UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-KSB/A
Amendment
No. 2
Mark
One:
þ Annual Report under
Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the fiscal year ended December 31, 2006;
or
¨ Transition Report under
Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from
__________ to __________.
Commission
File No. 1-32158
GEOGLOBAL
RESOURCES INC.
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(Name
of small business issuer in its charter)
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Delaware
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33-0464753
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(State
or other jurisdiction of incorporation or organization)
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(IRS
Employer Identification No.)
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Suite
310, 605 – 1 Street SW, Calgary, Alberta,
Canada T2P
3S9
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(Address
of principal executive
offices) (Zip
Code)
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(403)
777-9250
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(Issuer’s
telephone number)
Securities
registered under Section 12(b) of the Exchange Act:
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Title
of each class
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Name
of each exchange on which registered
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None
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Securities
registered under Section 12(g) of the Exchange Act:
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Common
Stock, par value $.001 per share
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(Title
of Each Class)
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Check
whether the issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange
Act ¨
Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 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. þ Yes ¨ No
Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. ¨
Indicate
by check whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act.¨ Yes þ No
Issuer’s
revenues for its most recent fiscal
year: $-0-
The
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked price of such common equity, as of April 13,
2007 was $202,227,474. (See definition
of affiliate in Rule 12b-2 of the Exchange Act).
The
number of shares outstanding of each of the issuer’s classes of common equity,
as of April 13, 2007, was 66,228,256.
DOCUMENTS
INCORPORATED BY REFERENCE
None
1
This Form
10-KSB/A Amendment No. 2 is being filed to amend the GeoGlobal Resources Inc.
(the “Company”) Annual Report on Form 10-KSB for the year ended December 31,
2006. The amendment arose out of a need to restate certain financial statements
previously filed with the Securities and Exchange Commission in order to correct
certain errors relating to the Company’s reporting of stock based compensation
in compliance with FAS 123R.
This Form
10-KSB/A does not reflect events occurring after the filing of the original Form
10-KSB or the 10-KSB/A Amendment No. 1 or modify or update those
disclosures. Information not affected by the amendment is unchanged
and reflects the disclosure made at the time of the original filing of the Form
10-KSB with the Securities and Exchange Commission on April 14, 2007 and the
subsequent filing of the Form 10-KSB/A Amendment No. 1 on May 11,
2007. The following items have been amended as a result of the
restatement:
Annual
Report on Form 10-KSB/A
December
31, 2006
Table
of Contents
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Page
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19
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20
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2
General
The
following discussion and analysis of our financial condition or plan of
operation should be read in conjunction with, and is qualified in its entirety
by, the more detailed information including our Financial Statements and the
related Notes appearing elsewhere in this Annual Report. This Annual
Report contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from the
results and business plans discussed in the forward-looking
statements. Factors that may cause or contribute to such differences
include those discussed below in "Risk Factors," as well as those discussed
elsewhere in this Annual Report.
Our
Business Activities
We are
engaged, through subsidiaries and joint ventures in which we are a participant,
in the exploration for and development of oil and gas reserves. We
initiated these activities in 2003. Through December 31, 2006, our
activities have been undertaken in locations where we and our joint venture
participants have been granted exploration rights pursuant to Production Sharing
Contract's ("PSCs") entered into with the Government of India
("GOI").
At April
13, 2007, we have not reported any proved reserves of oil or natural
gas. We have entered into ten PSCs. Each PSC relates to a
separate drilling block onshore or offshore India and each provides for
multi-year and multi-phase exploration and drilling
activities. Exploration and development activities pursuant to the
terms of these agreements are expected to continue throughout 2007.
Statements
of Operations
Oil and Gas
Operations
Our oil
and gas exploration activities commenced at our inception on August 21, 2002. We
have not since our inception earned any revenues from these
operations.
Years
ended December 31, 2006 and 2005
During
the year ended December 31, 2006, we had expenses of $3,295,616 compared with
expenses of $3,693,281 during the year ended December 31, 2005. This
decrease is primarily the result of the increased scale of our participation in
oil and gas exploration activities, with commensurate additions to the office
infrastructure and the initial year of accounting for stock-based compensation
expense offset by a substantial decrease in consulting fees due to a decrease in
our stock-based compensation for non-employee consultants.
Our
general and administrative expenses increased to $1,890,926 from
$495,326. Of this increase, $1,048,477 reflects the adoption of FAS
123(R) pursuant to which we are is required to recognize compensation costs for
stock-based arrangements with employees and consultants effective January 1,
2006. These general and administrative expenses include costs related
to the corporate head office including administrative salaries and services,
rent and office costs, insurance, American Stock Exchange listing and filing
fees and transfer agent fees and services. Our consulting fees
decreased to $1,104,106 during the year ended December 31, 2006 from $2,947,126
in the prior year. This decrease is mostly comprised of a decrease
from $2,681,680 for the year ended December 31, 2005 to $539,812 for the year
ended December 31, 2006 for stock-based compensation costs recognized for
non-employee consultants. Further, these consulting fees include
$70,000 (2005 - $62,000) paid under our Technical Services Agreement with a
corporation wholly owned by Mr. Roy and other fees and expenses we incurred in
employing various technical and corporate consultants who advised us on a
variety of matters. Professional fees increased to $251,261 during
the year ended December 31, 2006 from $201,298 during the year ended December
31, 2005. Professional fees include those paid to our auditors for
pre-approved audit, accounting and tax services and fees paid to our legal
advisors primarily for services provided with regard to filing various periodic
reports and other documents and reviewing our various oil and gas and other
agreements. In addition, costs associated with initiating the
modeling, testing and documenting internal controls as required by Section 404
of the Sarbanes Oxley Act were incurred during the latter part of the
year. This resulted in an increase of $49,963 in the fees paid to our
auditors, accountants and legal counsel for additional work incurred during the
year ending December 2006 as compared to 2005.
During
the year ended December 31, 2006, depreciation decreased slightly to $49,323
from $49,531 during the year ended December 31, 2005.
3
Our other
expenses and income during the year ended December 31, 2006 resulted in income
of $1,746,813 versus $530,621 for the same period in 2005. Included
in other expenses and income is a foreign exchange loss of $4,737 compared to a
gain in 2005 of $319. During the previous year ended December 31,
2005, we recovered fees and costs of $25,900 resulting from services provided
and billed out to the GSPC and a gain on the sale of computer equipment of
$42,228. No such expense recoveries or asset dispositions occurred
during the year ended December 31, 2006. Our increase in interest
income to $1,751,550 from $462,174 for the year ended December 31, 2005 is a
result of the significant increase in the size of our cash balances we held
during a full year in 2006 as compared to a partial year in 2005 as well as an
increase in the US prime rate.
Net loss
for the year ended December 31, 2006 was $1,548,803 versus a net loss of
$3,162,660 in 2005. This result was mainly attributable to a
reduction in our consulting fees as a result of a reduction in our compensation
costs for the stock-based compensation arrangements with non-employee
consultants, coupled with an increase in interest earned during the most recent
year, net of our increased costs as a result of our increased scale of
participation in oil and gas exploration activities.
We
capitalized overhead costs directly related to our exploration activities in
India. During the year ended December 31, 2006, these capitalized
overhead costs were $2,791,520 as compared to $2,141,844 during the year ended
December 31, 2005. This increase is mostly attributable to the
capitalized stock-based compensation for employees of $658,404 recognized for
the first time in 2006, as a consequence of our adoption of FAS 123(R) effective
January 1, 2006, with the remaining increase being consistent with the increased
scale of our participation in oil and gas exploration activities.
