of the second amendment remain the same as under the first amendment to the forbearance.
 
To mitigate our current financial situation, we are taking the following steps. We are actively meeting with investors for possible equity investments, including business combinations. We filedare continuing our effort to identify and market all possible non-producing assets in our portfolio to maximize cash in-flows while minimizing a new shelf registration statement on Form S-3 that was effective August 15, 2016, to permit the future saleloss of equity securities, including a limited at the market (ATM) capital raise. The shelf registration statement will be effective for a period of three years from its effective date; provided, however, if the Company’s common stock is delisted from the NYSE American (formerly NYSE MKT) due to its non-compliance with continued listing requirements (see disclosures below), the Company will no longer be eligible to use Form S-3 and will be required to withdraw its shelf registration statement.cash flow. We are also investigating other possible sources of capital.
On August 12, 2016, the Company entered into a binding Stock and Mineral Purchase Agreement (the “SMPA”) with HFT Enterprises, LLC (the “Buyer”), to provide liquidity to the Company. The Buyer purchased newly-issued shares of common stock of the Company equal to 19.9% of the total number of issued and outstanding shares of the Company,refinance our debt as measured on the date of the Agreement, for a price of $0.45 per share (the shares to be purchased, the “Shares”). In November 2016, the Buyer purchased for gross proceeds of $398,053 paid in consideration of 884,564 shares of unregistered common stock. In December 2016, the Buyer purchased for gross proceeds of $199,027 paid in consideration of 442,282 shares of unregistered common stock. The remaining 442,282 shares of the second tranche were purchased in January 2017 for gross proceeds of $199,027 paid in consideration of 442,282 shares of unregistered common stock. Euro Pacific Capital, Inc. acted as the placement agent and garnered a fee of 5%.
The SMPA also granted to the Buyer, a related party after the purchase of the stock discussed above, the right to purchase an undivided 100% working interest on or before December 31, 2016, in the Company’s Elkhorn and JC Kinney leases in the Big Muddy Oil Field in Converse County, Wyoming for a purchase price of $430,000. The SMPA was amended on January 9, 2017, to add the right to the Buyer to purchase an undivided 100% of working interest in the mineral lease covering the Quinoco Sulimar Field in Chaves County, New Mexico, in lieu of the Wyoming property, for a purchase price to be determined. Additionally, it extended the purchase date of either property to on or before April 1, 2017. The Board of Directors voted March 24, 2017, to extend the agreement for the Quinoco Sulimar Field only to June 30, 2017. The agreement has been verbally extended to August 31, 2017. As a condition of the purchase, all proceeds from the sale of the working interest must be usedwe continue to pay down the Company’s indebtedness owedour outstanding senior debt balance with a minimal effect on cash flow and our assets by selling properties that are non-producing or low producing. Finally, we are continuing discussion with various individuals and groups that could be willing to Citibank. Other conditions include the requirement that Citibank will have agreedprovide capital to extend the maturity date on the Company’s current indebtedness owed until December 31, 2017, which was accomplished in the Forbearance Agreement discussed above. Also, the Buyer has been granted the right to nominate one memberfund operations and growth of the Board of Directors.Company.
 
On May 11, 2016, the Company received notification from the NYSE American (formerly NYSE MKT) that it was noncompliant with the NYSE American (formerly NYSE MKT) continued listing standards; specifically, Section 1003(a)(i) of the Company Guide related to financial impairment. The Company’s stockholders’ equity is below the $2.0 million threshold required for listed companies that have reported losses from continuing operations in two of its three most recently completed fiscal years. The Company submitted a plan to regain compliance; whereupon NYSE Regulation reviewed the plan and determined to accept it, as supplemented, and granted a plan period through November 13, 2017, to regain compliance, the targeted completion date. NYSE Regulation staff will review the Company periodically for compliance with the initiatives outlined in the plan.
Additionally, on April 28, 2017, the Company received notification from the NYSE American (formerly NYSE MKT) that it was noncompliant with the NYSE American (formerly NYSE MKT) continued listing standards; specifically, Section 1003(a)(ii) of the Company Guide.  The Company’s stockholders’ equity has been below the $2.0 million threshold required for listed companies that have reported losses from continuing operations in two of its three most recently completed fiscal years (Section 1003(a)(i)) and is now below the $4.0 million threshold required for listed companies that have reported losses from continuing operations in three of its four most recent fiscal years (Section 1003(a)(ii)). The Company was given the opportunity to and submitted a supplement to the Plan to address how it intends to regain compliance with Section 1003(a)(ii).  The Plan period to regain compliance with all of the continued listing standards by November 13, 2017, remain the same. The Company will be subject to periodic reviews by the Exchange. If the Company is not in compliance with the NYSE MKT continued listing standards byand received an official delisting notice on November 13,16, 2017, or if the Company does not make progress consistent with the Plan, the Exchange will initiate delisting procedures as appropriate. If our initiatives to regain compliance are not successful and the Company is delisted from the NYSE American (formerly NYSE MKT), it could have a significant adverse impact on our ability to raise additional capital.

capital since we are no longer eligible to register securities on Form S-3 or undertake at-the-market offerings under Rule 415.
 
Our warrants listed onwere also delisted from the NYSE American (formerly NYSE MKT) as FPP WS expireon November 17, 2017, and then expired March 23, 2018. If
Our shares are now traded on the warrants trade at sub-penny before that date,over-the-counter market under the NYSE will immediately suspendsymbol FPPP which is more volatile than the Exchange and movemay result in a continued diminution in value of our shares. The delisting also resulted in the loss of other advantages to delist the warrants.an exchange listing, including marginability, blue sky exemptions and others.
 
Our ability to continue as a “going concern” is dependent on many factors, including, among other things, our ability to comply with the covenants in our existing debt agreements, our ability to cure any defaults that occur under our debt agreements or to obtain waivers or forbearances with respect to any such defaults, and our ability to pay, retire, amend, replace or refinance our indebtedness as defaults occur or as interest and principal payments come due. Our ability to continue as a going concern is also dependent on raising additional capital to fund our operations and ultimately on generating future profitable operations. While we are actively involved in seeking new sources of working capital, there can be no assurance that we will be able to raise sufficient additional capital or to have positive cash flow from operations to address all of our cash flow needs. Additional capital could be on terms that are highly dilutive to our shareholders. If we are not able to find alternative sources of cash or generate positive cash flow from operations, our business and shareholders may be materially and adversely affected.
 
