XOTC:JMGE Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

UNITED STATES

SECURITIES 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 June 30, 2012

or

 

 

 

o

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 001-32438

JMG Exploration, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

Nevada

 

20-1373949

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification Number)

 

 

 

180 South Lake Ave.

Seventh Floor

 

 

Pasadena, California

 

91101

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code:
(626) 792-3842


Former name, former address and former fiscal year, if changed from last report.
Not applicable


    

 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 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. (Check one):


Large accelerated filer o                                                                 Accelerated filer o                 

Non-accelerated filer o (Do not check if a smaller reporting company)        Smaller reporting company þ


     

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


     

The number of shares outstanding of Registrant’s common stock, par value $0.01, as of June 30, 2012, was 5,423,409.



JMG Exploration, Inc.
Index to Form 10-Q Quarterly Report
to the Securities and Exchange Commission

 

 

 

 

 

 

 

Page

 

 

 

No.

 

Part I  Financial Information

 

 

 

 

 

 

Item 1

Consolidated Financial Statements

 

 

 

 

 

 

 

Consolidated Balance Sheets as of June 30, 2012 (unaudited) and December 31, 2011.

 

3

 

 

 

 

 

Consolidated Statements of Operations (unaudited) for the six month periods ended June 30, 2012 and 2011.

 

4

 

 

 

 

 

Consolidated Statements of Cash Flows (unaudited) for the six month periods ended June 30, 2012 and 2011.

 

5

 

 

 

 

 

Consolidated Statement of Stockholders’ Equity (unaudited) for the six month period ended June 30, 2012.

 

6

 

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

 

7 - 13

 

 

 

 

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

14 - 18

 

 

 

 

Item 3

Quantitative and Qualitative Disclosures About Market Risk

 

19

 

 

 

 

Item 4T

Controls and Procedures

 

19-20

 

 

 

 

 

 

 

 

 

 

 

 

 

Part II Other Information

 

 

 

 

 

 

Item 1

Legal Proceedings

 

21

 

 

 

 

Item 1A

Risk Factors

 

21

 

 

 

 

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

 

21

 

 

 

 

Item 3

Defaults Upon Senior Securities

 

21

 

 

 

 

Item 4

Mine Safety Disclosures

 

21

 

 

 

 

Item 5

Other Information

 

21

 

 

 

 

Item 6

Exhibits

 

21

As of

June 30,
2012

December 31,

2011*

ASSETS

 (unaudited)

 

Current

 

 

Cash and cash equivalents

$  1,537,459

$  1,578,715

Accounts receivable, net of $289,800 and $248,400 allowance for doubtful accounts in 2012 and 2011

-

-

 

1,537,459

1,578,715

Oil and gas properties (accounted for under the successful efforts method of accounting), net of depreciation, depletion, amortization and impairment

13,346

44,223

 

$  1,550,805

$  1,622,938


LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

Current

 

 

Accounts payable

$       51,492

$       54,319

Accrued liabilities

353,577

321,367

Due to affiliate

34,764

34,764

   Total current liabilities

439,833

410,450

Asset retirement obligations

31,786

31,224

 

471,619

441,674

Stockholders’ equity

 

 

Share capital

 

 

Common stock - $.001 par value; 25,000,000 shares authorized; 5,423,409 and 5,188,409 shares issued and outstanding in 2012 and 2011, respectively

 5,423

 5,188

Preferred stock - $.001 par value; 10,000,000 shares authorized; no shares issued and outstanding in 2012 and 2011

 -

 -

Additional paid-in capital

 26,332,419

 26,257,968

Share purchase warrants

 2,184,452

 2,184,452

Accumulated deficit

 (27,417,093)

 (27,240,329)

Accumulated other comprehensive loss

 (26,015)

 (26,015)

 

 1,079,186

 1,181,264

 

 $  1,550,805

 $  1,622,938


*  Amounts derived from the audited financial statements for the year ended December 31, 2011


The accompanying notes are an integral part of these consolidated financial statements.




3



JMG Exploration, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


 

For the three month period

ended June 30,

For the six month period

ended June 30,

 

2012

2011

2012

2011

Revenues





Gross Revenue

$    24,000

$    24,000

$   48,000

$   48,000

Less royalties and taxes

(3,300)

(3,300)

(6,600)

(6,600)

   

20,700

20,700

41,400

41,400

 

 

 

 

 

Costs and Expenses

 

 

 

 

General and administrative

73,392

29,537

131,981

112,753

Production expenses

16,105

16,105

32,210

32,210

Depletion, depreciation, amortization and impairment

28,325

2,355

               30,877

               4,657

Accretion on asset retirement obligation

281

281

562

562

   

118,103

48,278

195,630

150,182

Loss from operations

(97,403)

(27,578)

(154,230)

(108,782)

 

 

 

 

 

Other Income and Expense

 

 

 

 

Interest income

-

1,807

452

3,594

Other

-

-

 -

 -

   

-

1,807

452

3,594

Net loss

(97,403)

(25,771)

(153,778)

(105,188)

Less:  deemed dividend on warrant extension

-

-

(22,986)

(191,310)

Net loss applicable to common shareholders

$  (97,403)

$  (25,771)

$  (176,764)

$  (296,498)


Basic and diluted weighted average shares outstanding

5,262,035

5,188,409

5,225,222

5,188,409

 

 

 

 

 

Net loss for the period per share, basic and diluted

$ (0.02)

$ (0.01)

          $(0.03)

          $(0.06)

 

 

 

         The accompanying notes are an integral part of these consolidated financial statements.



4



JMG Exploration, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

Six month period ended

June 30,

For the

2012

2011

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

Net loss for the period

$ (153,778)

$ (105,188)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

Depletion, depreciation, amortization, accretion and impairment

31,439

5,219

Change in allowance for doubtful accounts

41,400

41,400

   Other changes:

 

 

Decrease  in accounts receivable

(41,400)

(41,400)

Increase  in accounts payable  and accrued liabilities

29,383

11,693

Cash used in operating activities

(92,956)

(88,276)


CASH FLOWS FROM INVESTING ACTIVITIES

-

-

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

Proceeds from the exercise of stock options

51,700

-

Cash provided by investing activities

51,700

-

 

 

 

Net (decrease) in cash and cash equivalents

(41,256)

(88,276)

Cash and cash equivalents, beginning of period

1,578,715

1,714,959

Cash and cash equivalents, end of period

$1,537,459

$1,626,683

   

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

Cash paid during the period for:

 

 

     Interest

$                  -

$                  -

     Income taxes

$                  -

$                  -

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

 

 

Extension of warrant expiration date – deemed dividend

$     22,986

$     191,310


The accompanying notes are an integral part of these consolidated financial statements.



5



JMG Exploration, Inc.

STATEMENT OF CONSOLIDATED STOCKHOLDERS’ EQUITY


(unaudited)


 

Common Stock

Preferred

Stock

Additional

Paid-in

Capital

Share Purchase Warrants

Accumulated Deficit

Accumu-lated

Other Compre-hensive Loss

Total

No. Shares

Amt

Balance at December 31, 2011

5,188,409

$ 5,188

$             -

$ 26,257,968

$2,184,452

$ (27,240,329)

$ (26,015)

$ 1,181,264

Exercise of options

235,000

235

-

51,465

-

-

-

51,700

Extension of warrant expiration dates

-

-

-

22,986

-

(22,986)

-

-

Net loss for the six month period ended June 30, 2012

-

-

-

-

-

(153,778)

-

(153,778)

Balance at June 30, 2012 (unaudited)

5,423,409

5,423

$             -

$ 26,332,419

$2,184,452

$ (27,417,093)

$ (26,015)

$ 1,079,186

 

The accompanying notes are an integral part of these consolidated financial statements.



6



JMG Exploration, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

1.    INCORPORATION AND NATURE OF OPERATIONS

JMG Exploration, Inc. was incorporated under the laws of the State of Nevada on July 16, 2004 for the purpose of exploring for oil and natural gas in the United States and Canada. JMG’s wholly owned Canadian subsidiary is inactive and has no assets or operations. All of the properties under development, with the exception of the Pinedale natural gas wells, have not met with developmental objectives and have been sold as of January 2008.

As of June 30, 2012, JMG has an accumulated deficit of $­­27,417,093 and has insufficient working capital to fund development and exploratory drilling opportunities. JMG has sufficient working capital to maintain the current level of operations through at least December 31, 2013. The Company has been exploring a range of strategic alternatives, including the possible sale or merger with another party and has entered into a definitive agreement to acquire Ad-Vantage Networks, Inc., a development stage corporation that is engaged in digital advertising service technology. See footnote 9.

2.   SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Results for interim periods should not be considered indicative of results for a full year. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2011. The accounting policies used in preparing these consolidated financial statements are the same as those described in Note 1 to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2011. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included. All significant intercompany accounts and transactions have been eliminated in consolidation.

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States 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 revenues and expenses during the reporting period. Significant estimates are required as part of determining the fair value of warrants, allowance for doubtful accounts, estimated lives of property and equipment and intangibles, long-lived asset impairments, valuation allowances on deferred income taxes and the potential outcome of future tax consequences of events recognized in the Company's financial statements or tax returns. Actual results and outcomes may materially differ from management's estimates and assumptions.

Critical accounting estimates

In the preparation of the financial statements, it is necessary to make certain estimates that are critical to determining our assets, liabilities, and net income. None of these estimates affect the determination of cash flow but do have a significant impact in the determination of net income. The most critical of these estimates is the reserves estimations for gas properties.

At December 31, 2007, JMG engaged an independent engineering firm to evaluate 100% of our developed oil and gas reserves and prepare a report thereon. The estimation of the reserve volumes and future net revenues set out in the report is complex and subject to uncertainties and interpretations. Judgments are based upon engineering data, projected future rates of production, forecasts of commodity prices, and the timing of future expenditures. Inevitably the estimates of reserve volumes and future net revenues will vary over time as new data becomes available and estimates of future net revenues do not represent fair market value. For the year ended December 31, 2011 and the quarter ended June 30, 2012, JMG adjusted the 2007



7



reserve information per this report based on 2008, 2009, 2010, 2011 and 2012 production, current prices for natural gas and a review of other assumptions utilized in the 2007 reserve report.

The following significant accounting policies outline the major policies involving critical estimates.

Successful-efforts method of accounting

Our business is subject to special accounting rules that are unique to the oil and gas industry. There are two allowable methods of accounting for oil and gas business activities: the successful-efforts method and the full-cost method. Under the successful-efforts method, costs such as geological and geophysical, exploratory dry holes and delay rentals are expensed as incurred whereas under the full-cost method these types of charges are capitalized.

Under the successful-efforts method of accounting, all costs of property acquisitions and drilling of exploratory wells are initially capitalized. If a well is unsuccessful, the capitalized costs of drilling the well, net of any salvage value, are charged to expense. If a well finds oil and natural gas reserves that cannot be classified as proved within a year after discovery, the well is assumed to be impaired and the capitalized costs of drilling the well, net of any salvage value, are charged to expense. The capitalized costs of unproven properties are periodically assessed to determine whether their value has been impaired below the capitalized cost, and if such impairment is indicated, a loss is recognized. We consider such factors as exploratory results, future drilling plans, and lease expiration terms when assessing unproved properties for impairment. For each field, an impairment provision is recorded whenever events or circumstances indicate that the carrying value of those properties may not be recoverable from estimated future net revenues. The impairment provision is measured as the excess of carrying value over the fair value. Fair value is defined as the present value of the estimated future net revenue from total proved and risked-adjusted probable reserves over the economic life of the reserves, based on yearend oil and gas prices, consistent with price and cost assumptions used for acquisition evaluations.

Geological and geophysical costs and costs of retaining undeveloped properties are expensed as incurred. Expenditures for maintenance and repairs are charged to expense, and renewals and betterments are capitalized. Upon disposal, the asset and related accumulated depreciation and depletion are removed from the accounts, and any resulting gain or loss is reflected currently in income or loss.

Costs of development dry holes and proved leaseholds are depleted on the unit-of-production method using proved developed reserves on a field basis. The depreciation of capitalized production equipment, drilling costs and asset retirement obligations is based on the unit-of-production method using proved developed reserves on a field basis.

To economically evaluate our future proved oil and natural gas reserves, if any, independent engineers must make a number of assumptions, estimates, and judgments that they believe to be reasonable based upon their expertise and professional guidelines. Were the independent engineers to use differing assumptions, estimates and judgments, then our financial condition and results of operations could be affected. We would have lower revenues in the event revised assumptions, estimates, and judgments resulted in lower reserve estimates, since the depletion and depreciation rate would then be higher. A write-down of excess carrying value also might be required. Similarly, we would have higher revenues and net profits in the event the revised assumptions, estimates, and judgments resulted in higher reserve estimates, since the depletion and depreciation rate would then be lower.

Proved Gas Reserves

Proved reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves. The estimated quantities of proved natural gas and natural gas liquids are derived from geological and engineering data that demonstrate with reasonable certainty the amounts that can be recovered in future years from known reservoirs under existing economic and operating conditions. Reserves are considered proved if they can be produced economically as demonstrated by either actual production or conclusive formation tests. The gas reserve estimates are made using all available geological and reservoir data as well as historical production data. Estimates are reviewed and revised as appropriate. Revisions occur as a result of changes in prices, costs, fiscal regimes, reservoir performance, or a change in the Company’s plans.



8



Long-lived assets

When assets are placed into service, we make estimates with respect to their useful lives that we believe are reasonable. However, factors such as competition, regulation, or environmental matters could cause us to change our estimates, thus impacting the future calculation of depreciation and depletion. We evaluate long-lived assets for potential impairment by identifying whether indicators of impairment exist and, if so, assessing whether the long-lived assets are recoverable from estimated future undiscounted cash flows. The actual amount of impairment loss, if any, to be recorded is equal to the amount by which a long-lived asset’s carrying value exceeds its fair value. Estimates of future discounted cash flows and fair values of assets require subjective assumptions with regard to future operating results and actual results could differ from those estimates.

Impairment of Long-Lived Assets

If estimated undiscounted cash flows are insufficient to recover the net capitalized costs related to proved properties, then we recognize an impairment charge in income from operations equal to the difference between the net capitalized costs related to unproved properties and their estimated fair values based on the present value of the related estimated future net cash flows.

Undeveloped oil and gas properties that are individually significant are periodically assessed for impairment of value, and a loss is recognized at the time of impairment by providing an impairment allowance.

Asset Retirement Obligations

We have adopted ASC 410 “Asset Retirement and Environmental Obligations” from inception. The net estimated costs are discounted to present values using a credit-adjusted, risk-free rate over the estimated economic life of the properties. These costs are capitalized as part of the cost of the related asset and amortized. The associated liability is classified as a long-term liability and is adjusted when circumstances change and for the accretion of expense.

Stock-based compensation

The Company accounts for the cost of Director/employee services received in exchange for the award of common stock options based on the fair value of the award on the date of grant. The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option-pricing model. The expected life assumption is based on the expected life assumptions of similar entities. Expected volatility is based on actual share price volatility of the preceding twelve months. The risk-free interest rate is the yield currently available on U.S. Treasury zero-coupon issues with a remaining term approximating the expected term used as the input to the Black-Scholes model. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods as options vest, if actual forfeitures differ from those estimates.

The Company recognizes stock-based compensation expense as a component of general and administrative expenses in the consolidated statements of operations. There was no stock-based compensation expense for the quarters ended June 30, 2012 and 2011.

Contingencies

In the future, we may be subject to adverse proceedings, lawsuits and other claims related to environmental, labor, product and other matters. We will be required to assess the likelihood of any adverse judgments or outcomes of these matters as well as potential ranges of probable losses. A determination of the amount of reserves required, if any, for these contingencies is made after careful analysis of each individual issue. The required reserves may change in the future due to developments in each matter or changes in approach such as a change in settlement strategy in dealing with these potential matters.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash on hand and balances invested in short-term securities with original maturities of less than 90 days. As of June 30, 2012, the Company had $1,537,459 in cash. JMG maintains two cash accounts with financial institutions in the United States. The United States account is insured by the Federal Deposit Insurance Corporation up to $250,000. At times we may have cash balances



9



above the FDIC insured limits.  JMG has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk.

Loss per Common Share

Loss per share (“EPS”) is computed based on weighted average number of common shares outstanding and excludes any potential dilution. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock, which would then share in the earnings of the Company. The shares issuable upon the exercise of stock options and warrants are excluded from the calculation of net loss per share for the six month periods ended June 30, 2012 and 2011 because their effect would be antidilutive. The following shares were accordingly excluded from the net income/loss per share calculation.


 

Three month period ended

June 30,

Six month period ended

June 30,

 

2012

2011

2012

2011

Stock warrants

 4,062,551

 4,062,551

 4,062,551

 4,062,551

Stock options

220,000

473,333

220,000

473,333

Total shares excluded

4,282,551

4,535,884

4,282,551

4,535,884


Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and various states. There are currently no income tax examinations underway for these jurisdictions, although the tax years ended December 31, 2011, 2010, 2009, 2008, 2007 and 2006 are all still open for examination.  

The Company provides for income taxes in accordance with ASC 740 “Income Taxes” (ASC 740). ASC 740 requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of the assets and liabilities.  Where it is more likely than not that a tax benefit will not be realized, a valuation allowance is recorded to reduce the deferred tax asset to its realizable value.

A valuation allowance has been provided against the Company’s net deferred tax assets as the Company believes that it is more likely than not that the net deferred tax assets will not be realized. As a result of this valuation allowance, the effective tax rate for the six months ended June 30, 2012 and 2011 is zero percent.

Allowance for Doubtful Accounts

Trade accounts receivable are recorded at net realizable value. If the financial condition of JMG’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. Delinquent trade accounts receivable are charged against the allowance for doubtful accounts once uncollectibility has been determined. The need for an allowance is determined through an analysis of the past-due status of accounts receivable and assessments of risk that are based on historical trends and an evaluation of the impact of current and projected economic conditions. The allowance for doubtful accounts was $289,800 and $248,800 as of June 30, 2012 and December 31, 2011, respectively.

Fair Value of Financial Instruments

The estimated fair values for financial instruments are determined at discrete points in time based on relevant market information and other data. These estimates involve uncertainties and cannot be determined with precision. For certain of JMG’s financial instruments, including cash, accounts receivable, loan receivable and accounts payable, the carrying amounts approximate fair value. See footnote 6.



10



Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-04, Fair Value Measurement (“ASU 2011-04”), which amended ASC 820, Fair Value Measurements (“ASC 820”), providing a consistent definition and measurement of fair value, as well as similar disclosure requirements between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles, clarifies the application of existing fair value measurement and expands the disclosure requirements. ASU 2011-04 will be effective for us beginning January 1, 2012. The adoption of ASU 2011-04 did not have a material effect on our consolidated financial statements or disclosures.

In September 2011, the FASB issued ASU 2011-08, Testing Goodwill for Impairment (“ASU 2011-08”), which amends the guidance in ASC 350-20, Intangibles—Goodwill and Other – Goodwill. ASU 2011-08 provides entities with the option of performing a qualitative assessment before calculating the fair value of the reporting unit when testing goodwill for impairment. If the fair value of the reporting unit is determined, based on qualitative factors, to be more likely than not less than the carrying amount of the reporting unit, the entities are required to perform a two-step goodwill impairment test. ASU 2011-08 will be effective for us beginning January 1, 2012. The adoption of ASU 2011-08 did not have a material effect on our consolidated financial statements or disclosures.

3.  PROPERTY AND EQUIPMENT

Depletion, depreciation, amortization and impairment expense was $30,877 and $4,657 for the six month period ended June 30, 2012 and 2011, respectively. Undeveloped land and other assets not related to petroleum and natural gas properties were excluded from the depletion calculation.

Oil and gas properties (accounted for under the successful efforts method of accounting)


 

June 30,

2012

December 31,

2011

Petroleum and natural gas properties

$   1,987,646

$   1,987,646

Undeveloped Properties

1,477,396

1,477,396

Accumulated depletion, depreciation, amortization and impairment

(3,451,696)

(3,420,819)

 

$        13,346

$        44,223


4.  RELATED PARTY TRANSACTIONS


JED Oil Inc.

JMG had a Joint Services Agreement with JED Oil Inc. (“JED”). Under the Agreement, JED provided all required personnel, office space and equipment, at standard industry rates for similar services. The Joint Services Agreement was terminated upon JED’s reorganization in November 2009. JED was considered an affiliate because of its ownership interest in JMG and because two of our directors were directors of JED. All transactions are recorded at the exchange amount. Total expenses incurred under this agreement for both of the six month periods ended June 30, 2012 and 2011 were $0. Amounts payable to JED or its successor Steen River Oil & Gas Ltd. as of June 30, 2012 and December 31, 2011 for services up through termination of the agreement was $34,764.

Skeehan & Company

Joseph Skeehan, a director of JMG, is also the owner of Skeehan & Company, a professional service corporation that engages in accounting, finance and consulting services to small to mid-sized companies and organizations primarily in Southern California since 1980. In conjunction with the maintenance of accounting records and the preparation of financial statements and regulatory filings, Skeehan & Company was paid a total of $0 and $7,940 during the six month periods ended June 30, 2012 and 2011, respectively. As of June 30, 2012, no balance was due Skeehan & Company.




11



5.  ASSET RETIREMENT OBLIGATION

As of June 30, 2012, the estimated present value of the Company’s asset retirement obligation was $31,224 based on estimated future cash requirements of $20,443, determined using a credit adjusted risk free interest rate of 8.5% over the economic life of the properties, an inflation rate of 2.0%, and an estimated life until repayment of 5-10 years. Accretion of $281 was recorded for both of the six month periods ending June 30, 2012 and 2011.


Asset retirement obligations at December 31, 2011

$ 31,224

Accretion expense

562

Asset retirement obligations at June 30, 2012

$ 31,786



6. FAIR VALUE MEASUREMENTS

 

The fair value hierarchy established by ASC 820 “ Fair Value Measurements and Disclosures” prioritizes the inputs used in valuation techniques into three levels as follows:

 

 

·

Level 1 – Observable inputs – unadjusted quoted prices in active markets for identical assets and liabilities;

 

 

·

Level 2 – Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with market data; and

 

 

·

Level 3 – Unobservable inputs – includes amounts derived from valuation models where one or more significant inputs are unobservable.

 

JMG has no financial instruments recorded at fair value as of June 30, 2012.


7. PINEDALE NATURAL GAS PROPERTY LITIGATION

On July 16, 2009 , Jonah/Pinedale Partners LLC and JMG filed a Statement of Claim in the Court of Queen's Bench of Alberta in the Judicial District Of Calgary Regarding NEO Exploration Inc. and Ptarmigan Lands. In March 2005, JMG agreed to farm-in on the interests of the co-plaintiff, Jonah/Pinedale Partners. NEO, an Alberta, Canada corporation, through its wholly owned U.S. (Montana) partnership Ptarmigan Lands, became the operators of the Pinedale natural gas property effective January 1, 2009. To date, NEO has failed to report to JMG an accounting of Pinedale production or to remit to JMG their working interest in such production.

On July 9, 2012, NEO was placed in receivership in Canada. JMG intends to pursue collection of past uncollected revenues through the receivership process and expects that the new operator will start remitting JMG’s share of revenues on a timely basis.

We have accrued production revenues and costs based on historical production data but have fully reserved accounts receivable from NEO pending the outcome of the litigation. Management believes that NEO’s failure to remit JMG’s share of the production revenue is ungrounded, that JMG will prevail in the litigation.  

8. STOCKHOLDERS’ EQUITY

In June 2012, three holders of common stock options exercised 235,000 options at $0.22 per share for total consideration of $51,700.

On January 3, 2012, JMG’s Board of Directors elected to extend its three classes of warrants (1,739,500 warrants at $4.25, 1,763,802 warrants at $5.00 and 369,249 warrants at $6.00) for an additional year with an expiration on January 15, 2013. The strike prices of $4.25, $5.00, and $6.25 on the warrants will remain in place. A deemed dividend of $22,986 for this extension of the warrant expiration dates was calculated using the Black-Scholes option-pricing model.



12



On January 3, 2011, the Company extended the expiration dates of all warrants, except those issued to our underwriters, to January 15, 2012. A total of 369,249 $6.00 warrants, 1,739,500 $4.25 warrants, and 1,763,802 $5.00 warrants were to expire on January 15, 2011. A deemed dividend of $548,804 for this extension of the warrant expiration dates was calculated using the Black-Scholes option-pricing model.

9. AD-VANTAGE NETWORKS ACQUISITION

The Company has entered into a definitive agreement to acquire Ad-Vantage Networks, Inc., a development stage corporation that is engaged in digital advertising service technology (“Ad-Vantage”).

On completion of the proposed transaction:

·

Ad-Vantage will become a wholly owned subsidiary of JMG Exploration;

·

JMG will effect or have effected a one-for-two reverse stock split;

·

JMG, after giving effect to the reverse split will have 19,591,593 shares of common stock outstanding, of which 16,997,388 shares will be issued to complete the acquisition;  

·

JMG will extend its three classes of warrants ($4.25, $5.00 and $6.00) for a period of 18 months from the closing of the transaction;

·

JMG will cause the officers and directors of Ad-Vantage to become officers and directors of JMG Exploration;  

·

JMG will have a board of directors that will consist of five persons, two of whom will be designated by Ad-Vantage, two by JMG and one independent director to be mutually designated by the parties.

The acquisition will result in the current stockholders of JMG owning approximately 13.2% of the Company and the security holders of Ad-Vantage, as a group, owning the balance.

The close of the transaction is subject to:

·

completion and delivery of audited Ad-Vantage financial statements;

·

there being no material adverse change in the operations and financial condition of Ad-Vantage;

·

the approval of Ad-Vantage stockholders;

·

the execution of lock up agreements by officers of Ad-Vantage;

·

the registration of approximately 6,381,000 shares of common stock (out of the 16,997,388 shares to be issued) pursuant to an effective registration statement filed with Securities and Exchange Commission; and

·

compliance with other customary terms and conditions.

Pending close of the transaction the Company has agreed to lend $1,400,000 to Ad-Vantage on a secured basis at an interest rate of 10% per year. If the transaction is not closed, all outstanding loan amounts will be due no later than about January 11, 2014.


10. SUBSEQUENT EVENT

On July 12, 2012, the Company loaned Ad-Vantage $1,400,000 pursuant to the terms of the merger agreement.



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

The following Management’s Discussion and Analysis of financial results as provided by the management of JMG Exploration, Inc. (“JMG”) should be read in conjunction with the unaudited consolidated financial statements and notes for the six month periods ended June 30, 2012 and 2011, the audited financial statements and accompanying notes for the years ended December 31, 2011 and 2010 and the management’s discussion and analysis for the years ended December 31, 2011 and 2010.


FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements. All statements other than statements of historical facts contained herein, including statements regarding our future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions as described in “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2011.

Other sections of this report may include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Statements relating to “reserves” are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions, that the reserves described can be profitably produced in the future. Readers are cautioned that the foregoing lists of factors are not exhaustive. The forward-looking statements contained in this Form 10-Q are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws. The forward-looking statements contained in this Form 10-Q are expressly qualified by this cautionary statement.

In the presentation of the Form 10-Q, JMG uses terms that are universally applied in analyzing corporate performance within the oil and gas industry for which regulators require that we provide disclaimers.

Barrel of Oil Equivalent (BOE) – The oil and gas industry commonly expresses production volumes and reserves on a “barrel of oil equivalent” basis (“BOE”) whereby natural gas volumes are converted at the ratio of six thousand cubic feet to one barrel of oil. The intention is to sum oil and natural gas measurement units into one basis for improved analysis of results and comparisons with other industry participants. Throughout this Form 10-Q, JMG has used the 6:1 BOE measure which is the approximate energy equivalency of the two commodities at the burner tip. BOE does not represent a value equivalency at the plant gate, which is where JMG sells its production volumes, and therefore may be a misleading measure if used in isolation.

Overview

JMG Exploration, Inc. was incorporated under the laws of the State of Nevada on July 16, 2004 for the purpose of exploring for oil and natural gas in the United States and Canada. In August 2004, two private placements totaling $8.8 million were completed and exploration activities commenced. As discussed below, all of the properties under development, with the exception of the Pinedale natural gas wells, have not met with developmental objectives and have been sold as of January 2008.

As of June 30, 2012, JMG has an accumulated deficit of $27,417,093 and has insufficient working capital to fund development and exploratory drilling opportunities. JMG has sufficient working capital to maintain



14



the current level of operations through at least December 31, 2013. Raising additional capital is not considered a viable strategy and JMG is presently exploring a range of strategic alternatives, including the possible sale or merger with another party.

The Company has entered into a definitive agreement to acquire Ad-Vantage Networks, Inc., a development stage corporation that is engaged in digital advertising service technology (“Ad-Vantage”).

On completion of the proposed transaction:

·

Ad-Vantage will become a wholly owned subsidiary of JMG Exploration;

·

JMG will effect or have effected a one-for-two reverse stock split;

·

JMG, after giving effect to the reverse split will have 19,591,593 shares of common stock outstanding, of which 16,997,388 shares will be issued to complete the acquisition;  

·

JMG will extend its three classes of warrants ($4.25, $5.00 and $6.00) for a period of 18 months from the closing of the transaction;

·

JMG will cause the officers and directors of Ad-Vantage to become officers and directors of JMG Exploration;  

·

JMG will have a board of directors that will consist of five persons, two of whom will be designated by Ad-Vantage, two by JMG and one independent director to be mutually designated by the parties.

The acquisition will result in the current stockholders of JMG owning approximately 13.2% of the Company and the security holders of Ad-Vantage, as a group, owning the balance.

The close of the transaction is subject to:

·

completion and delivery of audited Ad-Vantage financial statements;

·

there being no material adverse change in the operations and financial condition of Ad-Vantage;

·

the approval of Ad-Vantage stockholders;

·

the execution of lock up agreements by officers of Ad-Vantage;

·

the registration of approximately 6,381,000 shares of common stock (out of the 16,997,388 shares to be issued) pursuant to an effective registration statement filed with Securities and Exchange Commission; and

·

compliance with other customary terms and conditions.

Pending close of the transaction the Company has agreed to lend $1,400,000 to Ad-Vantage on a secured basis at an interest rate of 10% per year. On July 12, 2012, the Company loaned Ad-Vantage $1,400,000 pursuant to the terms of the merger agreement. If the transaction is not closed, all outstanding loan amounts will be due no later than about January 11, 2014.

Results of operations

Revenue. Our revenue is dependent upon success in finding and developing oil and natural gas reserves. Our ownership interest in the production from these properties is measured in BOE per day, a term that encompasses both oil and natural gas production. Net revenues were $41,400 and $41,400 for the six month periods ended June 30, 2012 and 2011, respectively.

On July 16, 2009, Jonah/Pinedale Partners LLC and JMG filed a Statement of Claim in the Court of Queen's Bench Of Alberta in the Judicial District Of Calgary Regarding NEO Exploration Inc. and Ptarmigan Lands. In March 2005, JMG agreed to farm-in on the interests of the co-plaintiff, Jonah/Pinedale Partners. NEO, an Alberta, Canada corporation, through its wholly owned U.S. (Montana) partnership Ptarmigan Lands, became the operators of the Pinedale natural gas property effective January 1, 2009. To date, NEO has failed to report to JMG an accounting of Pinedale production or to remit to JMG their royalty interest in such production.  



15



On July 9, 2012, NEO was placed in receivership in Canada. JMG intends to pursue collection of past uncollected revenues through the receivership process and expects that the new operator will start remitting JMG’s share of revenues on a timely basis.

We may use derivative financial instruments when we deem them appropriate to hedge exposure to changes in the price of crude oil, fluctuations in interest rates and foreign currency exchange rates. JMG currently does not have any financial derivative contracts or fixed price contracts in place.

General and administrative expense. General and administrative expense relates to compensation and overhead for executive officers and fees for general operational and administrative services. For our Pinedale gas operations we have contracted out all field personnel and equipment necessary for ongoing operations and related administrative functions. General and administrative expenses were $131,981 and $112,753 for the six months ended June 30, 2012 and 2011, respectively.  Expenses consist principally of salaries, consulting fees and office costs.

The increase in general and administrative expense from 2011 was principally due to an increase in legal fees.

Production expense. Production costs include operating costs associated with field activities and geophysical and geological expense. Under the successful-efforts method, costs such as geological and geophysical, exploratory dry holes and delay rentals are expensed as incurred. Production expenses for the six months June 30, 2012 and 2011 were $32,210 and $32,210, respectively.

Depletion, depreciation. amortization and impairment expense. Depletion, depreciation, amortization and impairment expense for the six months ending June 30, 2012 and 2011 were $30,877 and $4,657, respectively. The increase in expense for 2012 is principally due to a $25,691 impairment charge.

Accretion expense. As of June 30, 2012, the estimated present value of the Company’s asset retirement obligation was $31,786 based on estimated future cash requirements of $20,443, determined using a credit adjusted risk free interest rate of 8.5% over the economic life of the properties, an inflation rate of 2.0%, and an estimated life until repayment of 5-10 years. Accretion of $562 was recorded for the six months ending June 30, 2012.

As of June 30, 2011, the estimated present value of the Company’s asset retirement obligation was $31,224 based on estimated future cash requirements of $20,443, determined using a credit adjusted risk free interest rate of 8.5% over the economic life of the properties, an inflation rate of 2.0%, and an estimated life until repayment of 5-10 years. Accretion of $562 was recorded for the three and six month periods ending June 30, 2011.

Interest income. Interest for the periods ending June 30, 2012 and 2011 was $452 and $3,594, respectively. Interest was principally attributable to interest on cash balances.  

Deemed dividend on warrant extension.  On January 3, 2012, JMG’s Board of Directors elected to extend its three classes of warrants (1,739,500 warrants at $4.25, 1,763,802 warrants at $5.00 and 369,249 warrants at $6.00) for an additional year with an expiration on January 15, 2013. The strike prices of $4.25, $5.00, and $6.25 on the warrants will remain in place. A deemed dividend of $22,986 for this extension of the warrant expiration dates was calculated using the Black-Scholes option-pricing model.

On January 3, 2011, the Company extended the expiration dates of all warrants, except those issued to our underwriters, to January 15, 2012. A total of 369,249 $6.00 warrants, 1,739,500 $4.25 warrants, and 1,763,802 $5.00 warrants were to expire on January 15, 2010. A deemed dividend of $548,804 for this extension of the warrant expiration dates was calculated using the Black-Scholes option-pricing model.

Income taxes. The Company files income tax returns in the U.S. federal jurisdiction and various states. There are currently no income tax examinations underway for these jurisdictions, although the tax years ended December 31, 2011, 2010, 2009, 2008, 2007 and 2006 are all still open for examination.  

The Company provides for income taxes in accordance with ASC 740 “Income Taxes”  (ASC 740). ASC 740 requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement carrying amounts and the tax basis of the assets and liabilities.  Where it is more likely than not that a tax benefit will not be realized, a valuation allowance is recorded to reduce the deferred tax asset to its realizable value.



16



A valuation allowance has been provided against the Company’s net deferred tax assets as the Company believes that it is more likely than not that the net deferred tax assets will not be realized.  As a result of this valuation allowance, the effective tax rate for the first quarter of 2012 and 2011 is zero percent.

Liquidity and capital resources

At June 30, 2012, we had $1,537,459 in cash and cash equivalents. Since our incorporation, we have financed our operating cash flow needs through private and public offerings of equity securities.  As of June 30, 2012, JMG has an accumulated deficit of $27,417,093 and has insufficient working capital to fund development and exploratory drilling opportunities. JMG has sufficient working capital to maintain the current level of operations through at least December 31, 2013. The Company has been exploring a range of strategic alternatives, including the possible sale or merger with another party and has entered into a definitive agreement to acquire Ad-Vantage Networks, Inc., a development stage corporation that is engaged in digital advertising service technology. An element of the merger agreement is JMG’s commitment to lend $1,400,000 to Ad-Vantage on a secured basis at an interest rate of 10% per year. On July 12, 2012, the Company loaned Ad-Vantage $1,400,000 pursuant to the terms of the merger agreement.

JMG has the following warrants outstanding as of June 30, 2012:

Warrant summary


 

Number

of warrants

outstanding

Exercise price

Maximum

proceeds

Expiration Date

Warrants issued in the preferred stock private placement

369,249

$6.00

2,215,494

01/15/2013

Warrants issued upon conversion of preferred stock

1,739,500

$4.25

7,392,875

01/15/2013

Warrants issued our initial public offering

1,763,802

$5.00

8,819,010

01/15/2013

Warrants issued to our underwriters

190,000

$7.00

1,330,000

08/03/2013

Total

4,062,551

various

19,757,379

various


Cash flow used in operations. Cash utilized by operating activities was $92,956 for the six months ended June 30, 2012. The use of cash in 2012 was attributable to net loss of $153,778 which was increased by the increase in accounts payable of $29,383, and decreased by a decrease in accounts receivable of $41,400. The cash requirements were further offset by depletion, depreciation, amortization, accretion, and impairment expense of $31,439 and an increase in the reserve for doubtful accounts of $41,400 which did not use cash.

Cash utilized by operating activities was $88,276 for the six month periods ended June 30, 2011. The use of cash in 2011 was attributable to net loss of $105,188 which was increased by the increase in accounts payable of $11,693, and decreased by a decrease in accounts receivable of $41,400. The cash requirements were further offset by depletion, depreciation, amortization, accretion, and impairment expense of $5,219 and an increase in the reserve for doubtful accounts of $41,400 which did not use cash.

Cash flow used in investing activities. Cash provided by investing activities was $0 for the six months ended June 30, 2012 and 2011.

Cash flow used in financing activities. Cash flows from financing activities were $51,700 and $0 for the six months ended June 30, 2012 and 2011. In June 2012, three holders of common stock options exercised 235,000 options at $0.22 per share for total consideration of $51,700.

Changes in critical accounting estimates

Contingencies

In the future, we may be subject to adverse proceedings, lawsuits and other claims related to environmental, labor, product and other matters. We will be required to assess the likelihood of any adverse judgments or outcomes of these matters as well as potential ranges of probable losses. A determination of the amount of



17



reserves required, if any, for these contingencies is made after careful analysis of each individual issue. The required reserves may change in the future due to developments in each matter or changes in approach such as a change in settlement strategy in dealing with these potential matters.

Contractual obligations and commitments

None.

Related Party Transactions

JED Oil Inc.

JMG had a Joint Services Agreement with JED Oil Inc. (“JED”). Under the Agreement, JED provided all required personnel, office space and equipment, at standard industry rates for similar services. The Joint Services Agreement was terminated upon JED’s reorganization in November 2009. JED was considered an affiliate because of its ownership interest in JMG and because two of our directors were directors of JED. All transactions are recorded at the exchange amount. Total expenses incurred under this agreement for both 2012 and 2011 were $0. Amounts payable to JED or its successor Steen River Oil & Gas Ltd. as of June 30, 2012 and December 31, 2011 for services up through termination of the agreement was $34,764.

Skeehan & Company

Joseph Skeehan, a director of JMG, is also the owner of Skeehan & Company, a professional service corporation that engages in accounting, finance and consulting services to small to mid-sized companies and organizations primarily in Southern California since 1980. In conjunction with the maintenance of accounting records and the preparation of financial statements and regulatory filings, Skeehan & Company was paid a total of $0 and $7,940 during the six month periods ended June 30, 2012 and 2011, respectively. As of June 30, 2012, no balance was due Skeehan & Company.

