Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10Q
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(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2014
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
For the transition period from __________ to ___________
Commission file number: 333-191164
FUELS, INC.
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(Exact name of registrant as specified in its charter)
Wyoming 83-0326780
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(State of Incorporation) (IRS Employer ID Number)
P.O. Box 917, Casper, Wyoming 82602
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(Address of principal executive offices)
307-472-3000
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(Registrant's Telephone number)
(Former Address and phone of principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to the 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 for Regulation S-T (ss.232.405
of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [X ] No [ ]
Indicate by check mark whether the registrant is a large accelerated file, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ]
Accelerated filer [ ]
Non-accelerated filer [ ]
Smaller reporting company [X]
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Indicate the number of share outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of May 12, 2014, there were 3,220,000 shares of the registrant's common stock
issued and outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Page
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Balance Sheets - March 31, 2014 and December 31, 2013 1
Statements of Operations -
For Three Months Ended March 31, 2014 and 2013 2
Statements of Changes in Shareholders' Equity -
For the Three Months Ended March 31, 2014 3-4
Statements of Cash Flows -
For the Three Months Ended March 31, 2014 and 2013 5
Notes to the Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- Not Applicable 14
Item 4. Controls and Procedures 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - Not Applicable 16
Item 1A. Risk Factors - Not Applicable 16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities - Not Applicable 16
Item 4. Mine Safety Disclosure - Not Applicable 16
Item 5. Other Information - Not Applicable 16
Item 6. Exhibits 17
SIGNATURES 18
PART I
ITEM 1. FINANCIAL STATEMENTS
FUELS, INC.
(A Development Stage Company)
BALANCE SHEETS
March 31, December 31,
2014 2013
-------------- ---------------
(Unaudited) (Audited)
Assets
Current Assets:
Cash $ - $ -
-------------- ---------------
Total Current Assets - -
-------------- ---------------
Other assets:
Farmout Agreement 2,500 2,500
-------------- ---------------
Total Other Assets 2,500 2,500
-------------- ---------------
Total Assets $ 2,500 $ 2,500
============== ===============
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable $ - $ -
-------------- ---------------
Total Current Liabilities - -
Stockholders' Equity
Common stock, $0.001 par value; 50,000,000 shares authorized, 3,220,000
and 720,000 shares issued and outstanding
at March 31, 2014 and December 31, 2013, respectively 3,220 3,220
Additional paid-in capital 9,780 1,380
Deficit accumulated during the development stage (10,500) (2,100)
-------------- ---------------
Total Stockholders' Equity 2,500 2,500
-------------- ---------------
Total liabilities and stockholders' equity $ 2,500 $ 2,500
============== ===============
See the notes to these financial statements.
1
FUELS, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended May 25, 1999
March 31, (Inception) to
2014 2013 March 31, 2014
----------------- ----------------- ------------------------
Revenue: $ - $ - $ -
----------------- ----------------- ------------------------
Operational expenses:
General and Administrative Expenses - - 600
Accounting Fees 8,400 - 9,800
Filing Fees - - 100
----------------- ----------------- ------------------------
Total operational expenses 8,400 - 10,500
----------------- ----------------- ------------------------
Net income (Loss) $ (8,400) $ - $ (10,500)
================= ================= ========================
Per share information
Net income (loss) per common share
Basic $ * $ *
Fully diluted * *
----------------- -----------------
Weighted average number of common
stock outstanding 3,220,000 720,000
----------------- -----------------
* Less than $(0.01) per share.
See the notes to these financial statements.
