UNITED STATES

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 September 30, 2014

 

¨	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: 333-174222

 

Puissant Industries, Inc.

(Exact name of Registrant as specified in its charter)

 

Florida		27-0543309
(State of incorporation)		(IRS Employer ID Number)

 

520 Whitley Street, London, Kentucky 40743

(Address of principal executive offices)

 

Telephone (606) 864-3161

(Registrant’s telephone number)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

All Correspondence to:

 

Frederick M. Lehrer, Esquire

Attorney and Counselor at Law

285 Uptown Road, 402

Altamonte Springs, Florida 32701

Office: (321) 972-8060

Email: flehrer@securitiesattorney1.com

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 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 (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 ¨ No ¨

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

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

 

As of November 13, 2014, there were 14,035,047 shares of common stock, par value $0.001 per share, outstanding.

 

 

 

TABLE OF CONTENTS

 

			Page
PART I FINANCIAL INFORMATION
Item 1.	Financial Statements		3
	Consolidated Statements of Financial Condition at September 30, 2014 (unaudited) and December 31, 2013		3
	Consolidated Statements of Operations for the three months ended September 30, 2014 and 2013 and the nine months ended September 30, 2014 and 2013 (unaudited)		4
	Consolidated Statements of Changes in Stockholders’ Equity (Balance at December 31, 2013, December 31, 2012, December 31, 2011 and September 30, 2013 (unaudited)		5
	Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2014 and 2013 (unaudited)		6
	Notes to consolidated financial statements		7
Item 1A.	Risk Factors		20
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		25
Item 4.	Controls and Procedures		25
PART II OTHER INFORMATION
Item 1.	Legal Proceedings		26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		26
Item 3.	Defaults Upon Senior Securities		26
Item 4.	Mine Safety Disclosures		26
Item 5.	Other Information		26
Item 6.	Exhibits		27
Signatures			28

 

2

 

PART 1 - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

Puissant Industries, Inc.

Consolidated Statements of Financial Condition

 

						September 30,				December 31,
						2014				2013
						(Unaudited)
ASSETS
	Current assets
		Cash				$	31,137			$	34,471
		Accounts receivable					61,500				50,800
		Prepaid expenses					194,503				96,428
			Total current assets				287,140				181,699
	Properties and equipment at cost, based on successful Efforts method:
			Producing oil and natural gas properties				599,523				534,338
			Non-producing oil and natural gas properties				180,899				121,220
							780,422				655,558
			Less: accumulated depreciation and depletion				82,748				59,222
							697,674				596,336
		Net properties and equipment
				Total assets		$	984,814			$	778,035
LIABILITIES AND STOCKHOLDERS' EQUITY
	Current liabilities
		Accounts and accrued expenses payable				$	52,843			$	31,429
		Notes payable, current portion					4,195				4,123
		Due related parties					4,000				4,000
			Total current liabilities				61,038				39,552
	Long-term debt						-				-
			Bonds payable - related parties				28,000				28,000
			Notes payable, less current portion				36,296				37,373
				Total liabilities			125,334				104,925
	Stockholders' equity
		Preferred stock, $0.001 par value; 10,000,000 authorized, none outstanding at September 30, 2014 and December 31, 2013, respectively
		Common stock, $0.001 par value; 90,000,000 shares authorized, 9,728,005 and 9,228,005 issued and outstanding at September 30, 2014 and December 31, 2013, respectively					9,728				9,228
		Paid-in capital					1,293,783				1,126,783
		Accumulated deficit					(444,031	)			(462,901	)
			Total stockholders' equity				859,480				673,110
				Total liabilities and stockholders' equity		$	984,814			$	778,035

 

The accompanying footnotes are an integral part of these financial statements.

 

3

 

Puissant Industries, Inc.

Consolidated Statements of Operations

 

				Three Months Ended								Nine Months Ended
				September 30,								September 30,
				2014				2013				2014				2013
				(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Revenues:
	Oil and gas production			$	151,070			$	113,628			$	493,126			$	326,635
	Royalty income				13,363				11,098				34,758				31,327
					164,433				124,726				527,884				357,962
Costs and Expenses
	Lease operating expenses				26,708				23,738				89,658				60,765
	Exploration costs				4,500				-				13,500				-
	Administrative expenses				112,938				131,743				375,187				422,717
	Depreciation and depletion				15,684				20,645				23,526				46,402
		Total costs and expenses			159,830				176,126				501,871				529,884
Net loss loss from operations					4,603				(51,400	)			26,013				(171,922	)
Other income (expense)
	Interest expense				(1,875	)			(1,808	)			(7,143	)			(8,016	)
		Total other expenses			(1,875	)			(1,808	)			(7,143	)			(8,016	)
Income (loss) before income taxes					2,728				(53,208	)			18,870				(179,938	)
Provision for income taxes					-				-				-				-
Net income (loss)				$	2,728			$	(53,208	)		$	18,870			$	(179,938	)
Net loss per weighted share, basic and fully diluted				$	0.000			$	-			$	0.002			$	(0.020	)
Weighted average number of common shares outstanding, basic and fully diluted					9,325,472				8,985,148				9,325,472				8,009,159

 

The Accompanying footnotes are an integral part of these financial statements.

 

4

 

Puissant Industries, Inc.