3.   
Recently Issued Accounting Pronouncements
 
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers”. Under this new standard, revenue is recognized at the time goods or services are transferred to a customer for the amount of consideration the entity expects to be entitled in exchange for the specific goods or services. Additional disclosures will be required to describe the nature, amount, timing, and uncertainty of revenue and cash flows from contracts with customers. The Company currently follows the sales method of accounting for oil, NGL and natural gas production, which is generally consistent with the revenue recognition provision of the new standard. However, we are currently evaluating the impact, if any, that this standard will have on our consolidated financial statements. Our evaluation process includes (i) review of revenue contracts and transactions and (ii) assessing the impact this guidance will have on our processes and internal controls. This evaluation will continue throughout 2017, and we are currently planning to adopt this new standard January 1, 2018.
In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases”, to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This authoritative guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. The Company is currently evaluating the provisions of this guidance and assessing its impact in relation to the Company's leases.
 
In November 2016,
6
FieldPoint Petroleum Corporation
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4.   
Revenue Recognition

On January 1, 2018, the FASB issuedCompany adopted Accounting Standards Update No. 2016-18, “StatementCodification (“ASC”) Topic 606 “Revenue from Contracts with Customers” (“ASC 606”) using the modified retrospective approach, which only applies to contracts that were not completed as of Cash Flows: Restricted Cash”,the date of the application. The adoption did not require an adjustment to require amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The guidance is effectiveoperating retained earnings for the annual period ending after December 15, 2017, and interim periods within those fiscal years, using a retrospective transition method to each period presented. The Company plans to adopt the new standard December 31, 2017,cumulative effect adjustment and does not expect anyhave a material impact on ourthe Company’s ongoing consolidated balance sheet, statement of operations, statement of stockholders’ equity or statement of cash flows.
 
The Company recognizes revenues from the sales of oil, natural gas and natural gas liquids (“NGL”) to its customers in accordance with the five-step revenue recognition model prescribed in ASC 606. Specifically, revenue is recognized when the Company’s performance obligations under contracts with customers (purchasers) are satisfied, which generally occurs with the transfer of control of the products to the purchasers. Control is generally considered transferred when the following criteria are met: (i) transfer of physical custody, (ii) transfer of title, (iii) transfer of risk of loss and (iv) relinquishment of any repurchase rights or other similar rights. Given the nature of the sold, revenue is recognized at a point in time based on the amount of consideration the Company expects to receive in accordance with the price specified in the contracts. Consideration under the marketing contracts is typically received from the purchaser one to two months after production and, as a result, the Company is required to estimate the amount of production that was delivered to the purchaser and the price that will be received for the sale of the product. The Company records the differences between estimates and the actual amounts received for product sales once payment is received from the purchaser. Such differences have historically not been significant as the Company uses knowledge of its properties and their historical performance, spot market prices and other factors as the basis for these estimates. At March 31, 2018, the Company had receivables related to contracts with customers of $360,306.
The following table summarizes revenue by major source for the three months ended March 31, 2018 and 2017, and there was no impact related to the adoption of ASC 606 as compared to the previous revenue recognition standard, ASC Topic 605, “Revenue Recognition” (“ASC 605”):
 
 
Three Months Ended
 
 
 
March 31,
 
 
 
2018
 
 
2017
 
Revenues
 
 
 
 
 
 
Oil
 $425,008 
 $720,673 
Natural Gas and NGL
  40,839 
  94,055 
Total oil, natural gas and NGL
 $465,847 
 $814,728 
4. Oil Contracts. Under its oil sales contracts, the Company sells oil at the delivery point specified in the contract and collects an agreed-upon index price, net of pricing differentials. At the delivery point, the purchaser takes custody, title and risk of loss of the product and, therefore, control as defined under ASC 606 passes at the delivery point. The Company recognizes revenue at the net price received when control transfers to the purchaser.
Natural Gas and NGL Contracts. The majority of the Company’s natural gas and NGL is sold at the lease location, which is generally when control of the natural gas and NGL has been transferred to the purchaser, and revenue is recognized as the amount received from the purchaser.
The Company does not disclose the value of unsatisfied performance obligations under its contracts with customers as it applies the practical exemption in accordance with ASC 606. The exemption, as described in ASC 605-10-50-14(a), applies to variable consideration that is recognized as control of the product is transferred to the purchaser. Since each unit of product represents a separate performance obligation, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required.
7
FieldPoint Petroleum Corporation
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5.
Oil and Natural Gas Properties
 
No wells were drilled or completed during the three or six months ended June 30, 2017March 31, 2018 or 2016.
In2017. The Company made no purchases of oil and natural gas properties during the three monthsyears ended June 30, 2017, the Company sold its net interest in the Hermes, Cronos and Mercury wells. These wells were not economic to our interests. We also sold our net interest in the unproved Bilbrey acreage that was held by production. The gross proceeds from the sale of our net interest in these properties was $2,145,000 and we recognized a gain of $2,030,477. We continue to evaluate our portfolio for other properties to divest in order to regain compliance with our bank’s debt covenants and with the NYSE American (formerly NYSE MKT).March 31, 2018 or 2017.
 
On a quarterly basis, the Company compares our most recent engineering reports to forward strip pricing as of the end of the quarter and production to determine impairment charges, if needed, in order to write down the carrying value of certain properties to fair value. In order to determine the amounts of the impairment charges, the Company compares net capitalized costs of proved oil and natural gas properties to estimated undiscounted future net cash flows using management's expectations of economically recoverable proved reserves. If the net capitalized cost exceeds the undiscounted future net cash flows, the Company impairs the net cost basis down to the discounted future net cash flows, which is management's estimate of fair value. In order to determine the fair value, the Company estimates reserves, future operating and development costs, future commodity prices and a discounted cash flow model utilizing a 10 percent discount rate. The estimates used by management for the fair value measurements utilized in this review include significant unobservable inputs, and therefore, the fair value measurements are classified as Level 3 of the fair value hierarchy. Based on its current circumstances, the Company has not recorded any impairment charges during the three or six months ended June 30, 2017.March 31, 2018.

 
5.       6.   
Earnings Per Share
 
Basic earnings per share are computed based on the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share take common stock equivalents (such as options and warrants) into consideration using the treasury stock method. The Company distributed warrants as a dividend to stockholders as of the record date, March 23, 2012. The Company had 7,177,010 warrants outstanding with an exercise price of $4.00 at June 30, 2017 and 2016.December 31, 2017. The warrants expired March 23, 2018. The dilutive effect of the warrants for the three months ended June 30,March 31, 2018 and 2017, and 2016, is presented below.
 