2
FUELS, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDER'S EQUITY
FROM MAY 25, 1999 (Inception) THROUGH MARCH 31, 2014
Deficit accum
Additional During
Common Stock paid-in Development
Number of shares Amount Capital Stage Totals
--------------- ----------- ----------- ------------- ------------
Issuance of common stock for cash 720,000 $ 720 $ 1,380 $ - $ 2,100
Net loss - - - (1,510) (1,510)
--------------- ----------- ----------- ------------- ------------
Balance - December 31, 1999 720,000 720 1,380 (1,510) 590
--------------- ----------- ----------- ------------- ------------
Net loss - - - (590) (590)
--------------- ----------- ----------- ------------- ------------
Balance - December 31, 2000 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- ------------- ------------
Net loss - - - - -
--------------- ----------- ----------- ------------- ------------
Balance - December 31, 2001 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- ------------- -----------
Net loss - - - - -
--------------- ----------- ----------- ------------- ------------
Balance - December 31, 2002 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- ------------- ------------
Net loss - - - - -
--------------- ----------- ----------- ------------- ------------
Balance - December 31, 2003 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- ------------- ------------
Net loss - - - - -
--------------- ----------- ----------- ------------- ------------
Balance - December 31, 2004 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- ------------- ------------
Net loss - - - - -
--------------- ----------- ----------- ------------- ------------
Balance - December 31, 2005 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- ------------- ------------
Net loss - - - - -
--------------- ----------- ----------- ------------- ------------
Balance - December 31, 2006 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- ------------- ------------
Net loss - - - - -
--------------- ----------- ----------- ------------- ------------
Balance - December 31, 2007 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- ------------- ------------
Net loss - - - - -
--------------- ----------- ----------- ------------- ------------
Balance - December 31, 2008 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- ------------- ------------
Net loss - - - - -
See the notes to these financial statements.
3
FUELS, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDER'S EQUITY
FROM MAY 25, 1999 (Inception) THROUGH MARCH 31, 2014
(continued)
--------------- ----------- ----------- ------------- ------------
Balance - December 31, 2009 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- ------------- ------------
Net loss - - - - -
--------------- ----------- ----------- ------------- ------------
Balance - December 31, 2010 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- ------------- ------------
Net loss - - - - -
--------------- ----------- ----------- ------------- ------------
Balance - December 31, 2011 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- ------------- ------------
Net loss - - - - -
--------------- ----------- ----------- ------------- ------------
Balance - December 31, 2012 720,000 720 1,380 (2,100) -
--------------- ----------- ----------- ------------- ------------
Issuance of shares for oil and gas lease 2,500,000 2,500 - - 2,500
Net loss - - - - -
--------------- ----------- ----------- ------------- ------------
Balance - December 31, 2013 3,220,000 3,220 1,380 (2,100) 2,500
--------------- ----------- ----------- ------------- ------------
Stockholder capital contribution - - 8,400 - 8,400
Net loss - - - (8,400) (8,400)
--------------- ----------- ----------- ------------- ------------
Balance - March 31, 2014 3,220,000 3,220 $ 9,780 $ (10,500) $ 2,500
=============== =========== =========== ============= ============
See the notes to these financial statements.
4
FUELS, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Unaudited
May 25, 1999
For the Three Months Ended (Inception) to
March 31, March 31,
2014 2013 2014
-------------- -------------- -------------------
Cash Flows from Operating Activities:
Net Loss $ (8,400) $ - $ (10,500)
Adjustments to reconcile net loss to net cash used
in operating activities:
- - -
-------------- -------------- -------------------
Net Cash Used by Operating Activities (8,400) - (10,500)
-------------- -------------- -------------------
Net Cash Used in Investing Activities - - -
-------------- -------------- -------------------
Cash Flows from Financing Activities:
Capital Contribution from Stockholder 8,400 - 8,400
Proceeds from sale of common stock - - 2,100
-------------- -------------- -------------------
Net Cash Provided by Financing Activities 8,400 - 10,500
-------------- -------------- -------------------
Net Increase (decrease) in Cash - - -
Cash and Cash Equivalents - Beginning of Period - - -
-------------- -------------- -------------------
Cash and Cash Equivalents - End of Period $ - $ - $ -
============== ============== ===================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest expense $ - - $ -
============== ============== ===================
Cash paid for income taxes $ - - $ -
============== ============== ===================
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING ACTIVITIES:
Issuance of common shares for farmout agreement $ - - $ 2,500
============== ============== ===================
See the notes to these financial statements.