Consolidated Statements of Changes in Stockholders' Equity

(Unaudited)

 

			Preferred Stock								Common Stock								Additional Paid-in				Common Stock				Deficit
			Shares				Amount				Shares				Amount				Capital				Subscribed				Accumulated				Total
Balance, December 31, 2011				-				-				5,941,800				5,942				583,199				-				(207,460	)			381,681
	Shares issued in exchange for professional services											100,000				100				199,900												200,000
	Shares issued in connection with purchase of support equipment											410,400				410				102,190												102,600
	Shares issued in exchange for  warrants											192,000				192				(192	)											-
	Net income (loss)																											(44,103	)			(44,103	)
Balance, December 31, 2012				-				-				6,644,200				6,644				885,097				-				(251,563	)			640,178
	Shares issued in payment of vendor invoices											618,722				619				55,246												55,865
	Sale of common stock for cash											250,000				250				49,750												50,000
	Shares issued in exchange for professional services											250,000				250				22,250												22,500
	Shares issued in exchange for professional services											200,000				200				39,800												40,000
	Shares issued in payment of unpaid wages											1,265,083				1,265				74,640												75,905
	Net income (loss)																											(211,338	)			(211,338	)
Balance, December 31, 2013				-				-				9,228,005			$	9,228			$	1,126,783			$	-			$	(462,901	)		$	673,110
	Shares issued in exchange for professional services											450,000				450				157,050												157,500
	Sales of common stock for cash											50,000				50				9,950												10,000
	Net income (loss)																											18,870				18,870
Balance, September 30, 2014				-				-				9,728,005			$	9,728			$	1,293,783			$	-			$	(444,031	)		$	859,480

 

The accompanying footnotes are an integral part of these financial statements.

 

5

 

Puissant Industries, Inc.

Consolidated Statements of Cash Flows

 

				Nine Months Ended
				September 30,
				2014				2013
				(Unaudited)				(Unaudited)
Cash flows from operations
	Net income (loss)			$	18,870			$	(179,938	)
Adjustments to reconcile income (loss) to cash provided by (used in) operating activities:
	Stock-based compensation				157,500				190,249
	Depreciation and depletion				23,526				46,402
	Changes in operating assets and liabilities:
		Accounts receivable			(10,700	)			183
		Prepaid expenses			(98,075	)			62,500
		Accounts and accrued expenses payable			21,558				(2,286	)
		Net cash provided by (used in) operating activities			112,679				117,110
Cash flows from investing activities
	Additions to oil and gas properties				(124,864	)			(128,078	)
		Net cash used by investing activities			(124,864	)			(128,078	)
Cash flows from financing activities activities
	Payment on notes payable				(1,149	)			(2,858	)
	Proceeds from sale of common stock				10,000				50,000
		Net cash provided by (used in) financing activities			8,851				47,142
	Net increase (decrease) in cash				(3,334	)			36,174
	Cash, beginning of period				34,471				20,625
	Cash, end of period			$	31,137			$	56,799
Supplemental disclosure of cash flow information:
Cash paid during the period for:
	Income taxes			$	-			$	-
	Interest			$	788			$	788
Non-cash investing and financiang transactisons:
	Common stock issued in exchange for services			$	157,500			$	-

 

The accompanying footnotes are an integral part of these financial statements.

 

6

 

Puissant Industries, Inc.

Notes to Consolidated Financial Statements

For the Nine Months Ended September 30, 2014 and 2013

 

Note 1—Basis of Presentation

 

We are providing herein the consolidated interim statements of financial condition of Puissant Industries, Inc. and its subsidiary (collectively the "Company") as of September 30, 2014, and the related consolidated interim statements of operations and cash flows for the three and nine months ended September 30, 2014 and 2013, and the consolidated interim statements of changes in stockholders equity for the nine months ended September 30, 2014 and the year ended December 31, 2013. The consolidated interim financial statements presented herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. The consolidated interim financial statements should be read in conjunction with the Company's financial statements and related notes for the year ended December 31, 2013, which are included in the Company's Form 10-K, as filed with the SEC on April 14, 2014.

 

The information furnished in this report reflects all adjustments consisting of only normal recurring adjustments, which are in the opinion of management necessary for a fair presentation of results for the interim periods. Prior interim period data has been reclassified to conform to current period presentation. These reclassifications have no effect on previously reported results of operations. The results of operations for the six months ended September 30, 2014 are not necessarily indicative of results that may be expected for the fiscal year ending December 31, 2014.

 

Note 2—Nature of Operations

 

Organization

 

Puissant Industries, Inc. (the “Company”) was organized as a Wyoming corporation on July 6, 2009. As of December 31, 2010, the Company was located in Columbia, Kentucky, in Adair County.

 

The Company is an oil and natural gas exploration, production and development company geographically focused on the onshore United States. The Company currently has 39 wells assigned to it with over 4,685 acres available for drilling and exploration. The Company redomiciled to the state of Florida and changed its name from American Resource Manaagement, Inc. to Puissant Industries, Inc. on March 17, 2011.

 

The Company owns 100% of ARM Operating Company (“ARM”). ARM was formed on July 12, 2011, primarily to manage all oil and gas properties of the Company, which includes the operation, development, and maintenance of all oil and gas wells, leases, and reserve activities. ARM will be registered as the operatior of wells with all relevant governmenal agencies, and it will be responsible for maintaining production and maintenance reports for all wells and facilities of the Company.

 

Accounting period

 

The Company has adopted an annual accounting period of January through December.

 

7

 

Puissant Industries, Inc.

Notes to Consolidated Financial Statements

For the Nine Months Ended September 30, 2014 and 2013

 

Note 3—Summary of significant accounting principles

 

Use of estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP’) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates particularly significant to the financial statements include the following:

 

	·	Estimates of our reserves of oil, natural gas and natural gas liquids ("NGL");
	·	Future cash flows from oil and gas properties;
	·	Depreciation, depletion and amortization expense;
	·	Asset retirement obligations;
	·	Fair values of derivative instruments;
	·	Fair values of assets acquired and liabilites assumed from business combinations; and
	·	Natural gas imbalances.