 
For the Three Months Ended
June 30,
 
 
For the Six Months Ended
June 30,
 
 
For the Three Months Ended
March 31,
 
 
2017
 
 
2016
 
 
2017
 
 
2016
 
 
2018
 
 
2017
 
 
 
 
Net income (loss)
 $1,747,186 
 $(587,433)
 $1,338,135 
 $(1,447,960)
Net loss
 $(210,773)
 $(409,051)
    
    
Weighted average common stock outstanding
  10,669,229 
  8,890,101 
  10,643,571 
  8,890,046 
  10,669,229 
  10,617,630 
Weighted average dilutive effect of stock warrants
  - 
  - 
Dilutive weighted average shares
  10,669,229 
  8,890,101 
  10,643,571 
  8,890,046 
  10,669,229 
  10,617,630 
    
    
Earnings (loss) per share:
    
Loss per share:
    
Basic
 $0.16 
 $(0.07)
 $0.13 
 $(0.16)
 $(0.02)
 $(0.04)
Diluted
 $0.16 
 $(0.07)
 $0.13 
 $(0.16)
 $(0.02)
 $(0.04)
 
6.       7. 
Income Taxes
 
ForOn December 22, 2017, the threePresident of the United States signed into law what is informally called the Tax Cuts and six months ended June 30,Jobs Act of 2017 (the “Act”), a comprehensive U.S. tax reform package that, effective January 1, 2018, among other things, lowered the corporate income tax rate from 35% to 21%, repealed the Alternative Minimum Tax and 2016,made the Company’sAMT credit refundable. Accounting rules require companies to recognize the effects of changes in tax laws and tax rates on deferred tax assets were reducedand liabilities in full bythe period in which the new legislation was enacted. We recorded a valuation allowance due tototal income tax benefit of $157,227 in the year ended December 31, 2017, the amount of our determinationAMT credit that will be refundable in tax years beginning after 2017. The refund is reported as a long-term asset in other assets on the balance sheet.

8
FieldPoint Petroleum Corporation
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company also reassessed the realizability of our deferred tax assets but determined that it iscontinues to be more likely than not that some or all of the deferred tax assets will not be realizedutilized in the future.future and continue to record a full valuation allowance of the deferred tax assets. As a result, the Company has not recognized anno income tax benefit associated with its net losswas recognized by the Company for the three or six months ended June 30, 2016. ForMarch 31, 2018 and the three and six monthsyear ended June 30, 2017, the Company recognized $3,846 in state income tax expense, which is less than 1% income tax rate. This rate differs from the statutory federal and state rate due to net operating losses from prior years.December 31, 2017. The Company had no income tax expense for the three or six months ended June 30, 2016.March 31, 2018 and 2017.
 
7.       8.  
Line of Credit
 
The Company has a line of credit with a bank with a borrowing base of $5,500,000$2,761,632 at June 30, 2017,March 31, 2018, and December 31, 2016.2017. The amount outstanding under this line of credit was $6,478,333 which is $978,333 over the borrowing base$2,761,632 at March 31, 2018, and December 31, 2016. During the three months ended June 30, 2017, the company sold non-producing and non-economic assets in Lea County, New Mexico, and used $2,115,000 of the proceeds to pay toward the principal balance of our line of credit to cure our borrowing base deficiency. Our loan balance is $4,363,333 as of June 30, 2017. Although our borrowing base is $5,500,000, we cannot draw additional amounts on the line of credit while we remain in technical default on the loan. We plan to continue evaluating our portfolio for non-producing assets which can be liquidated to reduce debt further.
 

The sixth amendment to the originalamended loan agreement requires quarterly interest-only payments until maturity on January 1, 2018.expiration. The interest rate is based on a LIBOR or Prime option. The Prime option provides for the interest rate to be prime plus a margin ranging between 1.75% and 2.25% and the LIBOR option to be the 3-month LIBOR rate plus a margin ranging between 2.75% and 3.25%, both depending on the borrowing base usage. Currently, we have elected the LIBOR interest rate option in which our interest rate was approximately 4%5% as of June 30, 2017,March 31, 2018 and December 31, 2016, respectively.2017. The commitment fee is .50% of the unused borrowing base. Citibank is in a first lien position on all our properties and assets.
 
The line of credit provides for certain financial covenants and ratios which include a current ratio that cannot be less than 1.10:1.00, a leverage ratio that cannot be more than 3.50:1.00, and an interest coverage ratio that cannot be less than 3.50:1.00. The Company is out of compliance with all three ratios as of June 30, 2017,March 31, 2018 and December 31, 2016,2017, and is in technical default of the agreement. Citibank is in a first lien position on all our properties and assets.
 
In October 2016, we executed a sixth amendment to the original loan agreement, which provides for Citibank’s forbearance from exercising remedies relating to the current defaults including the principal payment deficiencies. The Forbearance Agreement runsran through January 1, 2018, and requiresrequired that we make a $500,000 loan principal pay down by September 30, 2017, and adhere to other requirements including weekly cash balance reports, quarterly operating reports, monthly accounts payable reports and that we pay all associated legal expenses. Furthermore, under the agreement Citibank may sweep any excess cash balances exceeding a net amount of $800,000 less equity offering proceeds, which will be applied towards the outstanding principal balance. The Company paid $2,115,000 toward
On December 29, 2017, we executed a seventh amendment to the original loan agreement and first amendment to the forbearance, which reduced our borrowing base to our current loan balance of $2,761,632 and it provided for Citibank’s forbearance from exercising remedies relating to the current defaults including the principal balance inpayment deficiencies. The Forbearance Agreement ran through March 31, 2018, and required that we adhere certain reporting requirements such as weekly cash reports and pay all of the fees and expenses of the Lender’s counsel invoiced on or before the effective date. On March 30, 2018, we executed an eighth amendment to the original loan agreement and second amendment to the forbearance which extends it to June 2017.30, 2018. The terms of the second amendment remain the same as under the first amendment to the forbearance.
 
8.       
9
FieldPoint Petroleum Corporation
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9.  
Stockholders’ Equity
 
There were 7,177,010We approved a stock warrant dividend of one warrant per one common share in March 2012. The warrants withhad an exercise price of $4.00 outstanding at June 30, 2017. There have been noand were exercisable over 6 years from the record date. Our warrants issued or exercised duringwere delisted from the NYSE American (formerly NYSE MKT) on November 17, 2017, and then expired on March 23, 2018. The following table summarizes the warrant activity for the three and six months ended June 30, 2017. The weighted average expected life of the warrants was less than one year at June 30, 2017.ending March 31, 2018:
 
As a signing bonus to his “at will” employment agreement,
 
 
Warrants
 
 
Weighted Average Exercise Price
 
 
Weighted Average Expected Life (Years)
 
 
 
 
 
 
 
 
 
 
 