Years
ended December 31, 2005 and 2004
During
the year ended December 31, 2005, we had expenses of $3,693,281 compared with
expenses of $1,216,094 during the year ended December 31, 2004. This
increase is primarily the result of the increased scale of our participation in
oil and gas exploration activities.
Our
general and administrative expenses increased to $495,326 from
$451,788. These general and administrative expenses include costs
related to the corporate head office including administrative salaries and
services, rent and office costs, insurance, American Stock Exchange listing and
filing fees and transfer agent fees and services. Our consulting fees
increased to $2,947,126 during the year ended December 31, 2005 from $541,617 in
the prior year. . The majority of this increase can be attributed to
an increase in the compensation costs recognized during the year of $2,681,680
for stock arrangements with non-employee consultants of the Company as compared
to $304,002 for the year ending December 31, 2004. Further, these
consulting fees reflect $62,000 (2004 - $50,000) paid under our Technical
Services Agreement ("TSA") with Roy Group (Barbados) Inc. ("RGB"), a corporation
wholly owned by Mr. Roy and other fees and expenses we incurred in employing
various technical and corporate consultants who advised us on a variety of
matters. Professional fees increased to $201,298 during the year
ended December 31, 2005 from $161,381 during the year ended December 31,
2004. Professional fees include those paid to our auditors for
pre-approved audit, accounting and tax services and fees paid to our legal
advisors primarily for services provided with regard to filing various periodic
reports and other documents and reviewing our various oil and gas and other
agreements. The increase is attributable to an approximately $40,000
increase in our fees paid to our auditors for additional work incurred during
the year ending December 2005 as compared to 2004.
During
the year ended December 31, 2005, depreciation decreased to $49,531 from $61,308
during the year ended December 31, 2004.
Our other
expenses and income during the year ended December 31, 2005 resulted in income
of $530,621 versus $44,596 for the same period in 2004. Included in
other expenses and income is a foreign exchange gain of $319 compared to a loss
in 2004 of $3,495. During the year ended December 31, 2005, we
recovered fees and costs of $25,900 (2004 - $16,500) resulting from services
provided and billed out to the GSPC. Other expenses and income
include a gain on the sale of computer equipment of $42,228 during the year
ended December 31, 2005. Our increase in interest income to $462,174
from $31,591 for the year ended December 31, 2004 is a result of the significant
increase in the size of our cash balances we held during the year as compared to
2004 as well as an increase in the US prime rate.
Reflecting
the increase in our consulting fees offset by the increase in our interest
income during the year ended December 31, 2005 as compared to the year ended
December 31, 2004, our net loss increased to $3,162,660 compared to a net loss
of $1,171,498 in 2004.
4
We
capitalized overhead costs directly related to our exploration activities in
India. During the year ended December 31, 2005, these capitalized
overhead costs were $2,141,844 as compared to $382,788 during the year ended
December 31, 2004. This increase is mostly attributed to an increase
in the capitalized compensation costs recognized during the year of $1,672,576
for stock-based compensation with non-employee consultants of the Company as
compared to $46,253 in the year ending December 31, 2004. The
remaining increase is consistent with the increased scale of our participation
in oil and gas exploration activities.
Liquidity and Capital
Resources
Years
ended December 31, 2006 and 2005
Our net
cash used in operating activities during the year ended December 31, 2006 was
$245,071 as compared to $165,558 for the year ended December 31,
2005. This increase is mostly the result of an increase in our
exploration activities net of our interest earned on our cash balances for the
year ended December 31, 2006 as compared to 2005.
Cash used
by investing activities during the year ended December 31, 2006 was $8,267,169
as compared to $1,679,352 during the year ended December 31,
2005. This increase is a result of the increased scale of our
participation in oil and gas exploration activities. Funds of
$6,739,386 were used for exploration activities and $142,924 for the acquisition
of property and equipment in 2006 as compared to $1,578,124 and $36,826 in
2005. These acquisitions included computer and office equipment
totaling $114,835 plus a deposit on our office condominium in India of
$28,090. As well we incurred $6,739,386 as our share of exploration
costs related to our PSCs for our oil and gas interests in India. The
increase in restricted cash of $3,198,284 represents additional term deposits we
made in 2006 as compared to $185,689 in 2005 which are used as collateral for
letters of credit given to the GOI as minimum work commitment guarantees on a
total of six exploration blocks at December 31, 2006.
Cash
provided by financing activities for the year ended December 31, 2006 was
$4,837,830 as compared to cash provided in financing activities of $33,462,700
during the year ended December 31, 2005. This consisted of
$4,922,640 from the issuance of 3,254,000 shares of common stock on the exercise
of options and purchase warrants issued from our 2003 financing less share
issuance costs of $74,010.
At
December 31, 2006, our cash and cash equivalents were $32,362,978 (December 31,
2005 - $36,037,388). The majority of these funds are currently held
as US funds in our bank accounts and in term deposits earning interest based on
the US prime rate.
Years
ended December 31, 2005 and 2004
Our net
cash used in operating activities during the year ended December 31, 2005 was
$165,558 as compared to $1,075,637 for the year ended December 31,
2004. This decrease is mostly as a result of our reduced net loss for
the year ended December 31, 2005 as compared to 2004.
Cash used
by investing activities during the year ended December 31, 2005 was $1,679,352
as compared to $748,222 during the year ended December 31, 2004. This
increase is a result of the increased scale of our participation in oil and gas
exploration activities. Funds of $1,615,000 were used for exploration
activities and the acquisition of property and equipment as compared to $547,357
in 2004. The property and equipment acquired included computer and
office equipment totaling $36,876 with the balance of $1,578,124 incurred as
exploration costs for our oil and gas interests in India. The
restricted cash of $185,689 represents additional term deposits we made in 2005
which are used as collateral for two letters of credit given to the GOI as a
minimum work commitment guarantee on the Cambay Blocks.
Cash
provided by financing activities for the year ended December 31, 2005 was
$33,462,700 as compared to cash used in financing activities of $786,450 during
the year ended December 31, 2004. As further described below, during
the year ended December 31, 2005, we completed the sale of 3,252,400 Units of
our securities at $6.50 per Unit, together with a concurrent sale of an
additional 1,000,000 Units on the same terms, for aggregate cash gross proceeds
of $27,640,600. This amount combined with cash of $7,352,985 which
was provided from the issuance of 3,494,400 shares of common stock on the
exercise of options, purchase warrants and broker warrants issued in our 2003
financing, less financing costs of $1,541,685 incurred in connection with the
2005 financing accounts for the increase in our cash and cash
equivalents. Cash provided by financing activities for the year ended
December 31, 2005 in the amount of $786,450 included the full repayment of
$1,000,000 of the note payable, net of $213,550 realized from the issuance of
154,100 shares of common stock on the exercise of options and broker
warrants.
5
The sale
of the 3,252,400 Units of securities was completed in September
2005. The securities were sold at $6.50 per Unit, together with a
concurrent sale of an additional 1,000,000 Units on the same terms, for
aggregate gross cash total proceeds of $27,640,600.