 

As fair value is a market-based measurement, it is determined based on the assumptions that market participants would use. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Such estimates and assumptions are adjusted when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates. Any changes in estimates resulting from continuous changes in the economic environment will be reflected in the financial statements in future periods.

 

There are numerous uncertainties in estimating the quantity of reserves and in projecting the future rates of production and timing of development expenditures, including future costs to dismantle, dispose and restore our properties. Oil and gas reserve engineering must be recognized as a subjective process of estimating underground accumulations of oil and gas that cannot be measured in an exact way.

 

Cash and cash equivalents

 

The Company considers short-term interest bearing investments with initial maturities of three months or less to be cash equivalents. Cash and cash equivalents consist of cash in banks, free credit on investment accounts and money market accounts.

 

Foreign currency translation

 

The Company complies with Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 830, Foreign Currency Matters. Monetary items are translated at the exchange rate in effect at the balance sheet date; non-monetary items are translated at historical exchange rates. Income and expense items are translated at the average exchange rate for the year. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

 

8

 

Puissant Industries, Inc.

Notes to Consolidated Financial Statements

For the Nine Months Ended September 30, 2014 and 2013

 

Note 3—Summary of significant accounting principles (continued)

 

Property and equipment

 

Property and equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Repairs and maintenance are expensed as incurred while betterments and improvements are capitalized. When items are sold or retired, the related cost and accumulated depreciation is removed from the accounts and any gain or loss is included in operations.

 

The Company provides for depreciation and amortization over the following estimated useful lives:

 

Building	39 years
Land improvements	10 years
Machinery and equipment	5-7 years
Computer equipment	3 years
Office equipment	7 years
Trucks and trailers	5 years

  

Oil and Gas Properties

 

Oil and gas investments are accounted for by the successful efforts method of accounting. Accordingly, the costs incurred to acquire property (proved and unproved), all development costs, and successful exploratory costs are capitalized, whereas the costs of unsuccessful exploratory wells are expensed.

 

Depletion

 

The provision for depletion of proved oil and gas properties is calculated on the units-of-production method, whereby capitalized costs, as adjusted for future development costs and asset retirement obligations, are amortized over the total estimated proved reserves. The Company calculates depletion on a quarterly basis.

 

Inventories

 

Inventories, consisting primarily of tubular goods and other well equipment held for use in the development and production of natural gas and crude oil reserves, are carried at the lower of cost or market, on a first-in first-out basis. Adjustments are made from time to time to recognize, as appropriate, any reductions in value.

 

9

 

Puissant Industries, Inc.

Notes to Consolidated Financial Statements

For the Nine Months Ended September 30, 2014 and 2013

 

Note 3—Summary of significant accounting principles (continued)

 

Unproved Properties

 

Investments in unproved properties are not depleted pending determination of the existence of proved reserves. Unproved properties are assessed periodically to ascertain whether there is a probability of obtaining proved reserves in the future. When it is determined these properties have been promoted to a proved reserve category or there is no longer any probability of obtaining proved reserves from the properties, the costs associated with these properties is transferred into the amortization base to be included in depletion calculations. Unproved properties whose costs are individually significant are assessed individually by considering the primary lease terms of the properties, the holding period of the properties, and geographic and geological data obtained relating to the properties. Where it is not practicable to assess properties individually as their costs are not individually significant, such properties are grouped for purposes of the periodic assessment.

 

Long-Lived Assets

 

In accordance with Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360 Property, Plant, and Equipment, the Company records impairment losses on long-lived assets such as oil and gas properties and equipment used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. There was no impairment charges during the years ended December 31, 2013 and 2012.

 

Impairment of unproved oil and gas properties are determined by FASB ASC Topic 932, Extractive Activities—Oil and Gas.

 

Fair Value of Financial Instruments

 

The fair values of the Company’s assets and liabilities that qualify as financial instruments under FASB ASC Topic 825, “Financial Instruments,” approximate their carrying amounts presented in the accompanying balance sheet at December 31, 2013 and 2012.

 

Market Risk

 

Our activities primarily consist of acquiring, owning, enhancing and producing oil and gas properties. The future results of our operations, cash flows and financial condition may be affected by changes in the market price of oil and natural gas. The availability of a ready market for oil and natural gas products in the future will depend on numerous factors beyond our control, including weather, imports, marketing of competitive fuels, proximity and capacity of oil and natural gas pipelines and other transportation facilities, any oversupply or undersupply of oil, natural gas and liquid products, the regulatory environment, the economic environment and, other regional and political events, none of which can be predicted with certainty.

 

10

  

Puissant Industries, Inc.

Notes to Consolidated Financial Statements

For the Nine Months Ended September 30, 2014 and 2013

 

Note 3—Summary of significant accounting principles (continued)

 

Oil and Gas Reserve Quantities

 

Reserves and their relation to estimated future net cash flows impact our depletion and impairment calculations. As a result, adjustments to depletion are made concurrently with changes to reserve estimates. We disclose reserve estimates, and the projected cash flows derived from these reserve estimates, in accordance with SEC guidelines. Our independent engineers will also adhere to the SEC definitions when preparing their reserve reports.

