On July 8, 2015, the holders of the convertible promissory note dated September 30, 2013 elected to convert accrued interest of $400 into 10,000 share of common stock.
On August 1, 2015, Eaton Central America elected to convert all principal and accrued interest on the convertible note payable into 7,248,170 shares of common stock.
During July 2015, the Company issued 5,545 shares of common stock as a result of rounding up fractional shares to the nearest whole share and ensuring that each shareholder received at least five shares. This was related to the reincorporation and reverse split.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
First Titan Corp., a Nevada corporation, was incorporated on September 16, 2010. The Company’s year-end is September 30. The Company formed to design and manufacture both panel and engineered/tooled custom vacuum formed instrument panels and wiring harnesses, required for the monitoring of any final product that utilizes a gas or diesel engine source. The Company is currently primarily an oil and gas exploration company.
Critical Accounting Policies
We prepare our Consolidated financial statements in conformity with GAAP, which requires management to make certain estimates and apply judgments. We base our estimates and judgments on historical experience, current trends, and other factors that management believes to be important at the time the condensed Consolidated financial statements are prepared. We regularly review our accounting policies, and how they are applied and disclosed in our condensed consolidated financial statements.
While we believe that the historical experience, current trends and other factors considered support the preparation of our condensed consolidated financial statements in conformity with GAAP, actual results could differ from our estimates and such differences could be material.
For a full description of our critical accounting policies, please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report for the year ended September 30, 2014 on Form 10-K.
Results of Operations
Nine months ended June 30, 2015 compared to the nine months ended June 30, 2014.
Oil and Gas Sales
We earned net revenue of $35,530 during the nine months ended June 30, 2015, compared to $82,133 during the comparable period of the previous year. About $33,600 (71%) of the variance is due to lower oil prices in the current year. The remaining difference is due to lower oil production, as some of our wells were temporarily out of service this year.
Lease operating expense
We incurred lease operating expenses of $13,580 and $13,489 during the nine months ended June 30, 2015 and 2014, respectively. The increase is negligible.
Depletion, depreciation & amortization
We incurred depletion expense of $21,034 during the nine months ended June 30, 2015, and $62,007 for the comparable period of the previous year. The decrease in depletion is a lower depletion rate per barrel of oil equivalent (“BOE”) as a result of an increased estimate of reserves as of September 30, 2014 as compared to September 30, 2013.
General and Administrative Expenses
We recognized general and administrative expenses in the amount of $354,255 and $417,223 for the nine months ended June 30, 2015 and ended 2014, respectively. The decrease was due to a small decrease in professional fees during the nine months ended June 30, 2015.
Impairment of Oil and Gas Properties
As of June 30, 2015, management determined that it was not economically beneficial to continue to develop a parcel of unproved properties with a cost of $100,000. As a result, the Company recognized an expense for impairment of unproved properties of $100,000 during the nine months ended June 30, 2015. No such impairment expense was recognized during the comparable period of 2014.
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Interest Expense
Interest expense decreased from $618,225 for the nine months ended June 30, 2014 to $341,864 for the nine months ended June 30, 2015. Interest expense for the nine months ended June 30, 2015 included amortization of discount on convertible notes in the amount of $285,162, compared to $542,251 for the comparable period of 2014. This was offset by a $15,406 decline in interest expense accrued on our convertible notes and a $7,323 decline in imputed interest expense on advances we received.
Change in Fair Value of Available-for-Sale Securities
During the nine months ended June 30, 2015, the market value of our available securities declined by $19, as compared to $21,279 during the comparable period in 2014. The $21,620 favorable variance is due to better market performance of shares we hold in Biofuel Power Corporation.
Net Loss
We incurred a net loss of $796,473 for the nine months ended June 30, 2015 as compared to $1,029,707 for the comparable period of 2014. The decrease in the net loss was the result of reduced depletion expense and reductions in interest expense, as discussed above. This is offset by the decline in oil and gas sales, due to declining market prices.
Three months ended June 30, 2015 compared to the three months ended June 30, 2014.
Oil and Gas Sales
We earned net revenue of $13,133 during the three months ended June 30, 2015, compared to $28,064 during the comparable period of the previous year. The decrease is due to the decline in crude oil prices. Our net revenue per barrel of oil declined from $122 in the prior period to $50 in the current period.