Outstanding, December 31, 2017
  7,177,010 
 $4.00 
  0.25 
Issued
  - 
  - 
    
Exercised
  - 
  - 
    
Exercised during temporary modification period
  - 
  - 
    
Expired
  (7,177,010)
  - 
    
Outstanding, March 31, 2018
  - 
 $- 
  - 

Phillip Roberson, as President and CFO, received a total of 50,000 shares of common stock that vested over a three year period beginning on July 1, 2014. On January 1, 2016, 10,000 shares were vested and issued. The final 10,000 shares vested at the last six-month anniversary date on July 1, 2016. The fair value of this stock grant was $275,000 on July 1, 2014, of which $13,750 was recognized as non-cash stock compensation expense during the six months ended June 30, 2016. Mr. Roberson was awarded, as part of his annual compensation, on his third anniversary date 5,000 shares, and will receive on his fourth anniversary date 6,000 shares, on his fifth anniversary date 7,000 shares, on his sixth anniversary date 8,000 shares, on his seventh anniversary date 9,000 shares, and each annual anniversary date thereafter 10,000 shares. However, Mr. Roberson declined the 5,000 shares that would have been awarded on this third anniversary date on July 1, 2017. Mr. Roberson’s contract was extended by the Compensation Committee to July 1, 2018.
 
On August 12, 2016, the Company entered into a binding Stock and Mineral Purchase Agreement (the “SMPA”) with HFT Enterprises, LLC (the “Buyer”) in order to provide liquidity to the Company. The Buyer purchased newly-issued restricted shares of common stock of the Company equal to 19.9% of the total number of issued and outstanding shares of the Company, as measured on the date of the Agreement, for a price of $0.45 per share. In 2016, the Buyer purchased for gross proceeds of $597,080 paid in consideration of 1,326,846 shares of unregistered common stock. The remaining shares were purchased in January 2017, for gross proceeds of $199,027 paid in consideration of 442,282 shares of unregistered common stock. Costs incurred by the Company to issue the stock was $11,807 for the six monthsyear ended June 30,December 31, 2017.

The SMPA also granted to the Buyer, a related party after the purchase of the stock, discussed above, the right to purchase an undivided 100% working interest on or before December 31, 2016, in the Company’s Elkhorn and JC Kinney leases in the Big Muddy Oil Field in Converse County, Wyoming for a purchase price of $430,000. The SMPA was amended on January 9, 2017, to add the right to the Buyer to purchase an undivided 100% of working interest in the mineral lease covering the Quinoco Sulimar Field in Chaves County, New Mexico, in lieu of the Wyoming property, for a purchase price to be determined. Additionally, it extended the purchase date of either property to on or before April 1, 2017. The Board of Directors voted March 24, 2017, to extend the agreement for the Quinoco Sulimar Field only to June 30, 2017. The agreement has been verbally extended to August 31, 2017. As a condition of the purchase, all proceeds from the sale of the working interest must be used to pay down the Company’s indebtedness owed to Citibank. Other conditions include the requirement that Citibank will have agreed to extend the maturity date on the Company’s current indebtedness owed until December 31, 2017, which was accomplished in the Forbearance Agreement discussed above. Also, the Buyer has been granted the right to nominate one member of the Board of Directors.
 
9.       
Subsequent Events
10. Related Party
 
On July 20, 2017,During 2018, the Company announcedreceived netted Joint Interest Billing statements from Trivista Operating, LLC for approximately $78,000.  This amount was netted against disputed outstanding invoices which Trivista claims were acquired from the prior operator.  Trivista Operating, LLC is believed to be controlled by Natale Rea, who owns approximately 6.98% of the Company’s common stock through control of Ontario Inc. and Natale Rea (2013) family trust.
11. Legal Proceedings
As previously disclosed in the Company’s Current Report on Form 8-K dated May 8, 2018, the Company is a party to a civil action captionedTrivista Oil Company, LLC v. Bass Petroleum, Inc. and Fieldpoint Petroleum Corporation, Cause No. 16,539in the District Court of Lee County, Texas, 335 Judicial District (the “Trivista Litigation”). Trivista filed suit for non-payment of outstanding disputed invoices of $107,000 plus attorney fees and court costs on February 26, 2018. Trivista Operating LLC is controlled by one of our major shareholders, Natale Rea (2013) Trust.The Company disputes that it has any liability to the plaintiff in that action and intends to vigorously defend same.
12. Subsequent Events
On May 11, 2018, we closed on the sale of an additional 401our Buchanan wells and associated acreage, for approximately $370,000. The sale included approximately 40 net undeveloped acres of non-producing leaseholdon our Buchanan leases in LeaMidland County, New Mexico, for $1,200,000. The Company used $1,000,000 of the proceeds to reduce our credit lineTexas, along with Citibank to $3,363,333 and the additional $200,000 was reserved for general corporate purposes.associated working interest from four gross wells.
 


 
PART I
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The following discussion should be read in conjunction with the Company’s Condensed Consolidated Financial Statements, and respective notes thereto, included elsewhere herein. The information below should not be construed to imply that the results discussed herein will necessarily continue into the future or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of the management of FieldPoint Petroleum Corporation.
 
General
 
FieldPoint Petroleum Corporation derives its revenues from its operating activities including sales of oil and natural gas and operating oil and natural gas properties. The Company's capital for investment in producing oil and natural gas properties has been provided by cash flow from operating activities and from bank financing. The Company categorizes its operating expenses into the categories of production expenses and other expenses.
 
The Company has temporarily suspended drilling and exploration activities due to low commodity prices and has no near-term plans at this time to continue development of the Taylor Serbin field. Furthermore, we plan to limit any remedial work that does not increase production and reduce general and administrative costs as much as possible until commodity pricing improves. As we are out of compliance with our revolving line of credit and our borrowing base has been decreased, we do not expect to reinstate our drilling programs until commodity prices and our cash flow improve.
 
Going concern
 
We had net incomelosses of $1,338,135$210,773 and $409,051 for the sixthree months ended June 30,March 31, 2018 and 2017, due to the sale of non-producingrespectively and non-economic assets in Lea County, New Mexico, but continue to have negative operating cash flow. We incurred a net loss of $1,447,960 for the six months ended June 30, 2016. We expect that the Company will continue to experience operating losses and negative cash flow for so long as commodity prices remain depressed. The audit report of our independent registered public accountants covering our financial statements for the fiscal years ended December 31, 20162017 and 2015,2016, include an explanatory paragraph expressing substantial doubt as to our ability to continue as a going concern. The financial statements have been prepared "assuming that the Company will continue as a going concern."concern”. Our ability to continue as a going concern is dependent on raising additional capital to fund our operations and ultimately on generating future profitable operations. We filed a new shelf registration statement on Form S-3 which was declared effective by the SEC on August 15, 2016, which will permit the future sale of equity securities, including a limited at the market (ATM) capital raise. We are investigating other sources of capital. There can be no assurance that we will be able to raise sufficient additional capital or have positive cash flow from operations to address all of our cash flow needs. If we are not able to find alternative sources of cash or generate positive cash flow from operations, our business and shareholders may be materially and adversely affected.
 