 

Asset Retirement Obligations

 

We have significant obligations to plug and abandon oil and natural gas wells and related equipment at the end of oil and natural gas production operations. We incur these liabilities upon acquiring or drilling a well. GAAP requires entities to record the fair value of a liability for an asset retirement obligation (“ARO”) in the period in which it is incurred with a corresponding increase in the carrying amount of the related long-lived asset. Over time, changes in the present value of the liability are accreted and expensed. The capitalized asset costs are depleted as a component of the full cost pool. The fair values of additions to the ARO liability are estimated using present value techniques that convert future cash flows to a single discounted amount. Significant inputs to the valuation include estimates of: (i) plug and abandonment costs per well based on existing regulatory requirements; (ii) remaining life per well; (iii) inflation factors; and (iv) a credit-adjusted risk free rate. Future revisions to ARO estimates will impact the present value of existing ARO liabilities and corresponding adjustments will be made to the capitalized asset retirement costs balance. Upon settlement of the liability, we report a gain or loss to the extent the actual costs differ from the recorded liability.

 

Income Taxes

 

Income taxes are recorded in accordance with ASC Topic 740, Accounting for Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. The Company determines its deferred tax assets and liabilities based on differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are provided, when necessary, to reduce the deferred income tax assets to the amount expected to be realized.

 

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of September 30, 2014 and 2013, the Company did not have any uncertain tax positions.

 

11

 

Puissant Industries, Inc.

Notes to Consolidated Financial Statements

For the Nine Months Ended September 30, 2014 and 2013

 

Note 3—Summary of significant accounting principles (continued)

 

Income Taxes (Continued)

 

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of September 30, 2014 and 2013, the Company did not have any uncertain tax positions.

 

Generally, tax fillings are no longer subject to income tax examinations by major taxing authorities for years before 2010. Any potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with U.S. federal, state, and local tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

 

The Company’s policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of September 30, 2014 and 2013, the Company has not accrued interest or penalties related to uncertain tax positions.

 

Upon the attainment of taxable income by the Company, management will assess the likelihood of realizing the tax benefit associated with the use of the carryforwards and will recognize a deferred tax asset at that time.

 

Comprehensive Income

 

The Company complies with FASB ASC Topic 220, Comprehensive Income, which establishes rules for the reporting and display of comprehensive income (loss) and its components.

 

Loss Per Common Share

 

The Company complies with the accounting and disclosure requirements of FASB ASC 260, Earnings Per Share. Basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per common share incorporates the dilutive effect of common stock equivalents on an average basis during the period.

 

Stock-Based Compensation

 

The Company complies with FASB ASC Topic 718 Compensation – Stock Compensation, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. FASB ASC Topic 718 focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions.

 

12

 

Puissant Industries, Inc.

Notes to Consolidated Financial Statements

For the Nine Months Ended September 30, 2014 and 2013

 

Note 3—Summary of significant accounting principles (continued)

 

Stock-Based Compensation (continued)

 

FASB ASC Topic 718 requires an entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award the requisite service period (usually the vesting period). No compensation costs are recognized for equity instruments for which employees do not render the requisite service. The grant-date fair value of employee share options and similar instruments will be estimated using option-pricing models adjusted for the unique characteristics of those instruments (unless observable market prices for the same or similar instruments are available). If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. For the nine months ended September 30, 2014 and 2013, the Company recorded compensation expense of $-0- and $-0-, respectively.

 

Valuation of Investments in Securities at Fair Value—Definition and Hierarchy

 

FASB ASC Topic 820 Fair Value Measurements and Disclosuresprovides a framework for measuring fair value under generally accepted accounting principles in the United States and requires expanded disclosures regarding fair value measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. 

 

In determining fair value, the Company uses various valuation approaches. In accordance with GAAP, a fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. FASB ASC Topic 820 establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations, as follows:

 

Level 1 - Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 securities. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.

 

Level 2 - Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

 

Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

 

13

 

Puissant Industries, Inc.

Notes to Consolidated Financial Statements

For the Nine Months Ended September 30, 2014 and 2013

 

Note 3—Summary of significant accounting principles (continued)

 

Valuation of Investments in Securities at Fair Value—Definition and Hierarchy (continued)

 

The availability of valuation techniques and observable inputs can vary from security to security and is affected by a wide variety of factors including, the type of security, whether the security is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined.

 

Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the securities existed. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for securities categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement.

 

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many securities. This condition could cause a security to be reclassified to a lower level within the fair value hierarchy.

 

Valuation Techniques

 

The Company values investments in securities that are freely tradable and are listed on a national securities exchange or reported on the NASDAQ national market at their last sales price as of the last business day of the year. At September 30, 2014 and 2013, the Company had no investments classified as securities owned on the balance sheet.

 

Certificate of Deposits

 

The fair values of the bank certificate of deposits are based on the face value of the certificate of deposits.

 

Recently Adopted Accounting Pronouncements

 

In July 2013, the FASB issued ASU No. 2013-11, Income Taxes (Topic 740) which provides guidance on financial statement presentation of an un recognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exits. The update is effective for hears beginning after December 15, 2013. The Company does not expect the implementation of this standard to have a material impact on its financial position or results of operations.

 

In March 2013, the FASB issued Accounting Standards Update No. 2013-05, Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity(ASU 2013-05). ASU 2013-05 provides guidance on releasing cumulative translation adjustments when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or a business within a foreign entity. ASU 2013-05 is effective on a prospective basis for fiscal years and interim reporting periods within those years, beginning after December 15, 2013. Early adoption is permitted. The adoption of ASU 2013-05 is not expected to have a material impact on our financial position, results of operations or cash flows.

 

14

 

Puissant Industries, Inc.

