First Titan Corp was incorporated in Florida on September 16, 2010. The Company intended to design and manufacture both panel and engineered/tooled custom vacuum formed instrument panels and wiring harnesses, required for the monitoring of any final product that utilizes a gas or diesel engine source. The Company was considered to be in the development stage in accordance with ASC 915 until October 1, 2012 when it began receiving revenue.
We intend to invest in oil and gas properties, greenfield projects and in the development of cutting edge exploration and production technologies.
In September 2011, First Titan Corporation created First Titan Energy, LLC with the goal of capitalizing on the booming oil and gas industry. It is our intention to maximize shareholder value through mergers and acquisitions, greenfield projects and investments in the development of cutting edge exploration and production technologies.
First Titan Energy’s oil and gas development activities include the following:
During October 2012, we acquired a working interest in the Lake Boeuf Field in Southeast Louisiana. The field covers 300 acres in Lafourche Parish. The prospect was a 12,025 directional well to be drilled utilizing a land rig. The project has been indefinitely suspended. All amounts invested in this project have been transferred to the South Lake Charles Prospect.
Big Canyon Prospect – On January 19, 2012, we entered into an agreement to drill two wells on 640 acres of land located in Terrell County, Texas. Our option to drill expired January 27, 2013 and no wells have been drilled.
We have incurred losses since inception, have been issued a going concern opinion from our auditors and rely upon the sale of our securities and debt financing to fund operations. We will need additional financing in order to continue operations.
We earned net revenue of $54,069 during the six months sended March 31, 2014, compared to $37,707 during the comparable period in last year. The increase of revenue is due to the acquisition of the Minns Project late in fiscal 2013. The Minns Project did not generate any revenue during the six months ended March 31, 2013.
Lease operating expense
We incurred lease operating expense of $11,324 and $633 during the six months ended March 31, 2014 and 2013, respectively. The increase of lease operating expense is due to the acquisition of the Minns Project late in fiscal 2013.
Depletion, depreciation & amortization
We incurred depletion expense of $30,630 during the six months ended March 31, 2014, and $7,206 for the comparable period last year. The increase in depletion, depreciation and amortization is the result of higher production combined with a higher rate of depletion per BOE during the six months ended March 31, 2014.
Impairment of investment in joint venture
During the six months ended March 31, 2014, we recognized impairment of an investment in a joint venture of $35,000 as a result of impairing our investment in the joint venture with Biofuels Power Corp.
General and Administrative Expenses
We recognized general and administrative expenses in the amount of $276,313 and $224,289 for the six months ended March 31, 2014 and ended 2013, respectively. The increase is due to the higher professional fees during the current year.
Loss from Operations
Our loss from operation for the six months ended March 31, 2014 and 2013 from $194,438 to $299,724, primarily due to the increases in depletion, impairment and professional fees discussed above.
Interest Expense
Interest expense from $137,462 for the six months ended March 31, 2013 to $262,359 for the six months ended March 31, 2014. Interest expense for the six months ended March 31, 2014 included amortization of discount on convertible notes payable in the amount of $227,065, compared to $108,444 for the comparable period of 2013. The remaining increase is the result of the Company entering into interest-bearing convertible notes payable.
Net
We incurred a net of $562,083 for the six months ended March 31, 2014 as compared to $331,900 for the comparable period of 2013. The in the net was primarily the result of the increases in depletion, impairment, professional fees and interest expense discussed above.
Three months ended March 31, 2014 compared to the three months ended March 31, 2013
Oil and Gas Sales
We earned net revenue of $21,859 during the period, compared to $13,750 during the comparable period in last year. The increase of revenue is due to the acquisition of the Minns Project late in fiscal 2013.
Lease operating expense
We incurred lease operating expense of $7,507 and $321 during the three months ended March 31, 2014 and 2013, respectively. The increase of lease operating expense is due to the acquisition of the Minns Project late in fiscal 2013.
