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 UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 000-51712
PARK PLACE ENERGY CORP.
(Exact name of small business issuer as specified in its
charter)
Nevada |
71-0971567 |
(State or other jurisdiction of incorporation or
organization) |
(I.R.S. Employer Identification No.) |
|
|
2200 Ross Ave., Suite 4500E |
|
Dallas, TX USA |
75201 |
(Address of principal executive offices) |
(Zip Code) |
(214) 220-4340
Registrants telephone number, including area
code
N/A
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer,
accelerated filer, non-accelerated filer, and smaller reporting company in
Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] |
Accelerated filer [ ] |
Non-accelerated filer [ ] (Do not check if a smaller
reporting company) |
Smaller reporting company
[X] |
Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
State the number of shares outstanding of each of the issuers
classes of common equity, as of the latest practicable date: 45,624,427 shares
of common stock as of November 7, 2014.
1
PARK PLACE ENERGY CORP.
Quarterly Report On Form 10-Q
For The Quarterly
Period Ended
September 30, 2014
INDEX
2
PART I
Item 1. Financial Statements
PARK PLACE ENERGY CORP. |
Consolidated financial statements |
September 30, 2014 |
(Expressed in US dollars) |
(unaudited) |
3
PARK PLACE ENERGY CORP. |
Consolidated balance sheets |
(Expressed in US dollars) |
|
|
September 30, |
|
|
December 31, |
|
|
|
2014 |
|
|
2013 |
|
|
|
$ |
|
|
$ |
|
|
|
(unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash |
|
1,915,505 |
|
|
32,782 |
|
Amounts receivable |
|
6,960 |
|
|
91,375 |
|
Prepaid expenses and deposits |
|
20,984 |
|
|
5,256 |
|
Total current assets |
|
1,943,449 |
|
|
129,413 |
|
Restricted cash |
|
2,300 |
|
|
2,300 |
|
Oil
and gas properties (Notes 3 and 8) |
|
2,006,417 |
|
|
1,206,201 |
|
Total assets |
|
3,952,166 |
|
|
1,337,914 |
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts payable and accrued liabilities (Note 8) |
|
423,266 |
|
|
197,777 |
|
Total liabilities |
|
423,266 |
|
|
197,777 |
|
Nature of operations and continuance of business (Note 1)
|
|
|
|
|
|
|
Commitments (Note 9) |
|
|
|
|
|
|
Subsequent events (Note 12) |
|
|
|
|
|
|
Stockholders equity |
|
|
|
|
|
|
Common stock
Authorized:
250,000,000 shares, par value $0.00001
Issued and
outstanding: 45,602,677 and 32,063,447 shares, respectively |
|
456 |
|
|
321 |
|
Additional paid-in capital |
|
16,946,812 |
|
|
13,748,758 |
|
Stock subscriptions received (Note 4) |
|
|
|
|
153,286 |
|
Deficit |
|
(13,418,368 |
) |
|
(12,762,228 |
) |
Total
stockholders equity |
|
3,528,900 |
|
|
1,140,137 |
|
Total liabilities and stockholders equity |
|
3,952,166 |
|
|
1,337,914 |
|
(The accompanying notes are an integral part of these
consolidated financial statements)
4
PARK PLACE ENERGY CORP. |
Consolidated statements of operations |
(Expressed in US dollars) |
(unaudited) |
|
|
Three months |
|
|
Three months |
|
|
Nine months |
|
|
Nine months |
|
|
|
ended |
|
|
ended |
|
|
ended |
|
|
ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
(Refer to |
|
|
|
|
|
(Refer to |
|
|
|
|
|
|
Note 11) |
|
|
|
|
|
Note 11) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
238 |
|
|
|
|
|
775 |
|
Foreign exchange loss |
|
12,034 |
|
|
13,375 |
|
|
21,117 |
|
|
15,277 |
|
General and administrative (Note 8) |
|
267,552 |
|
|
169,891 |
|
|
635,023 |
|
|
288,710 |
|
Total expenses |
|
279,586 |
|
|
183,504 |
|
|
656,140 |
|
|
304,762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before other expenses |
|
(279,586 |
) |
|
(183,504 |
) |
|
(656,140 |
) |
|
(304,762 |
) |
Other expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Loss on settlement of debt |
|
|
|
|
|
|
|
|
|
|
(3,414 |
) |
Loss
on disposal of property and equipment |
|
|
|
|
|
|
|
|
|
|
(112 |
) |
Total other expenses |
|
|
|
|
|
|
|
|
|
|
(3,526 |
) |
Net loss for the
period |
|
(279,586 |
) |
|
(183,504 |
) |
|
(656,140 |
) |
|
(308,288 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share,
basic and diluted |
|
(0.01 |
) |
|
(0.01 |
) |
|
(0.02 |
) |
|
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares outstanding |
|
43,246,407 |
|
|
24,704,751 |
|
|
37,767,677 |
|
|
22,082,887 |
|
(The accompanying notes are an integral part of these
consolidated financial statements)
5
PARK PLACE ENERGY CORP. |
Consolidated statement of stockholders equity |
(Expressed in US dollars) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Stock |
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
Additional |
|
|
subscriptions |
|
|
|
|
|
|
|
|
|
|
|
|
Amount |
|
|
paid-in capital |
|
|
received |
|
|
Deficit |
|
|
Total |
|
|
|
# |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
Balance, December 31, 2013 |
|
32,063,447 |
|
|
321 |
|
|
13,748,758 |
|
|
153,286 |
|
|
(12,762,228 |
) |
|
1,140,137 |
|
Issuance of common stock for cash |
|
13,506,430 |
|
|
135 |
|
|
3,150,651 |
|
|
(153,286 |
) |
|
|
|
|
2,997,500 |
|
Stock issuance costs |
|
|
|
|
|
|
|
(15,650 |
) |
|
|
|
|
|
|
|
(15,650 |
) |
Issuance of common stock for consulting services |
|
32,800 |
|
|
|
|
|
2,624 |
|
|
|
|
|
|
|
|
2,624 |
|
Fair value of stock options vested |
|
|
|
|
|
|
|
60,429 |
|
|
|
|
|
|
|
|
60,429 |
|
Net loss for the
period |
|
|
|
|
|
|
|
|
|
|
|
|
|
(656,140 |
) |
|
(656,140 |
) |
Balance, September 30, 2014 |
|
45,602,677 |
|
|
456 |
|
|
16,946,812 |
|
|
|
|
|
(13,418,368 |
) |
|
3,528,900 |
|
(The accompanying notes are an integral part of these
consolidated financial statements)
6
PARK PLACE ENERGY CORP. |
Consolidated statements of cash flows |
(Expressed in US dollars) |
(unaudited) |
|
|
Nine months |
|
|
Nine months |
|
|
|
ended |
|
|
ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
|
$ |
|
|
$ |
|
|
|
|
|
|
(Refer to |
|
|
|
|
|
|
Note 11) |
|
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
Net loss for the period |
|
(656,140 |
) |
|
(308,288 |
) |
Adjustments to reconcile net
loss to net cash used in operating activities: |
|
|
|
|
|
|
Depreciation |
|
|
|
|
775 |
|
Loss on
settlement of debt |
|
|
|
|
3,414 |
|
Loss on disposal of property and
equipment |
|
|
|
|
112 |
|
Stock-based
compensation |
|
106,512 |
|
|
75,784 |
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
Amounts
receivable |
|
84,415 |
|
|
(80,554 |
) |
Prepaid expenses and deposits
|
|
(15,728 |
) |
|
3,354 |
|
Due from related
party |
|
|
|
|
700 |
|
Accounts payable and accrued liabilities |
|
127,138 |
|
|
63,886 |
|
Net cash used in operating activities |
|
(353,803 |
) |
|
(240,817 |
) |
Investing activities |
|
|
|
|
|
|
Restricted cash |
|
|
|
|
6,325 |
|
Oil
and gas properties expenditures |
|
(745,324 |
) |
|
(638,564 |
) |
Net cash used in investing activities |
|
(745,324 |
) |
|
(632,239 |
) |
Financing activities |
|
|
|
|
|
|
Proceeds from issuance of
common stock / stock subscriptions received |
|
2,997,500 |
|
|
1,100,000 |
|
Share
issuance costs |
|
(15,650 |
) |
|
|
|
Net cash provided by financing activities |
|
2,981,850 |
|
|
1,100,000 |
|
Change in cash |
|
1,882,723 |
|
|
226,944 |
|
Cash, beginning of period |
|
32,782 |
|
|