Notes to Consolidated Financial Statements

For the Nine Months Ended September 30, 2014 and 2013

 

Note 3—Summary of significant accounting principles (continued)

 

Recently Adopted Accounting Pronouncements (continued)

 

In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220) – Reporting of Amounts Reclassified out of Accumulative Other Comprehensive Income (ASU 2013-02), which replaces the presentation requirements for reclassifications out of accumulated other comprehensive income in ASU 2011-05 and ASU 2011-12. ASU 2013-02 requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component and to present significant amounts reclassified out of accumulated other comprehensive income by respective line items of net income if the amount reclassified is required to be reclassified to net income in its entirety. The adoption of ASU 2013-02 did not have any impact on our financial position, results of operations or cash flows.

 

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission (the "SEC") did not or are not believed by management to have a material impact on the Company's present or future financial statements.

 

Concentration of Credit Risk

 

The Company maintains its cash and cash equivalents in bank deposit accounts, which, at times may exceed federally insured limits. The Company has not experienced any losses in such accounts. Management believes the Company is not exposed to any significant credit risk related to cash and cash equivalents.

 

The Company extends credit, primarily in the form of uncollateralized oil and gas sales to various companies in the oil and gas industry, which results in concentrations of credit risk. Concentrations of credit risk may be affected by changes in economic or other conditions within our industry and may impact our overall credit risk. However, we believe that the risk of these unsecured receivables is mitigated by the size, reputation, and nature of the companies to which we extend credit.

 

Historically, the Company has sold its oil and natural gas production to a relatively small number of purchasers. We are not dependent upon, or confined to, any one purchaser or small group of purchasers. Due to the nature of oil and natural gas markets and because oil and natural gas are commodities and there are numerous purchasers in the areas in which we sell production, we do not believe the loss of a single purchaser, or more than one purchaser, would materially affect our ability to sell our production.

 

For the nine months ended September 30, 2014 and 2013, revenues from four customers accounted for 100% of oil and gas production revenues.

 

15

  

Puissant Industries, Inc.

Notes to Consolidated Financial Statements

For the Nine Months Ended September 30, 2014 and 2013

 

Note 4—Convertible Bonds Payable–Related Parties

 

During April 2012 and September 2012, the Company received $20,000 and $8,000, respectively, of proceeds from the issuance of convertible bonds to related parties. The convertible bonds bear interest at 15% per annum and are due 60 months from the date of the bonds. The bond holder at his sole option may convert all of the principal due into common stock at a price per share of $2.00 per share.

 

Note 5—Notes Payable – Property and Mineral Rights

 

On August 1, 2011, the Company entered into a property and mineral and property rights purchase agreement (“Agreement”) in exchange for $25,000. The Agreement provided for a $1,000 down payment, with the balance of $24,000 to be paid in twelve monthly payments of approximately $2,077, which includes interest at 7% per annum. The note was paid in full during the year ended December 31, 2012.

 

On October 13, 2011, the Company entered into an agreement (“Agreement) to acquire property and property and mineral rights, in exchange for $50,000. The Agreement provided for a $500 down payment, with the balance of $49,500 to be paid in 120 payments of approximately $575, which includes interest at 7% per annum.

 

Maturities for these two notes payable are as follows at December 31:
2014		$	3,117
2015			4,421
2016			4,740
2017			5,083
2018			5,450
Thereafter			17,680
		$	40,491

  

Note 6—Notes Payable - Shareholders

 

During the year ended December 31, 2011, the Company borrowed a total of $15,000 from related party shareholders, repaying $11,000 during the year, leaving a balance due of $4,000. These borrowings are non-interest bearing and due on demand.

 

16

 

Puissant Industries, Inc.

Notes to Consolidated Financial Statements

For the Nine Months Ended September 30, 2014 and 2013

 

Note 7—Income Taxes

 

At September 30, 2014, the Company had approximately $457,000 of net operating losses (“NOL”) carry-forwards for federal and state income purposes. These losses are available for future years and expire through 2034. Utilization of these losses may be severely or completely limited if the Company undergoes an ownership change pursuant to Internal Revenue Code Section 382.

 

The deferred tax asset is summarized as follows:

 

		September 30,				December 31,
		2014				2013
Deferred tax asset:
Net operating loss carryforwards		$	156,000			$	174,000
Deferred tax assets		$	156,000			$	174,000
Less:  Valuation allowance			(156,000	)			(174,000	)
Net deferred tax asset		$	-			$	-

  

A reconciliation of income tax expense computed at the U.S. federal, state, and local statutory rates and the Company’s effective tax rate is as follows:

 

		September 30,				December 31,
		2014				2013
Statutory federal income tax expense			(34	)			(34	)
State and local income tax (net of federal benefits)			(4	)			(4	)
Valuation allowance			38				38
			-	%			-	%

  

The Company has taken a 100% valuation allowance against the deferred asset attributable to the NOL carry-forwards of $153,000 at September 30, 2014, due to the uncertainty of realizing the future tax benefits.

 

17

  

Puissant Industries, Inc.

Notes to Consolidated Financial Statements

For the Nine Months Ended September 30, 2014 and 2013

 

Note 8—Common Stock

 

The Company is authorized to issue 90,000,000 shares of common stock with a par value of $0.001. At September 30, 2014 and December 31, 2013, 9,728,005 and 9,228,005 shares were issued and outstanding, respectively.

 

Note 9—Preferred Stock

 

The Company is authorized to issue 10,000,000 of preferred stock with a par value of $0.001. As of September 30, 2014 and December 31, 2013, no shares had been issued and none were outstanding.

 

Note 10—Equity

 

On April 15, 2013, the Company issued 618,722 shares of its $0.001 par value common stock in payment of vendor invoices. We valued these shares at $0.09 per share. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration "transactions by an issuer not involving any public offering."

