Item 1. Financial Statements
PARK PLACE ENERGY INC.
Consolidated Balance Sheets
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September 30,
|
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|
December 31,
|
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|
|
2016
|
|
|
2015
|
|
|
|
(unaudited)
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|
|
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|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
12,866
|
|
|
$
|
75,561
|
|
Receivables
|
|
|
96
|
|
|
|
583
|
|
Prepaid expenses and deposits
|
|
|
12,409
|
|
|
|
13,347
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
25,371
|
|
|
|
89,491
|
|
Oil and gas properties
|
|
|
2,867,227
|
|
|
|
2,701,182
|
|
Deposit for Tiway acquisition
|
|
|
500,000
|
|
|
|
500,000
|
|
Note receivable
|
|
|
40,919
|
|
|
|
39,490
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,433,517
|
|
|
$
|
3,330,163
|
|
|
|
|
|
|
|
|
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LIABILITIES AND STOCKHOLDERS EQUITY
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Current liabilities:
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Accounts payable and accrued liabilities
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$
|
367,761
|
|
|
$
|
119,006
|
|
Stockholder loan payable
|
|
|
52,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
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|
|
420,261
|
|
|
|
119,006
|
|
|
|
|
|
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Commitments and contingencies
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Stockholders equity:
|
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|
|
|
|
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Common stock Authorized: 250,000,000 shares, par value $0.00001 Issued and outstanding: 49,981,482
and 45,731,482 shares, respectively
|
|
|
500
|
|
|
|
457
|
|
Additional paid-in capital
|
|
|
21,212,313
|
|
|
|
17,258,619
|
|
Stock subscriptions and stock to be issued
|
|
|
|
|
|
|
350,000
|
|
Accumulated other comprehensive gain
|
|
|
988
|
|
|
|
1,190
|
|
Accumulated deficit
|
|
|
(18,200,545
|
)
|
|
|
(14,399,109
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
3,013,256
|
|
|
|
3,211,157
|
|
|
|
|
|
|
|
|
|
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Total liabilities and stockholders equity
|
|
$
|
3,433,517
|
|
|
$
|
3,330,163
|
|
|
|
|
|
|
|
|
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|
See accompanying notes to consolidated financial statements.
3
PARK PLACE ENERGY INC.
Consolidated Statements of Operations
(unaudited)
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Three Months Ended
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Nine Months Ended
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September 30,
|
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September 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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General and administrative
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$
|
3,520,369
|
|
|
$
|
176,441
|
|
|
$
|
3,803,323
|
|
|
$
|
587,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Total expenses
|
|
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3,520,369
|
|
|
|
176,441
|
|
|
|
3,803,323
|
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587,460
|
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|
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|
|
|
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Loss before other expenses
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(3,520,369
|
)
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|
|
(176,441
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)
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(3,803,323
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)
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|
|
(587,460
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)
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|
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|
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|
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Other income (expenses)
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Reversed tax penalties
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120,000
|
|
|
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|
|
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|
120,000
|
|
Foreign exchange gain (loss)
|
|
|
(12
|
)
|
|
|
(1,066
|
)
|
|
|
1,887
|
|
|
|
(39,138
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Other income (expenses)
|
|
|
(12
|
)
|
|
|
118,934
|
|
|
|
1,887
|
|
|
|
80,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Net loss for the period
|
|
$
|
(3,520,381
|
)
|
|
$
|
(57,507
|
)
|
|
$
|
(3,801,436
|
)
|
|
$
|
(506,598
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Loss per share, basic and diluted
|
|
$
|
(0.07
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Weighted average number of shares outstanding
|
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|
49,984,229
|
|
|
|
45,731,482
|
|
|
|
49,930,387
|
|
|
|
45,729,521
|
|
See accompanying notes to consolidated financial statements.
PARK PLACE ENERGY INC.