12,130 |
|
Cash, end of
period |
|
1,915,505 |
|
|
239,074 |
|
Non-cash investing and financing
activities: |
|
|
|
|
|
|
Common stock issued to settle debt |
|
|
|
|
9,104 |
|
Common stock issued for oil
and gas properties expenditures |
|
2,624 |
|
|
21,600 |
|
Oil
and gas property expenditures included in accounts payable |
|
52,268 |
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures: |
|
|
|
|
|
|
Interest paid |
|
|
|
|
|
|
Income taxes paid |
|
|
|
|
|
|
(The accompanying notes are an integral part of these
consolidated financial statements)
7
PARK PLACE ENERGY CORP. |
Notes to the consolidated financial statements |
September 30, 2014 |
(Expressed in US dollars) |
(unaudited) |
1. |
Basis of Presentation |
|
|
|
|
The accompanying consolidated interim financial
statements of Park Place Energy Corp. (the Company) should be read in
conjunction with the consolidated financial statements and accompanying
notes filed with the U.S. Securities and Exchange Commission in the
Companys Annual Report on Form 10-K for the fiscal year ended December
31, 2013. In the opinion of management, the accompanying financial
statements reflect all adjustments of a recurring nature considered
necessary to present fairly the Companys financial position and the
results of its operations and its cash flows for the periods
shown. |
|
|
|
|
The preparation of consolidated financial statements in
accordance with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect
the amounts reported. Actual results could differ materially from those
estimates. The results of operations and cash flows for the periods shown
are not necessarily indicative of the results to be expected for the full
year. |
|
|
|
|
These consolidated financial statements have been
prepared on a going concern basis, which implies the Company will continue
to realize its assets and discharge its liabilities in the normal course
of business. The Company has a history of negative cash flows from
operating activities and the continuation of the Company as a going
concern is dependent upon the continued financial support from its
shareholders, the ability of the Company to obtain necessary equity
financing to continue operations, and the attainment of profitable
operations. As at September 30, 2014, the Company has an accumulated
deficit of $13,418,368 since inception. While these factors alone could
raise substantial doubt regarding the Companys ability to continue as a
going concern, it should be noted that the Company currently has working
capital of $1,520,183. These financial statements do not include any
adjustments to the recoverability and classification of recorded asset
amounts and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. |
|
|
|
|
See Note 3 for a recent development on Companys
Agreement for Crude Oil and Natural Gas Prospecting and Exploration in the
Block with the Ministry of Economy and Energy of Bulgaria. During the
appeal process, the Company has sufficient cash to continue its data
gathering and evaluation work. Management will continue to evaluate
various alternatives to obtain additional funding, which include, without
limitation, financing through the sale of equity, borrowings or farm outs
or similar arrangements under which third parties would pay all or a
portion of the costs to implement the Companys business plan in exchange
for an interest in the assets of the Company. In connection with a
possible financing through the sale of equity, the Company will consider a
listing on a domestic or foreign stock exchange. |
|
|
|
2. |
Summary of Significant Accounting Policies |
|
|
|
|
(a) |
Reclassifications |
|
|
|
|
|
Certain reclassifications have been made to the prior
periods financial statements to conform to the current periods
presentation. |
|
|
|
|
(b) |
Recent Accounting Pronouncements |
|
|
|
|
|
The Company has limited operations and is considered to
be in the development stage. In the period ended June 30, 2014, the
Company elected to early adopt Accounting Standards Update No.
2014-10, Development Stage Entities (Topic 915): Elimination of
Certain Financial Reporting Requirements. The adoption of this ASU
allows the Company to remove the inception to date information and all
references to development stage. |
|
|
|
|
|
The Company has implemented all new accounting
pronouncements that are in effect and that may impact its financial
statements and does not believe that there are any other new accounting
pronouncements that have been issued that might have a material impact on
its financial position or results of operations. |
|
|
|
3. |
Oil and Gas Properties |
|
|
|
September 30, |
|
|
December 31, |
|
|
|
|
2014 |
|
|
2013 |
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Unproven properties |
|
|
|
|
|
|
|
Bulgaria |
|
2,006,417 |
|
|
1,206,201 |
|
8
PARK PLACE ENERGY CORP. |
Notes to the consolidated financial statements |
September 30, 2014 |
(Expressed in US dollars) |
(unaudited) |
3. |
Oil and Gas Properties (continued) |
|
|
|
Pursuant to an exploration permit originally awarded in
October 2010, on April 1, 2014, the Company entered into an Agreement for
Crude Oil and Natural Gas Prospecting and Exploration in the Vranino 1-11
Block with the Ministry of Economy and Energy of Bulgaria (the License
Agreement). The initial term of the License Agreement is five years. This
five-year period will commence once the Bulgarian regulatory authorities
approve of the Companys work programs for the permit area. The License
Agreement (or applicable legislation) provides for possible extension
periods for up to five additional years during the exploration phase, as
well as the conversion of the License Agreement to an exploitation
concession, which can last up to 35 years. Under the License Agreement,
the Company will submit a yearly work program that is subject to approval
of the Bulgarian regulatory authorities. |
|
|
|
The Companys commitment is to perform geological and
geophysical exploration activities in the first 3 years of the initial
term (the Exploration and Geophysical Work Stage), followed by drilling
activities in years 4 and 5 of the initial term (the Data Evaluation and
Drilling Stage). The Company is required to drill 10,000 meters
(approximately 32,800 feet) of new wellbore (which may be vertical,
horizontal or diagonal) and conduct other exploration activities during
the initial term. |
|
|
|
Pursuant to the License Agreement, the Company is
obligated to incur minimum costs during the initial term as
follows: |
|
(i) |
$925,000 for the Exploration and Geophysical Work Stage;
and |
|
(ii) |
$3,675,000 for the Data Evaluation and Drilling
Stage. |
In addition, during the term of the
License Agreement, the Company is obligated to pay an annual land rental fee of
$10,309 (15,897 BGN).
The Company is permitted to commence
limited production during the initial term of the License Agreement. Upon
confirmation of a commercial discovery, the Company is entitled to convert the
productive area of the license to an exploitation concession which may last for
up to 35 years provided that the minimum work commitments are satisfied.