5
FUELS, INC.
(A Development Stage Company)
Notes to the Financial Statements
For the Three Months Ended March 31, 2014 and 2013
(Unaudited)
NOTE 1 - BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Business
Fuels, Inc. ("the Company") was incorporated in May 25, 1999 in the state of
Wyoming. The Company was originally incorporated for the purpose of general
investing. Due to an inability to raise adequate financing the Company was
forced to cease operations in 2000.
The Company's fiscal year end is December 31st. The Company's financial
statements are presented on the accrual basis of accounting.
Basis of Presentation
Development Stage Company
The Company has not earned significant revenues from planned operations.
Accordingly, the Company's activities have been accounted for as those of a
"Development Stage Company", as set forth in Statement of Financial Accounting
Standards No. 7 ("SFAS"). Among the disclosures required by SFAS No. 7 are that
the Company's financial statements of operations, stockholders' equity and cash
flows disclose activity since the date of the Company's inception.
NOTE 2 - GOING CONCERN AND MANAGEMENT'S PLAN
The Company's financial statements for the three months ended March 31, 2014
have been prepared on a going concern basis, which contemplates the realization
of assets and the settlement of liabilities and commitments in the normal course
of business. The Company reported an accumulated deficit of $10,500 as of March
31, 2014. The Company did not recognize revenues from its activities during the
three months ended March 31, 2014 and 2014 nor during the years ended December
31, 2013 and 2012. These factors raise substantial doubt about the Company's
ability to continue as a going concern.
The Company is currently addressing its liquidity issues by seeking investment
capital through private placement of common stock and/or debt. The Company
intends to use any funds raised to support its efforts in assessing its farmout
prospect for oil and gas and exploration.
6
NOTE 3 - SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America 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 periods. Actual results could differ from those
estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less and money market instruments to be cash equivalents.
Oil and Gas Properties, Full Cost Method
The Company uses the full cost method of accounting for oil and gas producing
activities. Costs to acquire mineral interests in oil and gas properties, to
drill and equip exploratory wells used to find proved reserves, and to drill and
equip development wells including directly related overhead costs and related
asset retirement costs are capitalized.
Under this method, all costs, including internal costs directly related to
acquisition, exploration and development activities are capitalized as oil and
gas property costs. Properties not subject to amortization consist of
exploration and development costs which are evaluated on a property-by-property
basis. Amortization of these unproved property costs begins when the properties
become proved or their values become impaired. The Company assesses the
realization of unproved properties, taken as a whole, if any, on at least an
annual basis or when there has been an indication that impairment in value may
have occurred. Impairment of unproved properties is assessed based on
management's intention with regard to future exploration and development of
individually significant properties and the ability of the Company to obtain
funds to finance such exploration and development. If the results of an
assessment indicate that the properties are impaired, the amount of the
impairment is added to the capitalized costs to be amortized.
Costs of oil and gas properties will be amortized using the units of production
method.
7
In applying the full cost method, the Company will perform an impairment test
(ceiling test) at each reporting date, whereby the carrying value of property
and equipment is compared to the "estimated present value," of its proved
reserves discounted at a 10-percent interest rate of future net revenues, based
on current economic and operating conditions, plus the cost of properties not
being amortized, plus the lower of cost or fair market value of unproved
properties included in costs being amortized, less the income tax effects
related to book and tax basis differences of the properties. If capitalized
costs exceed this limit, the excess is charged as an impairment expense.
Net Loss per Share
Basic net loss per common share is calculated by dividing the net loss
applicable to common shares by the weighted average number of common and common
equivalent shares outstanding during the period. For the years ended December
31, 2013 and 2012, there were no potential common equivalent shares used in the
calculation of weighted average common shares outstanding as the effect would be
anti-dilutive because of the net loss.