On August 12, 2016, the Company entered into a binding Stock and Mineral Purchase Agreement (the “SMPA”) with HFT Enterprises, LLC (the “Buyer”) in order to provide liquidity to the Company. The Buyer purchased newly-issued shares of common stock of the Company equal to 19.9% of the total number of issued and outstanding shares of the Company, as measured on the date of the Agreement, for a price of $0.45 per share (the shares to be purchased, the “Shares”). In November 2016, the Buyer purchased for gross proceeds of $398,053 paid in consideration of 884,564 shares of unregistered common stock. In December 2016, the Buyer purchased for gross proceeds of $199,027 paid in consideration of 442,282 shares of unregistered common stock. The remaining 442,282 shares were purchased in January 2017, for gross proceeds of $199,027 paid in consideration of 442,282 shares of unregistered common stock. Euro Pacific Capital, Inc. acted as the placement agent and garnered a fee of 5%.

The SMPA also granted to the Buyer,buyer, a related party after the purchase of the stock, discussed above, the right to purchase an undivided 100% working interest on or before December 31, 2016, in the Company’s Elkhorn and JC Kinney leases in the Big Muddy Oil Field in Converse County, Wyoming for a purchase price of $430,000. The SMPA was amended on January 9, 2017, to add the right to the Buyer to purchase an undivided 100% of working interest in the mineral lease covering the Quinoco Sulimar Field in Chaves County, New Mexico, in lieu of the Wyoming property, for a purchase price to be determined. Additionally, it extended the purchase date of either property to on or before April 1, 2017. The Board of Directors voted March 24, 2017, to extend the agreement for the Quinoco Sulimar Field only to June 30, 2017. The agreement has been verbally extended to August 31, 2017. As a condition of the purchase, all proceeds from the sale of the working interest must be used to pay down the Company’s indebtedness owed to Citibank. Other conditions include the requirement that Citibank will have agreed to extend the maturity date on the Company’s current indebtedness owed until December 31, 2017, which was accomplished in the Forbearance Agreement discussed above. Also, the Buyer has been granted the right to nominate one member of the Board of Directors.
 
On May 11, 2016, the Company received notification from the NYSE American (formerly NYSE MKT) that it was noncompliant with the NYSE American (formerly NYSE MKT) continued listing standards; specifically, Section 1003(a)(i) of the Company Guide related to financial impairment. The Company’s stockholders’ equity is below the $2.0 million threshold required for listed companies that have reported losses from continuing operations in two of its three most recently completed fiscal years.The Company submitted a plan to regain compliance; whereupon NYSE Regulation reviewed the plan and determined to accept it, as supplemented, and granted a plan period through November 13, 2017, to regain compliance, the targeted completion date. NYSE Regulation staff will review the Company periodically for compliance with the initiatives outlined in the plan.
 
Additionally, on April 28, 2017, the Company received notification from the NYSE American (formerly NYSE MKT) that it was noncompliant with the NYSE American (formerly NYSE MKT) continued listing standards; specifically, Section 1003(a)(ii) of the Company Guide.  The Company’s stockholders’ equity has been below the $2.0 million threshold required for listed companies that have reported losses from continuing operations in two of its three most recently completed fiscal years (Section 1003(a)(i)) and is now below the $4.0 million threshold required for listed companies that have reported losses from continuing operations in three of its four most recent fiscal years (Section 1003(a)(ii)). The Company was given the opportunity to and submitted a supplement to the Plan to address how it intends to regain compliance with Section 1003(a)(ii).  The Plan period to regain compliance with all of the continued listing standards by November 13, 2017, remain the same. The Company will be subject to periodic reviews by the Exchange. If the Company is not in compliance with the continued listing standards by November 13, 2017, or if the Company does not make progress consistent with the Plan, the Exchange will initiate delisting procedures as appropriate. If our initiatives to regain compliance are not successful and the Company is delisted from the NYSE American (formerly NYSE MKT), iton November 16, 2017, which could have a significant adverse impact on our ability to raise additional capital.capital since we are no longer eligible to register securities on Form S-3 or undertake at-the-market offerings under Rule 415.
 
DuringOur shares are now traded on the three months ended June 30, 2017,over-the-counter market under the company sold non-producingsymbol FPPP which is more volatile than the Exchange and non-economic assetsmay result in Lea County, New Mexico, and used $2,115,000 of the proceeds to pay toward the principal balancea continued diminution in value of our lineshares and resulted in the loss of creditother advantages to cure our borrowing base deficiency. Our loan balance is $4,363,333 as of June 30, 2017. We plan to continue evaluating our portfolio for non-producing assets which can be liquidated to reduce debt further.an exchange listing, including marginability, blue sky exemptions and others.
 
The Company’s plans to mitigate our current financial situation and more details about the SMPA are discussedis in Note 2 – Liquidity and Going Concern in the financial statements for the quarter ended June 30, 2017.

March 31, 2018.
 
Results of Operations
 
Comparison of three months ended June 30, 2017,March 31, 2018, to the three months ended June 30, 2016March 31, 2017
 
 
Quarter Ended June 30,
 
 
Quarter Ended March 31,
 
 
2017
 
 
2016
 
 
2018
 
 
2017
 
Revenue:
 
 
 
 
 
 
Oil sales
 $789,683 
 $700,516 
 $425,008 
 $720,673 
Natural gas sales
  91,292 
  50,519 
  40,839 
  94,055 
Total oil and natural gas sales
 $880,975 
 $751,035 
 $465,847 
 $814,728 
    
    
Sales volumes:
    
    
Oil (Bbls)
  15,776 
  17,740 
  7,614 
  14,938 
Natural gas (Mcf)
  31,925 
  24,214 
  13,867 
  30,001 
Total (BOE)
  21,096 
  21,776 
  9,925 
  19,938 
    
    
Average sales prices:
    
    
Oil ($/Bbl)
 $50.06 
 $39.49 
 $55.82 
 $48.24 
Natural gas ($/Mcf)
  2.86 
  2.09 
  2.95 
  3.14 
Total ($/BOE)
 $41.76 
 $34.49 
 $46.94 
 $40.86 
    
    
Costs and expenses ($/BOE)
    