On August 26, 2014, the Bulgarian
environmental agency approved the Companys overall work program and first year
annual work program. A number of parties appealed the decision of the
environmental agency; accordingly, there will be an appeals proceeding before an
administrative judge panel. The initial term of the License Agreement will not
commence until the appeals proceeding has been completed and the decision
upheld. The Company plans to continue its data gathering and evaluation during
this period.
4. |
Common Stock |
|
|
|
|
(a) |
On March 5, 2014, the Company issued 4,516,430 shares of
common stock at a price of $0.20 per share for proceeds of $903,286, of
which $153,286 was received as at December 31, 2013. Included in this
private placement was 125,000 shares of common stock issued to the
Corporate Secretary of the Company for proceeds of $25,000. In connection
with this private placement, the Company incurred $7,500 in stock issuance
costs to a director of the Company. |
|
|
|
|
(b) |
On July 24, 2014, the Company issued 8,990,000 shares of
common stock at a price of $0.25 per share for proceeds of $2,247,500.
Included in this private placement was 1,000,000 shares of common stock
issued to a significant shareholder of the Company for proceeds of
$250,000. In connection with this private placement, the Company incurred
$8,150 in stock issuance costs. |
|
|
|
|
(c) |
On July 31, 2014, the Company issued 32,800 shares of
common stock with a fair value of $2,624 to the Vice President of
Exploration pursuant to a consulting agreement. Refer to Note
9(a). |
|
|
|
5. |
Stock Options |
|
|
|
|
The Company has granted stock options pursuant to two
stock option plans, the 2013 Long-term Incentive Plan the 2013 LTIP and
the 2011 Stock Option Plan (which was replaced by the 2013 LTIP). Under
the 2013 LTIP, the total number of authorized options which may be granted
is up to a total of 10% of the total number of shares of common stock
issued and outstanding of the company on a rolling basis. Under the 2013
LTIP, the exercise price of each option shall not be less than the market
price of the Companys stock as calculated immediately preceding the day
of the grant. The vesting schedule for each option shall be specified by
the Board of Directors at the time of grant. The maximum term of options
granted is ten years or such lesser time as determined by the Company at
the time of grant. |
9
PARK PLACE ENERGY CORP. |
Notes to the consolidated financial statements |
September 30, 2014 |
(Expressed in US dollars) |
(unaudited) |
5. |
Stock Options (continued) |
|
|
|
The following table summarizes the continuity of the
Companys stock options: |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
average |
|
|
Aggregate |
|
|
|
|
|
|
|
exercise |
|
|
intrinsic |
|
|
|
|
Number |
|
|
price |
|
|
value |
|
|
|
|
of
options |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2013 |
|
1,800,000 |
|
|
0.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
350,000 |
|
|
0.24 |
|
|
|
|
|
Expired |
|
(50,000 |
) |
|
0.10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
September 30, 2014 |
|
2,100,000 |
|
|
0.17
|
|
|
249,460 |
|
Additional information regarding stock
options as of September 30, 2014, is as follows:
|
|
|
Outstanding |
|
|
Exercisable |
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
average |
|
|
Weighted |
|
|
|
|
|
Weighted |
|
|
Range of |
|
|
|
|
remaining |
|
|
average |
|
|
|
|
|
average |
|
|
exercise prices |
|
Number of |
|
|
contractual life |
|
|
exercise price |
|
|
Number of |
|
|
exercise price |
|
|
$ |
|
shares |
|
|
(years) |
|
|
$ |
|
|
shares |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.10 |
|
1,050,000 |
|
|
3.0 |
|
|
0.10 |
|
|
1,050,000 |
|
|
0.10 |
|
|
0.20 |
|
100,000 |
|
|
2.3 |
|
|
0.20 |
|
|
50,000 |
|
|
0.20 |
|
|
0.23 - 0.235 |
|
850,000 |
|
|
2.1 |
|
|
0.23 |
|
|
825,000 |
|
|
0.23 |
|
|
0.28 |
|
100,000 |
|
|
2.8
|
|
|
0.28
|
|
|
50,000 |
|
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,100,000 |
|
|
2.6
|
|
|
0.17
|
|
|
1,975,000 |
|
|
0.16
|
|
The fair values for stock options
granted have been estimated using the Black-Scholes option pricing model
assuming no expected dividends and the following weighted average
assumptions:
|
|
Nine months |
|
|
Nine months |
|
|
|
ended |
|
|
ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2014 |
|
|
2013 |
|
|
|
|
|
|
|
|
Risk-free interest rate |
|
0.81% |
|
|
1.17% |
|
Expected life (in years) |
|
3.0 |
|
|
4.5 |
|
Expected volatility |
|
173% |
|
|
187% |
|
|
The fair value of stock options vested during the nine
months ended September 30, 2014 was $60,429 (2013 $75,784) which was
recorded as stock-based compensation and charged to operations. The
weighted average fair value of stock options granted during the nine
months ended September 30, 2014 was $0.20 (2013 $0.10) per
option. |
|
|
6. |
Share Purchase Warrants |
|
|
|
The following table summarizes the continuity of share
purchase warrants: |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
average |
|
|
|
|
|
|
|
exercise |
|
|
|
|
Number of |
|
|
price |
|
|
|
|
warrants |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2013 and September 30, 2014 |
|
11,000,000 |
|
|
0.20 |
|
10
PARK PLACE ENERGY CORP. |
Notes to the consolidated financial statements |
September 30, 2014 |
(Expressed in US dollars) |
(unaudited) |
6. |
Share Purchase Warrants (continued) |
|
|
|
As at September 30, 2014, the following share purchase
warrants were outstanding: |
Number of |
Exercise |
|
warrants |
price |
|
outstanding |
$ |
Expiry
date |
|
|
|
11,000,000 |
0.20 |
August 29, 2016
|
7. |
Restricted Stock Units |
|
|
|
|
On August 1, 2014, the Company granted 744,320 restricted
stock units (RSUs) with a fair value of $208,410 ($0.28 per share) and
with vesting periods ranging from one month to sixteen months. Of this
amount, 191,720 RSUs with a fair value of $52,682 were granted to officers
of the Company. Expense related to RSUs is recognized ratably over the
vesting period. During the nine months ended September 30, 2014, 30,000
RSUs with a fair value of $8,400 vested. Total compensation expense
related to RSUs was $46,083 (2013 - $nil) for the nine months ended
September 30, 2014, which is included in accrued liabilities as at
September 30, 2014. As at September 30, 2014, unrecognized compensation
expense related to the RSUs was $162,327 (December 31, 2013 - $nil). Refer
to Note 12. |
|
|
|
8. |
Related Party Transactions |
|
|
|
|
(a) |
During the nine months ended September 30, 2014, the
Company incurred management fees of $nil (2013 $12,000) to a company
controlled by the former President of the Company. |
|
|
|
|
(b) |
During the nine months ended September 30, 2014, the
Company incurred oil and gas consulting costs of $84,500 (2013 $nil) and
consulting fees of $32,500 (2013 $nil) to a company controlled by the
President of the Company, of which $16,120 (December 31, 2013 $13,773)
was included in accounts payable and accrued liabilities as at September
30, 2014. |
|
|
|
|
(c) |
During the nine months ended September 30, 2014, the
Company incurred wages of $16,453 (2013 $16,075) to the Assistant
Treasurer of the Company, of which $1,760 (December 31, 2013 $nil) was
included in accounts payable and accrued liabilities as at September 30,
2014. |
|
|
|
|
(d) |
During the nine months ended September 30, 2014, the
Company incurred oil and gas consulting costs of $45,196 (2013 $nil) and
management fees of $64,769 (2013 $nil) to the Corporate Secretary, of
which $28,864 (December 31, 2013 $7,250) was included in accounts
payable and accrued liabilities as at September 30, 2014. |
|
|
|
|
(e) |
During the nine months ended September 30, 2014, the
Company incurred oil and gas consulting costs of $123,308 (2013 $nil) to
a company controlled by the Vice President of Exploration of the Company,
of which $18,399 (December 31, 2013 $nil) was included in accounts
payable and accrued liabilities as at September 30, 2014. |
|
|
|
|
(f) |
During the nine months ended September 30, 2014, the
Company incurred accounting fees of $17,335 (2013 $7,470) to a company
controlled by the former Treasurer of the Company. |
|
|
|
|
(g) |
During the nine months ended September 30, 2014, the
Company granted 350,000 stock options with a fair value of $60,429 to
officers and directors of the Company. |
11
PARK PLACE ENERGY CORP. |
Notes to the consolidated financial statements |
September 30, 2014 |
(Expressed in US dollars) |
(unaudited) |
9. |
Commitments |
|
|
|
|
(a) |
On July 25, 2013 (as amended on February 1, 2014 and
August 1, 2014), the Company entered into an agreement with a company
controlled by the Vice President of Exploration for a period of four
months, which was later extended to commence on February 1, 2014 to
December 31, 2014, and may be continued on a month to month basis upon the
Company providing written notice of intent to extend at least thirty days
prior to the end of each month or until as otherwise mutually agreed.
