GlobeStar Therapeutics Corp - Quarter Report: 2014 March (Form 10-Q)

UNITED STATES

SECURITY AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(MARK ONE)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

o TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File Number: 333-170315

FIRST TITAN CORP.

(Exact name of registrant as specified in its charter)


Florida		27-3480481
(State or other jurisdiction of Incorporation or organization)		(I.R.S. Employer Identification Number)

495 Grand Boulevard, Suite 206 Miramar Beach, FL		32550
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code: (850) 269-7267

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No o

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” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	þ
(Do not check is smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of May 15, 2014, 16,113,730 shares of common stock are issued and outstanding.

TABLE OF CONTENTS


Part I — Financial Information	4

Item 1. Financial Statements	4

Balance Sheets (Unaudited)	4

Statements of Operations (Unaudited)	5

Statement of Stockholders’ Equity (Deficit) (Unaudited)	6

Statements of Cash Flows (Unaudited)	7

Notes to the Unaudited Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3. Quantitative and Qualitative Disclosures about Market Risk	18

Item 4. Controls and Procedures	18

Part II — Other Information	19

Item 1. Legal Proceedings	19

Item 1A. Risk Factors	19

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	19

Item 3. Defaults upon Senior Securities	19

Item 4. Mine Safety Disclosures	19

Item 5. Other Information	19

Item 6. Exhibits	19

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

Certain statements in this report contain or may contain forward-looking statements. These statements, identified by words such as “plan”, “anticipate”, “believe”, “estimate”, “should”, “expect” and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy. These statements are subject to known and unknown risks, uncertainties and other factors, which may cause actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward - looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, but are not limited to, our ability to secure suitable financing to continue with our existing business or change our business and conclude a merger, acquisition or combination with a business prospect, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this report in its entirety, including but not limited to our financial statements and the notes thereto and the risks described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2013. We advise you to carefully review the reports and documents we file from time to time with the Securities and Exchange Commission (the “SEC”), particularly our quarterly reports on Form 10-Q and our current reports on Form 8-K. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.

OTHER PERTINENT INFORMATION

When used in this report, the terms, “we,” the “Company,” “our,” and “us” refers to First Titan Corp., a Florida corporation.

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FIRST TITAN CORP.

BALANCE SHEETS

(UNAUDITED)


	March 31, 2014			September 30, 2013
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	91,107		$	127,748
Accounts receivable		22,013			10,458
Total current assets		113,120			138,206

Oil and gas properties
Evaluated property, net of accumulated depletion of $91,301 and $60,671 and net of accumulated impairment of $80,141 and $80,141, respectively.		97,817			123,777
Unevaluated property		200,575			200,575
Total oil and gas properties		298,392			324,352

TOTAL ASSETS	$	411,512		$	462,558

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	157,729		$	113,558
Advances payable		203,980			—
Current portion of asset retirement obligation		7,500			7,500
Total current liabilities		369,209			121,058

Convertible notes payable, net of discount of $698,775 and $925,840, respectively.		155,993			76,262
Accrued interest payable		25,840			5,812
Asset retirement obligation		14,670			14,144
TOTAL LIABILITIES		565,712			217,276

COMMITMENTS AND CONTINGENCIES		—			—

STOCKHOLDERS’ EQUITY (DEFICIT)
Common Stock, $0.0001 par value; 250,000,000 shares authorized; 14,813,730 and 10,863,730 shares issued and outstanding at March 31, 2014 and September 30, 2013, respectively.		1,481			1,086
Additional paid-in capital		2,518,006			2,355,801
Accumulated deficit		(2,673,687	)		(2,111,605	)
Total stockholders’ equity (deficit)		(154,200	)		245,282

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	411,512		$	462,558

The accompany notes are an integral part of these unaudited financial statements.

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FIRST TITAN CORP.

STATEMENTS OF OPERATIONS

(UNAUDITED)


	Six months ended March 31,						Three months ended March 31,
	2014			2013			2014			2013

OIL AND GAS SALES, net	$	54,069		$	37,707		$	21,859		$	13,750

OPERATING EXPENSES
Lease operating expense		11,324			633			7,507			321
Depletion, depreciation and amortization		30,630			7,206			7,730			2,202
Accretion expense		526			17			178			13
Impairment of oil and gas properties		35,000			—			10,000			—
General and administrative expense		276,313			224,289			111,245			146,508

LOSS FROM OPERATIONS		(299,724	)		(194,438	)		(114,801	)		(135,294	)

OTHER INCOME (EXPENSE)
Interest expense		(262,359	)		(137,462	)		(66,761	)		(100,599	)

NET LOSS	$	(562,083	)		(331,900	)		(181,562	)		(235,893	)

NET LOSS PER COMMON SHARE – basic and fully diluted	$	(0.04	)		(0.05	)	$	(0.01	)	$	(0.03	)

COMMON SHARES OUTSTANDING basic and fully diluted		12,744,225			6,581,719			13,769,286			7,350,797

The accompany notes are an integral part of these unaudited financial statements.

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FIRST TITAN CORP.

STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

(UNAUDITED)


	Common Stock			Additional Paid In
	Shares	Amount		Capital		Deficit			Total

BALANCE, September 30, 2012	5,646,416	$	564	$	1,058,795	$	(1,165,494	)	$	(106,134	)

Shares issued for conversion of notes payable	5,217,315		522		208,172		—			208,694
Discount on issuance of convertible note payable	—		—		1,048,049		—			1,048,049
Imputed Interest	—		—		40,785		—			40,785
Net Loss	—		—		—		(946,111	)		(945,111	)

BALANCE, September 30, 2013	10,863,730	$	1,086		2,355,801	$	(2,111,605	)	$	245,282

Shares issued for conversion of notes payable	3,950,000		395		157,605		—			158,000
Imputed Interest	—		—		4,600		—			4,600
Net Loss	—		—		—		(562,083	)		(562,083	)

BALANCE, March 31, 2014	14,813,730	$	1,481	$	2,518,006	$	(2,673,687	)	$	(154,200	)

The accompany notes are an integral part of these unaudited financial statements.

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FIRST TITAN CORP.

STATEMENTS OF CASH FLOWS

(UNAUDITED)


	Six months ended March 31,
	2014			2013

CASH FLOW FROM OPERATING ACTIVITIES:
Net Loss	$	(562,083	)	$	(331,900	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depletion and accretion		31,156			7,223
Impairment of oil and gas properties		35,000			—
Amortization of discount on convertible note payable		227,065			108,444
Imputed interest expense		4,600			21,550
Changes in operating assets and liabilities:
Accounts receivable and accrued revenue		(11,555	)		(13,984	)
Accounts payable and accrued liabilities		74,865			86,820
NET CASH USED IN OPERATING ACTIVITIES		(200,952	)		(121,847	)

CASH FLOWS FROM INVESTING ACTIVITIES

Investment in oil and gas properties		(4,669	)		(86,040	)
Investment in joint venture		(35,000	)		—
NET CASH USED IN INVESTING ACTIVITIES		(39,669	)		(86,040	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from advances		203,980			241,015
NET CASH PROVIDED BY FINANCING ACTIVITIES		203,980			241,015

NET INCREASE (DECREASE) IN CASH		(36,641	)		33,128

CASH, at the beginning of the period		127,748			1,359

CASH, at the end of the period	$	91,107		$	34,487

Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest	$	—		$	—
Taxes	$	—		$	—

Noncash investing and financing transaction:
Refinancing of advances into convertible notes payable	$	—		$	329,050
Beneficial conversion on convertible note payable	$	—		$	329,050
Common stock issue for conversion of note payable	$	158,000		$	115,600

The accompany notes are an integral part of these unaudited financial statements.

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FIRST TITAN CORP.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

Note 1. General Organization and Business

First Titan Corp. (the “Company”), a Florida corporation, was 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.

The Company was incorporated on September 16, 2010 with our corporate headquarters located in Bradenton, Florida. The Company’s year-end is September 30.

On September 16, 2011, First Titan Corporation created First Titan Energy, LLC for the purpose of investing in oil and gas properties, greenfield projects and in the development of cutting edge exploration and production technologies.

On September 16, 2011, we formed a new subsidiary company —First Titan Technical, LLC— to commence business operations designing and marketing automotive electronics custom-designed for heavy-duty vehicles.

Note 2. Going Concern

For the six months ended March 31, 2014, the Company had a net loss of $562,083 and negative cash flow from operating activities of $200,952. As of March 31, 2014, the Company has negative working capital of $256,089. Although the Company began receiving revenue on October 1, 2012, management does not anticipate having positive cash flow from operations in the near future.

These factors raise a substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.

The Company does not have the resources at this time to repay its credit and debt obligations, make any payments in the form of dividends to its shareholders or fully implement its business plan. Without additional capital, the Company will not be able to remain in business.

Management has plans to address the Company’s financial situation as follows:

In the near term, management plans to continue to focus on raising the funds necessary to fully implement the Company’s business plan. Management will continue to seek out debt financing to obtain the capital required to meet the Company’s financial obligations. There is no assurance, however, that lenders will continue to advance capital to the Company or that the new business operations will be profitable. The possibility of failure in obtaining additional funding and the potential inability to achieve profitability raise doubts about the Company’s ability to continue as a going concern.

In the long term, management believes that the Company’s projects and initiatives will be successful and will provide cash flow to the Company which will be used to finance the Company’s future growth. However, there can be no assurances that the Company’s planned activities will be successful, or that the Company will ultimately attain profitability. The Company’s long term viability depends on its ability to obtain adequate sources of debt or equity funding to meet current commitments and fund the continuation of its business operations, and the ability of the Company to ultimately achieve adequate profitability and cash flows from operations to sustain its operations.

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Note 3. Summary of Significant Accounting Policies

Interim Financial Statements

The accompanying these unaudited financial statements have been prepared in accordance with Generally Accepted Accounting Principles (“GAAP”) in the United States of America for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, the financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and such adjustments are of a normal recurring nature. These financial statements should be read in conjunction with the financial statements for the fiscal year ended September 30, 2013 and notes thereto and other pertinent information contained in our Form 10-K the Company has filed with the Securities and Exchange Commission (the “SEC”). Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statement for the most recent fish year ended September 30, 2013 have been omitted.

The results of operations for the six month period ended March 31, 2014 are not necessarily indicative of the results to be expected for the full fiscal year ending September 30, 2014.

Consolidated Financial Statements

The consolidated financial statements of the Company include the accounts of the Company and its wholly-owned subsidiaries, First Titan Energy, LLC and First Titan Technical, LLC, from the date of their formation. Significant intercompany transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Credit Risk due to Certain Concentrations

We extend credit, primarily in the form of uncollateralized oil and gas sales through the operators of our working interests, to various companies in the oil and gas industry, which results in a concentration of credit risk. The concentration of credit risk may be affected by changes in economic or other conditions within our industry and may accordingly impact our overall credit risk. However, we believe that the risk of these unsecured receivables is mitigated by the nature of the companies to which we extend credit. For the six months ended March 31, 2014, two operators accounted for 88% and 12% of our oil and gas sales. Those operators account for 75% and 25% of accounts receivable as of March 31, 2014. We did not recognize any credit losses during the six months ended March 31, 2014. We have not recognized an allowance for doubtful accounts as of March 31, 2014. All accounts receivable as of March 31, 2014 were collected subsequent to year end.

Cash and Cash Equivalents

All cash, other than held in escrow, is maintained with a major financial institution in the United States. Deposits with this bank may exceed the amount of insurance provided on such deposits. Temporary cash investments with an original maturity of six months or less are considered to be cash equivalents.

Cash was $91,107 and $127,748 at March 31, 2014 and September 30, 2013, respectively. There were no cash equivalents as March 31, 2014 and September 30, 2013.

Oil and Gas Properties

The Company follows the full cost method of accounting for its oil and gas properties, whereby all costs incurred in connection with the acquisition, exploration for and development of petroleum and natural gas reserves are capitalized. Such costs include lease acquisition, geological and geophysical activities, rentals on non-producing leases, drilling, completing and equipping of oil and gas wells and administrative costs directly attributable to those activities and asset retirement costs. Disposition of oil and gas properties are accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship between capital costs and proved reserves of oil, in which case the gain or loss is recognized in the statement of operations.

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Depletion of capitalized oil and gas properties and estimated future development costs, excluding unproved properties, are based on the units-of-production method based on proved reserves. The company recognized $30,630 and $7,206 of depletion during the six months ended March 31, 2014 and 2013, respectively. Net capitalized costs of oil and gas properties, less related deferred taxes, are limited to the lower of unamortized cost or the cost ceiling, defined as the sum of the present value of estimated future net revenues from proved reserves based on unescalated prices discounted at 10 percent, plus the cost of properties not being amortized, if any, plus the lower of cost or estimated fair value of unproved properties included in the costs being amortized, if any, less related income taxes. As of March 31, 2014, the Company has oil and gas properties in the amount of $200,575 which are being excluded from amortization because they have not been evaluated to determine whether proved reserves are associated with those properties. Costs in excess of the present value of estimated future net revenues as discussed above are charged to impairment expense. The Company applies the full cost ceiling test on a quarterly basis on the date of the latest balance sheet presented.

Based on management’s review, 100% of the unproved oil and gas properties balance as of March 31, 2014 are expected to be added to amortization during the year ending September 30, 2014. The table below sets forth the cost of unproved properties excluded from the amortization base as of March 31, 2014 and notes the year in which the associated costs were incurred:


	Year of Acquisition
	2012		2013		2014		Total
Acquisition costs	$	153,264	$	47,311	$	—	$	200,575
Development costs		—		—		—		—
Exploration costs		—		—		—		—
Total	$	153,264	$	47,311	$	—	$	200,575

Asset retirement costs are recognized when the asset is placed in service, and are included in the amortization base and amortized over proved reserves using the units of production method. Asset retirement costs are estimated by management using existing regulatory requirements and anticipated future inflation rates.

Common Stock

The Company records common stock issuances when all of the legal requirements for the issuance of such common stock have been satisfied.

Earnings (Loss) per Common Share

The Company computes basic and diluted earnings per common share amounts in accordance with ASC Topic 260, Earnings per Share. The basic earnings (loss) per common share are calculated by dividing the Company’s net income available to common shareholders by the weighted average number of common shares outstanding during the year. The diluted earnings (loss) per common share are calculated by dividing the Company’s net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted as of the first of the year for any potentially dilutive debt or equity. There are no dilutive shares outstanding for any periods reported.

Revenue Recognition

Sales of crude oil are recognized when the delivery to the purchaser has occurred and title has been transferred. This occurs when oil has been delivered to a pipeline or a tank lifting has occurred. Crude oil is priced on the delivery date based upon prevailing prices published by purchasers with certain adjustments related to oil quality and physical location.

Financial Instruments

The Company’s balance sheet includes certain financial instruments. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.

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FASB Accounting Standards Codification (ASC) 820 Fair Value Measurements and Disclosures (ASC 820) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:


Level 1 -	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 -	Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 -	Inputs that are both significant to the fair value measurement and unobservable.

Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of March 31, 2014. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include accounts receivable, other current assets, accounts payable, and accrued expenses. The fair value of the Company’s notes payable is estimated based on current rates that would be available for debt of similar terms that is not significantly different from its stated value.

On September 16, 2010, the Company applied ASC 820 for all non-financial assets and liabilities measured at fair value on a non-recurring basis. The adoption of ASC 820 for non-financial assets and liabilities did not have a significant impact on the Company’s financial statements.

The following table presents assets that were measured and recognized at fair value as of March 31, 2014 and September 30, 2013 and the periods then ended on a recurring and nonrecurring basis:


March, 31 2014 Description	Level 1		Level 2		Level 3		Total Realized Loss
Asset retirement obligation	$	—	$	—	$	22,170	$	—
Totals	$		$		$	22,170	$	—


September, 30 2013 Description	Level 1		Level 2		Level 3		Total Realized Loss
Asset retirement obligation	$	—	$	—	$	21,644	$	—
Totals	$		$		$	21,644	$	—

Recently Issued Accounting Pronouncements

We have reviewed the FASB issued Accounting Standards Update (“ASU”) accounting pronouncements and interpretations thereof that have effectiveness dates during the periods reported and in future periods. The Company has carefully considered the new pronouncements that alter previous generally accepted accounting principles and does not believe that any new or modified principles will have a material impact on the corporation’s reported financial position or operations in the near term. The applicability of any standard is subject to the formal review of our financial management and certain standards are under consideration.

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In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to:


·	Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and

·	Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense.

The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Early adoption is permitted. The adoption of ASU No. 2013-02 is not expected to have a material impact on our financial position or results of operations.

In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013-01 is not expected to have a material impact on our financial position or results of operations.

In October 2012, the FASB issued Accounting Standards Update ASU 2012-04, “Technical Corrections and Improvements” in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations.

In August 2012, the FASB issued ASU 2012-03, “Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)” in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a material impact on our financial position or results of operations.

In July 2012, the FASB issued ASU 2012-02, “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment” in Accounting Standards Update No. 2012-02. This update amends ASU 2011-08, Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment and permits an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles - Goodwill and Other - General Intangibles Other than Goodwill. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity’s financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The adoption of ASU 2012-02 has not had a material impact on our financial position or results of operations.

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Note 4. Investment in Joint Venture

On October 11, 2013, we entered into a joint venture agreement with Biofuels Power Corp. The purpose of the joint venture is to explore business opportunities in the natural gas conversion business. Biofuels Power Corp. will operate the joint venture. Under the terms of the agreement, we will contribute introductions and consulting with respect to marketing and introductions for business. In addition, we will fund up to $100,000 in monthly contributions of $20,000. These contributions are solely at the discretion of the Company. In exchange for the contributions, we will receive common stock of Biofuels Power Corp. at two-thirds of the market price of the common stock.

During the six months ended March 31, 2014, we contributed $35,000 to the joint venture. Although the Company feels that this is a viable investment, management has determined that it had to impair the investment in the joint venture with Biofuels Power Corp. There are no financial records which would support the valuation of the investment. As a result, we recognized a loss on the impairment of $35,000 during six months ended March 31, 2014

Note 5. Related Party Transactions

On March 14, 2014, the Company entered into a participation and operating agreement (the “Participation Agreement”) with SoHo Resource Holdings I, LLC (“SoHo”) for the joint acquisition and development of oil and gas leases in Bell, Milam, Falls, Robertson, Limestone, Freestone, Leon, Madison and Brazos counties in Texas (the “Target Area”). Under the terms of the Participation Agreement, the Company will pay $300 per acre for its proportionate share of acreage in the Target Area (the “Target Acreage”). The Target Acreage, which will not have more than a 25% royalty burden, will be acquired by SoHo, who will manage all operations under the Participation Agreement. Under the terms of the Participation Agreement, the Company will be invoiced for its share of the Target Acreage cost and will have thirty days to pay its proportionate cost for the Target Acreage. The Company will pay 33.33% of the drilling and completion costs associated with the wells drilled and/or recompleted on the Target Acreage in order to receive its 25.00% working interest in the wells until payout and 18.75% working interest after well payout. Under the terms of the Participation Agreement, the Company must remit its proportionate share of drilling and completion costs within fifteen days of notice by SoHo.

G. Jonathan Pina, our CEO, owns 50% of the membership interest in SoHo; however he does not have daily management oversight of SoHo. As of March 31, 2014, the Company had not yet made any payments to SoHo.

Note 6. Advances from Third Parties

During the six months ended March 31, 2014, the Company received net, non-interest bearing advances from certain third parties totaling $203,980. The total amount due under these advances as of March 31, 2014 was $203,980. These advances are not collateralized, non-interest bearing and are due on demand. During the six months ended March 31, 2014, we recognized imputed interest expense in the amount of $4,600 on these advances.

Note 7. Convertible Notes Payable

During six months ended March 31, 2014, the holders of the Convertible Note Payable dated February 28, 2013 elected to convert principal and accrued interest in the amounts show below into share of common stock at a rate of $0.04 per share. On the conversion date, the unamortized discount related to the principal amount converted was immediately amortized to interest expense. No gain or loss was recognized on the conversions as they occurred within the terms of the agreement which provided for conversion at $0.04 per share.


Date	Amount Converted		Number of Shares Issued	Unamortized Discount
October 25, 2013	$	20,000	500,000	$	14,119
October 31, 2013		20,000	500,000		15,961
December 10, 2013		10,000	250,000		5,818
December 12, 2013		20,000	500,000		15,717
December 27, 2013		20,000	500,000		15,083
February 7, 2013		20,000	500,000		13,028
March 3, 2014		24,000	600,000		16,222
March 4, 2014		24,000	600,000		16,967
Total	$	158,000	3,950,000		112,916

As of March 31, 2014, the balance of the note dated February 28, 2013 was $135,769.