Each Unit
is comprised of one common share and one half of one warrant. One
full warrant ("2005 Purchase Warrant") entitles the holder to purchase one
additional common share for $9.00, for a term of two years expiring September
2007. The 2005 Purchase Warrants are subject to accelerated
expiration in the event that the price of the Company's common shares on the
American Stock Exchange is $12.00 or more for 20 consecutive trading days, the
resale of the shares included in the Units and issuable on exercise of the 2005
Purchase Warrants has been registered under the US Securities Act of 1933, as
amended (the “Act”), and the hold period for Canadian subscribers has
expired. In such events, the warrant term will be reduced to 30 days
from the date of issuance of a news release announcing such accelerated
expiration of the warrant term.
Costs of
$1,541,685 were incurred in issuing shares in these transactions which included
a fee of $1,268,436 paid to Jones Gable & Company Limited with respect to
the sale of the 3,252,400 Units, and, in addition, Compensation Options were
issued to Jones Gable & Company Limited entitling it to purchase an
additional 195,144 Units at an exercise price of $6.50 per Unit through their
expiration in September 2007. Compensation Options are also
subject to accelerated expiration on the same terms and conditions as the
warrants issued in the transaction.
At
December 31, 2005, our cash and cash equivalents were $36,037,388 (December 31,
2004 - $4,419,598). The majority of these funds are currently held as
US funds in our bank accounts and in term deposits earning interest based on the
US prime rate.
The
KG Offshore Block and Our Carried Interest Agreement
At
December 31, 2006, GSPC, the Operator of the KG Offshore Block, has expended on
exploration activities approximately $26.1 million attributable to us under the
CIA as compared to $14.1 million at December 31, 2005. Of this
amount, 50% is for the account of RGM. Under the terms of the CIA,
GeoGlobal and RGM are carried by GSPC for 100% of all our share of any costs
during the exploration phase on the KG Offshore Block prior to the start date of
initial commercial production.
Under the
terms of the PSC, GSPC is committed to expend further funds for the exploration
of and drilling on the KG Offshore Block. Preliminary estimates were
that these expenditures attributable to us will total approximately $22.0
million over the 6.5 year term of the PSC. Additional drilling costs
incurred in drilling to depths in excess of 5,000 meters versus shallower depths
as originally anticipated, as well as the testing and completion costs of these
wells, has resulted in our actual costs significantly exceeding our original
budgeted expenditures. The estimated annual budget for costs to be
incurred by GSPC for the twelve month period April 1, 2007 to March 31, 2008
attributable to us under the CIA is approximately $50.4 million. Of
this amount, 50% is for the account of RGM. We are unable to estimate
the amount of additional expenditures GSPC will make attributable to us prior to
the start date of initial commercial production under the CIA or when, if ever,
any commercial production will commence. As provided in the CIA, we
will be required to bear the expenditures attributable to us after the start
date of initial commercial production on the KG Offshore Block.
We will
not realize cash flow from the KG Offshore Block until such time as the
expenditures attributed to us, including those expenditures made for the account
of RGM under the CIA have been recovered by GSPC from future production
revenue. Under the terms of the CIA, all of our proportionate share
of capital costs for exploration and development activities must be repaid to
GSPC without interest over the projected production life or ten years, whichever
is less.
6
KG
Onshore Block Agreement
Under the
PSC for the KG Onshore Block, the Phase I work commitment consists of
reprocessing 564 LKM of 2-D seismic, conducting a gravity and magnetic and
geochemical survey, as well as a seismic acquisition program consisting of 548
sq km of 3-D seismic. This Phase I commitment further consists of the
drilling of 12 exploration wells to various depths between 2,000 and 5,000
meters. The Company will be required to fund its 10% proportionate
share of the costs incurred in these activities estimated to be approximately
US$8.5 million over the four years of the first phase of the work commitment
with respect to a 10%participating interest in the block and approximately
US$21.3 million with respect to a 25% participating interest in the
block.
Cambay
Block Agreements
We
originally committed to expend a minimum aggregate of approximately $2.5 million
for exploration activities under the terms of the PSCs on the Mehsana and
Sanand/Miroli Cambay Blocks over a period of 6 years. At December 31,
2006, we have incurred costs of approximately $1.0 million with respect to the
Mehsana Block and approximately $1.1 million with respect to the Sanand/Miroli
Block. We estimate that our expenditures for exploration activities
during the 2007 fiscal year will be approximately $2.3 million on the Mehsana
Block and approximately $2.6 million on the Sanand/Miroli Block based upon our
10% PI in these PSCs.
At
December 31, 2006, we have provided to the GOI three irrevocable letters of
credit totaling $2,216,445 (Mehsana US$711,445, Sanand/Miroli US$905,000 and
Ankleshwar US$600,000) (December 31, 2005 – $392,485) secured by our term
deposits in the same amount. These letters of credit serve as
guarantees for the performance of the minimum work commitments for the budget
period April 1, 2006 to March 31, 2007 of Phase I of these Cambay
Blocks.
As the
holder of a participating interest in the Tarapur Block, we are required to fund
a 20% share of all exploration and development costs incurred on the exploration
block. To December 31, 2006, we have incurred costs of approximately
$4.0 million under the terms of our agreement with GSPC. We
originally committed to expend an aggregate of approximately $1.2 million for
exploration activities under the terms of the agreement entered into covering
the Tarapur block over the period ending November 22, 2007. It is
expected however, that with the increase in GSPC’s current drilling activities,
we have increased our estimated expenditures to $2.7 million over the period
April 1 to November 22, 2007.
At
December 31, 2006, we provided to the GOI an irrevocable letter of credit in the
amount of US$1,200,000 for the Tarapur Block secured by a term deposit of the
Company in the same amount. This letter of credit serves as a
guarantee for the performance of the exploration work commitment for the Tarapur
Block for the budget period also ending March 31, 2007. Under the
terms of the agreement, the Company will be required to keep in force a
Financial and Performance Guarantee in an amount sufficient to secure its
performance under the Tarapur PSC.
Under the
terms of our PSC for the Ankleshwar Block, we have committed to expend
approximately $1.7 million for exploration activities over a period of seven
years. As at December 31, 2006, we have incurred costs of
approximately $400,000 on the Ankleshwar Block. We estimate our
expenditures for exploration activities during the period April 1, 2007 to March
31, 2008 will be approximately $2.7 million on Ankleshwar Block.
The
Deccan Syneclise Block Agreements
Under the
terms of the PSC for the DS 03 Block, we have committed to expend approximately
$9.6 million for exploration activities over a period of seven
years. As at December 31, 2006, we have incurred costs of
approximately $50,000 on this block. We estimate our expenditures for
exploration activities during the period April 1, 2007 to March 31, 2008 will be
approximately $400,000 based upon our PI in this PSC.
Under the
PSC for the DS 04 Block, the Phase I work commitment consists of conducting a
gravity and magnetic and geochemical survey, as well as a seismic acquisition
program consisting of 325 LKM of 2-D seismic. We further committed to
drill 10 core holes to a depth of approximately 500 meters. We will
be required to fund our 100% proportionate share of the costs incurred in these
activities estimated to be approximately US$1.2 million over the four years of
the first phase of the work commitment.
7
Rajasthan
Block Agreements
The
combined Phase I work commitments under the PSCs for RJ Block 20 and RJ Block 21
consist of reprocessing of a total 926 LKM of 2-D seismic, conducting a gravity
and magnetic and geochemical survey, as well as a seismic acquisition program
consisting of 560 LKM of 2-D seismic and 1,311 sq km of 3-D
seismic. The combined Phase I commitments further consist of drilling
a total of 20 exploration wells over both blocks to various depths between 2,000
and 2,500 meters. We will be required to fund our 25% proportionate
share of the costs incurred in these activities estimated to be approximately
US$18.3 million over the four years of the first phase of the work
commitments.