 

On April 19, 2013, the Company issued 250,000 shares of its $0.001 par value common stock in exchange for professional services. We valued these shares at $0.09 per share. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration "transactions by an issuer not involving any public offering."

 

On April 19, 2013, the Company issued 1,265,083 shares of its $0.001 par value common stock in payment of unpaid wages due to two of its officers. The shares were valued at $0.06 per share. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration "transactions by an issuer not involving any public offering."

 

On August 16, 2013, The Company issued 250,000 shares of its $0.001 par value common stock for a cash payment of $50,000. These shares were valued at $0.20 per share. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration "transactions by an issuer not involving any public offering."

 

On August 23, 2013, the Company issued 200,000 shares of its $0.001 par value common stock in exchange for professional services. These shares were valued at $0.20 per share. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration "transactions by an issuer not involving any public offering."

 

On January 3, 2014, the Company issued 450,000 shares of its $.001 par value common stock in exchange for professional services. We valued these shares at $0.35 per share. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration "transactions by an issuer not involving any public offering."

 

On January 6, 2014, The Company issued 50,000 shares of its $0.001 par value common stock for a cash payment of $10,000. These shares were valued at $0.20 per share. The shares were deemed to have been issued pursuant to an exemption provided by Section 4(2) of the Act, which exempts from registration "transactions by an issuer not involving any public offering."

 

18

 

Puissant Industries, Inc.

Notes to Consolidated Financial Statements

For the Nine Months Ended September 30, 2014 and 2013

 

Note 11—Related Party

 

On April 15, 2013, the Company issued a total of 618,722 shares of its $0.001 par value common stock to ADID Corporation in payment of invoices totaling $55,865.

 

On April 19, 2013, the Company issued 1,265,083 shares of its $0.001 par value common stock in payment of unpaid wages of $75,905 due to two of its officers. Mark Holbrook, president and CEO, received 1,216,250 shares and Cora Holbrook, secretary and treasurer, received 48,833 shares. The shares were valued at $0.06 per share.

 

The Company is related to several other entities by virtue of common ownership and control, which includes family members.

 

Note 12—Subsequent Events

 

Management has evaluated subsequent events through November 14, 2014, the date of which the financial statements were available to be issued and has determined that the following subsequent event occured after the quarter ended September 30, 2014:

 

On October 6, 2014, the Company issued 400,000 shares to each of its officer/directors for their performance in 2013 and 2014.

 

19

 

Puissant Industries, Inc.

Consolidated Statements of Financial Condition

 

Item 1A. Risk Factors

 

A Smaller Reporting Company, as defined by Item 10 of Regulation S-K, is not required to provide the information required by this item.

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

As used in this Form 10-Q, references to “we,” “our” or “us” refer to Puissant Industries, Inc. unless the context otherwise indicates.

 

Forward-Looking Statements

 

The following discussion should be read in conjunction with our financial statements, which are included elsewhere in this Form 10-Q (the “Report”). This Report contains forward-looking statements that relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

 

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

 

20

 

Corporate History

 

Corporate Overview.

 

We were incorporated on July 6, 2009, in the state of Wyoming as American Resource Management, Inc. We changed our domicile to the State of Florida on March 17, 2011 and simultaneously changed our name to Puissant Industries, Inc.. Our principal offices are located at 520 Whitley Street, London Kentucky and our telephone number is (606) 864-3161.

 

Business Description.

 

We are engaged in oil and gas exploration and development activities in fractured formations located in Kentucky.

 

On or about January 15, 2005, Sovereign One, Inc., a company controlled by Mark Holbrook, McCrome International Inc., a company controlled by Cora J Holbrook and Logos Resources, Inc., a company controlled by Marshall Holbrook entered into an agreement with A.D.I.D. Corporation, a Kentucky corporation controlled by Marshall Holbrook ("A.D.I.D.") whereby A.D.I.D. agreed to acquire oil and gas leases and properties and assign such oil and gas leases and properties as specified by Sovereign One Inc., McCrome International, Inc., and Logos Resources, Inc.

 

In exchange for our issuance of an aggregate of 5,250,000 shares of our common stock representing 1,750,000 common shares to each Sovereign One Inc., McCrome International, Inc. and Logos Resources, Inc., A.D.I.D. assigned the following interests to us:

 

(i) On August 9, 2010, 100% ownership in: (a) 34,000 of 2-inch natural gas pipeline and 60,000 feet of 4-inch natural gas pipeline, compressor stations, right of ways and easements located in Clay and Laurel Counties, Kentucky; and (b) 59,000 feet of 2-inch natural gas pipeline and 10,000 feet of 4-inch natural gas pipeline, compressor stations, right of ways and easements located in Whitley County, Kentucky; and

 

(ii) On February 15, 2010, a 100% working interest and an 85% net revenue interest of 39 oil and gas wells and leases in Kentucky wells (the “Wells”).

 

This working interest gives us the ability to explore for and to produce and own oil, gas or other minerals from the Wells. As the working interest owner, we bear the exploration, development, and operating costs from the property. The net revenue interest provides us with approximately 85% of the proceeds from any oil and gas production on the Wells after payment of all operating and development costs.

 

 Beginning in the fourth quarter of 2011, we commenced recompletion of old wells by connecting the wells to our existing pipeline. During this period, we located the first purchaser of the natural gas from the recompleted wells, Seminole Energy Services.

 

In the fourth quarter of 2011, we acquired the surface mineral and property rights to 100 acres and subsurface rights to 175 acres in Clay County Kentucky.