Consolidated Statements of
Comprehensive Loss
(unaudited)
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Three Months Ended
|
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Nine Months Ended
|
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September 30,
|
|
|
September 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Net loss for the period
|
|
$
|
(3,520,381
|
)
|
|
$
|
(57,507
|
)
|
|
$
|
(3,801,436
|
)
|
|
$
|
(506,598
|
)
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency cumulative translation adjustment
|
|
|
(109
|
)
|
|
|
(91
|
)
|
|
|
(202
|
)
|
|
|
430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss for the period
|
|
$
|
(3,520,490
|
)
|
|
$
|
(57,598
|
)
|
|
$
|
(3,801,638
|
)
|
|
$
|
(506,168
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
See accompanying notes to consolidated financial statements.
4
PARK PLACE ENERGY INC.
Consolidated Statement of Stockholders Equity
(
unaudited
)
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Common Stock
|
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Additional
paid-in capital
|
|
|
Stock
subscriptions
and stock
to be issued
|
|
|
Accumulated
other
comprehensive
income
|
|
|
Accumulated
deficit
|
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Total
|
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Shares
|
|
|
Amount
|
|
|
|
|
|
|
Balance, December 31, 2015
|
|
|
45,731,482
|
|
|
$
|
457
|
|
|
$
|
17,258,619
|
|
|
$
|
350,000
|
|
|
$
|
1,190
|
|
|
$
|
(14,399,109
|
)
|
|
$
|
3,211,157
|
|
Stock subscriptions received
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
Issuance of common stock
|
|
|
4,250,000
|
|
|
|
43
|
|
|
|
424,957
|
|
|
|
(425,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
3,468,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,468,622
|
|
Capitalized stock based compensation
|
|
|
|
|
|
|
|
|
|
|
60,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,115
|
|
Currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(202
|
)
|
|
|
|
|
|
|
(202
|
)
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,801,436
|
)
|
|
|
(3,801,436
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2016
|
|
|
49,981,482
|
|
|
$
|
500
|
|
|
$
|
21,212,313
|
|
|
$
|
|
|
|
$
|
988
|
|
|
$
|
(18,200,545
|
)
|
|
$
|
3,013,256
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
5
PARK PLACE ENERGY INC.
Consolidated Statements of Cash Flows
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2016
|
|
|
2015
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
$
|
(3,801,436
|
)
|
|
$
|
(506,598
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
3,468,622
|
|
|
|
56,062
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
487
|
|
|
|
3,422
|
|
Prepaid expenses and deposits
|
|
|
938
|
|
|
|
(8,777
|
)
|
Accounts payable and accrued liabilities
|
|
|
182,740
|
|
|
|
(222,508
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(148,649
|
)
|
|
|
(678,399
|
)
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
Issuance of note receivable
|
|
|
(1,429
|
)
|
|
|
(39,086
|
)
|
Oil and gas properties expenditures
|
|
|
(39,915
|
)
|
|
|
(330,740
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(41,344
|
)
|
|
|
(369,826
|
)
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock / stock subscriptions received
|
|
|
75,000
|
|
|
|
|
|
Proceeds from stockholder loan
|
|
|
52,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
127,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
(202
|
)
|
|
|
430
|
|
|
|
|
|
|
|
|
|
|
Change in cash
|
|
|
(62,695
|
)
|
|
|
(1,047,795
|
)
|
Cash, beginning of period
|
|
|
75,561
|
|
|
|
1,539,439
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
12,866
|
|
|
$
|
491,644
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Oil and gas expenditures included in accounts payable
|
|
$
|
66,015
|
|
|
$
|
7,047
|
|
Restricted stock issued for oil and gas properties
|
|
$
|
60,115
|
|
|
$
|
48,790
|
|
Stock issued for subscription receivable
|
|
$
|
425,000
|
|
|
$
|
46,116
|
|
See accompanying notes to consolidated financial statements.
6
PARK PLACE ENERGY INC.
Notes to the Consolidated Financial Statements
(unaudited)
1)
|
Summary of Significant Accounting Policies
|
|
(a)
|
Basis of Presentation
|
These consolidated financial statements are unaudited and have been
prepared from the books and records of Park Place Energy Inc. and its consolidated subsidiaries (Park Place, the Company, we, or our). In our opinion, all normal and recurring adjustments necessary for
a fair presentation of the financial position of the Company as of September 30, 2016, and the results of operations for the three and nine months ended September 30, 2016 and 2015, and cash flows for the nine months ended
September 30, 2016 and 2015, have been made in conformity with generally accepted accounting principles. All significant intercompany accounts and transactions have been eliminated. These interim financial statements and notes are condensed as
permitted by the instructions to Form 10-Q and should be read in conjunction with the audited consolidated financial statements of the Company included in its Form 10-K for the year ended December 31, 2015.