Plan
of Operations in 2007
We expect
our exploration and development activities pursuant to the PSCs we are parties
to will continue throughout 2007 in accordance with the terms of those
agreements. In addition, we may seek to participate in joint ventures
bidding for the award of further PSCs for exploration blocks expected to be
awarded by the GOI in the future. As of April 13, 2007, we have no
specific plans to join with others in bidding for any specific PSCs in
India. We expect that our interest in any such ventures would involve
a minority PI in the venture. In addition, as opportunities arise, we
may seek to acquire minority PI's in exploration blocks where PSCs have been
heretofore awarded by the GOI. The acquisition of any such interests
would be subject to the execution of a definitive agreement and obtaining the
requisite government consents and other approvals.
We may
during the year 2007 seek to participate in joint venture bidding for the
acquisition of oil and gas interests in other international
countries. As of April 13, 2007, we have not been awarded any such
interests.
Depending
upon the scope of our activities during the year 2007, we may require additional
capital for the possible acquisition of further minority PIs in PSCs in drilling
blocks heretofore awarded and that we may hereafter propose to enter into in
India and possibly elsewhere. We believe it can be expected that our
interest in such ventures would be a PI. As of April 13, 2007, the
scope of any possible such activities has not been definitively established and,
accordingly, we are unable to state the amount of any funds that may be required
for these purposes. As the holder of a PI in any such possible
activities, it can be expected that we will be required to contribute capital to
any such ventures in proportion to our percentage interest. No
specific plans or arrangements have been made to raise additional capital and we
have not entered into any agreements in that regard. We expect that
if we seek to raise additional capital it will be through the sale of equity
securities. As of April 13, 2007, we are unable to estimate the terms
on which any such capital may be raised, the price per share or possible number
of shares involved.
We
believe that our available cash resources will be sufficient to meet all our
expenses and cash requirements during the year ended December 31, 2007 for our
present level of operations. We do not expect to have any significant
change in 2007 in our number of employees.
Critical
Accounting Policies and Estimates
The
Company’s Significant Accounting Policies are outlined in Note 2 to our
Consolidated Financial Statements in Item 7 of this Annual Report. In
the ordinary course of business, we have made a number of estimates and
assumptions relating to the reporting of our consolidated financial position and
the consolidated results of our operations and our cash flows in conformity with
U.S. generally accepted accounting principles. Actual results could
differ significantly from those estimates under different assumptions and
conditions. We believe that the following discussion addresses our
most critical accounting policies.
Property
and equipment
The
Company follows the full cost method of accounting for its petroleum and natural
gas operations. Upon the commencement of economic production
quantities of petroleum and natural gas, depletion of our exploration costs in
India included in Property and Equipment, will be provided on a
country-by-country basis using the unit-of-production method based upon
estimated proven petroleum and natural gas reserves. The costs of
acquiring and evaluating our unproven properties in India will not be depleted
until it is determined whether or not proven reserves are attributable to the
properties, the major development projects are completed, or impairment
occurs. To date we are currently in the development stage and have
not yet found any commercial reserves in India. We are continuing
with our exploratory drilling programs in India and have no basis for impairment
of the costs incurred to date.
8
Recent
Accounting Standards
Accounting for Uncertainty
in Income Taxes
In June
2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes” (“FIN 48”), an interpretation of FASB Statement No. 109,
“Accounting for Income Taxes”. FIN 48 prescribes a recognition
threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax
return. The Interpretation requires that the Corporation recognize in
the financial statements, the impact of a tax position, if that position is more
likely than not of being sustained on audit, based on the technical merits of
the position. FIN 48 also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods and
disclosure. The provisions of FIN 48 are effective beginning January
1, 2007 with the cumulative effect of the change in accounting principle
recorded as an adjustment to the opening balance of deficit. The
Corporation is currently evaluating the impact FIN 48 will have on its
consolidated financial statements.
Fair Value
Measurements
In
September 2006, the FASB issued FAS No. 157, “Fair Value Measurements” (“FAS
157”), which defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurements. FAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years, and is
applicable beginning in the first quarter of 2008. The Company is currently
evaluating the impact that FAS 157 will have on its consolidated financial
statements.
The Fair Value Option for
Financial Assets and Financial Liabilities
In
February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities – Including an amendment of FASB Statement No.
115”, (“FAS 159”) which permits entities to choose to measure many financial
instruments and certain other items at fair value at specified election dates. A
business entity is required to report unrealized gains and losses on items for
which the fair value option has been elected in earnings at each subsequent
reporting date. This statement is expected to expand the use of fair value
measurement. FAS 159 is effective for financial statements issued for fiscal
years beginning after November 15, 2007, and interim periods within those fiscal
years, and is applicable beginning in the first quarter of 2008. The Company is
currently evaluating the impact that FAS 159 will have on its consolidated
financial statements.
Cautionary
Statement For Purposes Of The "Safe Harbor" Provisions Of The Private Securities
Litigation Reform Act Of 1995
With the
exception of historical matters, the matters discussed in this Report are
“forward-looking statements” as defined under the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, that involve risks
and uncertainties. Forward-looking statements made herein include,
but are not limited to:
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the
statements in this Report regarding our plans and objectives relating to
our future operations,
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plans
and objectives regarding the exploration, development and production
activities conducted on the exploration blocks in India in which we have
interests,
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plans
regarding drilling activities intended to be conducted through the
ventures in which we are a participant, the success of those drilling
activities and our ability and the ability of the ventures to complete any
wells on the exploration blocks, to develop reserves of hydrocarbons in
commercially marketable quantities, to establish facilities for the
collection, distribution and marketing of hydrocarbons, to produce oil and
natural gas in commercial quantities and to realize revenues from the
sales of those hydrocarbons,
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our
ability to maintain compliance with the terms and conditions of our PSCs,
including the related work commitments, to obtain consents, waivers and
extensions from the GOI as and when required, and our ability to fund
those work commitments,
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our
plans and objectives to join with others or to directly seek to enter into
or acquire interests in additional PSCs with the GOI and
others,
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our
assumptions, plans and expectations regarding our future capital
requirements,
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our
plans and intentions regarding our plans to raise additional
capital,
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the
costs and expenses to be incurred in conducting exploration, well
drilling, development and production activities and the adequacy of our
capital to meet our requirements for our present and anticipated levels of
activities are all forward-looking
statements.
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9
These
statements appear, among other places, under the captions "Management's
Discussion and Analysis or Plan of Operations" and "Risk Factors". If
our plans fail to materialize, your investment will be in jeopardy.
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We
cannot assure you that our assumptions or our business plans and
objectives discussed herein will prove to be accurate or be able to be
attained.
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We
cannot assure you that any commercially recoverable quantities of
hydrocarbon reserves will be discovered on the exploration blocks in which
we have an interest.
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Our
ability to realize revenues cannot be assured. Our ability to
successfully drill, test and complete producing wells cannot be
assured.
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We
cannot assure you that we will have available to us the capital required
to meet our plans and objectives at the times and in the amounts required
or we will have available to us the amounts we are required to fund under
the terms of the PSCs we are a party
to.
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We
cannot assure you that we will be successful in joining any further
ventures seeking to be granted PSCs by the GOI or that we will be
successful in acquiring interests in existing
ventures.