Pursuant to the agreement, the Company is to pay the consultant 10,000 GBP
per month, issue 120,000 shares of common stock (issued), and grant
100,000 stock options (granted) with an exercise price of $0.10 per share
expiring three years from the date of grant (of which 50,000 stock options
vested on July 26, 2013 and 50,000 expired unvested on January 26, 2014),
for the initial term of four months. For the period from February 2, 2014
to December 31, 2014, the Company is to pay the consultant 11,000 GBP per
month. As additional compensation, the Company has issued to the
consultant 32,800 shares of common stock with a vesting date of June 1,
2014, and granted 100,000 stock options with an exercise price of $0.28
per share expiring three years from August 1, 2014 and vesting as follows:
50,000 stock options shall vest on the date of grant and 50,000 shall vest
on the Qualified Transaction Date. Qualified Transaction Date is defined
as the earlier of the following: |
|
(i) |
The date the Company completes raising in the aggregate
$10,000,000 in one or a series of capital raises, the calculation of which
commences June 15, 2013; |
|
(ii) |
The date in which the Company completes a farm out or
other infusion of capital for the project (under a financing or other
arrangement) in an amount of $20,000,000 or greater; or |
|
(iii) |
March 31, 2015. |
|
(b) |
On September 1, 2013, the Company entered into an
agreement with a consultant whereby the Company is to pay the consultant
Cdn$7,500 per month, increasing to Cdn$10,000 per month when the Company
raises at least Cdn$10,000,000 in financing, for a period of two years.
The Company has the right to terminate this agreement after the expiration
of one year if the Company has not secured a financing of at least
Cdn$10,000,000 during the first year of this agreement. On August 1, 2014,
the Company and the consultant entered into a termination agreement under
which this consulting agreement will terminate as of December 31, 2014. In
lieu of any and all termination fees payable under the consulting
agreement, the Company granted 164,700 RSUs. Such RSUs will vest on
December 31, 2014, provided that the consultant is providing services to
the Company or its subsidiary on that date. |
|
|
|
|
(c) |
On September 20, 2013 (as amended on August 1, 2014), the
Company entered into an agreement with a consultant whereby the Company is
to pay the consultant $1,800 per calendar day for services provided. A
calendar day will be broken into quarter days where less than a full
working calendar day is spent providing services. 50% of the consultant
fee is deferred and will be paid in RSUs. Fees accrued from the inception
of the agreement to June 30, 2014 shall be paid by RSUs issued as of
August 1, 2014. From and after July 1, 2014 until the Qualified
Transaction Date, the deferral fee shall be paid in RSUs on a quarterly
basis. Pricing for the RSUs accruing from and after July 1, 2014 will be
determined based on the average closing price of the Companys common
shares for the last ten days of the calendar quarter in which such RSUs
accrued. After the Qualified Transaction Date, the fees and deferrals
shall no longer apply. The Company is to pay the consultant $1,500 per
calendar day after the Qualified Transaction Date. |
|
|
|
|
(d) |
On November 1, 2013 (as amended on August 1, 2014), the
Company entered into an agreement with the President of the Company and a
company controlled by the President of the Company with a term of two
years effective September 1, 2013. The term will renew on a month-to-month
basis thereafter. Pursuant to the agreement as amended, the Company is to
pay $18,000 per month, with $5,000 of such consulting fees being deferred
and paid in RSUs to the President of the Company through and including the
month that a Phase I Capital Raise transaction is completed by the Company
not later than March 31, 2015, at which time the deferral ends. The
pricing for such RSUs will be determined based on the average closing
price of the Companys common shares for the last ten days of the calendar
quarter in which such RSUs accrued. Phase I Capital Raise is defined as
the following: |
|
(i) |
Raising in the aggregate $10,000,000 in one or a series
of capital raises, the calculation of which commences June 15, 2013;
or |
|
(ii) |
A farm out or other infusion of capital for the project
(under a financing or other arrangement) in an amount of $20,000,000 or
greater. |
12
PARK PLACE ENERGY CORP. |
Notes to the consolidated financial statements |
September 30, 2014 |
(Expressed in US dollars) |
(unaudited) |
9. |
Commitments (continued) |
If the Phase I Capital Raise is
completed on or before March 31, 2015, the President would also be issued
300,000 fully vested RSUs, which will be subject to a minimum two year hold
period upon completion of this financing. The Company will issue the President
100,000 fully vested RSUs upon each anniversary of this agreement dated upon
completion of the financing so long as the agreement remains in effect. If the
Company completes any additional cash financing of $10,000,000 or more in
addition to the first $10,000,000 of equity financing, the Company will issue
the President 250,000 fully vested RSUs upon the first subsequent capital raise
and 200,000 upon completion of a second subsequent capital raise.