The Company computes loss per share of Company stock in accordance with ASC 260
(Earnings per Share), which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing the loss available to common shareholders (numerator)
by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock
using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes dilutive
potential shares if their effect is anti-dilutive. For the three and nine months ended September 30, 2016 and 2015, the Company had 15,903,940 and 15,893,940, respectively, and 14,810,645 and 14,450,563, respectively, in potentially dilutive
shares outstanding that were excluded for the diluted EPS calculation, respectively.
As shown in the accompanying consolidated financial statements, the Company has
no revenues and has incurred continuous losses from operations and had an accumulated deficit of $18,200,545 at September 30, 2016. These factors raise substantial doubt about the Companys ability to continue as a going concern.
Management is actively pursuing new ventures to increase revenues. In addition, the Company is currently seeking additional sources of capital to fund short term operations. The Company, however, is dependent upon its ability to secure equity and/or
debt financing and there are no assurances that the Company will be successful, therefore, without sufficient financing it would be unlikely for the Company to continue as a going concern. The financial statements do not include any adjustments that
might result from the outcome of any uncertainty as to the Companys ability to continue as a going concern. The financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset
amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
7
3.)
|
Oil and Gas Properties
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2016
|
|
|
December 31,
2015
|
|
Unproven properties
|
|
|
|
|
|
|
|
|
Bulgaria
|
|
$
|
2,867,227
|
|
|
$
|
2,701,182
|
|
The Company holds a 98,205 acre oil and gas exploration claim in the Dobrudja Basin located in northeast
Bulgaria. The Company intends to conduct exploration for natural gas and test production activities over a five year period in accordance with or exceeding its minimum work program obligation. The Company intends to commence its work program efforts
once it receives all regular regulatory approvals of its work programs.
In April 2015, the Company loaned $38,570 to a Bulgarian company pursuant to a
revolving credit facility, enabling such Bulgarian company to buy and manage land in Bulgaria to be leased by the Company for future well sites. The credit facility has a maximum loan obligation of BGN 1,000,000 ($574,880) at September 30,
2016), bears interest at 6.32%, has a five-year term and is secured by the land the Bulgarian company buys. Payment on the facility is due the earlier of the end of the five-year term (April 6, 2020) or demand by the Company. As of
September 30, 2016 and 2015 the outstanding balance on the loan obligation was $40,919 and $39,490, respectively.
The Company entered into a share purchase agreement on December 22,
2015 to acquire the three subsidiaries of Tiway Oil B.V. (Tiway), a company currently in bankruptcy in the Netherlands. These Tiway subsidiaries are oil and gas exploration and production companies operating in the Republic of Turkey.
They own interests in three producing oil and gas fields, one offshore and two onshore, as well as a number of exploration licenses and operate one of the onshore fields. Current production for the Tiway subsidiaries is about 300 Boe/d (barrels per
day equivalent); as of September 30, 2016, year-to-date production has averaged 417 Boe/d. The purchase price is $2.1 million USD and the Company paid at signing a $500,000 deposit toward the purchase price.
The transaction is subject to obtaining the approval of two regulatory agencies in Turkey, the GDPA which regulates the oil and gas licenses
and EMRA which regulates gas marketing. Both approvals have now been obtained. During the period prior to closing, in consultation with the Tiway staff and partners in the various fields, the Company has prepared work programs for 2017 and into the
future.
The transaction was originally scheduled to close March 31, 2016. However, the transaction is conditioned on receiving the
EMRA and GDPA regulatory approvals. Accordingly, the closing date has been extended a number of times to allow sufficient time to secure the approvals from the respective regulatory agencies, most recently to December 15, 2016. To facilitate
closing, the Company has formed a new wholly owned subsidiary, Park Place Energy (Bermuda) Ltd. which will become the acquirer of the shares of the Tiway subsidiaries at closing. Closing on the transaction is expected to occur prior to
December 31, 2016 or in January 2017 now that both regulatory approvals have been received.