 

On July 12, 2011, we formed our wholly owned subsidiary, ARM Operating Company (“ARM”), a Kentucky corporation which manages all of our oil and gas properties and oversees the operation, development, and maintenance of all our oil and gas wells, leases, and reserve activities. ARM is registered as the operator of wells with all relevant governmental agencies, and is responsible for maintaining production and maintenance reports for all of our wells and facilities. Our officers and Board of Directors makes all decisions concerning ARM.

 

On May 1, 2014, we purchased approximately 14 miles of 4-inch pipeline, 3 Knox Oil and Gas Wells, Compressor Station Site and related facilities and 814 acres for oil and gas development from N.A. Energy Resources Corporation and Kentucky Petroleum Operating Ltd for consideration of $400,000 cash to be paid at $10,000 per month with no interest. The additional 14 miles of pipeline is estimated to increase the Company’s capacity by 82%, from 1.82 MMCFPD (million cubic feet per day) to 3.31 MMCFPD. 

 

21

 

On May 30, 2014, we completed a new compressor station on the site acquired from N.A. Energy Resources Corporation. The new compressor station was built at a cost of $34,443

 

On July 8, 2014, we formed our wholly owned subsidiary, American Pipeline Company (“APC”), a Kentucky corporation which owns, manages and maintains all of our oil and natural gas pipelines and facilities. Our officers and Board of Directors makes all decisions concerning APC.

 

On the payable date of October 17, 2014, we paid our shareholders a 20% common stock dividend.

 

Report by Independent Engineering Firm

 

An independent petroleum-engineering firm provided the following information with respect to the proved reserves attributable to our properties as of December 31, 2013.

 

						Proved Developed Producing				Proved Undeveloped				Total Proved
Net Reserves
Natural Gas		-MMcf					3,523,315				12,426,644				15,949,959
Oil / Condendsate		-Mbbl					39,317				157,264				197,026
Natural Gas Liquids		- Mbbl					0				326,862				326,862
Income Data
Future Gross Revenue		$	-M				14,440.382				63,935.218				78,375.600
Deductions		$	-M				3,032.083				13,384.852				16,416.935
Future Net Income
Undiscounted		$	-M				11,408.299				50,550.366				61,958.665
Discounted @10% (Net Present Value)		$	-M				5,975.694				23,251.996				29,227.690

 

The foregoing estimated proved reserve data was prepared using unweighted average first-day-of-the-month prices for the year ended December 31, 2013. The Securities and Exchange Commission (SEC) pricing guidelines were used to set the oil and gas prices. An oil price of $96.94 per barrel (Bbl), a natural gas liquids price of $36.68 per barrel (Bbl) and gas price of $3.671 per million British Thermal Unit (MMbtu) were used in this study. The prices were adjusted for energy content, price differentials, and other expenses as needed.

 

Our proved natural gas reserves were 15.949 billion cubic feet (Bcf), or 2.6583 million barrels of oil equivalent (BOE) (1Bbl = 6 Mcf basis). The proved oil reserves were .197 million barrels. The proved natural gas liquids (NGL) reserves were .327 million barrels, for a total of 3.182 million barrels of oil equivalent (BOE). The Net Present Value, discounted at 10%, of the estimated future net cash flow before income taxes (PV-10) of our total proved reserves at December 31, 2013 was $29.227 million.

 

Uncertainties

 

There are many uncertainties inherent in estimating quantities and values of proved reserves and projecting future rates of production and timing of development. The reserve data set forth herein, although prepared by an independent petroleum engineer in a manner customary in the industry, are estimates only, and the actual quantities and values of oil and gas are likely to differ from the estimated amounts set forth herein. In addition, the reserve estimates for our properties will be affected by future changes in sales prices of oil and gas produced. Other than those filed with the SEC, our estimated reserves have not been filed with or included in any reports to any federal agency.

 

22

 

Results of operations

 

Three-month period ended September 30, 2014 compared to the three-month period ended September 30, 2013

 

For the three months ended September 30, 2014, we generated total revenues of $164,433, consisting of $151,070 in oil and gas production and $$13,363 in royalty income. For the three-month period ending September 30, 2013, we generated total revenues of $124,726 consisting of oil and gas production of $113,628 in oil and gas production and $11,098 of royalty income. The $39,707 increase or 31.8% increase in our total revenues for the three months ended September 30, 2014 compared to the September 30, 2013 is primarily attributable to the increase of $37,442 of oil and gas production revenues in the September 30, 2014 quarter compared to the September 30, 2013 quarter. For the three month period ended September 30, 2014 and September 30, 2013, we incurred total costs and expenses of $159,830 and $176,126, respectively, The total costs and expenses for September 30, 2014 and September 30, 2013 periods represents a $16,296 or 9.25% decrease in our operating expenses during the September 30, 2014 quarter compared to the September 30, 2013 quarter; however, there are material differences in the comparisons of type costs and expenses between the 2014 quarter and 2013 quarters, as follows: (a) a $2,970 increase in lease operating expenses; (b) a $4,500 increase in exploration costs, of which there were (no such costs) during the three months ended September 30, 2013; (c) a $18,805 decrease in administrative expenses; and (d) a $4,961 decrease in depreciation and depletion.

 

Nine-month period ended September 30, 2014 compared to the nine-month period ended September 30, 2013

 

For the nine months ended September 30, 2014, we generated total revenues of $527,884 consisting of $493,126 in oil and gas production revenues and $34,758 in royalty income. We reported $357,962 of total revenues for the nine-months ended September 30, 2013, consisting of $326,635 in oil and gas production and $31,327 in royalty income. The $169,922 or 47.4% increase in our revenues for the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013 is primarily attributable to an increase of $166,491 in oil and gas production compared to the nine months ended September 30, 2013. For the nine month period ended September 30, 2014 and September 30, 2013, we incurred operating expenses of $159,830 and $176,126 respectively, representing decreased expenses of $16,296. The decreased expenses are primarily attributable to a $47,530 increase in administrative expenses, a $22,876 decrease in depreciation and depletion, offset by a $28,893 increase in lease operating expenses during the nine months ended September 30, 2014 compared to the nine months ended September 30, 2013.