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Note 8. Stockholders’ Equity

Conversion of Shares

During six months ended March 31, 2014, the holders of our convertible notes elected to convert principal and interest into shares of common stock as detailed below:


Date	Amount Converted		Number of Shares Issued
October 25, 2013	$	20,000	500,000
October 31, 2013		20,000	500,000
December 10, 2013		10,000	250,000
December 12, 2013		20,000	500,000
December 27, 2013		20,000	500,000
February 7, 2013		20,000	500,000
March 3, 2014		24,000	600,000
March 4, 2014		24,000	600,000
Total	$	158,000	3,950,000

Imputed Interest

During six months ended March 31, 2014, the Company recognized imputed interest of $4,600 as an increase to shareholders’ equity.

Note 9. Subsequent Events

On April 1, 2014, the Company issued 600,000 shares of common stock to a third party for conversion of $24,000 of principal and interest on the convertible note dated February 28, 2013. The shares were valued at $24,000 and no gain or loss was recognized on the conversion as it occurred with the terms of the agreement which provide for conversion at $0.04 per share.

On April 14, 2014, the Company issued 700,000 shares of common stock to a third party for conversion of $28,000 of principal and interest on the convertible note dated February 28, 2013. The shares were valued at $28,000 and no gain or loss was recognized on the conversion as it occurred with the terms of the agreement which provide for conversion at $0.04 per share.

On April 25, 2014, the Company issued 800,000 shares of common stock to a third party for conversion of $32,000 of principal and interest on the convertible note dated February 28, 2013. The shares were valued at $32,000 and no gain or loss was recognized on the conversion as it occurred with the terms of the agreement which provide for conversion at $0.04 per share.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

First Titan Corp was incorporated in Florida on September 16, 2010. The Company intended to design and manufacture both panel and engineered/tooled custom vacuum formed instrument panels and wiring harnesses, required for the monitoring of any final product that utilizes a gas or diesel engine source. The Company was considered to be in the development stage in accordance with ASC 915 until October 1, 2012 when it began receiving revenue.

We intend to invest in oil and gas properties, greenfield projects and in the development of cutting edge exploration and production technologies.

In September 2011, First Titan Corporation created First Titan Energy, LLC with the goal of capitalizing on the booming oil and gas industry. It is our intention to maximize shareholder value through mergers and acquisitions, greenfield projects and investments in the development of cutting edge exploration and production technologies.

First Titan Energy’s oil and gas development activities include the following:

Alabama – On May 2, 2012, we acquired a one percent working interest in one well in Little Cedar Creek Field in Alabama. This well was drilled during the fiscal year ended September 30, 2012 and we began receiving revenue during the fiscal year ended September 30, 2013. This well is located in the Little Cedar Field, Alabama’s largest producing oil field.

Louisiana – On January 3, 2012, we entered into a participation agreement in an oil and gas drilling project in Calcasieu Parish, Louisiana (the “Participation Agreement”). The South Lake Charles Prospect is located seven miles south of the city of Lake Charles, Louisiana. It is a middle Oligocene age geo-pressured prospect located in the middle and lower hackberry sands. Under the terms of the Participation Agreement, we will participate in the drilling of one well and may participate in the drilling of future wells if it chooses. We will pay 25% of the drilling cost of the first well and will receive 13.59% of the net revenue from the well. We anticipate that our share of the total drilling and completion cost of the initial well, projected to be drilled to approximately 15,500 feet, will be $3.4 million. On August 12, 2013, the Participation Agreement was amended to reduce our working interest to 1.8%. As a result, our share of the drilling cost is expected to be approximately $181,000. The Company has paid $143,264 of its share of the costs of the well to date. We will receive 1.4% of the revenue from this well. The well is currently being drilled and is expected to be completed during fiscal 2014.

During October 2012, we acquired a working interest in the Lake Boeuf Field in Southeast Louisiana. The field covers 300 acres in Lafourche Parish. The prospect was a 12,025 directional well to be drilled utilizing a land rig. The project has been indefinitely suspended. All amounts invested in this project have been transferred to the South Lake Charles Prospect.