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We
cannot assure you that we will obtain all required consents, waivers and
extensions from the GOI as and when required to maintain compliance with
our PSCs and that we may not be adversely affected by any delays we may
experience in receiving those consents, waivers and
extensions.
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We
cannot assure you that the outcome of testing of one or more wells on the
exploration blocks under our PSCs will be satisfactory and result in a
commercially-productive wells or that any further wells drilled will have
commercially-successful results.
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Our
inability to meet our goals and objectives or the consequences to us from
adverse developments in general economic or capital market conditions, events
having international consequences, or military or terrorist activities could
have a material adverse effect on us. We caution you that various
risk factors accompany those forward-looking statements and are described, among
other places, under the caption "Risk Factors" herein. They are also
described in our Quarterly Reports on Form 10-QSB and 10-Q, and our Current
Reports on Form 8-K. These risk factors could cause our operating
results, financial condition and ability to fulfill our plans to differ
materially from those expressed in any forward-looking statements made in this
Report and could adversely affect our financial condition and our ability to
pursue our business strategy and plans.
Risk
Factors
An
investment in shares of our common stock involves a high degree of
risk. You should consider the following factors, in addition to the
other information contained in this Annual Report, in evaluating our business
and current and proposed activities before you purchase any shares of our common
stock. You should also see the "Cautionary Statement for Purposes of
the Safe Harbor Provisions of the Private Securities Litigation Reform Act of
1995" regarding risks and uncertainties relating to us and to forward-looking
statements in this Annual Report.
There can
be no assurance that the exploratory drilling to be conducted on the exploration
blocks in which we hold an interest will result in any discovery of reserves of
hydrocarbons or that any hydrocarbons that are discovered will be in
commercially recoverable quantities. In addition, the realization of
any revenues from commercially recoverable hydrocarbons is dependent upon the
ability to deliver, store and market any hydrocarbons that are
discovered. The presence of hydrocarbon reserves on contiguous
properties is no assurance or necessary indication that hydrocarbons will be
found in commercially marketable quantities on the exploration blocks in which
we hold an interest.
10
Risks
Relating to Our Oil and Gas Activities
Because We Are In the Early
Stage Of Developing Our Activities, There Are Considerable Risks That We Will Be
Unsuccessful
We are in
the early stage of developing our operations. Our only activities in
the oil and natural gas exploration and production industry have primarily
involved entering into ten PSCs with the GOI. We have realized no
revenues from our oil and natural gas exploration and development activities and
do not claim any proved reserves of oil or natural gas. As of April
13, 2007, a venture in which we have a net 5% carried interest has drilled and
abandoned two wells, has drilled, tested and cased three wells and is currently
drilling two wells. Two ventures that we have a 10% participating
interest have drilled and abandoned two wells, are in the testing phase of two
wells and have suspended one well. One venture that we have a 20% PI
has drilled eight wells of which three have been abandoned and five that are
either currently suspended or are being tested.
Our
current plans are to conduct the exploration and development activities on the
areas offshore and onshore India in accordance with the terms of the PSCs we are
a party to. There can be no assurance that the exploratory drilling
to be conducted on the exploration blocks in which we hold will result in any
discovery of hydrocarbons or that any hydrocarbons that are discovered will be
in commercially recoverable quantities. In addition, the realization
of any revenues from commercially recoverable hydrocarbons is dependent upon the
ability to deliver, store and market any hydrocarbons that are discovered and as
of April 13, 2007, there are no or limited facilities for the delivery and
storage of hydrocarbons on the areas covered by our PSCs. The
presence of hydrocarbon reserves on contiguous properties is no assurance or
necessary indication that hydrocarbons will be found in commercially marketable
quantities on the exploration blocks in which we hold an
interest. Our exploration opportunities are highly speculative and
should any of these opportunities not result in the discovery of commercial
quantities of oil and gas reserves, our investment in the venture could be
lost.
Our
business plans also include seeking to enter into additional joint ventures or
other arrangements to acquire interests in additional government created and
granted hydrocarbon exploration opportunities, primarily located onshore or in
the offshore waters of India and possibly elsewhere. Opportunities to
acquire interests in exploration opportunities will be dependent upon our
ability to identify, negotiate and enter into joint venture or other similar
arrangements with respect to specific exploration opportunities and upon our
ability to raise sufficient capital to fund our participation in those joint
ventures or other exploration activities. Our success will be
dependent upon the success of the exploration activities of the ventures in
which we acquire an interest and our ability to have adequate capital resources
available at the times required.
Our
Interest In The Production Sharing Contracts Involve Highly Speculative
Exploration Opportunities That Involve Material Risks That We Will Be
Unsuccessful
Our
interests in the exploration blocks should be considered to be highly
speculative exploration opportunities that involve material
risks. None of the exploration blocks in which we have an interest
have any proven reserves and are not producing any quantities of oil or natural
gas. Exploratory drilling activities are subject to many risks,
including the risk that no commercially productive reservoirs will be
encountered. There can be no assurance that wells drilled on any of
the exploration blocks in which we have an interest or by any venture in which
we may acquire an interest in the future will be productive or that we will
receive any return or recover all or any portion of our
investment. Drilling for oil and gas may involve unsuccessful or
unprofitable efforts, not only from dry wells, but from wells that are
productive but do not produce sufficient net revenues to return a profit after
drilling, operating and other costs. The cost of drilling, completing
and operating wells is often uncertain. Drilling operations may be curtailed,
delayed or cancelled as a result of numerous factors, many of which are beyond
the operator’s control, including economic conditions, mechanical problems,
extreme downhole pressures and temperatures, title problems, weather conditions,
compliance with governmental requirements and shortages or delays of equipment
and services. Drilling activities on the exploration blocks in which
we hold an interest may not be successful and, if unsuccessful, such failure may
have a material adverse effect on our future results of operations and financial
condition.
11
Possible Inability of
Contracting Parties to Fulfill Phase One of the Minimum Work Program for Certain
of Our PSCs
Our PSC
relating to the KG Offshore Block provides that by the end of the first phase of
the exploration phase the contracting parties shall have drilled at least
fourteen wells. The first phase of the exploration period relating to
the PSC for the KG Offshore Block has expired without the required minimum of at
least fourteen exploration wells being drilled during the first
phase. GSPC, as operator and on behalf of the contracting parties, is
engaged in seeking from the GOI its consent to an extension of the expiration
date of the first phase of the exploration period and is also seeking to proceed
to the second phase of the exploration period without relinquishing any of the
contract area at the end of the first phase. In connection with the process of
seeking these consents, on February 24, 2006, the management committee for the
KG Offshore Block, which includes members representing the GOI, recommended a
further extension of the first phase of twelve months to March 11,
2007. On February 9 2007, GSPC proposed to the Directorate General of
Hydrocarbons, a body under the Ministry of Petroleum & Natural Gas (“DGH”)
and to the GOI that the contracting parties proceed to the next exploration
phase (Phase II) upon completion of Phase I which was expiring on March 11,
2007. It was also requested, on behalf of the contracting parties, to
not relinquish any of the contract area at the end of Phase I. On
March 12, 2007 DGH noted the option of GSPC, on behalf of the contracting
parties, to enter phase two and advised that entry into phase two, effective
March 12, 2007, is subject to the following conditions: (1) Any decision by the
GOI on the substitution of the Work Program of Phase I will be binding on the
contracting parties; and (2) Any decision by the GOI on relinquishment of the
25% of original contract Area (ie. 462 sq. kms.) under the PSC would be binding
on the contracting parties. The extension of the first phase for the
18 months to March 11, 2007 would be deducted from the next succeeding
exploration phase. As such the second phase would have a term of one
year and expire March 11, 2008. As at April 13, 2007, five
exploratory wells have been drilled and one exploratory well, the KG#16 well, is
currently being drilled on the exploration block leaving eight exploration wells
to be drilled. A seventh well, the KG#28 is also being drilled on the
exploration block, but has been classified by the management committee as an
appraisal well for the purposes of the PSC and not as an exploration
well. Approval of the extension and the entering into the second
phase of exploration under the PSC without relinquishment of any portion of the
contract area from the GOI is currently outstanding. Unless this
approval is granted, the Company may be liable for the consequences of
non-fulfillment of the minimum work commitment in a given time frame under the
PSC. The PSC has provisions for termination of the PSC on account of
various reasons specified therein including material breach of the
contract. Termination rights can be exercised after giving ninety
days written notice. This failure to timely complete the minimum work
commitment, though the Company has been advised by GSPC there is no
precedence, may be
deemed by the GOI to be a failure to comply with the provisions of the contract
in a material particular.