 

Liquidity

 

At September 30, 2014, we had total current assets of $287,140 consisting of $31,137 in cash, $61,500 in accounts receivable and $194,503 in prepaid expenses for professional services. Total current liabilities at September 30, 2014 were $61,038 consisting of accounts and accrued expenses payable of $52,843, notes payable - current portion of $4,195 and due to related parties of $4,000. At September 30, 2014, we had positive working capital of $226,102.

 

Our material sources and uses of cash for the three months ended September 30, 2014 and 2013 are as follows:

 

		2014				2013
Net cash provided by operating activities		$	112,679			$	117,110
Net cash used in investing activities		$	(124,864	)		$	(128,078	)
Net cash provided by (used in) financing activities		$	8,851			$	47,142
Increase (decrease) in cash		$	34,471			$	20,625

 

Our net gain of $2,728 for the three months ended September 30, 2014 compared to a net loss of ($53,208) for the three months ended September 30, 2013 represents an increased net gain of $55,936. The primary component of our positive operating cash flow for the three months ended September 30, 2014 were a $39,707 increase in total revenues comparing the 2014 to the 2013 quarter.

 

23

 

TRENDS AND UNCERTAINTIES

 

Our operations are subject to certain trends and uncertainties:

 

·	Supply and demand factors in the oil and gas industry;

 

·	Actions by United States policy makers in the oil and gas industry, particularly those that impact upon supply, demand and price;

 

·	Whether we are able to obtain adequate financing to expand our operations;

 

·	Fluctuating changes in the market price of oil and natural gas; and

 

·

Weather, imports, marketing of competitive fuels, proximity and capacity of oil and natural gas pipelines and other transportation facilities, any oversupply or undersupply of oil, natural gas and liquid products, the regulatory environment, the economic environment and, other regional and political events, none of which can be predicted with certainty;

 

SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP’) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates particularly significant to the financial statements include the following:

 

●	Estimates of our reserves of oil, natural gas and natural gas liquids ("NGL");

 

●	Future cash flows from oil and gas properties;

 

●	Depreciation, depletion and amortization expense;

 

●	Asset retirement obligations;

 

●	Fair values of derivative instruments;

 

●	Fair values of assets acquired and liabilities assumed from business combinations; and

 

●	Natural gas imbalances.

 

As fair value is a market-based measurement, it is determined based on the assumptions that market participants would use. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Such estimates and assumptions are adjusted when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates. Any changes in estimates resulting from continuous changes in the economic environment will be reflected in the financial statements in future periods.

 

There are numerous uncertainties in estimating the quantity of reserves and in projecting the future rates of production and timing of development expenditures, including future costs to dismantle, dispose and restore our properties. Oil and gas reserve engineering must be recognized as a subjective process of estimating underground accumulations of oil and gas that cannot be measured in an exact way.

 

24

 

Cash and cash equivalents

 

The Company considers short-term interest bearing investments with initial maturities of three months or less to be cash equivalents. Cash and cash equivalents consist of cash in banks, free credit on investment accounts and money market accounts.

 

Foreign currency translation

 

The Company complies with Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 830, Foreign Currency Matters. Monetary items are translated at the exchange rate in effect at the balance sheet date; non-monetary items are translated at historical exchange rates. Income and expense items are translated at the average exchange rate for the year. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

 

OFF BALANCE SHEET ARRANGMENTS

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Inapplicable. We have no market sensitive instruments.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

As of the end of the period covered by this Report, we conducted an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the 1934 Act). Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in reports that we file or submit under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms.

 

Changes in Internal Control Over Financial Reporting.

 

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 240.15d-15 that occurred during our last fiscal quarter that has materially affected, or is reasonable likely to materially affect, our internal control over financial reporting.

 

25

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings

 

None

 

Item 2. Unregistered Sales of Equity Securities

 

After the quarter ending September 30, 2014, on October 6, 2014, we issued 400,000 common stock shares to each of our 3 officers/directors for their performance in 2013 and 2014.

 

Item 3. Defaults upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures.

 

Inapplicable.

 

Item 5. Other Information.

 

None.

 

26

 

Item 6. Exhibits

Exhibit No.		Description
31.1		Rule 13a-14(a)/15d14(a) Certifications of Mark Holbrook Chief Executive Officer and Director (attached hereto)
31.2		Rule 13a-14(a)/15d14(a) Certifications of Cora J. Holbrook, the CFO (attached hereto)
32.1		Section 1350 Certifications of Mark Holbrook, the President, Chief Executive Officer and Director (attached hereto)
32.2		Section 1350 Certifications Cora Holbrook (attached hereto)
101.INS**		XBRL INSTANCE DOCUMENT
101.SCH**		XBRL TAXONOMY EXTENSION SCHEMA
101.CAL**		XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF**		XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
101.LAB**		XBRL TAXONOMY EXTENSION LABEL LINKBASE
101.PRE**		XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

_________________ 

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

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SIGNATURES

 

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

 

	Puissant Industries Inc.
Dated: November 14, 2014	By:	/s/ Mark Holbrook
	Name:	Mark Holbrook
	Title:	Chief Executive Officer

 

 

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