    
Production expense (lifting costs)
 $28.24 
 $31.28 
 $23.32 
 $35.71 
Depletion and depreciation
  10.12 
  14.13 
  10.15 
  7.85 
Accretion of discount on asset retirement obligations
  1.23 
  1.24 
  2.72 
  1.30 
General and administrative
  13.27 
  13.29 
  31.20 
  14.24 
Total
 $52.86 
 $59.94 
 $67.39 
 $59.10 

 
Oil and natural gas sales revenues increased 17%decreased 43% or $129,940$348,881 to $880,975$465,847 for the three months ended June 30, 2017,March 31, 2018, from the comparable 20162017 period. Average oil sales prices increased 27%16% to $50.06$55.82 for the three months ended June 30, 2017,March 31, 2018, compared to $39.49$48.24 for the period ended June 30, 2016.March 31, 2017. Average natural gas sales prices increased 37%decreased 6% to $2.86$2.95 for the three months ended June 30, 2017,March 31, 2018, compared to $2.09$3.14 for the period ended June 30, 2016.March 31, 2017. Decreased oil and natural gas production, due in part to the sale of fields that were noneconomic, and lower commodity prices for natural gas accounted for a decrease in revenue of approximately $78,000. Increased natural gas production$407,000. Higher commodity prices for oil accounted for an increase in revenue of approximately $16,000. Higher commodity prices for oil and natural gas accounted for an increase in revenue of approximately $192,000.$58,000. We have temporarily suspended drilling and exploration activity due to low commodity prices and expect our volumes to decline in the coming quarters until drilling and exploration activities are re-established.
 
Production expense decreased 13%67% or $85,446$480,394 to $595,643$231,481 for the three months ended June 30, 2017,March 31, 2018, from the comparable 20162017 period. This was primarily due to a decrease in unexpected workover activity and operating costs.costs associated with properties sold in 2017. Lifting costs per BOE decreased $3.04$12.39 to $28.24$23.32 for the 20172018 period compared to $31.28$35.71 for the three months ended June 30, 2016,March 31, 2017, due mainly to decreased workover activity and general decreases in costs and lease operating expenses.expenses associated with properties sold in 2017, which had higher than average operating costs per BOE.. We anticipate lease operating expenses to decline slightly over the following quarters due to a cessation of new well activity as a result of low commodity pricing.decrease in costs and lease operating expenses associated with properties sold in 2017, which had higher than average operating costs per BOE and less anticipated work over activity.
 
Depletion and depreciation decreased 31%36% or $94,246$55,800 to $213,554$100,754 for the three months ended June 30, 2017,March 31, 2018, versus $307,800$156,554 in the 20162017 comparable period. This was primarily due to a lower depletable base and lower production volumes during the three months ended June 30, 2017.

March 31, 2018.
 
General and administrative costs decreased 3%increased 9% or $9,431$25,619 to $279,934$309,627 for the three months ended June 30, 2017,March 31, 2018, from the three months ended June 30, 2016.March 31, 2017. This was primarily attributable to a decreasean increase in non-officer employee salaries and professional services. At this time, the Company anticipates general and administrative expenses to remain stable or decrease slightly in the coming quarters.
 
Other income,expense, net for the quarter ended June 30, 2017,March 31, 2018, was $1,966,472,$34,873, which included gain on saleinterest expense of oil and natural gas properties of $2,030,477.$34,888. Other expense, net for the quarter ended June 30, 2016, was $62,759. Interest expense was $64,277 and $63,542 for the three months ended June 30, 2017 and 2016, respectively.
Results of Operations
Comparison of six months ended June 30, 2017, to the six months ended June 30, 2016
 
 
Six Months Ended June 30,
 
 
 
2017
 
 
2016
 
Revenue:
 
 
 
 
 
 
Oil sales
 $1,510,356 
 $1,217,717 
Natural gas sales
  185,347 
  102,057 
Total oil and natural gas sales
 $1,695,703 
 $1,319,774 
 
    
    
Sales volumes:
    
    
Oil (Bbls)
  30,714 
  34,942 
Natural gas (Mcf)
  61,925 
  54,071 
Total (BOE)
  41,035 
  43,954 
 
    
    
Average sales prices:
    
    
Oil ($/Bbl)
 $49.18 
 $34.85 
Natural gas ($/Mcf)
  2.99 
  1.89 
Total ($/BOE)
 $41.32 
 $30.03 
 
    
    
Costs and expenses ($/BOE)
    
    
Production expense (lifting costs)
 $31.86 
 $30.52 
Depletion and depreciation
  9.02 
  14.28 
Accretion of discount on asset retirement obligations
  1.27 
  1.23 
General and administrative
  13.74 
  15.12 
Total
 $55.89 
 $61.15 
Oil and natural gas sales revenues increased 28% or $375,929 to $1,695,703 for the six months ended June 30, 2017, from the comparable 2016 period. Average oil sales prices increased 41% to $49.18 for the six months ended June 30, 2017, compared to $34.85 for the six months ended June 30, 2016. Average natural gas sales prices increased 58% to $2.99 for the six months ended June 30, 2017, compared to $1.89 for the six months ended June 30, 2016. Decreased oil production accounted for a decrease in revenue of approximately $147,000, offset by higher natural gas production of approximately $15,000. Higher commodity prices for oil and natural gas accounted for an increase in revenue of approximately $508,000. We have temporarily suspended drilling and exploration activity due to low commodity prices and expect our volumes to decline in the coming quarters until drilling and exploration activities are re-established.

Production expense decreased 3% or $33,846 to $1,307,518 for the six months ended June 30, 2017, from the comparable 2016 period. This was primarily due to a decrease in unexpected workover activity and operating costs. Lifting costs per BOE increased $1.34 to $31.86 for the 2017 period compared to $30.52 for the six months ended June 30, 2016, due mainly to increased workover activity and general increases in costs and lease operating expenses. We anticipate lease operating expenses to decline slightly over the following quarters due to a cessation of new well activity as a result of low commodity pricing.
Depletion and depreciation decreased 41% or $257,492 to $370,108 for the six months ended June 30, 2017, versus $627,600 in the 2016 comparable period. This was primarily due to a lower depletable base and lower production volumes during the six months ended June 30, 2017.
General and administrative costs decreased 15% or $100,860 to $563,942 for the six months ended June 30, 2017, from the six months ended June 30, 2016. This was primarily attributable to a decrease in salaries and professional services. At this time, the Company anticipates general and administrative expenses to remain stable or decrease slightly in the coming quarters.
Other income, net for the six months ended June 30,March 31, 2017, was $1,897,432, which$69,040 and included gain on saleinterest expense of oil and natural gas properties of $2,030,477. Other expense, net for the six months ended June 30, 2016, was $125,487. Interest expense was $133,331 and $126,832 for the six months ended June 30, 2017 and 2016, respectively.$69,054.
 