Stock-Based Compensation
The Company adopted the provisions of and accounts for stock-based compensation
using an estimate of value in accordance with the fair value method. Under the
fair value recognition provisions of this statement, stock-based compensation
cost is measured at the grant date based on the fair value of the award and is
recognized as expense on a straight-line basis over the requisite service
period, which generally is the vesting period. The Company elected the
modified-prospective method, under which prior periods are not revised for
comparative purposes. The valuation method applies to new grants and to grants
that were outstanding as of the effective date and are subsequently modified.
Fair Value of Financial Instruments
The carrying amount of accounts payable is considered to be representative of
respective fair values because of the short-term nature of these financial
instruments.
Other Comprehensive Income
The Company has no material components of other comprehensive income (loss) and
accordingly, net loss is equal to comprehensive loss in all periods.
8
Income Taxes
Provision for income taxes represents actual or estimated amounts payable on tax
return filings each year. Deferred tax assets and liabilities are recorded for
the estimated future tax effects of temporary differences between the tax basis
of assets and liabilities and amounts reported in the accompanying balance
sheets, and for operating loss and tax credit carry forwards. The change in
deferred tax assets and liabilities for the period measures the deferred tax
provision or benefit for the period. Effects of changes in enacted tax laws on
deferred tax assets and liabilities are reflected as adjustment to the tax
provision or benefit in the period of enactment.
Recent Accounting Pronouncements
There were accounting standards and interpretations issued during the three
months ended March 31, 2014, none of which are expected to have a material
impact on the Company's financial position, operations or cash flows.
NOTE 4 - OTHER ASSETS
In February 2013, the Company issued 2,500,000 shares of its restricted common
stock to an unrelated third party in exchange as part of an Assignment on an oil
and gas lease located in Natrona County, Wyoming. The shares were valued at
$2,500 at the time of the transaction ($0.001 per share). The Assignment
provides for the Company to retain 82.5% of the working interest.
NOTE 5 - STOCKHOLDERS' EQUITY
The authorized capital stock of the Company is 50,000,000 shares of common stock
with a $0.001 par value. At March 31, 2014, the Company had 3,220,000 shares of
its common stock issued and outstanding. The Company does not have any preferred
shares issued or authorized.
During the three months ended March 31, 2014, a stockholder of the Company paid
$8,400 on behalf of the Company to pay for its audit. Such funds have been
treated as a capital contribution with additional paid in capital being credited
accordingly.
During the year ended December 31, 2013, the Company issued 2,500,000 shares of
its restricted common stock as part of an assignment for 82.5% interest in a oil
and gas lease in Natrona County, Wyoming. The shares were valued at $2,500 or
$0.001 per share (par value).
9
NOTE 6 - INCOME TAXES
The Company is subject to domestic income taxes. The Company has had no income,
and therefore has paid no income tax.
Deferred income taxes arise from temporary timing differences in the recognition
of income and expenses for financial reporting and tax purposes. The Company's
deferred tax assets consist entirely of the benefit from net operating loss
(NOL) carry-forwards. The Company's deferred tax assets are offset by a
valuation allowance due to the uncertainty of the realization of the NOL
carry-forwards. NOL carry-forwards may be further limited by a change in company
ownership and other provisions of the tax laws.
The Company's deferred tax assets, valuation allowance, and change in valuation
allowance are as follows:
Estimated NOL
Carry-forward Valuation Net Tax
Period Ending benefit Allowance Benefit
-----------------------------------------------------------------------
March 31, 2014 $ 8,400 (8,400) -
December 31, 2013 $ - - -
NOTE 7 - SUBSEQUENT EVENTS:
The Company has evaluated it activities subsequent to March 31, 2014 and through
the issuance of the financial statements and found no other reportable
subsequent events.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with our unaudited
financial statements and notes thereto included herein. In connection with, and
because we desire to take advantage of, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange Commission. Forward-looking
statements are statements not based on historical information and which relate
to future operations, strategies, financial results or other developments.