Depletion, depreciation & amortization
We incurred depletion, depreciation and amortization expense of $7,730 during the three months ended March 31, 2014, and $2,202 for the comparable period of previous year. The increase in depletion, depreciation and amortization is the result of higher production combined with a higher rate of depletion per BOE during the three months ended March 31, 2014.
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Impairment of investment in joint venture
During the three months ended March 31, 2014, we recognized impairment of an investment in a joint venture of $10,000 as a result of impairing our investment in the joint venture with Biofuels Power Corp.
General and Administrative Expenses
We recognized general and administrative expenses in the amount of $111,245 and $146,508 for the three months ended March 31, 2014 and 2013, respectively. The decrease was primarily the result of lower management fees.
Loss from Operations
Our loss from operation for the six months ended March 31, 2014 and 2013 from $135,294 to $114,801, due to a greater incremental increase in revenue when compared to the incremental increase of expenses during the period.
Interest Expense
Interest expense from $100,599 for the three months ended March 31, 2013 to $66,761 for the three months ended March 31, 2014. Interest expense for the three months ended March 31, 2014 included amortization of discount on convertible notes payable in the amount $57,607, compared to $84,662 for the comparable period of 2013. The remaining decrease is the result of the lower principal balances on convertible notes payable.
Net
We incurred a net of $181,562 for the three months ended March 31, 2014 as compared to $235,893 for the comparable period of 2013. The in the net was primarily the result of a greater incremental increase in revenue when compared to the incremental increase of expenses during the period.
Going Concern
Liquidity and Capital Resources
We anticipate needing approximately of $750,000 to fund our operations and to effectively execute our business plan over the next eighteen months. Currently available cash is not sufficient to allow us to commence full execution of our business plan. Our business expansion will require significant capital resources that may be funded through the issuance of common stock or of notes payable or other debt arrangements that may affect our debt structure. Despite our current financial status we believe that we may be able to issue notes payable or debt instruments in order to start executing our business plan. However, there can be no assurance that we will be able to raise money in this fashion and have not entered into any agreements that would obligate a third party to provide us with capital.
During the three months ended March 31, 2014, we incurred a net of $181,562. We raised the cash amount to be used in these activities from advances. As of March 31, 2014, we had cash on hand of $91,107 and of $256,089. Our cash on hand will be adequate to fund our operations for approximately three months.
As of the date of this filing, the current funds available to the Company will not be sufficient to continue maintaining a reporting status. Management believes if the Company cannot maintain its reporting status with the SEC it will have to cease all efforts directed towards the Company. As such, any investment previously made would be lost in its entirety.
To date, the Company has been able to fund operations through the sale of stock and by obtaining cash advances. The Company will have to seek additional financing in the future. However, the Company may not be able to obtain additional capital or generate sufficient revenues to fund our operations. If we are unsuccessful at raising sufficient funds to fund our operations, the Company may be forced to seek a buyer for our business or another entity with which we could create a joint venture. If all of these alternatives fail, we expect that the Company will be required to seek protection from creditors under applicable bankruptcy laws.
Our independent auditor has expressed substantial doubt about our ability to continue as a going concern and believes that our ability is dependent on our ability to implement our business plan, raise capital and generate revenues. See Note 2 of our financial statements.
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Recent federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or The NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges are those that address board of directors’ independence, audit committee oversight, and the adoption of a code of ethics. Our Board of Directors is comprised of one individual who is also our executive officer. Our executive officer makes decisions on all significant corporate matters such as the approval of terms of the compensation of our executive officer and the oversight of the accounting functions.
The Company has not yet adopted any of these corporate governance measures, and since our securities are not yet listed on a national securities exchange, the Company is not required to do so. The Company has not adopted corporate governance measures such as an audit or other independent committees of our board of directors as we presently do not have any independent directors. If we expand our board membership in future periods to include additional independent directors, the Company may seek to establish an audit and other committees of our board of directors. It is possible that if our Board of Directors included independent directors and if we were to adopt some or all of these corporate governance measures, stockholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees may be made by a majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions.