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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Octagon 88 Resources Inc (CE) | USOTC:OCTX | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.0001 | 0.00 | 01:00:00 |
(Mark One)
|
|
[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the quarterly period ended December 31, 2013
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|
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
For the transition period from __________ to ______________
|
Yes [X]
No [ ]
|
Yes [ ]
No [ X ]
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Large accelerated filer
|
[ ]
|
Accelerated filer
|
[ ]
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Non-accelerated filer
|
[ ]
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Smaller reporting company
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[X ]
|
(Do not check if a smaller reporting company)
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Yes [
]
No [ X]
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Yes [ ] No [ ]
|
26,795,978
shares of common stock outstanding as of February 7, 2014
|
(Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.)
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Page
|
||
PART I – FINANCIAL INFORMATION
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||
Financial Statements
|
4 | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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5 | |
Quantitative and Qualitative Disclosures About Market Risk
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9 | |
Controls and Procedures
|
9 | |
PART II – OTHER INFORMATION
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||
Legal Proceedings
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10 | |
Risk Factors
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10 | |
Unregistered Sales of Equity Securities and Use of Proceeds
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10 | |
Defaults Upon Senior Securities
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10 | |
Mine Safety Disclosures
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10 | |
Other Information
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10 | |
Exhibits
|
11 | |
12 |
Page
|
|
Unaudited Consolidated Financial Statements
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|
F-2 | |
F-3 | |
F-4 | |
F-5 to F-16 |
OCTAGON
88 RESOURCES, INC.
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||||||||||||||||||||
(An Exploration Stage Enterprise)
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||||||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS
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||||||||||||||||||||
(Unaudited)
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||||||||||||||||||||
Three Months
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Six Months
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Cumulative From Inception
(June 9, 2008,)
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||||||||||||||||||
Ended
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Ended
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Through
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||||||||||||||||||
December 31,
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December 31,
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December 31,
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||||||||||||||||||
2013
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2012
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2013
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2012
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2013
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||||||||||||||||
Revenues
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$ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||
General and administrative expenses:
|
||||||||||||||||||||
Exploration expenses
|
- | - | 29,066 | - | 29,066 | |||||||||||||||
Services contributed by officers
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- | - | - | - | 13,200 | |||||||||||||||
Professional fees
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75,358 | 7,860 | 94,153 | 18,645 | 234,594 | |||||||||||||||
Investor relations fees
|
16,594 | - | 68,049 | - | 68,049 | |||||||||||||||
Loss on undeveloped , unproven properties
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- | - | - | - | 15,000 | |||||||||||||||
Stock-based compensation
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4,986,667 | - | 4,986,667 | - | 4,986,667 | |||||||||||||||
Other general and administrative expenses
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6,226 | 630 | 13,262 | 787 | 25,874 | |||||||||||||||
Losses (gain) equity investments, net
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59,962 | - | 163,553 | - | 696,911 | |||||||||||||||
Total operating expenses
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5,144,807 | 8,490 | 5,354,750 | 19,432 | 6,069,361 | |||||||||||||||
(Loss) from operations
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(5,144,807 | ) | (8,490 | ) | (5,354,750 | ) | (19,432 | ) | (6,069,361 | ) | ||||||||||
(Loss) before taxes
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(5,144,807 | ) | (8,490 | ) | (5,354,750 | ) | (19,432 | ) | (6,069,361 | ) | ||||||||||
Provision (credit) for taxes on income:
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- | - | - | - | ||||||||||||||||
Net (loss)
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$ | (5,144,807 | ) | $ | (8,490 | ) | $ | (5,354,750 | ) | $ | (19,432 | ) | $ | (6,069,361 | ) | |||||
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||||||||||||||||||||
Basic and diluted earnings (loss) per common share
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$ | (0.19 | ) | $ | (0.00 | ) | $ | (0.20 | ) | $ | (0.00 | ) | ||||||||
Weighted average number of shares outstanding
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26,545,473 | 36,770,734 | 26,545,473 | 37,962,922 |
Cumulative,
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||||||||||||
Three Months
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Three Months
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Inception, (June 9, 2008)
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||||||||||
Ended
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Ended
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Through
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||||||||||
December 31,
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December 31,
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December 31,
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||||||||||
2013
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2012
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2013
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||||||||||
Cash flows from operating activities:
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||||||||||||
Net (loss)
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$ | (5,354,750 | ) | $ | (19,432 | ) | $ | (6,069,361 | ) | |||
Adjustments to reconcile net (loss) to cash provided (used) by exploration stage activities:
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||||||||||||
Services contributed by officers
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- | - | 13,200 | |||||||||
Stock-based compensation
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4,986,667 | - | 4,986,667 | |||||||||
Share of (loss) of equity accounted investees
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163,553 | - | 696,911 | |||||||||
Loss on undeveloped, unproven properties
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- | - | 15,000 | |||||||||
Changes in current assets and liabilities:
|
||||||||||||
Prepaid expenses
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(4,422 | ) | - | (4,422 | ) | |||||||
Accounts payable, trade
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6,874 | 19,252 | 20,756 | |||||||||
Accounts payable, related parties
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- | (5,913 | ) | 23,560 | ||||||||
Net cash used in operating activities
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(202,078 | ) | (6,093 | ) | (317,689 | ) | ||||||
Cash flows from investing activities:
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||||||||||||
Long-term investments
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(483,639 | ) | - | (483,639 | ) | |||||||
Acquisition of undeveloped, unproved properties
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- | - | (15,000 | ) | ||||||||
Net cash flows from investing activities
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(483,639 | ) | - | (498,639 | ) | |||||||
Cash flows from financing activities:
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||||||||||||
Advances from stockholders
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- | - | 19,167 | |||||||||
Advances from third party
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- | 13,000 | 6,000 | |||||||||
Investor deposits
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578,537 | - | 701,515 | |||||||||
Proceeds from sale of common stock
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- | - | 106,060 | |||||||||
Less, Applicable offering costs
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- | - | (15,000 | ) | ||||||||
Net cash flows from financing activities
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578,537 | 13,000 | 817,742 | |||||||||
Net cash flows
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(107,180 | ) | 6,907 | 1,413 | ||||||||
Cash and equivalent, beginning of period
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108,593 | 355 | - | |||||||||
Cash and equivalent, end of period
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$ | 1,413 | $ | 7,262 | 1,413 | |||||||
Supplemental cash flow disclosures:
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||||||||||||
Cash paid for interest
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$ | - | $ | - | $ | - | ||||||
Cash paid for income taxes
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$ | - | $ | - | $ | - | ||||||
Non Cash Transactions
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||||||||||||
Accounts payable settled by issuance of shares
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$ | - | $ | 35,473 | $ | 35,473 | ||||||
Stock payable from investor deposit
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651,515 | - | 651,515 | |||||||||
Shares issued to acquire interest North Star
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- | 44,100,000 | 61,623,000 | |||||||||
Total Non-Cash Transactions
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$ | 651,515 | $ | 44,135,473 | $ | 62,309,988 |
Level 1:
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Quoted prices in active markets for identical assets or liabilities.
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Level 2:
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Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability.
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Level 3:
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Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
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a.
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Geological and geophysical costs and the costs of carrying and retaining undeveloped properties are charged to expense when incurred since they do not result in the acquisition of assets.
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b.
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Costs incurred to drill exploratory wells and exploratory-type stratigraphic test wells that do not find proved reserves are charged to expense when it is determined that the wells have not found proved reserves.
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c.
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Costs incurred to acquire properties and drill development-type stratigraphic test wells, successful exploratory wells, and successful exploratory-type stratigraphic wells are capitalized.
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d.
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Capitalized costs of wells and related equipment are amortized, depleted, or depreciated using the unit-of-production method.
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e.
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Costs of unproved properties are assessed periodically to determine if an impairment loss should be recognized.
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Warrants
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200,000
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Stock options
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1,500,000
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Balance as of June 30, 2012
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$ | - | |||
Contributions:
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|||||
Issue 14,000,000 restricted shares of the Company at market value on December 24, 2012
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44,100,000 | ||||
Issue 5,310,000 restricted shares of the Company at market value on January 24, 2013
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17,523,000 | ||||
Total
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61,623,000 | ||||
Equity (loss) income on long-term investment in North Star accounted for under the equity method
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(533,358 | ) | |||
Balance as of June 30, 2013
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61,089,642 | ||||
Cash payment to acquire 13,158 Units
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483,639 | ||||
Equity (loss) income on long-term investment in North Star accounted for under the equity method
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(163,553 | ) | |||
Balance as of December 31, 2013
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$ | 61,409,728 |
At December 31,
2013
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At June 30,
2013
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|||||||
Current assets
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$ | 783,315 | $ | 158,823 | ||||
Property, and other assets, net
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137,995,803 | 137,704,045 | ||||||
Total assets
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$ | 138,779,118 | $ | 137,862,868 | ||||
Current liabilities
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$ | 2,705,765 | $ | 1,794,136 | ||||
Long-term debt and other liabilities
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- | 2,376,250 | ||||||
Equity
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136,073,353 | 133,692,482 | ||||||
Total liabilities and equity
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$ | 138,779,118 | $ | 137,862,868 |
3 Months Ended
December 31,
2013
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6 Months ended December 31,
2013
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|||||||
Net Revenues
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$ | - | $ | - | ||||
Operating expenses
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257,765 | 594,875 | ||||||
Operating loss
|
(257,765 | ) | (594,875 | ) | ||||
Interest expenses
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(1,095 | ) | (1,284 | ) | ||||
Net loss
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$ | (258,860 | ) | $ | (596,159 | ) |
Section 9 -89 R3W5
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Alberta Crown P&NG
Expiry: August, 2016
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Sections 3,4,5 89R3W5
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Alberta Crown Oil Sands Development Lease No. 7408100382
Expiry: July, 2017
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·
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An 8% Royalty of Gross Monthly Production to be paid to Zentrum;
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·
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On or before December 31, 2013, the Company shall have drilled a minimum of one (1) Exploration Well to Contract Depth at locations to be provided by Zentrum and agreed to by the Company on Section 9 89 R3W5 of the Trout Property;
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·
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On or before June 30, 2014, unless otherwise mutually agreed to, the Company shall perform a 3D seismic program on Sections 4, 5, 6 89 R3W5 of the Trout Property. A copy and rights to the seismic data shall be provided to the Vendor within 60 days of the completion of the project;
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·
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On or before December 31, 2014, unless otherwise mutually agreed to, the Company shall have drilled a minimum of one (1) Exploration Well at a location to be mutually determined based on the 3D seismic above;
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·
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Any default in the terms above will terminate the Mineral Rights Agreement and the Company shall return the Trout Property to Zentrum.
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December 31, 2013
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June 30, 2013
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|||||||||
Shares
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Weighted Average Exercise Price
$
|
Shares
|
Weighted Average Exercise Price
$
|
|||||||
Outstanding at beginning of the year
|
-
|
-
|
-
|
-
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||||||
Granted
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1,500,000
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6
|
-
|
-
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||||||
Exercised
|
-
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-
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-
|
-
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||||||
Expired or cancelled
|
-
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-
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-
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-
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||||||
Outstanding at the period
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1,500,000
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6
|
-
|
-
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Stock Options
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Weighted Average
Grant Date
Fair Value
|
|||||||
Unvested, at June 30, 2013
|
-
|
-
|
||||||
Granted
|
1,500,000
|
$
|
6
|
|||||
Vested
|
(500,000)
|
6
|
||||||
Forfeited
|
-
|
|||||||
Unvested, end of December 31, 2013
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1,000,000
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$
|
6
|
Exercise Price
|
Number Outstanding
|
Weighted Average Remaining Contractual Life
|
Number Subject to Exercise
|
|||||||||||
$
|
6
|
1,500,000
|
5.89
|
1,500,000
|
Options Granted
|
||||
November 11, 2013
|
||||
Fair value of options granted
|
$
|
5.44
|
||
Assumptions used:
|
||||
Expected life (years) (a)
|
6
|
|||
Risk free interest rate (b)
|
2.12
|
%
|
||
Volatility (c)
|
462
|
%
|
||
Dividend yield (d)
|
0.00
|
%
|
a)
|
Expected life
: The expected term of options granted is determined using the “shortcut” method allowed by SAB No.107. Under this approach, the expected term is presumed to be the mid-point between the vesting date and the end of the contractual term.
|
|
b)
|
Risk-free interest rate
: The rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected life of the options.
|
|
c)
|
Volatility:
The expected volatility of the Company’s common stock is calculated by using the historical daily volatility of the Company’s stock price calculated over a period of time representative of the expected life of the options.
|
|
d)
|
Dividend yield
: The dividend yield rate is not considered in the model, as the Company has not established a dividend policy for the stock.
|
Exercise
Price
|
Expiry
Date
|
Weighted Average Remaining Contractual Life (Years)
|
Outstanding
at
June 30,
2013
|
Issued
|
Exercised
|
Expired
|
Outstanding
at
December 31,
2013
|
||||||||||||||||||||
$ | 3 |
October 3, 2013
|
0 | - | 200,000 | 50,505 | 149,495 | 0 | |||||||||||||||||||
$ | 3 |
October 3, 2016
|
2.76 | - | 200,000 | - | - | 200,000 | |||||||||||||||||||
- | 400,000 | - | - | 200,000 |
1)
|
Lack of an audit committee. We do not have an audit committee. These factors may be counter to corporate governance practices as defined by the various stock exchanges and may lead to less supervision over management;
|
2)
|
Inadequate staffing and supervision within our bookkeeping operations. We have consultant relatively small number of people involved in bookkeeping functions and part of our work is provided by an outside booking firm who has only two staff members. The relatively small number of people who are responsible for bookkeeping functions prevents us from segregating duties within our internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews. This may result in a failure to detect errors in spreadsheets, calculations or assumptions used to compile the financial statements and related disclosures as filed with the SEC;
|
3)
|
Outsourcing of the majority of our accounting operations. We have outsourced the majority of our accounting functions to an independent firm. The employees of this firm are managed by supervisors within the firm and are not answerable to the Company’s management. This is a material weakness because it could result in a disjunction between the accounting policies adopted by our Board of Directors and the accounting practices applied by the independent firm;
|
4)
|
Insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements;
|
5)
|
Ineffective controls over period end financial disclosure and reporting processes.
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Number
|
Description
|
|
3.1
|
Articles of Incorporation
|
Incorporated by reference to the Exhibits filed with the Form S-1 filed with the SEC on September 18, 2008
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3.2
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Bylaws
|
Incorporated by reference to the Exhibits filed with the Form S-1 filed with the SEC on September 18, 2008
|
10.1
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Financing commitment between the Company and Zentrum Energie Trust AG.
|
Incorporated by reference to the Exhibits attached to the Company Form 8K/A filed with the SEC on February 19, 2013
|
10.2
|
Acquisition Agreement between the Company and Zentrum Energie Trust AG dated October 15, 2012
|
Incorporated by reference to the Exhibits attached to the Company’s Form 8K/A filed with the SEC on February 19, 2013.-
|
10.3
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Mineral Rights Agreement between the Company and Zentrum Energie Trust AG
|
Incorporated by reference to the Exhibits attached to the Company’s Form 8K filed with the SEC on January 29, 2013.
|
10.4
|
Share Purchase Agreement between the Company and Various Vendors
|
Incorporated by reference to the Exhibits attached to the Company’s Form 8K filed with the SEC on January 29, 2013.
|
10.5
|
2013 Stock Option and Stock Award Plan
|
Incorporated by reference to the Exhibits attached to the Company’s Form 8K filed with the SEC on December 20, 2013.
|
10.6
|
Form of Stock Option Agreement
|
Incorporated by reference to the Exhibits attached to the Company’s Form 8K filed with the SEC on December 20, 2013.
|
10.7
|
Agency Agreement between the Company and DVB
|
Incorporated by reference to the Exhibits attached to the Company’s Form 8K filed with the SEC on February 7, 2014.
|
10.8
|
Form of Securities Purchase Agreement
|
Incorporated by reference to the Exhibits attached to the Company’s Form 8K filed with the SEC on February 7, 2014.
|
10.9
|
Form of Warrant
|
Incorporated by reference to the Exhibits attached to the Company’s Form 8K filed with the SEC on February 7, 2014.
|
31.1
|
Section 302 Certification - Principal Executive Officer
|
Filed herewith
|
31.2
|
Section 302 Certification - Principal Financial Officer
|
Filed herewith
|
32.1
|
Certification Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Principal Executive Officer
|
Filed herewith
|
32.2
|
Certification Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 – Principal Financial Officer
|
Filed herewith
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase
|
Filed herewith*
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase
|
Filed herewith*
|
101.INS
|
XBRL Instance Document
|
Filed herewith*
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase
|
Filed herewith*
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase
|
Filed herewith*
|
101.SCH
|
XBRL Taxonomy Extension Schema
|
Filed herewith*
|
OCTAGON 88 RESOURCES, INC.
|
|||
Date: February 19, 2014
|
By:
|
/s/
Guido Hilekes
|
|
Guido Hilekes
|
|||
Chief Executive Officer (Principal Executive Officer), President and Director
|
|||
Date: February 19, 2014
|
By:
|
/s/
Bryan Cook
|
|
Bryan Cook
|
|||
Chief Financial Officer (Principal Financial Officer), Treasurer, and Director
|
1 Year Octagon 88 Resources (CE) Chart |
1 Month Octagon 88 Resources (CE) Chart |
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