10. |
Segmented Information |
|
|
|
The Companys operations are in the resource industry in
Bulgaria with head offices in the United States and a satellite office in
Sofia, Bulgaria. Geographical information is as
follows: |
|
September 30, 2014 |
|
Canada |
|
|
Bulgaria |
|
|
Total |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash |
|
2,300 |
|
|
|
|
|
2,300 |
|
|
Oil
and gas properties |
|
|
|
|
2,006,417 |
|
|
2,006,417 |
|
|
December 31, 2013 |
|
Canada |
|
|
Bulgaria |
|
|
Total |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted cash |
|
2,300 |
|
|
|
|
|
2,300 |
|
|
Oil
and gas properties |
|
|
|
|
1,206,201 |
|
|
1,206,201 |
|
11. |
Change in Reporting Currency |
|
|
|
On December 31, 2013, the Company changed its reporting
currency from Canadian dollars to US dollars. In preparing the Companys
prior period comparative balances in US dollars, the Company has adjusted
and reclassified amounts previously reported in the financial statements
in Canadian dollars. The changes made to the consolidated statements of
operations for the three and nine months ended September 30, 2013 and the
consolidated statement of cash flows for the nine months ended September
30, 2013 are shown below. |
|
|
|
|
(a) |
Reconciliation of statement of operations for the three
months ended September 30, 2013: |
|
|
|
|
|
|
Effect of change |
|
|
|
|
|
|
|
|
|
|
in reporting |
|
|
|
|
|
|
|
As previously |
|
|
currency and |
|
|
Revised |
|
|
|
|
reported |
|
|
reclassifications |
|
|
amount |
|
|
|
|
Cdn$ |
|
|
$ |
|
|
US$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting |
|
18,154 |
|
|
(18,154 |
) |
|
|
|
|
Depreciation |
|
248 |
|
|
(10 |
) |
|
238 |
|
|
Foreign exchange loss |
|
13,172 |
|
|
203 |
|
|
13,375 |
|
|
General and administrative |
|
|
|
|
169,891 |
|
|
169,891 |
|
|
Insurance |
|
3,538 |
|
|
(3,538 |
) |
|
|
|
|
Investor relations |
|
(231 |
) |
|
231 |
|
|
|
|
|
Management fees |
|
3,515 |
|
|
(3,515 |
) |
|
|
|
|
Office and general |
|
12,456 |
|
|
(12,456 |
) |
|
|
|
|
Professional fees |
|
52,261 |
|
|
(52,261 |
) |
|
|
|
|
Stock-based compensation |
|
75,979 |
|
|
(75,979 |
) |
|
|
|
|
Travel |
|
3,785 |
|
|
(3,785 |
) |
|
|
|
|
Wages
|
|
6,447
|
|
|
(6,447 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
189,324 |
|
|
(5,820 |
) |
|
183,504 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period |
|
(189,324 |
) |
|
5,820 |
|
|
(183,504 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
(35,688 |
) |
|
35,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
(225,012 |
) |
|
41,508 |
|
|
(183,504 |
) |
13
PARK PLACE ENERGY CORP. |
Notes to the consolidated financial statements |
September 30, 2014 |
(Expressed in US dollars) |
(unaudited) |
11. |
Change in Reporting Currency (continued) |
|
|
|
|
(b) |
Reconciliation of statement of operations for the nine
months ended September 30, 2013: |
|
|
|
|
|
|
Effect of change |
|
|
|
|
|
|
|
|
|
|
in reporting |
|
|
|
|
|
|
|
As previously |
|
|
currency and |
|
|
Revised |
|
|
|
|
reported |
|
|
reclassifications |
|
|
amount |
|
|
|
|
Cdn$ |
|
|
$ |
|
|
US$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting |
|
55,347 |
|
|
(55,347 |
) |
|
|
|
|
Depreciation |
|
793 |
|
|
(18 |
) |
|
775 |
|
|
Foreign exchange loss |
|
15,407 |
|
|
(130 |
) |
|
15,277 |
|
|
General and administrative |
|
|
|
|
288,710 |
|
|
288,710 |
|
|
Insurance |
|
10,454 |
|
|
(10,454 |
) |
|
|
|
|
Investor relations |
|
563 |
|
|
(563 |
) |
|
|
|
|
Management fees |
|
15,607 |
|
|
(15,607 |
) |
|
|
|
|
Office and general |
|
24,873 |
|
|
(24,873 |
) |
|
|
|
|
Professional fees |
|
87,361 |
|
|
(87,361 |
) |
|
|
|
|
Stock-based compensation |
|
78,582 |
|
|
(78,582 |
) |
|
|
|
|
Travel |
|
7,253 |
|
|
(7,253 |
) |
|
|
|
|
Wages
|
|
16,452 |
|
|
(16,452 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
312,692 |
|
|
(7,930 |
) |
|
304,762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before other
expenses |
|
(312,692 |
) |
|
7,930
|
|
|
(304,762 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses |
|
|
|
|
|
|
|
|
|
|
Loss on settlement of debt |
|
(3,467 |
) |
|
53 |
|
|
(3,414 |
) |
|
Loss
on disposal of property and equipment |
|
(114 |
) |
|
2 |
|
|
(112 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Total other
expenses |
|
(3,581 |
) |
|
55
|
|
|
(3,526 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period |
|
(316,273 |
) |
|
7,985 |
|
|
(308,288 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment |
|
(15,277 |
) |
|
15,277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
(331,550 |
) |
|
23,262 |
|
|
(308,288 |
) |
14
PARK PLACE ENERGY CORP. |
Notes to the consolidated financial statements |
September 30, 2014 |
(Expressed in US dollars) |
(unaudited) |
11. |
Change in Reporting Currency (continued) |
|
|
|
|
(c) |
Reconciliation of statement of cash flows for the nine
months ended September 30, 2013: |
|
|
|
|
|
|
Effect of change |
|
|
|
|
|
|
|
As previously |
|
|
in reporting |
|
|
Revised |
|
|
|
|
reported |
|
|
currency |
|
|
amount |
|
|
|
|
Cdn$ |
|
|
$ |
|
|
US$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
Net loss for the period |
|
(316,273 |
) |
|
7,985 |
|
|
(308,288 |
) |
|
Adjustments to reconcile net
loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
793 |
|
|
(18 |
) |
|
775 |
|
|
Loss on
settlement of debt |
|
3,467 |
|
|
(53 |
) |
|
3,414 |
|
|
Loss on disposal of property and
equipment |
|
114 |
|
|
(2 |
) |
|
112 |
|
|
Stock-based
compensation |
|
78,582 |
|
|
(2,798 |
) |
|
75,784 |
|
|
Changes in operating assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
Amounts
receivable |
|
(83,087 |
) |
|
2,533 |
|
|
(80,554 |
) |
|
Prepaid expenses and deposits
|
|
3,095 |
|
|
259 |
|
|
3,354 |
|
|
Due from related
party |
|
700 |
|
|
|
|
|
700 |
|
|
Accounts payable and accrued liabilities |
|
66,289 |
|
|
(2,403 |
) |
|
63,886 |
|
|
Net cash used in operating activities |
|
(246,320 |
) |
|
5,503 |
|
|
(240,817 |
) |
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
Restricted cash |
|
6,292 |
|
|
33 |
|
|
6,325 |
|
|
Oil
and gas properties expenditures |
|
(672,647 |
) |
|
34,083 |
|
|
(638,564 |
) |
|
Net cash used in investing activities |
|
(666,355 |
) |
|
34,116 |
|
|
(632,239 |
) |
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock/
subscriptions received |
|
1,156,103 |
|
|
(56,103 |
) |
|
1,100,000 |
|
|
Net cash provided
by financing activities |
|
1,156,103 |
|
|
(56,103 |
) |
|
1,100,000 |
|
|
Effect of exchange rate changes on cash |
|
(9,386 |
) |
|
9,386 |
|
|
|
|
|
Change in cash |
|
234,042 |
|
|
(7,098 |
) |
|
226,944 |
|
|
Cash, beginning of period |
|
12,181 |
|
|
(51 |
) |
|
12,130 |
|
|
Cash, end of
period |
|
246,223 |
|
|
(7,149 |
) |
|
239,074 |
|
|
Non-cash investing and financing
activities: |
|
|
|
|
|
|
|
|
|
|
Common stock issued to settle debt |
|
9,343 |
|
|
(239 |
) |
|
9,104 |
|
|
Common stock issued for oil and gas
properties expenditures |
|
22,009 |
|
|
(409 |
) |
|
21,600 |
|
12. |
Subsequent Events |
|
|
|
|
(a) |
On October 1, 2014, the Company granted 141,555 RSUs with
a fair value of $39,465. Of this amount, 94,647 RSUs with a fair value of
$26,501 were granted to officers of the Company. |
|
|
|
|
(b) |
On October 31, 2014, the Company issued 9,750 and 12,000
common shares to the former Treasurer of the Company and the Assistant
Treasurer of the Company, respectively, pursuant to the RSUs vested. Refer
to Note 7. |
15
Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
Managements Discussion and Analysis of Financial Condition and
Results of Operations (MD&A) is intended to provide readers of our
financial statements with a narrative from the perspective of our management on
our financial condition, results of operations, liquidity, and certain other
factors that may affect our future results. Our MD&A is presented in the
following sections:
- Executive Summary
- Results of Operations
- Liquidity and Capital Resources
- Recent Accounting Pronouncements
- Forward-Looking Statements.
Our MD&A should be read in conjunction with our unaudited
financial statements of Park Place Energy Corp. ("Park Place", Company", we,
and "our" ) and related Notes in Part I, Item 1 of the Quarterly Report on Form
10-Q and Item 8, Financial Statements and Supplementary Data, of the Annual
Report on Form 10-K for the year ended December 31, 2013.
Our website can be found at www.parkplaceenergy.com. Our Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form
8-K and amendments to those reports filed with or furnished to the U.S.
Securities and Exchange Commission ("SEC"), pursuant to Section 13(a) or 15(d)
of the Securities Exchange Act of 1934 ("Exchange Act"), can be accessed free of
charge by linking directly from our website under the "Investor Relations - SEC
Filings" caption to the SEC's Edgar Database.
Executive Summary
Park Place is an energy company engaged in oil and gas
exploration in Bulgaria.
Pursuant to an exploration permit originally awarded in October
2010, on April 1, 2014, the Company entered into an Agreement for Crude Oil and
Natural Gas Prospecting and Exploration in the Vranino 1-11 Block with the
Ministry of Economy and Energy of Bulgaria (the License Agreement). The
initial term of the License Agreement is five years. The five-year period will
commence once the Bulgarian regulatory authorities approve the Park Place work
programs for the permit area. The License Agreement (or applicable legislation)
provides for possible extension periods for up to five additional years during
the exploration phase, as well as the conversion of the License Agreement to an
exploitation concession, which can last up to 35 years. Under the License
Agreement, the Company will submit a yearly work program that is subject to
approval of the Bulgarian regulatory authorities.
The Companys commitment is to perform geological and
geophysical exploration activities in the first 3 years of the initial term (the
Exploration and Geophysical Work Stage), followed by drilling activities in
years 4 and 5 of the initial term (the Data Evaluation and Drilling Stage).
The Company is required to drill 10,000 meters (approximately 32,800 feet) of
new wellbore (which may be vertical, horizontal or diagonal) and conduct other
exploration activities during the initial term.
Pursuant to the License Agreement, the Company is obligated to
incur minimum costs during the initial term as follows:
|
(i) |
$925,000 for the Exploration and Geophysical Work Stage;
and |
|
(ii) |
$3,675,000 for the Data Evaluation and Drilling
Stage. |
In addition, during the term of the License Agreement, the
Company is obligated to pay an annual land rental fee of $10,309 (15,897 BGN).
The Company is permitted to commence limited production during
the initial term of the License Agreement. Upon confirmation of a commercial
discovery, the Company is entitled to convert the productive area of the license
to an exploitation concession, which may last for up to 35 years provided that
the minimum work commitments are satisfied.
On August 26, 2014, the Bulgarian environmental agency approved
the Companys overall work program and first year annual work program. A number
of parties appealed the decision of the environmental agency; accordingly, there
will be an appeals proceeding before an administrative judge panel. The initial
term of the License Agreement will not commence until the appeals proceeding has been
completed and the decision upheld. The Company plans to continue its data
gathering and evaluation during this period.
16
Results of Operations
The following summary of our results of operations should be
read in conjunction with our unaudited consolidated financial statements for the
quarter ended September 30, 2014, which are included herein.
Revenue
We are a pre-revenue stage company, and our future revenues
depend upon successful extraction of oil and gas deposits for sale.
Expenses
Our total operating expenses for the nine months ended
September 30, 2014 was $656,140 compared to $304,762 for the same period in
2013.
Our primary expense categories are described below:
General and Administrative Expenses
Our office and general expenses increased to $635,023 for the
nine months ended September 30, 2014 from $288,710 for the nine months ended
September 30, 2013. Our overhead increased due to employing more consultants and
increased general activity of the Company over the last year.
Loss
Our net loss for the nine months ended September 30, 2014 was
$656,140 compared to $308,288 for the nine months ending September 30, 2013.
Capital Expenditures
Based on our current plan of operations as set forth above, we
estimate that we will require approximately $1,400,000 to pursue our plan of
operations over the next 12 months. As at September 30, 2014, we had cash of
$1,915,505 and working capital of $1,520,183.
As mentioned in the Executive Summary, our work in Bulgaria is
being delayed. During the appeal process, the Company has sufficient cash to
continue its data gathering and evaluation work. Management will continue to
evaluate various alternatives to obtain additional funding, which include,
without limitation, financing through the sale of equity, borrowings or farm
outs or similar arrangements under which third parties would pay all or a
portion of the costs to implement the Companys business plan in exchange for an
interest in the assets of the Company. In connection with a possible financing
through the sale of equity, the Company will consider a listing on a domestic or
foreign stock exchange.
Liquidity and Capital Resources
Overview
For the nine months ending September 30, 2014, we raised net
proceeds of $2,981,850 in cash from the issuance of common stock, all which
funds will be used for general operation and to commence the exploration in
Bulgaria.
We used net cash of $353,803 in operating activities for the
nine months ended September 30, 2014 compared to $240,817 for the same period in
2013.
17
The following table summarizes our liquidity position as at
September 30, 2014:
|
|
As at |
|
|
|
September 30, |
|
|
|
2014 |
|
|
|
(Unaudited) |
|
|
|
$ |
|
Cash |
|
1,915,505 |
|
Working capital |
|
1,520,183 |
|
Total assets |
|
3,952,166 |
|
Total liabilities |
|
423,266 |
|
Shareholders equity |
|
3,528,900 |
|
We anticipate that we will require approximately $1,400,000 to
pursue our plan of operations over the next 12 months. We anticipate raising
additional funds over the next twelve months to pay for our exploration
commitments in Bulgaria and general and administrative expenses.
Cash Flow from Investing Activities
Net cash used in investing activities for the nine months ended
September 30, 2014 was $745,324 compared to net cash use of $632,239 for the
nine months ended September 30, 2013. This increase was due to increased
expenditures on the Bulgarian project.
Cash Provided By Financing Activities
For the nine months ended September 30, 2014, cash provided by
financing activities was $2,981,850 compared to $1,100,000 for the nine months
ended September 30, 2013.
Contractual Obligations
See Notes 3 and 9 of the Consolidated Financial Statements for
information about the Companys contractual obligations.
Critical Accounting Policies
Our consolidated financial statements and accompanying notes
have been prepared in accordance with U.S. generally accepted accounting
principles applied on a consistent basis. The preparation of financial
statements in conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the 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.
We regularly evaluate the accounting policies and estimates
that we use to prepare our consolidated financial statements. In general,
managements estimates are based on historical experience, on information from
third party professionals, and on various other assumptions that are believed to
be reasonable under the facts and circumstances. Actual results could differ
from those estimates made by management.