Texas – On July 7, 2013, the Company acquired a 30% working interest in the Minns Project located in Waller County, Texas. The project included three producing wells and a salt water disposal well within the Brookshire Field. The project is targeted for additional development vis-à-vis reworks, deepening of wells, and potentially drilling new wells on the property.

Big Canyon Prospect – On January 19, 2012, we entered into an agreement to drill two wells on 640 acres of land located in Terrell County, Texas. Our option to drill expired January 27, 2013 and no wells have been drilled.

We have incurred losses since inception, have been issued a going concern opinion from our auditors and rely upon the sale of our securities and debt financing to fund operations. We will need additional financing in order to continue operations.

Results of Operations

Six months ended March 31, 2014 compared to the six months ended March 31, 2013

Oil and Gas Sales

We earned net revenue of $54,069 during the six months sended March 31, 2014, compared to $37,707 during the comparable period in last year. The increase of revenue is due to the acquisition of the Minns Project late in fiscal 2013. The Minns Project did not generate any revenue during the six months ended March 31, 2013.

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Lease operating expense

We incurred lease operating expense of $11,324 and $633 during the six months ended March 31, 2014 and 2013, respectively. The increase of lease operating expense is due to the acquisition of the Minns Project late in fiscal 2013.

Depletion, depreciation & amortization

We incurred depletion expense of $30,630 during the six months ended March 31, 2014, and $7,206 for the comparable period last year. The increase in depletion, depreciation and amortization is the result of higher production combined with a higher rate of depletion per BOE during the six months ended March 31, 2014.

Impairment of investment in joint venture

During the six months ended March 31, 2014, we recognized impairment of an investment in a joint venture of $35,000 as a result of impairing our investment in the joint venture with Biofuels Power Corp.

General and Administrative Expenses

We recognized general and administrative expenses in the amount of $276,313 and $224,289 for the six months ended March 31, 2014 and ended 2013, respectively. The increase is due to the higher professional fees during the current year.

Loss from Operations

Our loss from operation for the six months ended March 31, 2014 and 2013 from $194,438 to $299,724, primarily due to the increases in depletion, impairment and professional fees discussed above.

Interest Expense

Interest expense from $137,462 for the six months ended March 31, 2013 to $262,359 for the six months ended March 31, 2014. Interest expense for the six months ended March 31, 2014 included amortization of discount on convertible notes payable in the amount of $227,065, compared to $108,444 for the comparable period of 2013. The remaining increase is the result of the Company entering into interest-bearing convertible notes payable.

Net

We incurred a net of $562,083 for the six months ended March 31, 2014 as compared to $331,900 for the comparable period of 2013. The in the net was primarily the result of the increases in depletion, impairment, professional fees and interest expense discussed above.

Three months ended March 31, 2014 compared to the three months ended March 31, 2013

Oil and Gas Sales

We earned net revenue of $21,859 during the period, compared to $13,750 during the comparable period in last year. The increase of revenue is due to the acquisition of the Minns Project late in fiscal 2013.

Lease operating expense

We incurred lease operating expense of $7,507 and $321 during the three months ended March 31, 2014 and 2013, respectively. The increase of lease operating expense is due to the acquisition of the Minns Project late in fiscal 2013.

Depletion, depreciation & amortization

We incurred depletion, depreciation and amortization expense of $7,730 during the three months ended March 31, 2014, and $2,202 for the comparable period of previous year. The increase in depletion, depreciation and amortization is the result of higher production combined with a higher rate of depletion per BOE during the three months ended March 31, 2014.

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Impairment of investment in joint venture

During the three months ended March 31, 2014, we recognized impairment of an investment in a joint venture of $10,000 as a result of impairing our investment in the joint venture with Biofuels Power Corp.

General and Administrative Expenses

We recognized general and administrative expenses in the amount of $111,245 and $146,508 for the three months ended March 31, 2014 and 2013, respectively. The decrease was primarily the result of lower management fees.

Loss from Operations

Our loss from operation for the six months ended March 31, 2014 and 2013 from $135,294 to $114,801, due to a greater incremental increase in revenue when compared to the incremental increase of expenses during the period.