6.)
|
Stockholder Loan Payable
|
Two of the Companys shareholders provided loans to the Company
totaling $52,500 during the nine months ended September 30, 2016. The loans are repayable upon demand.
In March 2016, the Company received subscriptions for 250,000 shares of common
stock at $0.10 per share for total proceeds of $25,000 which is included in stock subscriptions received. In April 2016, the Company received subscriptions for 500,000 shares of common stock at $0.10 per share for total proceeds of $50,000. The
Company issued 4,250,000 shares of common stock in April for the stock subscriptions received during 2015 and the nine months ended September 30, 2016.
8
The following table summarizes the Companys stock options as of
September 30, 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of options
|
|
|
Weighted
average
exercise price
|
|
|
Weighted
average
fair value
|
|
|
Aggregate
intrinsic
value
|
|
Outstanding, December 31, 2015
|
|
|
2,250,000
|
|
|
$
|
0.17
|
|
|
$
|
0.14
|
|
|
$
|
|
|
Granted
|
|
|
165,000
|
|
|
$
|
0.10
|
|
|
$
|
0.11
|
|
|
|
|
|
Expired
|
|
|
(150,000
|
)
|
|
$
|
0.10
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, September 30, 2016
|
|
|
2,265,000
|
|
|
$
|
0.16
|
|
|
$
|
0.14
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional information regarding stock options as of September 30, 2016, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
Exercisable
|
|
Range of exercise prices
|
|
Number
of shares
|
|
|
Weighted
average
remaining
contractual life
(years)
|
|
|
Weighted
average
exercise price
|
|
|
Number
of shares
|
|
|
Weighted
average
exercise
price
|
|
$ 0.10
|
|
|
1,065,000
|
|
|
|
1.0
|
|
|
$
|
0.10
|
|
|
|
1,065,000
|
|
|
$
|
0.10
|
|
$ 0.14
|
|
|
150,000
|
|
|
|
1.5
|
|
|
$
|
0.14
|
|
|
|
150,000
|
|
|
$
|
0.14
|
|
$ 0.20
|
|
|
100,000
|
|
|
|
0.3
|
|
|
$
|
0.20
|
|
|
|
50,000
|
|
|
$
|
0.20
|
|
$ 0.23-0.235
|
|
|
850,000
|
|
|
|
0.1
|
|
|
$
|
0.23
|
|
|
|
825,000
|
|
|
$
|
0.23
|
|
$ 0.28
|
|
|
100,000
|
|
|
|
0.8
|
|
|
$
|
0.28
|
|
|
|
50,000
|
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,265,000
|
|
|
|
1.4
|
|
|
$
|
0.16
|
|
|
|
2,140,000
|
|
|
$
|
0.17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option expense recorded as stock-based compensation for the nine months ended September 30, 2016 and 2015
was $4,722 and $20,729, respectively. At September 30, 2016, the Company had $13,806 in unrecognized compensation expense related to stock options that will be expensed through January 2019.
During the third quarter 2016, the Company amended and restated the terms of the
11,000,000 stock purchase warrants with an exercise price of $0.20 per share issued in 2013 to extend the expiration date one year from August 27, 2016 to August 27, 2017. No other conditions of the warrants were amended. The amended and
restated warrants vested immediately. The Company recognized expense of $3,421,501 related to the amendment and restatement of the warrants.
10.)
|
Restricted Stock Units
|
During the nine months ended September 30, 2016, the Company
granted 520,939 restricted stock units (RSUs) with vesting periods ranging from fourteen to nineteen months and a fair value of $144,687 to officers of the Company. In addition, the Company extended the vesting date for 685,957 RSUs to
December 1, 2016. Expense related to RSUs is recognized ratably over the vesting period.
|
|
|
|
|
|
|
|
|
|
|
Number of
restricted stock
units
|
|
|
Weighted average
fair value per
award
|
|
Balance, December 31, 2015
|
|
|
2,118,001
|
|
|
$
|
0.17
|
|
Issued
|
|
|
520,939
|
|
|
$
|
|
|
Vested
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2016
|
|
|
2,638,940
|
|
|
$
|
0.17
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, 2016 and 2015, restricted stock expense recorded as stock-based
compensation was $42,399 and $35,333, respectively, and capitalized stock based compensation was $60,115 and $48,790, respectively.