We believe that our critical accounting policies and estimates
include the following:
Oil and gas properties
The Company follows the full cost method of accounting for oil
and natural gas operations, whereby all costs of exploring for and developing
oil and natural gas reserves are capitalized and accumulated in cost centers on
a country-by-country basis. Costs include land acquisition costs, geological and
geophysical charges, carrying charges on non-productive properties and costs of
drilling both productive and non-productive wells. General and administrative
costs are not capitalized other than to the extent of the Companys working
interest in operated capital expenditure programs on which operators fees have
been charged equivalent to standard industry operating agreements.
18
The costs in each cost center, including the costs of well
equipment, are depleted and depreciated using the unit-of-production method
based on the estimated proved reserves before royalties. Natural gas reserves
and production are converted to equivalent barrels of crude oil based on
relative energy content. The costs of acquiring and evaluating significant
unproved properties are initially excluded from depletion calculations. These
unevaluated properties are assessed periodically to ascertain whether impairment
has occurred. When proved reserves are assigned or the property is considered to
be impaired, the cost of the property or the amount of the impairment is added
to costs subject to depletion.
The capitalized costs less accumulated depletion and
depreciation in each cost center are limited to an amount equal to the estimated
future net revenue from proved reserves (based on prices and costs at the
balance sheet date) plus the cost (net of impairments) of unproved properties.
The total capitalized costs less accumulated depletion and depreciation, site
restoration provision and future income taxes of all cost centers are further
limited to an amount equal to the future net revenue from proved reserves plus
the cost (net of impairments) of unproved properties of all cost centers less
estimated future site restoration costs, general and administrative expenses,
financing costs and income taxes.
Proceeds from the sale of oil and natural gas properties are
applied against capitalized costs, with no gain or loss recognized, unless such
a sale would significantly alter the rate of depletion and depreciation.
Stock-based compensation
The Company records stock-based compensation in accordance with
ASC 718, Compensation Stock Compensation, using the fair value method. All
transactions in which goods or services are the consideration received for the
issuance of equity instruments are accounted for based on the fair value of the
consideration received or the fair value of the equity instrument issued,
whichever is more reliably measurable.
The Company uses the Black-Scholes option pricing model to
calculate the fair value of stock-based awards. This model is affected by the
Companys stock price as well as assumptions regarding a number of subjective
variables. These subjective variables include, but are not limited to the
Companys expected stock price volatility over the term of the awards, and
actual and projected employee stock option exercise behaviors. The value of the
portion of the award that is ultimately expected to vest is recognized as an
expense in the statement of operations over the requisite service period.
Recent Accounting Pronouncements
See Note 2 of the Consolidated Financial Statements for
information about recent accounting pronouncements.
Forward-Looking Information
Certain statements in this Quarterly Report on Form 10-Q
constitute forward-looking statements within the meaning of applicable U.S.
securities legislation. Additionally, forward-looking statements may be made
orally or in press releases, conferences, reports, on our website or otherwise,
in the future, by us or on our behalf. Such statements are generally
identifiable by the terminology used such as plans, expects, estimates,
budgets, intends, anticipates, believes, projects, indicates,
targets, objective, could, should, may or other similar words.
By their very nature, forward-looking statements require us to
make assumptions that may not materialize or that may not be accurate.
Forward-looking statements are subject to known and unknown risks and
uncertainties and other factors that may cause actual results, levels of
activity and achievements to differ materially from those expressed or implied
by such statements, including the factors discussed under Item 1A. Risk Factors
in our most recent Annual Report on Form 10-K. Such factors include, but are not
limited to, the following: fluctuations in and volatility of the market prices
for oil and natural gas products; the ability to produce and transport oil and
natural gas; the results of exploration and development drilling and related
activities; global economic conditions, particularly in the countries in which
we carry on business, especially economic slowdowns; actions by governmental
authorities including increases in taxes, legislative and regulatory initiatives
related to fracture stimulation activities, changes in environmental and other
regulations, and renegotiations of contracts; political uncertainty, including
actions by insurgent groups or other conflicts; the negotiation and closing of
material contracts; future capital requirements and the availability of
financing; estimates and economic assumptions used in connection with our
acquisitions; risks associated with drilling, operating and decommissioning
wells; actions of third-party co-owners of interests in properties in which we
also own an interest; our ability to effectively integrate companies and properties that we acquire; our limited operating
history; our history of operating losses; our lack of insurance coverage; and
the other factors discussed in other documents that we file with or furnish to
the U.S. Securities and Exchange Commission. The impact of any one factor on a
particular forward-looking statement is not determinable with certainty as such
factors are interdependent upon other factors and our course of action would
depend upon our assessment of the future, considering all information then
available. In that regard, any statements as to: future oil or natural gas
production levels; capital expenditures; the allocation of capital expenditures
to exploration and development activities; sources of funding for our capital
expenditure programs; drilling of new wells; demand for oil and natural gas
products; expenditures and allowances relating to environmental matters; dates
by which certain areas will be developed or will come on-stream; expected
finding and development costs; future production rates; ultimate recoverability
of reserves, including the ability to convert probable and possible reserves to
proved reserves; dates by which transactions are expected to close; future cash
flows, uses of cash flows, collectability of receivables and availability of
trade credit; expected operating costs; changes in any of the foregoing and
other statements using forward-looking terminology are forward-looking
statements, and there can be no assurance that the expectations conveyed by such
forward-looking statements will, in fact, be realized.
19
Although we believe that the expectations conveyed by the
forward-looking statements are reasonable based on information available to us
on the date such forward-looking statements were made, no assurances can be
given as to future results, levels of activity, achievements or financial
condition.
Readers should not place undue reliance on any forward-looking
statement and should recognize that the statements are predictions of future
results, which may not occur as anticipated. Actual results could differ
materially from those anticipated in the forward-looking statements and from
historical results, due to the risks and uncertainties described above, as well
as others not now anticipated. The foregoing statements are not exclusive and
further information concerning us, including factors that potentially could
materially affect our financial results, may emerge from time to time. We do not
intend to update forward-looking statements to reflect actual results or changes
in factors or assumptions affecting such forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
Not applicable because we are a smaller reporting company.
Item 4. Controls and Procedures Evaluation of Disclosure of
Controls and Procedures
We carried out an evaluation of the effectiveness of our
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) as of September 30, 2014 (the Evaluation Date). This evaluation
was carried out under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer. Based upon that evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were not entirely effective as of the
Evaluation Date as a result of the material weaknesses disclosed in our Annual
Report on Form 10-K for the year ended December 31, 2013 (2013 Annual Report).
Notwithstanding the assessment that our internal control over financial
reporting was not entirely effective and that there were material weaknesses as
identified in our 2013 Annual Report, we believe that our consolidated financial
statements contained in our Quarterly Report on Form 10-Q for the quarter ended
September 30, 2014 fairly present our financial condition, results of operations
and cash flows in all material respects.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial
reporting that occurred during our last fiscal quarter that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
20
PART II OTHER INFORMATION
Item 1. Legal Proceedings
We are not currently involved in any legal proceedings and we
are unaware of any pending proceedings, except that the Company will be a
participant as an interested party to the appeals that have been filed in
Bulgaria against the Bulgarian environmental agency that approved the Companys
overall work program and first year annual work program.