Liquidity and Capital Resources
 
Cash flow used in operating activities was $402,843$64,889 for the sixthree months ended June 30, 2017,March 31, 2018, as compared to $552,146$67,811 of cash flow used in operating activities in the comparable 20162017 period. The decrease in cash flows used in operating activities was primarily due to the increasedecrease in oil and natural gas revenuedepletion during the sixthree months ended 2017.March 31, 2018, offset by the change in accounts payable and accrued liabilities between the two periods.
 
Cash flow provided byused in investing activities was $1,818,480$17,094 for the sixthree months ended June 30, 2017, which included proceeds of $2,145,000 from the sale of oil and natural gas properties, offset by $326,520 inMarch 31, 2018, due to additions to oil and natural gas properties and equipment. Cash flow used in investing activities was $79,469$262,148 for the sixthree months ended June 30, 2016,March 31, 2017, due to additions to oil and natural gas properties and equipment.
 
Cash flow used in financing activities was $1,927,780 primarily due to payment of $2,115,000 principal on the long term debt that was partially offset by proceeds of $187,220 from the sale of common stock during the six months ended June 30, 2017. No cash flow was provided by or used in financing activities for the sixthree months ended June 30, 2016.March 31, 2018. Cash flow was provided by financing activities due to the net proceeds of $187,220 from the issuance of 442,282 shares of unregistered stock during the three months ended March 31, 2017.

 
We are out of compliance with the current ratio, leverage ratio, and interest coverage ratio required by our line of credit as of June 30, 2017,March 31, 2018, and are in technical default of the agreement. In October 2016, we executed a sixth amendment to the original loan agreement, which provides for Citibank’s forbearance from exercising remedies relating to the current defaults including the principal payment deficiencies. The Forbearance Agreement runsran through January 1, 2018, and requiresrequired that we make a $500,000 loan principal pay down by September 30, 2017, and adhere to other requirements including weekly cash balance reports, quarterly operating reports, monthly accounts payable reports and pay all associated legal expenses. Furthermore, under the agreement Citibank may sweep any excess cash balances exceeding a net amount of $800,000 less equity offering proceeds, which will be applied towards the outstanding principal balance. The Company paid $2,115,000 toward the principal balance in June 2017.

 
On May 11, 2016, the Company received notification from the NYSE American (formerly NYSE MKT) that it was noncompliant with the NYSE American (formerly NYSE MKT) continued listing standards; specifically, Section 1003(a)(i) of the Company Guide related to financial impairment. The Company’s stockholders’ equity is below the $2.0 million threshold required for listed companies that have reported losses from continuing operations in two of its three most recently completed fiscal years. The Company submittedDecember 29, 2017, we executed a plan to regain compliance; whereupon NYSE Regulation reviewed the plan and determined to accept it, as supplemented, and granted a plan period through November 13, 2017, to regain compliance, the targeted completion date. NYSE Regulation staff will review the Company periodically for compliance with the initiatives outlined in the plan.
Additionally, on April 28, 2017, the Company received notification from the NYSE American (formerly NYSE MKT) that it was noncompliant with the NYSE American (formerly NYSE MKT) continued listing standards; specifically, Section 1003(a)(ii) of the Company Guide.  The Company’s stockholders’ equity has been below the $2.0 million threshold required for listed companies that have reported losses from continuing operations in two of its three most recently completed fiscal years (Section 1003(a)(i)) and is now below the $4.0 million threshold required for listed companies that have reported losses from continuing operations in three of its four most recent fiscal years (Section 1003(a)(ii)). The Company was given the opportunity to and submitted a supplementseventh amendment to the Planoriginal loan agreement and first amendment to address howthe forbearance, which reduced our borrowing base to our current loan balance of $2,761,632 and it intendsprovided for Citibank’s forbearance from exercising remedies relating to regain compliance with Section 1003(a)(ii).the current defaults including the principal payment deficiencies. The Plan period to regain compliance withForbearance Agreement ran through March 31, 2018, and required that we adhere certain reporting requirements such as weekly cash reports and pay all of the continued listing standards by November 13, 2017,fees and expenses of the Lender’s counsel invoiced on or before the effective date. On March 30, 2018, we executed an eighth amendment to the original loan agreement and second amendment to the forbearance which extends it to June 30, 2018. The terms of the second amendment remain the same. same as under the first amendment to the forbearance.
The Company will be subject to periodic reviews by the Exchange. If the Company is not in compliance with the continued listing standards by November 13, 2017, or if the Company does not make progress consistent with the Plan, the Exchange will initiate delisting procedures as appropriate. If our initiatives to regain compliance are not successful and the Company iswas delisted from the NYSE American (formerly NYSE MKT), itMKT on November 16, 2017, which could have a significant adverse impact on our ability to raise additional capital.capital since we are no longer eligible to register securities on Form S-3 or undertake at-the-market offerings under Rule 415.
Our shares are now traded on the over-the-counter market under the symbol FPPP which is more volatile than the Exchange and may result in a continued diminution in value of our shares. The delisting also resulted in the loss of other advantages to an exchange listing, including marginability, blue sky exemptions and others.
 
Subsequent Events
 
On July 20, 2017, the Company announcedMay 11, 2018, we closed on the sale of an additional 401our Buchanan wells and associated acreage, for approximately $370,000. The sale included approximately 40 net undeveloped acres of non-producing leasehold mineralon our Buchanan leases in Midland County, Texas, along with associated working interest in Lea County, New Mexico, for $1,200,000. The Company used $1,000,000 of the proceeds to reduce our credit line with Citibank to $3,363,333 and the additional $200,000 was reserved for general corporate purposes. We plan to continue evaluating our portfolio for non-producing assets which can be liquidated to reduce debt further.from four gross wells.
 

 
PART I
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
We periodically enter into certain commodity price risk management transactions to manage our exposure to oil and natural gas price volatility. These transactions may take the form of futures contracts, swaps or options. All data relating to our derivative positions is presented in accordance with authoritative guidance. Accordingly, unrealized gains and losses related to the change in fair value of derivative contracts that qualify and are designated as cash flow hedges are recorded as other comprehensive income or loss and such amounts are reclassified to oil and natural gas sales revenues as the associated production occurs. Derivative contracts that do not qualify for hedge accounting treatment are recorded as derivative assets and liabilities at fair value in the consolidated balance sheet, and the associated unrealized gains and losses are recorded as current expense or income in the consolidated statement of operations. While such derivative contracts do not qualify for hedge accounting, management believes these contracts can be utilized as an effective component of commodity price risk management activities. There were no commodity positions open at June 30, 2017March 31, 2018 or 2016.2017.
 