The
termination of the PSC by the GOI would result
in the loss of the Company’s interest in the KG Offshore Block other than areas
determined to encompass "commercial discoveries". The PSC sets forth
procedures whereby the operator can obtain the review of the management
committee under the PSC as to whether a discovery on the exploration block
should be declared a commercial discovery under the PSC. Those
procedures have not been completed at present with respect to the discovery on
the KG Offshore Block and, accordingly, as of April 13, 2007, no areas on the KG
Offshore Block have been determined formally to encompass "commercial
discoveries" as that
term is defined under the PSC.
In the
event the PSC is terminated by the Government of India, or in the event the work
program is not fulfilled by the end of the relevant exploration phase, the PSC
provides that each party to the PSC is to pay to the GOI its participating
interest share of an amount which is equal to the amount that would be required
to complete the minimum work program for that phase. We are of the
view that GSPC, under the terms of our CIA, would be liable for our
participating interest share of the amount required to complete the minimum work
program for the phase.
The PSC
relating to the Mehsana Block expired without the required minimum of seven
wells having been drilled. In October, 2006 the management committee under the
PSC for the Mehsana Block approved a proposal to seek from the GOI an extension
of the first exploration phase for a six month period from November 21, 2006 to
May 20, 2007 and on April 6, 2007 the members of the operating committee under
the Mehsana Block operating agreement resolved to submit an application to the
GOI for extension for an additional six months to November 20, 2007 to complete
the minimum work program under Phase I. In seeking that extension,
the joint venture partners agreed to provide a 100% Bank Guarantee and a 10%
cash payment to be agreed upon based on pre-estimated liquidated damages for the
unfinished minimum work program as reasonably determined by
12
DGH,
which has not yet been determined. As well, the contractor would be
required to relinquish 25% of the block pursuant to the provisions of the
PSC. The period of extension will be set off against the term of the
Second Phase which would reduce Phase II to one year expiring November 20,
2008. Final consent to this extension is awaiting GOI
approval.
The PSC
relating to the Sanand/Miroli Block expired without the required minimum of
twelve wells having been drilled. On January 29, 2007 the management
committee under the PSC for the Sanand/Miroli Block approved a proposal to seek
from the GOI an extension of the first exploration phase for a six month period
from January 28, 2007 to July 28, 2007. Final consent to this
extension is awaiting GOI approval.
Because Our Activities Have
Only Recently Commenced And We Have No Operating History And Reserves Of Oil And
Gas, We Anticipate Future Losses; There Is No Assurance Of Our
Profitability
Our oil
and natural gas operations have been only recently established and we have very
limited operating history, oil and gas reserves or assets upon which an
evaluation of our business, our current business plans and our prospects can be
based. Our prospects must be considered in light of the risks,
expenses and problems frequently encountered by all companies in their early
stages of development and, in particular, those engaged in exploratory oil and
gas activities. Such risks include, without limitation:
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We
will experience failures to discover oil and gas in commercial
quantities;
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There
are uncertainties as to the costs to be incurred in our exploratory
drilling activities, cost overruns are possible and we may encounter
mechanical difficulties and failures in completing
wells;
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There
are uncertain costs inherent in drilling into unknown formations, such as
over-pressured zones, high temperatures and tools lost in the hole;
and
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We
may make changes in our drilling plans and locations as a result of prior
exploratory drilling.
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During
the exploration phase prior to the start date of initial commercial production,
we have a carried interest in the exploration activities on the KG Offshore
Block. Our interests in our other exploration blocks are
participating interests which require us to pay our proportionate share of
exploration, drilling and development expenses on these blocks substantially as
those expenses are incurred. Unexpected or additional costs can
affect the commercial viability of producing oil and gas from a well and will
affect the time when and amounts that we can expect to receive from any
production from a well. Because our carried costs of exploration and
drilling on the KG Offshore Block are to be repaid in full to the operator,
GSPC, before we are entitled to any share of production, additional exploration
and development expenses will reduce and delay any share of production and
revenues we will receive.
There can
be no assurance that the ventures in which we are a participant will be
successful in addressing these risks, and any failure to do so could have a
material adverse effect on our prospects for the future. Our
operations were recently established, and as such, we have no substantial
operating history to serve as the basis to predict our ability to further the
development of our business plan. Likewise, the outcome of our
exploratory drilling activities, as well as our quarterly and annual operating
results cannot be predicted. Consequently, we believe that period to period
comparisons of our exploration, development, drilling and operating results will
not necessarily be meaningful and should not be relied upon as an indication of
our stage of development or future prospects. Through April 13, 2007,
we abandoned two wells drilled on the KG Offshore Block, two wells on the
Mehsana Block and three wells on the Tarapur Block and it is likely that in some
future quarter our stage of development or operating or drilling results may
fall below our expectations or the expectations of securities analysts and
investors and that some of our drilling results will be unsuccessful and the
wells abandoned. In such event, the trading price of our common stock
may be materially and adversely affected.
13
We Expect to Have
Substantial Requirements For Additional Capital That May Be Unavailable To Us
Which Could Limit Our Ability To Participate In Our Existing and Additional
Ventures Or Pursue Other Opportunities. Our Available Capital is
Limited
In order
to participate under the terms of our PSCs as well as in further joint venture
arrangements leading to the possible grant of exploratory drilling
opportunities, we will be required to contribute or have available to us
material amounts of capital. Under the terms of our CIA relating to
the KG Offshore Block, after the start date of initial commercial production on
the KG Offshore Block, and under the terms of the nine other PSCs we are parties
to, we are required to bear our proportionate share of costs during the
exploration phases of those agreements. There can be no assurance
that our currently available capital will be sufficient for these purposes or
that any additional capital that is required will be available to us in the
amounts and at the times required. Such capital also may be required
to secure bonds in connection with the grant of exploration rights, to conduct
or participate in exploration activities or be engaged in drilling and
completion activities. We intend to seek the additional capital to
meet our requirements from equity and debt offerings of our
securities. Our ability to access additional capital will depend in
part on the success of the ventures in which we are a participant in locating
reserves of oil and gas and developing producing wells on the exploration
blocks, the results of our management in locating, negotiating and entering into
joint venture or other arrangements on terms considered acceptable, as well as
the status of the capital markets at the time such capital is
sought.