At
September 30, 2016 unrecognized compensation expense related to RSUs totaled $56,531 that will be recognized over a weighted average period of approximately five months.
9
The Companys operations are in the resource industry in Bulgaria
with head offices in the United States and a satellite office in Sofia, Bulgaria. The Company operates as a single reportable segment and its oil and gas properties are located in Bulgaria.
The Company is subject to United States federal and state income taxes at a rate
of 34%. The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Companys income tax expense as reported is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Benefit at statutory rate
|
|
$
|
(1,196,929
|
)
|
|
$
|
(19,552
|
)
|
|
$
|
(1,292,488
|
)
|
|
$
|
(172,243
|
)
|
Permanent differences and other:
|
|
|
|
|
|
|
43
|
|
|
|
|
|
|
|
721
|
|
Valuation allowance change
|
|
|
1,196,929
|
|
|
|
19,509
|
|
|
|
1,292,488
|
|
|
|
171,522
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
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:
|
|
|
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 Inc. (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, 2015.
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 SECs Edgar Database.
Executive Summary
Park Place is an energy company
engaged in oil and gas exploration in Bulgaria.
On November 12, 2015, Park Place became the successor registrant to Park Place Energy Corp, a Nevada
corporation (PPEC Nevada), following a reincorporation merger, approved by the stockholders of PPEC Nevada to provide a better organizational structure for future acquisitions and management of operations. See Park Places Annual
Report on Form 10-K for the year ended December 31, 2015 for more information on the reincorporation.
The Company holds a 98,205 acre oil and gas
exploration claim in the Dobrudja Basin located in northeast Bulgaria. The Company intends to conduct exploration for natural gas and test production activities in accordance with or exceeding its minimum work program obligation. The Company intends
to commence its work program efforts once it receives all regulatory approvals of its work programs and the five year license term commences.
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 and an appeal proceeding was
commenced before an administrative judge panel. Since then, there have been several hearings resulting in a number of appellants being dismissed and empaneling a panel of experts to confirm the correctness of the approval by the environmental
agency. The Company is participating in that proceeding as an interested party. The Company is continuing its data gathering, evaluation and planning, has acquired the land for a future well site and has commissioned an environmental baseline survey
of the license area. The initial term of the License Agreement will not begin until (i) the appeal proceeding is completed and the decision upheld, (ii) the Bulgarian energy agency has approved the Companys work programs and
(iii) the license term commences.
The Company entered into a share purchase agreement on December 22, 2015 to acquire the three subsidiaries of
Tiway Oil B.V. (Tiway), a company currently in bankruptcy in the Netherlands. These Tiway subsidiaries are oil and gas exploration and production companies operating in the Republic of Turkey. They own interests in three producing oil
and gas fields, one offshore and two onshore, as well as a number of exploration licenses and operate one of the onshore fields. Current production for the Tiway subsidiaries is about 315 Boe/d (barrels per day equivalent); as of September 30,
2016, year-to-date production has averaged 417 Boe/d. The purchase price is $2.1 million USD and the Company paid at signing a $500,000 deposit toward the purchase price.
11
The transaction is subject to obtaining the approval of two regulatory agencies in Turkey, the GDPA (which
regulates the oil and gas licenses) and EMRA (which regulates gas marketing). Both regulatory approvals have now been received.
The transaction was
originally scheduled to close March 31, 2016. The closing date has been extended a number of times to allow sufficient time to secure the approvals from the respective regulatory agencies. Currently, the transaction has been extended to
December 15, 2016. To facilitate closing, the Company has formed a new wholly owned subsidiary, Park Place Energy (Bermuda) Ltd. which will become the acquirer of the shares of the Tiway subsidiaries. Closing on the transaction will occur prior
to December 31, 2016 or in January 2017 now that both regulatory approvals have been received.
Results of Operations
The following summary of our results of operations should be read in conjunction with our unaudited consolidated financial statements for the periods ended
September 30, 2016 and 2015, which are included herein.