PART I
Item 4. CONTROLS AND PROCEDURES
 
a)
Disclosure Controls and Procedures
 
Our Principal Executive Officer, Roger D. Bryant, and our Principal Financial Officer, Phillip H. Roberson, have established and are currently maintaining disclosure controls and procedures for the Company. The disclosure controls and procedures have been designed to provide reasonable assurance that the information required to be disclosed by the Company in reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and to ensure that information required to be disclosed by the Company is accumulated and communicated to the Company's management as appropriate to allow timely decisions regarding required disclosure.
 
The Principal Executive Officer and the Principal Financial Officer conducted a review and evaluation of the effectiveness of the Company’s disclosure controls and procedures and have concluded, based on their evaluation as of the end of the period covered by this Report, that our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and to ensure that information required to be disclosed by the Company is accumulated and communicated to management, including our principal executive officer and our principal financial officer, to allow timely decisions regarding required disclosure and we refer you to Exchange Act Rule 13a-15(e).
 
b)
Changes in Internal Control over Financial Reporting
 
There have been no changes to the Company’s system of internal controls over financial reporting during the quarter ended June 30, 2017,March 31, 2018, that have materially affected, or are reasonably likely to materially affect, the Company’s system of controls over financial reporting.  As part of a continuing effort to improve the Company’s business processes, management is evaluating its internal controls and may update certain controls to accommodate any modifications to its business processes or accounting procedures.

 
c)
Limitations of Any Internal Control Design
 
Our principal executive and financial officers do not expect that our disclosure controls or internal controls will prevent all error and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our principal executive and financial officers have determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the 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 if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
 


 
PART II
 
OTHER INFORMATION
 
Item 1. Legal Proceedings
 
None.As previously disclosed in the Company’s Current Report on Form 8-K dated May 8, 2018, the Company is a party to a civil action captionedTrivista Oil Company, LLC v. Bass Petroleum, Inc. and Fieldpoint Petroleum Corporation, Cause No. 16,539in the District Court of Lee County, Texas, 335 Judicial District (the “Trivista Litigation”). Trivista Operating LLC is controlled by one of our major shareholders, Natale Rea (2013) Trust.The Company disputes that it has any liability to the plaintiff in that action and intends to vigorously defend same.
 
Item 1A. Risk Factors
 
None.
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 
None, except as previously disclosed on Current Reports on Form 8-K.
 
Item 3. Default Upon Senior Securities
 
OurOn December 1, 2015, Citibank lowered our borrowing base from $11,000,000 to $5,500,000 and lowered it again to $2,761,632 on December 29, 2017. The line of credit is a senior secured credit facility and provides for certain financial covenants and ratios measured quarterly which include a current ratio that cannot be less than 1.10:1.00, a leverage ratio that cannot be more than 3.50:1.00, and an interest coverage ratio that cannot be less than 3.50:1.00. The Company is out of compliance with all three ratios as of June 30, 2017,March 31, 2018, and iswe do not expect to regain compliance in technical default of the agreement. As a result of the redetermination of the credit base, the Company had a borrowing base deficiency2018.  A Forbearance Agreement was executed in the amount of $1,495,000 on December 1, 2015.  As an election under the Loan Agreement, the Company agreed to pay and cure the deficiency in three equal monthly installments of $498,333 each, due on December 31, 2015, January 31,October 2016 and February 29, 2016. We made our first required deficiency payment in the amount of $516,667amended on December 29, 2015. However, we did not make the required deficiency payments in January or February 2016. As of December 31, 2017, our loan balance was $6,478,333 and our borrowing base deficiency was $978,333. During the three months ended Juneon March 30, 2017, the Company sold non-producing and non-economic assets in Lea County, New Mexico, and used $2,115,000 of the proceeds to pay toward the principal balance of our line of credit to cure our borrowing base deficiency. Our loan balance was $4,363,3332018, as of June 30, 2017. We plan to continue evaluating our portfolio for non-producing assets which can be liquidated to reduce debt further.discussed below.
 
In October 2016, we executed a sixth amendment to the original loan agreement, which provides for Citibank’s forbearance from exercising remedies relating to the current defaults including the principal payment deficiencies. The Forbearance Agreement runsran through January 1, 2018, and requiresrequired that we make a $500,000 loan principal pay down by September 30, 2017, and adhere to other requirements including weekly cash balance reports, quarterly operating reports, monthly accounts payable reports and that we pay all associated legal expenses. Furthermore, under the agreement Citibank may sweep any excess cash balances exceeding a net amount of $800,000 less equity offering proceeds, which will be applied towards the outstanding principal balance. We are currently in compliance with
On December 29, 2017, we executed a seventh amendment to the original loan agreement howeverand first amendment to the Agreement was supplemented by a closing letter agreementforbearance, which reduced our borrowing base to allow the Company time to pay the associated legal costsour current loan balance of $2,761,632 and solidify the Deposit/Withdraw at Custodian Agreements (“DEWAC”) asit provided for inCitibank’s forbearance from exercising remedies relating to the current defaults including the principal payment deficiencies. The Forbearance Agreement. Citibank is in a first lien position onAgreement ran through March 31, 2018, and required that we adhere to certain reporting requirements such as weekly cash reports and pay all of our propertiesthe fees and assets.expenses of the Lender’s counsel invoiced on or before the effective date. On March 30, 2018, we executed an eighth amendment to the original loan agreement and second amendment to the forbearance which extends it to June 30, 2018. The terms of the second amendment remain the same as under the first amendment to the forbearance.
 

Item 4. Mine Safety Disclosures
 
None.
 

Item 5. Other Information
 
None.
 
Item 6. Exhibits
 
Exhibits
  
31.1
Certifications of Chief Executive Officer
31.2
Certifications of Chief Financial Officer
32.1
Certification of Chief Executive Officer Pursuant to U.S.C. Section 1350
32.2
Certification of Chief Financial Officer Pursuant to U.S.C. Section 1350
101.INSXBRL Instance Document
101.SCHXBRL Schema Document
101.CALXBRL Calculation Linkbase Document
101.LABXBRL Label Linkbase Document
101.PREXBRL Presentation Linkbase Document
101.DEFXBRL Definition Linkbase Document
 
 

 
SIGNATURES
 
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
Date:  May 15, 2018     
By: /s/ Roger D. Bryant                                       
Roger D. Bryant, Principal Executive Officer
 
Date:  August 14, 2017
By:May 15, 2018     
/s/ Roger D. Bryant
Roger D. Bryant  
Executive Officer 
Date:  August 14, 2017
By:
/s/ Phillip H. Roberson                                  
Phillip H. Roberson,
Principal Financial Officer
 
 
 
 
 
 
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