Forward looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward looking
statements made by, or on our behalf. We disclaim any obligation to update
forward-looking statements.
The independent registered public accounting firm's report on the Company's
financial statements as of December 31, 2013, and for each of the years in the
two-year period then ended, includes a "going concern" explanatory paragraph,
that describes substantial doubt about the Company's ability to continue as a
going concern.
PLAN OF OPERATIONS
------------------
We had no operations prior to 2011 and we did not have any revenues during the
years ended December 31, 2013 and 2012. We did not recognize any revenues or
income during the three months ended March 31, 2014. We have minimal capital,
moderate cash and only our intangible assets which consist of our business plan,
relationships and contacts. We are illiquid and need cash infusions from
investors or shareholders to provide capital, or loans from any sources, none of
which have been arranged nor assured.
Our plan of operations is as follows:
Milestones
2nd Quarter 2014 Permit & Drilling Syndication; Seeking Other Prospects
3rd Quarter 2014 Permit & Drilling Syndication; Seeking Additional Capital for
Company;
4th Quarter 2014 Permit & Drilling Syndication; Seeking Additional Capital
Begin Drilling Operations
Our Budget for operations in next year is as follows:
Maximum
-------
Geological evaluation of lease expenses and acquire leases $25,000
General and administrative expenses $25,000
Working Capital for costs of assessment, drilling permits,
syndication and consultants $75,000
--------------------------------------
$125,000
11
We will need substantial additional capital to support our proposed future Item
2 operations. We have no revenues. We have no committed source for any funds as
of date here. No representation is made that any funds will be available when
needed. In the event funds cannot be raised when needed, we may not be able to
carry out our business plan, may never achieve sales or royalty income, and
could fail in business as a result of these uncertainties. If our initial
prospect appears uneconomical after evaluation we will seek other prospects it
the area to acquire or farm into.
Decisions regarding future participation in exploration wells or geophysical
studies or other activities will be made on a case-by-case basis. We may, in any
particular case, decide to participate or decline participation. If
participating, we may pay our proportionate share of costs to maintain our
proportionate interest through cash flow or debt or equity financing. If
participation is declined, we may elect to farmout, non-consent, sell or
otherwise negotiate a method of cost sharing in order to maintain some
continuing interest in the prospect.
We are proposing an offering of convertible promissory notes in the Spring of
2014 to raise $125,000. The convertible promissory notes are expected to have a
6% interest rate to commence in the Spring of 2014 to support our efforts in
assessing our prospect for oil and gas and exploration. The convertible
promissory notes are expected to have a term of 1 to 2 years. We cannot make any
assurances that we will be able to raise such funds or any additional funds that
may be needed.
We many also consider a private placement of our restricted common stock, if the
market conditions allow at the time. No price, schedule or terms for such an
offering has been determined at this time. We expect to expend funds on a
quarterly basis, as follows:
1st Quarter 2014 $35,000
2nd Quarter 2014 35,000
3rd Quarter 2014 40,000
4th Quarter 2014 20,000
--------------------
Total $125,000
RESULTS OF OPERATIONS
---------------------
For the Three Months Ended March 31, 2014 Compared to the Three Months Ended
March 31, 2013
During the three months ended March 31, 2014 and 2013, we did not have revenues
to our lack of operations, as explained above. We don't anticipate recognizing
revenues from our activities in the near future.
During the three months ended March 31, 2014 we recognized a net loss of $8,400
compared to $0 for the three months ended March 31, 2013. The increase was
wholly a result of the performance of our 2013 audit.
12
LIQUIDITY
---------
March 31, 2014
We had no cash or other liquid assets at March 31, 2014. Our only asset at March
31, 2014, was our working interest in the oil and gas lease in Natrona County,
Wyoming. We will be reliant upon shareholder loans or private placements of our
equity to fund any kind operations. We have not secured any sources of loans or
private placements at this time. Due to this the Company did not have any cash
flows during the three months ended March 31, 2014 and 2013.