Outlook and Proposed Transactions

As of June 30, 2012, we had an accumulated deficit of $27,417,093 and have insufficient working capital to fund development and exploratory drilling opportunities. JMG has sufficient working capital to maintain the current level of operations through at least December 31, 2013. Raising additional capital is not considered a viable strategy and JMG is presently exploring a range of strategic alternatives, including the possible sale or merger with another party.



18



Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to all of the normal market risks inherent within the oil and natural gas industry, including commodity price risk, foreign-currency rate risk, interest rate risk and credit risk. We plan to manage our operations in a manner intended to minimize our exposure to such market risks.

     

Credit Risk. Credit risk is the risk of loss resulting from non-performance of contractual obligations by a customer or joint venture partner. Our accounts receivable are from the operator of our Pinedale natural gas interest and is subject to normal industry credit risk.

 

Market Risk. We are exposed to market risk from fluctuations in the market price of natural gas. Natural gas is a commodity and its price is subject to wide fluctuations in response to relatively minor changes in supply and demand. Historically, the market for natural gas has been volatile. This market will likely continue to be volatile in the future. The prices we may receive for any future production, and the levels of this production, depend on numerous factors beyond our control.

     

Interest Rate Risk. Interest rate risk will exist principally with respect to any future indebtedness that bears interest at floating rates. At June 30, 2012, we had no long-term indebtedness and do not contemplate utilizing indebtedness as a means of financing operations.

Item 4T. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of June 30, 2012, the Company carried out an assessment under the supervision and with the participation of our Chief Executive and Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(1) and I 5d-15(1)). Our Chief Executive and Financial Officer concluded that the Company's disclosure controls and procedures were not effective as of June 30, 2012.

 Material Weaknesses and Related Remediation Initiatives

 Set forth below is a summary of the various significant deficiencies which caused management to conclude that we had the material weaknesses identified above. Through the efforts of management, external consultants and our Audit Committee, we have developed a specific action plan to remediate the material weaknesses.  We expect to implement these various action plans during 2012 and anticipate that all control deficiencies and material weaknesses will be remediated by December 31, 2012.

We did not effectively implement comprehensive entity-level internal controls and did not maintain a sufficient level of resources within our accounting department, as discussed below: 


·

Financial Close Process.  JMG lacks personnel with sufficient competence in US generally accepted accounting principles and SEC reporting requirements to ensure proper and timely evaluation of the Company’s activities and transactions.


·

Financial Close Process.  JMG only prepares financial statements on a quarterly basis which increases the potential that any unusual activities or transactions will not be detected on a timely basis.


·

Cash Disbursement Process.  Our accounting personnel performed all bookkeeping activities including cash disbursements, cash receipts, and monthly bank reconciliation. The lack of segregation of duties in this area increased the potential that any fraud would not be detected on a timely basis.


·

Cash Disbursement Process.   Payments to related parties were not subject to review and approval by independent parties which increased the potential that any improper distributions would not be detected on a timely basis.




19



·

Reporting Deficiencies.  We did not perform timely and sufficient internal or external reporting of our progress and evaluation of prior year material weaknesses or the current fiscal year internal control deficiencies. 

Remediation of Internal Control Deficiencies and Expenditures

It is reasonably possible that, if not remediated, one or more of the material weaknesses described above could result in a material misstatement in our reported financial statements that might result in a material misstatement in a future annual or interim period. We are developing specific action plans for each of the above material weaknesses. In addition, our audit committee has authorized the hiring of additional temporary staff and/or the use of financial consultants, as necessary, to ensure that we have the depth and experience to remediate the above listed material weaknesses. We are uncertain at this time of the costs to remediate all of the above listed material weaknesses, however, we anticipate the cost to be in the range of $20,000 to $30,000, most of which costs we expect to incur ratably during the year. We cannot guarantee that the actual costs to remediate these deficiencies will not exceed this amount.

Through these steps, we believe that we are addressing the deficiencies that affected our internal control over financial reporting as of June 30, 2012. Because the remedial actions may require hiring of additional personnel, and relying extensively on manual review and approval, the successful operation of these controls for at least several quarters may be required before management may be able to conclude that the material weaknesses have been remediated. We intend to continue to evaluate and strengthen our internal control over financial reporting systems. These efforts require significant time and resources. If we are unable to establish adequate internal control over financial reporting systems, we may encounter difficulties in the audit or review of our financial statements by our independent registered public accounting firm, which in turn may have a material adverse effect on our ability to prepare financial statements in accordance with GAAP and to comply with our Commission reporting obligations.

 Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



20



Part II. Other Information

Item 1. Legal Proceedings

There are no material outstanding or threatened legal claims by or against us.


Item 1A. Risk Factors

There have been no material changes to the information included in response to Item 1A. “Risk Factors” in our 2011 Annual Report on Form 10-K.


Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities

None


Item 3. Defaults Upon Senior Securities

None


Item 4. Mine Safety Disclosures

None


Item 5. Other Information

None


Item 6. Exhibits

(a)

Exhibits required by Item 601 of Regulation S-K are as follows:


Exhibit 31.1 – Certification of Chief Executive and Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended


Exhibit 32.1 – Certification of Chief Executive and Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002





21



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.


 

 

 

 

 

 

 

 

  

 

JMG Exploration, Inc

 

 

 

 

 

Date: August 2, 2012

 

/s/ Justin Yorke

 

  

 

Justin Yorke

 

  

 

Chief Executive and Financial Officer, and President

 

 

 

 

 

 



22



XOTC:JMGE Quarterly Report 10-Q Filling

XOTC:JMGE Stock - Get Quarterly Report SEC Filing of XOTC:JMGE stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

XOTC:JMGE Quarterly Report 10-Q Filing - 6/30/2012
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