Interest Expense

Interest expense from $100,599 for the three months ended March 31, 2013 to $66,761 for the three months ended March 31, 2014. Interest expense for the three months ended March 31, 2014 included amortization of discount on convertible notes payable in the amount $57,607, compared to $84,662 for the comparable period of 2013. The remaining decrease is the result of the lower principal balances on convertible notes payable.

Net

We incurred a net of $181,562 for the three months ended March 31, 2014 as compared to $235,893 for the comparable period of 2013. The in the net was primarily the result of a greater incremental increase in revenue when compared to the incremental increase of expenses during the period.

Going Concern

Liquidity and Capital Resources

We anticipate needing approximately of $750,000 to fund our operations and to effectively execute our business plan over the next eighteen months. Currently available cash is not sufficient to allow us to commence full execution of our business plan. Our business expansion will require significant capital resources that may be funded through the issuance of common stock or of notes payable or other debt arrangements that may affect our debt structure. Despite our current financial status we believe that we may be able to issue notes payable or debt instruments in order to start executing our business plan. However, there can be no assurance that we will be able to raise money in this fashion and have not entered into any agreements that would obligate a third party to provide us with capital.

During the three months ended March 31, 2014, we incurred a net of $181,562. We raised the cash amount to be used in these activities from advances. As of March 31, 2014, we had cash on hand of $91,107 and of $256,089. Our cash on hand will be adequate to fund our operations for approximately three months.

As of the date of this filing, the current funds available to the Company will not be sufficient to continue maintaining a reporting status. Management believes if the Company cannot maintain its reporting status with the SEC it will have to cease all efforts directed towards the Company. As such, any investment previously made would be lost in its entirety.

To date, the Company has been able to fund operations through the sale of stock and by obtaining cash advances. The Company will have to seek additional financing in the future. However, the Company may not be able to obtain additional capital or generate sufficient revenues to fund our operations. If we are unsuccessful at raising sufficient funds to fund our operations, the Company may be forced to seek a buyer for our business or another entity with which we could create a joint venture. If all of these alternatives fail, we expect that the Company will be required to seek protection from creditors under applicable bankruptcy laws.

Our independent auditor has expressed substantial doubt about our ability to continue as a going concern and believes that our ability is dependent on our ability to implement our business plan, raise capital and generate revenues. See Note 2 of our financial statements.

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Recent federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or The NASDAQ Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges are those that address board of directors’ independence, audit committee oversight, and the adoption of a code of ethics. Our Board of Directors is comprised of one individual who is also our executive officer. Our executive officer makes decisions on all significant corporate matters such as the approval of terms of the compensation of our executive officer and the oversight of the accounting functions.

The Company has not yet adopted any of these corporate governance measures, and since our securities are not yet listed on a national securities exchange, the Company is not required to do so. The Company has not adopted corporate governance measures such as an audit or other independent committees of our board of directors as we presently do not have any independent directors. If we expand our board membership in future periods to include additional independent directors, the Company may seek to establish an audit and other committees of our board of directors. It is possible that if our Board of Directors included independent directors and if we were to adopt some or all of these corporate governance measures, stockholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for director nominees may be made by a majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions.

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 March 31, 2014. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2014, 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.


1.	As of March 31, 2014, 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.

2.	As of March 31, 2014, 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.

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

The Company is not involved in any legal proceedings.

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.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

There were no defaults upon senior securities.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS


3.1	Article of Incorporation (incorporated by reference to our Form S-1 filed with the Securities and Exchange Commission on November 3, 2010)
3.2	Bylaws (incorporated by reference to our Form S-1 filed with the Securities and Exchange Commission on November 3, 2010)
10.1	Working Interest Purchase and Sale Agreement (incorporated by reference to Form 10-Q for the quarter ended December 31, 2011, filed on February 14, 2012).
31.1 (2)	Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer and principal financial and account officer.
32.1 (2)	Section 1350 Certification of principal executive officer and principal financial accounting officer.
101 (1),(2)	XBRL data files of Financial Statement and Notes contained in this Quarterly Report on Form 10-Q.


(1)	In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.”
(2)	Filed or furnished herewith

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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.


	First Titan Corp.


Date: May 20, 2014	BY: /s/ G. Jonathan Piña
	G. Jonathan Piña
	Chief Executive Officer, President, Secretary, Treasurer, Principal Executive Officer, Principal Finance and Accounting Officer and Sole Director

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