Lease operating expense
We incurred lease operating expenses of $2,507 and $2,165 during the three months ended June 30, 2015 and 2014, respectively. During the three months ended June 30, 2014, some our wells were out of production, which was not the case during the comparable period in 2015.
Depletion, depreciation & amortization
We incurred depletion expense of $9,316 during the three months ended June 30, 2015, and $31,377 for the comparable period of the previous year. The decrease in depletion is a lower depletion rate per barrel of oil equivalent (“BOE”) as a result of an increased estimate of reserves as of September 30, 2014 as compared to September 30, 2013.
General and Administrative Expenses
We recognized general and administrative expenses in the amount of $107,433 and $140,910 for the three months ended June 30, 2015 and ended 2014, respectively. The decrease was due to increased professional fees during the three months ended June 30, 2015.
Impairment of Oil and Gas Properties
As of June 30, 2015, management determined that it was not economically beneficial to continue to develop a parcel of unproved properties with a cost of $100,000. As a result, the Company recognized an expense for impairment of unproved properties of $100,000 during the three months ended June 30, 2015. No such impairment expense was recognized during the comparable period of 2014.
Interest Expense
Interest expense decreased from $355,866 for the three months ended June 30, 2014 to $60,020 for the three months ended June 30, 2015. Interest expense for the three months ended June 30, 2015 included amortization of discount on convertible notes in the amount of $41,025, compared to $225,340 for the comparable period of 2014. The remainder was due to interest on convertible notes payable and imputed interest expense.
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Net Loss
We incurred a net loss of $266,553 for the three months ended June 30, 2015 as compared to $502,624 for the comparable period of 2014. The decrease in the net loss was the result of the decreased general and administrative expenses discussed above.
Liquidity and Capital Resources
At June 30, 2015, we had cash on hand of $3,497. The company has negative working capital of $372,573. Net cash used in operating activities for the nine months ended June 30, 2015 was $169,368. Cash on hand is adequate to fund our operations for less than one month. We do not expect to achieve positive cash flow from operating activities in the near future. We will require additional cash in order to implement our business plan. There is no guarantee that we will be able to attain fund when we need them or that funds will be available on terms that are acceptable to the Company. We have no material commitments for capital expenditures as of June 30, 2015.
Additional Financing
Additional financing is required to continue operations. Although actively searching for available capital, the Company does not have any current arrangements for additional outside sources of financing and cannot provide any assurance that such financing will be available.
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to a smaller reporting company.
ITEM 4. CONTROLS AND PROCEDURES
Management’s Report on Internal Control over Financial Reporting
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of June 30, 2015. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2015, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed by us under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
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| As of June 30, 2015, we did not maintain effective controls over the control environment. Specifically we have not developed and effectively communicated to our employees our accounting policies and procedures. This has resulted in inconsistent practices. Further, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.
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| As of June 30, 2015, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness.
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Our management, including our principal executive officer and principal financial officer, who is the same person, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
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Change in Internal Controls Over Financial Reporting
There was no change in our internal controls over financial reporting that occurred during the period covered by this report, which has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder are an adverse party or has a material interest adverse to us.
ITEM 1A. RISK FACTORS
Not applicable to a smaller reporting company.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no sales of unregistered equity securities during the nine months ended June 30, 2015.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Company has not defaulted upon senior securities.
ITEM 4. MINE SAFETY DISCLOSURES
This item is not applicable to smaller reporting companies.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
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3.1
| Articles of Incorporation (1)
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3.2
| Bylaws (1)
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14.1
| Code of Ethics (1)
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| Subsidiaries of the Registrant (2)
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31.1
| Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer and principal financial and account officer. (2)
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32.1
| Section 1350 Certification of principal executive officer and principal financial accounting officer. (2)
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101
| XBRL data files of Financial Statement and Notes contained in this Quarterly Report on Form 10-Q. (3)
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(1)
| Incorporated by reference to our Form S-1 filed with the Securities and Exchange Commission on November 3, 2010.
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(2)
| Filed or furnished herewith.
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(3)
| To be submitted by amendment.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| First Titan Corp.
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Date: August 17, 2015
| BY: /s/ Sydney Jim
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| Sydney Jim
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| Chief Executive Officer, President, Secretary, Treasurer, Principal Executive Officer, Principal Finance and Accounting Officer and Sole Director
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