In February 2013, we issued 2,500,000 shares of its restricted common stock to
an unrelated third party in exchange as part of an Assignment on an oil and gas
lease located in Natrona County, Wyoming. The shares were valued at $2,500 at
the time of the transaction ($0.001 per share). The Assignment provides for us
to retain 82.5% of the working interest.
During the three months ended March 31, 2014, a stockholder of the Company paid
$8,400 on behalf of the Company to pay for its audit. Such funds have been
treated as a capital contribution with additional paid in capital being credited
accordingly.
Short Term.
On a short-term basis, we do not generate any revenue or revenues sufficient to
cover operations. Based on prior history, we will continue to have insufficient
revenue to satisfy current and recurring liabilities as it seeks explore.
No commitments to provide additional funds have been made by our management or
other stockholders. Accordingly, there can be no assurance that any additional
funds will be available to us to allow it to cover our expenses as they may be
incurred.
Capital Resources
We have only common stock as our capital resource.
We have no material commitments for capital expenditures within the next year,
however if operations are commenced, substantial capital will be needed to pay
for participation, investigation, exploration, acquisition and working capital.
Need for Additional Financing
We do not have capital sufficient to meet our cash needs. We will have to seek
loans or equity placements to cover such cash needs. Once exploration commences,
our needs for additional financing is likely to increase substantially.
No commitments to provide additional funds have been made by our management or
other stockholders. Accordingly, there can be no assurance that any additional
funds will be available to us to allow it to cover our expenses as they may be
incurred.
Critical Accounting Policies
13
Oil and Gas Properties, Full Cost Method
The Company uses the full cost method of accounting for oil and gas producing
activities. Costs to acquire mineral interests in oil and gas properties, to
drill and equip exploratory wells used to find proved reserves, and to drill and
equip development wells including directly related overhead costs and related
asset retirement costs are capitalized.
Under this method, all costs, including internal costs directly related to
acquisition, exploration and development activities are capitalized as oil and
gas property costs. Properties not subject to amortization consist of
exploration and development costs which are evaluated on a property-by-property
basis. Amortization of these unproved property costs begins when the properties
become proved or their values become impaired. The Company assesses the
realization of unproved properties, taken as a whole, if any, on at least an
annual basis or when there has been an indication that impairment in value may
have occurred. Impairment of unproved properties is assessed based on
management's intention with regard to future exploration and development of
individually significant properties and the ability of the Company to obtain
funds to finance such exploration and development. If the results of an
assessment indicate that the properties are impaired, the amount of the
impairment is added to the capitalized costs to be amortized.
Costs of oil and gas properties will be amortized using the units of production
method.
In applying the full cost method, the Company will perform an impairment test
(ceiling test) at each reporting date, whereby the carrying value of property
and equipment is compared to the "estimated present value," of its proved
reserves discounted at a 10-percent interest rate of future net revenues, based
on current economic and operating conditions, plus the cost of properties not
being amortized, plus the lower of cost or fair market value of unproved
properties included in costs being amortized, less the income tax effects
related to book and tax basis differences of the properties. If capitalized
costs exceed this limit, the excess is charged as an impairment expense.
Stock-Based Compensation
The Company adopted the provisions of and accounts for stock-based compensation
using an estimate of value in accordance with the fair value method. Under the
fair value recognition provisions of this statement, stock-based compensation
cost is measured at the grant date based on the fair value of the award and is
recognized as expense on a straight-line basis over the requisite service
period, which generally is the vesting period. The Company elected the
modified-prospective method, under which prior periods are not revised for
comparative purposes. The valuation method applies to new grants and to grants
that were outstanding as of the effective date and are subsequently modified.