There can
be no assurance that capital will be available to us from any source or that, if
available, it will be at prices or on terms acceptable to us. Should
we be unable to access the capital markets or should sufficient capital not be
available, our activities could be delayed or reduced and, accordingly, any
future exploration opportunities, revenues and operating activities may be
adversely affected and could also result in our breach of the terms of a PSC
which could result in the loss of our rights under the contract.
As of
December 31, 2006, we had cash and cash equivalents of approximately $33.4
million. We currently expect that our available cash will be
sufficient to fund us through the budget periods ending March 31, 2008 and
through the balance of 2007 at our present level of operations on the ten
exploration blocks in which we are currently a participant including our newly
acquired NELP-VI exploration blocks. Although exploration activity budgets are
subject to ongoing review and revision, our present estimate of our commitments
of capital pursuant to the terms of our PSCs relating to our six exploration
blocks, excluding our newly acquired NELP-VI exploration blocks, totals
approximately $12.7 million during the period April 1, 2007 to March 31,
2008. We anticipate total expenditures on the four newly acquired
NELP-VI blocks for the first exploration phase which covers four years to be
approximately $28 million. Any further PSC's we may
seek to enter into or any expanded scope of our operations or other transactions
that we may enter into may require us to fund our participation or capital
expenditures with amounts of capital not currently available to
us. We may be unsuccessful in raising the capital necessary to meet
these capital requirements. There can be no assurance that we will be
able to raise the capital.
India’s Regulatory Regime
May Increase Our Risks And Expenses In Doing Business
All
phases of the oil and gas exploration, development and production activities in
which we are participating are regulated in varying degrees by the Indian
government, either directly or through one or more governmental
entities. The areas of government regulation include matters relating
to restrictions on production, price controls, export controls, income taxes,
expropriation of property, environmental protection and rig
safety. In addition, the award of a PSC is subject to GOI consent and
matters relating to the implementation and conduct of operations under the PSC
are subject, under certain circumstances, to GOI consent. As a
consequence, all future drilling and production programs and operations we
undertake or are undertaken by the ventures in which we participate in India
must be approved by the Indian government. Shifts in political
conditions in India could adversely affect our business in India and the ability
to obtain requisite government approvals in a timely fashion or at
all. We, and our joint venture participants, must maintain
satisfactory working relationships with the Indian government. This
regulatory environment and possible delays inherent in that environment may
increase the risks associated with our exploration and production activities and
increase our costs of doing business.
14
Our Control By Directors And
Executive Officers May Result In Those Persons Having Interests Divergent From
Our Other Stockholders
As of
April 13, 2007, our Directors and executive officers and their respective
affiliates, in the aggregate, beneficially hold 32,523,667 shares or
approximately 49.1% of our outstanding Common Stock. As a result,
these stockholders possess significant influence over us, giving them the
ability, among other things, to elect a majority of our Board of Directors and
approve significant corporate transactions. These persons will retain
significant control over our present and future activities and our other
stockholders and investors may be unable to meaningfully influence the course of
our actions. These persons may have interests regarding the future
activities and transactions in which we engage which may diverge from the
interests of our other stockholders. Such share ownership and control
may also have the effect of delaying or preventing a change in control of us,
impeding a merger, consolidation, takeover or other business combination
involving us, or discourage a potential acquiror from making a tender offer or
otherwise attempting to obtain control of us which could have a material adverse
effect on the market price of our Common Stock. Although management
has no intention of engaging in such activities, there is also a risk that the
existing management will be viewed as pursuing an agenda which is beneficial to
themselves at the expense of other stockholders.
Our
Reliance On A Limited Number Of Key Management Personnel Imposes Risks On Us
That We Will Have Insufficient Management Personnel Available If The Services Of
Any Of Them Are Unavailable
We are
dependent upon the services of our President and Chief Executive Officer, Jean
Paul Roy, and Executive Vice President and Chief Financial Officer, Allan J.
Kent. The loss of either of their services could have a material
adverse effect upon us. We currently do not have employment
agreements with either of such persons or key man life insurance. The
services of both Mr. Roy and Mr. Kent are provided pursuant to the terms of
agreements with corporations wholly-owned by each of them. At
present, Mr. Kent’s services are provided through an oral agreement with the
corporation he owns. Accordingly, these agreements do not contain any provisions
whereby Mr. Roy and Mr. Kent have direct contractual obligations to us to
provide services or refrain from other activities.
At
present, our future is substantially dependent upon the geological and
geophysical capabilities of Mr. Roy to locate oil and gas exploration
opportunities for us and the ventures in which we are a
participant. His inability to do the foregoing could materially
adversely affect our future activities. We entered into a three-year
TSA with RGB dated August 29, 2003, a company owed 100% by Mr. Roy, to perform
such geological and geophysical duties and exercise such powers related thereto
as we may from time to time assign to it. The expiration term of this
contract has subsequently been extended to December 31, 2007. We have
no agreement directly with Mr. Roy regarding his services to us.
Our
Success Is Largely Dependent On The Success Of The Operators Of The Ventures In
Which We Participate And Their Failure Or Inability To Properly Or Successfully
Operate The Oil And Gas Exploration, Development And Production Activities On An
Exploration Block, Could Materially Adversely Affect Us
At
present, our only oil and gas interests are our contractual rights under the
terms of the ten PSCs with the GOI that we have entered into. We are
not and will not be the operator of any of the exploration, drilling and
production activities conducted on our exploration blocks, with the exception of
the DS block in which we are the operator. Accordingly, the
realization of successes in the exploration of the blocks is substantially
dependent upon the success of the operators in exploring for and developing
reserves of oil and gas and their ability to market those reserves at prices
that will yield a return to us.
Under the
terms of our CIA for the KG Offshore Block, we have a carried interest in the
exploration activities conducted by the parties on the KG Offshore Block prior
to the start date of initial commercial production. However, under
the terms of that agreement, all of our proportionate share of capital costs for
exploration and development activities must be repaid without interest over the
projected production life or ten years, whichever is less. Our
proportionate share of these costs and expenses expected to be incurred over the
6.5 year term of the PSC for which our interest is carried was originally
estimated to be approximately $22.0 million. Additional drilling
costs including the drilling to depths in excess of 5,000 meters, where higher
downhole temperatures and pressures are encountered, versus shallower depths as
originally anticipated, as well as the testing and completion costs of these
wells, has resulted in additional costs exceeding originally estimated
expenditures. As a consequence of these additional drilling costs
incurred, as of April 13, 2007, the annual budget for the period April 1, 2007
to March 31, 2008 submitted to the Management Committee under the
PSC
15
for the
KG Offshore Block estimates that GSPC will expend approximately $50.4 million
attributed to us (including the amount attributable to RGM) under the CIA over
the period April 1, 2007 to March 31, 2008. Further additional
expenditures may be required for cost overruns and completions of commercially
successful wells. We are unable to estimate the amount of additional
expenditures GSPC will make as operator attributable to us prior to the start
date of initial commercial production under the CIA or when, if ever, any
commercial production will commence. Of these expenditures, 50% are
for the account of Roy Group (Mauritius) Inc. under the terms of the
Participating Interest Agreement between us and Roy Group (Mauritius)
Inc. We are not entitled to any share of production from the KG
Offshore Block until such time as the expenditures attributed to us, including
those expenditures made for the account of Roy Group (Mauritius) Inc., under the
CIA, have been recovered by GSPC from future production
revenue. Therefore, we are unable to estimate when we may commence to
receive distributions from any production of hydrocarbon reserves found on the
KG Offshore Block. As provided in the CIA, in addition to repaying
our proportionate share of capital costs incurred for which we were carried, we
will be required to bear our proportionate share of the expenditures
attributable to us after the start date of initial commercial production on the
KG Offshore Block.