Item 1A. Risk Factors
Not applicable because we are a smaller reporting company. See
risk factors described in Item 1A of the Companys most recent Annual Report on
Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds
As of July 24, 2014, the Company issued 8,990,000 shares of common
stock at price of $0.25 per share for proceeds of $2,247,500. Further details of
this offering are disclosed on form 8-K filed July 30, 2014.
Item 3. Defaults Upon Senior Securities
None.
Item 4. (Removed and Reserved)
Not applicable.
Item 5. Other Information
None
21
Item 6. Exhibits
Articles of Incorporation
and Bylaws |
3.1 |
Articles of Incorporation(1) |
3.2 |
Amended and Restated
Bylaws(2) |
3.3 |
Certificate of Change Effective August 31,
2009(3) |
3.4 |
Certificate of Change Effective
March 24, 2010(4) |
|
|
Material Contracts
|
10.01 |
Larsen Energy Consulting Inc. Agreement dated
May 1, 2013 (5) |
10.02 |
Overgas Data and Consulting
Agreement dated July 11, 2013 (6) |
10.03 |
Larsen Energy Consulting Inc. Agreement dated
November 1, 2013 (7) |
10.04 |
De-registration of 2007 stock
option plan dated December 27, 2013 (8) |
10.05 |
2011 Stock option plan dated November 21, 2011
(9) |
10.06 |
2013 Long-Term Equity Incentive
Plan effective October 29, 2013 (10) |
10.07 |
First Amendment to the Larsen Energy Consulting
Inc. Agreement dated August 1, 2014 (11) |
|
|
|
|
Subsidiaries of
the Small Business Issuer |
21.1 |
Subsidiaries of Small Business Issuer: |
|
Name of Subsidiary |
|
BG
Explorations EOOD
Bulgaria |
|
|
Certifications |
|
31.1 |
Certification of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended |
31.2 |
Certification of Chief Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a), promulgated under the Securities and Exchange Act of 1934, as amended |
32.1 |
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
Notes
|
(1) |
Incorporated by reference from our Current Report on Form
8-K/A, filed with the SEC on August 8, 2007. |
(2) |
Incorporated by reference from our Current Report on Form
8-K, filed with the SEC on January 17, 2014. |
(3) |
Incorporated by reference from our Current Report on Form
8-K, filed with the SEC on September 3, 2009. |
(4) |
Incorporated by reference from our Current Report on Form
8-K, filed with the SEC on March 29, 2010. |
(5) |
Incorporated by reference from our Current Report on Form
8-K, filed with the SEC on July 18, 2013. |
(6) |
Incorporated by reference from our Current Report on Form
8-K, filed with the SEC on July 18, 2013. |
(7) |
Incorporated by reference from our Current Report on Form
8-K, filed with the SEC on November 7, 2013. |
(8) |
Incorporated by reference from our Current Report on Form
8-K, filed with the SEC on January 17, 2014. |
(9) |
Incorporated by reference from our Current Report on Form
8-K, filed with the SEC on November 25, 2011. |
(10) |
Incorporated by reference from our Schedule 14A filed on
September 27, 2013. |
(11) |
Incorporated by reference from our Current Report on Form
8-K, filed with the SEC on August 6, 2014. |
22
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.
PARK PLACE ENERGY CORP.
By: |
/s/ Chas Michel |
|
Chas Michel |
|
Chief Financial Officer (Principal Financial
Officer) |
|
Date: November 14, 2014 |
|
|
|
|
By: |
/s/ Scott C. Larsen
|
|
Scott C. Larsen |
|
President and CEO (Principal Executive Officer)
|
|
Date: November 14, 2014 |
23
Exhibit 31.1
CERTIFICATION
I, Chas Michel, certify that:
1. |
I have reviewed this report on Form 10-Q for the
quarterly period ended September 30, 2014 of Park Place Energy
Corp.; |
|
|
2. |
Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report; |
|
|
3. |
Based on my knowledge, the financial statements, and
other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
report; |
|
|
4. |
The registrants other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and
have: |
|
(a) |
Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which
this report is being prepared; |
|
|
|
|
(b) |
Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed
under our supervision, 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; |
|
|
|
|
(c) |
Evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on
such evaluation; and |
|
|
|
|
(d) |
Disclosed in this report any change in the registrants
internal control over financial reporting that occurred during the
registrants most recent fiscal quarter (the registrants fourth fiscal
quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrants internal
control over financial reporting; and |
5. |
The registrants other certifying officer(s) and I have
disclosed, based on our most recent evaluation of the internal control
over financial reporting, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing
the equivalent functions): |
|
(a) |
all significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrants ability to
record, process, summarize and report financial information; and |
|
|
|
|
(b) |
any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal control over financial
reporting. |
Date: November 14, 2014 |
|
|
|
|
Chas Michel |
By: |
Chas Michel |
Title: |
Chief Financial Officer |
|
(Principal Financial Officer)
|
Exhibit 31.2
CERTIFICATION
I, Scott C. Larsen, certify that:
1. |
I have reviewed this report on Form 10-Q for the
quarterly period ended September 30, 2014 of Park Place Energy
Corp.; |
|
|
2. |
Based on my knowledge, this report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this report; |
|
|
3. |
Based on my knowledge, the financial statements, and
other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
report; |
|
|
4. |
The registrants other certifying officer(s) and I are
responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and
have: |
|
(a) |
Designed such disclosure controls and procedures, or
caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which
this report is being prepared; |
|
|
|
|
(b) |
Designed such internal control over financial reporting,
or caused such internal control over financial reporting to be designed
under our supervision, 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; |
|
|
|
|
(c) |
Evaluated the effectiveness of the registrants
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on
such evaluation; and |
|
|
|
|
(d) |
Disclosed in this report any change in the registrants
internal control over financial reporting that occurred during the
registrants most recent fiscal quarter (the registrants fourth fiscal
quarter in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrants internal
control over financial reporting; and |
5. |
The registrants other certifying officer(s) and I have
disclosed, based on our most recent evaluation of the internal control
over financial reporting, to the registrants auditors and the audit
committee of the registrants board of directors (or persons performing
the equivalent functions): |
|
(a) |
all significant deficiencies and material weaknesses in
the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrants ability to
record, process, summarize and report financial information; and |
|
|
|
|
(b) |
any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal control over financial
reporting. |
Date: November 14, 2014 |
|
|
|
|
Scott C. Larsen |
By: |
Scott C. Larsen |
Title: |
Chief Executive Officer |
|
(Principal Executive Officer)
|
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND PRINCIPAL
FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED
PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, Scott C. Larsen, President and Chief Executive
Officer , and Chas Michel, the Chief Financial Officer, of Park Place Energy
Corp. (the Company), hereby certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to
their knowledge, the Quarterly Report on Form 10-Q for the period ended
September 30, 2014, fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended, and that the
information contained in the Quarterly Report on Form 10-Q, as amended, fairly
presents in all material respects the financial condition and results of
operations of the Company.
/s/ Scott C.
Larsen
Scott C. Larsen
President and CEO (Principal Executive
Officer)
Date: November 14, 2014
/s/Chas Michel
Chas
Michel
Chief Financial Officer (Principal Financial Officer)
Date:
November 14, 2014
A signed original of this written statement required by Section
906, or other document authenticating, acknowledging, or otherwise adopting the
signatures that appear in typed form within the electronic version of this
written statement required by Section 906, has been provided to Park Place
Energy Corp. and will be retained by Park Place Energy Corp. and furnished to
the Securities and Exchange Commission or its staff upon request.
__________