Fair Value of Financial Instruments
The carrying amount of accounts payable is considered to be representative of
respective fair values because of the short-term nature of these financial
instruments.
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable
14
ITEM 4. CONTROLS AND PROCEDURES
Disclosures Controls and Procedures
We have adopted and maintain disclosure controls and procedures (as such term is
defined in Rules 13a 15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) and that are designed to ensure that
information required to be disclosed in our reports under the Exchange Act, is
recorded, processed, summarized and reported within the time periods required
under the SEC's rules and forms and that the information is gathered and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer (Principal Executive Officer and Principal Financial Officer),
as appropriate, to allow for timely decisions regarding required disclosure.
As required by SEC Rule 15d-15(b), our Chief Executive and Chief Financial
Officers carried out an evaluation under the supervision and with the
participation of our management, of the effectiveness of the design and
operation of our disclosure controls and procedures pursuant to Exchange Act
Rule 15d-14 as of the end of the period covered by this report. Based on the
foregoing evaluation and the evaluation conducted at March 31, 2014, our
management has concluded that our disclosure controls and procedures are not
effective in timely alerting management them to material information required to
be included in our periodic SEC filings and to ensure that information required
to be disclosed in our periodic SEC filings is accumulated and communicated to
our management, including our Chief Financial Officer, to allow timely decisions
regarding required disclosure.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.
Our management, consisting of Mr. Smith, our Chief Executive Officer and Mr.
Butler, our Chief Financial Officer, are responsible for establishing and
maintaining adequate internal control over financial reporting. Internal control
over financial reporting, as defined in Exchange Act Rule 13a-15(f) and
15d-15(f), is a process designed by, or under the supervision of, our principal
executive and principal financial officers and effected by our Board of
Directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles, based on criteria established in Internal
Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission and includes those policies and
procedures that:
- Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of our
assets;
- Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of our financial statements in
accordance with generally accepted accounting principles, and that our
receipts and expenditures are being made only in accordance with
authorizations of our management and directors; and
- Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use of disposition of our assets that could
have a material effect on the financial statements.
15
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. All internal control systems,
no matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation.
Our management assessed the effectiveness of our internal control over financial
reporting as of March 31, 2014. Based on this assessment, management believes
that as of March 31, 2014, our internal control over financial reporting is
effective based on those criteria.
This quarterly report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the company's
registered public accounting firm pursuant to temporary rules of the SEC to
provide only management's report in this annual report.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes during our last fiscal quarter that materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
Not Applicable to Smaller Reporting Companies.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURE.
Not Applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
16
Exhibits. The following is a complete list of exhibits filed as part of this
Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of
Item 601 of Regulation S-K.
Exhibit 31.1 Certification of Chief Executive Officer and Principal Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act
Exhibit 31.2 Certification of Treasurer and Principal Accounting Officer pursuant to Section 302 of
the Sarbanes-Oxley Act
Exhibit 32.1 Certification of Principal Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act
Exhibit 32.2 Certification of Principal Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act
101.INS XBRL Instance Document (1)
101.SCH XBRL Taxonomy Extension Schema Document (1)
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document (1)
101.DEF XBRL Taxonomy Extension Definition Linkbase Document (1)
101.LAB XBRL Taxonomy Extension Label Linkbase Document (1)
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document (1)
------------
(1) Pursuant to Rule 406T of Regulation S-T, this interactive data file is
deemed not filed or part of a registration statement or prospectus for
purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed
not filed for purposes of Section 18 of the Securities Exchange Act of
1934, and otherwise is not subject to liability under these sections.
17
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
FUELS, INC.
-------------------------------------------
Dated: May 15, 2014
By: /s/ Roy C. Smith
---------------------------------------
Roy C. Smith, President and Chief
Executive Officer (Principal Executive
Officer)
By: /s/ Michael R. Butler
---------------------------------------
Michael R. Butler, Treasurer (Principal
Accounting Officer), Secretary and
Director
18