Revenue
We are a pre-revenue stage company, and our future revenues depend upon successful exploration of oil and gas assets.
Expenses
For the three months ended
September 30, 2016, our general and administrative expenses increased over the comparable prior year period. For the nine months ended September 30, 2016, our general and administrative expenses increased to $3,803,323 from $587,460 for
the same period in 2015.
During the third quarter 2016, the Company amended and restated the terms of the warrants issued in 2013 to extend the
expiration date one year from August 27, 2016 to August 27, 2017. No other conditions of the warrants were amended. The amended and restated warrants vested immediately. The Company recognized expense of $3,421,501 related to the amendment
and restatement of the warrants.
Excluding the stock-based compensation charge, our overhead decreased from last year primary because the Company has
been in a holding pattern waiting for the Tiway transaction to close and waiting for clearance of all regulatory hurdles in Bulgaria to commence work on the Vranino 1-11 license.
Other Income/Expense
Foreign exchange rate
fluctuations resulted in a loss of $12 for the three months ended September 30, 2016 compared to a loss of $1,066 for the three months ended September 30, 2015. For the nine months ended September 30, 2016 and 2015, other income was
$1,887 and other expenses were $39,138, respectively, due to a foreign exchange loss.
Loss
Our net loss for the three months ended September 30, 2016 was $3,520,381 compared to a loss of $57,507 for the three months ended September 30,
2015. The increase in net loss was primarily due a revaluation of warrants issued in 2013 charge for the period. Our net loss for the nine months ended September 30, 2016 was $3,801,436 compared to a loss of $506,598 for the nine months ended
September 30, 2015. The increase in net loss was primarily due a revaluation of warrants issued in 2013 described above.
12
Liquidity and Capital Resources
The following table summarizes our liquidity position:
|
|
|
|
|
|
|
|
|
|
|
September 30,
2016
(Unaudited)
|
|
|
December 31,
2015
|
|
Cash
|
|
$
|
12,866
|
|
|
$
|
75,561
|
|
Working deficit
|
|
|
(394,890
|
)
|
|
|
(29,515
|
)
|
Total assets
|
|
|
3,433,517
|
|
|
|
3,330,163
|
|
Total liabilities
|
|
|
420,261
|
|
|
|
119,006
|
|
Stockholders equity
|
|
|
3,013,256
|
|
|
|
3,211,157
|
|
Cash Used in Operating Activities
We used net cash of $148,649 in operating activities for the nine months ended September 30, 2016 compared to $678,399 for the nine months ended
September 30, 2015. The decrease was due to decreased activities in all areas of operations.
Cash Flow from Investing Activities
Net cash used in investing activities for the nine months ended September 30, 2016 was $41,344 compared to $369,826 for the nine months ended
September 30, 2015. This decrease was primarily due to decreased expenditures on both the Bulgarian project and the Tiway acquisition.
Cash
Provided by Financing Activities
We have funded our business to date primarily from sales of our common stock through private placements. During
the nine months ended September 30, 2016, we received cash of $75,000 for stock subscriptions. We did not have any common stock sales during the nine months ended September 30, 2015. Two of the Companys shareholders provided loans to
the Company totaling $52,500 during the nine months of 2016. The loans are repayable upon demand.
Future Operating Requirements
Based on our current plan of operations, we estimate that we will require approximately $3.6 million to pursue our plan of operations over the next 12 months:
$1.6 million to close the acquisition of the Tiway companies, $1.1 million for planned work programs on assets owned by the Tiway companies post-acquisition and $900,000 for ongoing operating costs and corporate expenditures.
The Company has no revenues and has incurred continuous losses from operations and had an accumulated deficit of $18,200,545 at September 30, 2016. These
factors raise substantial doubt about the Companys ability to continue as a going concern. Management is actively pursuing new ventures to increase revenues. In addition, the Company is currently seeking additional sources of capital to fund
short term operations and fund the Tiway acquisition. The Company, however, is dependent upon its ability to secure equity and/or debt financing and there are no assurances that the Company will be successful, therefore, without sufficient financing
it would be unlikely for the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of any uncertainty as to the Companys ability to continue as a going concern. The
financial statements also do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a
going concern.
13
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
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.
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.
14