Certain
Terms Of The Production Sharing Contracts May Create Additional Expenses And
Risks That Could Adversely Affect Our Revenues And
Profitability
The PSCs
contain certain terms that may affect the revenues of the joint venture
participants to the agreements and create additional risks for
us. These terms include, possibly among others, the
following:
|
·
|
The
venture participants are required to complete certain minimum work
programs during the two or three phases of the terms of the
PSCs. In the event the venture participants fail to fulfill any
of these minimum work programs, the parties to the venture must pay to the
GOI their proportionate share of the amount that would be required to
complete the minimum work program. Accordingly, we could be
called upon to pay our proportionate share of the estimated costs of any
incomplete work programs. At April 13, 2007, we have failed to
complete phase one work programs under three of our PSCs within the time
periods agreed. We have applied to the GOI for extensions of
these allotted time periods and are awaiting the GOI
response.
|
|
·
|
Until
such time as the GOI attains self sufficiency in the production of crude
oil and condensate and is able to meet its national demand, the parties to
the venture are required to sell in the Indian domestic market their
entitlement under the PSCs to crude oil and condensate produced from the
exploration blocks. In addition, the Indian domestic market has
the first call on natural gas produced from the exploration blocks and the
discovery and production of natural gas must be made in the context of the
government’s policy of utilization of natural gas and take into account
the objectives of the government to develop its resources in the most
efficient manner and promote conservation
measures. Accordingly, this provision could interfere with our
ability to realize the maximum price for our share of production of
hydrocarbons;
|
|
·
|
The
parties to each agreement that are not Indian companies, which includes
us, are required to negotiate technical assistance agreements with the GOI
or its nominee whereby such foreign company can render technical
assistance and make available commercially available technical information
of a proprietary nature for use in India by the government or its nominee,
subject, among other things, to confidentiality
restrictions. Although not intended, this could increase each
venture’s and our cost of operations;
and
|
|
·
|
The
parties to each venture are required to give preference, including the use
of tender procedures, to the purchase and use of goods manufactured,
produced or supplied in India provided that such goods are available on
equal or better terms than imported goods, and to employ Indian
subcontractors having the required skills insofar as their services are
available on comparable standards and at competitive prices and
terms. Although not intended, this could increase the ventures
and our cost of operations.
|
These
provisions of the PSCs, possibly among others, may increase our costs of
participating in the ventures and thereby affect our
profitability. Failure to fully comply with the terms of the PSCs
creates additional risks for us.
16
The Requirements of Section
404 of the Sarbanes-Oxley Act of 2002 Require That We Undertake an Evaluation of
Our Internal Controls That May Identify Internal Control
Weaknesses.
The
Sarbanes-Oxley Act of 2002 imposes new duties on us and our executives,
directors, attorneys and independent registered public accounting
firm. In order to comply with the Sarbanes-Oxley Act, we are
evaluating our internal controls systems to allow management to report on, and
our independent auditors to attest to, our internal controls. We have
initiated establishing the procedures for performing the system and process
evaluation and testing required in an effort to comply with the management
certification and auditor attestation requirements of Section 404 of the
Sarbanes-Oxley Act. We anticipate being able to fully implement the
requirements relating to reporting on internal controls and all other aspects of
Section 404 in a timely fashion. If we are not able to implement the
reporting requirements of Section 404 in a timely manner or with adequate
compliance, our management and/or our auditors may not be able to render the
required certification and/or attestation concerning the effectiveness of the
internal controls over financial reporting, we may be subject to investigation
and/or sanctions by regulatory authorities, such as the Securities and Exchange
Commission or American Stock Exchange, and our reputation may be
harmed. Any such action could adversely affect our financial results
and the market price of our common stock.
Oil And Gas Prices Fluctuate
Widely And Low Oil And Gas Prices Could Adversely Affect Our Financial
Results
There is
no assurance that there will be any market for oil or gas produced from the
exploration blocks in which we hold an interest and our ability to deliver the
production from any wells may be constrained by the absence of or limitations on
collector systems and pipelines. Future price fluctuations could have
a major impact on the future revenues from any oil and gas produced on these
exploration blocks and thereby our revenue, and materially affect the return
from and the financial viability of any reserves that are
claimed. Historically, oil and gas prices and markets have been
volatile, and they are likely to continue to be volatile in the
future. A significant decrease in oil and gas prices could have a
material adverse effect on our cash flow and profitability and would adversely
affect our financial condition and the results of our operations. In
addition, because world oil prices are quoted in and trade on the basis of U.S.
dollars, fluctuations in currency exchange rates that affect world oil prices
could also affect our revenues. Prices for oil and gas fluctuate in
response to relatively minor changes in the supply of and demand for oil and
gas, market uncertainty and a variety of additional factors that are beyond our
control, including:
|
·
|
political
conditions and civil unrest in oil producing regions, including the Middle
East and elsewhere;
|
|
·
|
the
domestic and foreign supply of oil and
gas;
|
|
·
|
quotas
imposed by the Organization of Petroleum Exporting Countries upon its
members;
|
|
·
|
the
level of consumer demand;
|
|
·
|
weather
conditions;
|
|
·
|
domestic
and foreign government regulations;
|
|
·
|
the
price and availability of alternative
fuels;
|
|
·
|
overall
economic conditions; and
|
|
·
|
international
political conditions.
|
In
addition, various factors may adversely affect the ability to market oil and gas
production from our exploration blocks, including:
|
·
|
the
capacity and availability of oil and gas gathering systems and
pipelines;
|
|
·
|
the
ability to produce oil and gas in commercial quantities and to enhance and
maintain production from existing wells and wells proposed to be
drilled;
|
|
·
|
the
proximity of future hydrocarbon discoveries to oil and gas transmission
facilities and processing equipment (as well as the capacity of such
facilities);
|
|
·
|
the
effect of governmental regulation of production and transportation
(including regulations relating to prices, taxes, royalties, land tenure,
allowable production, importing and exporting of oil and condensate and
matters associated with the protection of the
environment);
|
|
·
|
the
imposition of trade sanctions or embargoes by other
countries;
|
|
·
|
the
availability and frequency of delivery
vessels;
|
|
·
|
changes
in supply due to drilling by
others;
|
17
|
·
|
the
availability of drilling rigs and qualified personnel;
and
|
|
·
|
changes
in demand.
|
Our
Ability To Locate And Participate In Additional Exploration Opportunities And To
Manage Growth May Be Limited By Reason Of Our Limited History Of Operations And
The Limited Size Of Our Staff
While our
President and Executive Vice President have had extensive experience in the oil
and gas exploration business, we have been engaged in limited activities in the
oil and gas business over approximately the past three years and have a limited
history of activities upon which you may base your evaluation of our
performance. As a result of our brief operating history and limited
activities in oil and gas exploration activities, our success to date in
entering into ventures to acquire interests in exploration blocks may not be
indicative that we will be successful in entering into any further
ventures. There can be no assurance that we will be successful in
growing our oil and gas exploration and development activities.
Any
future significant growth in our oil and gas exploration and development
activities will place demands on our executive officers, and any increased scope
of our operations will present challenges to us due to our current limited
management resources. Our future performance will depend upon our
management and its ability to locate and negotiate opportunities to participate
in joint venture and other arrangements whereby we can participate in
exploration opportunities. There can be no assurance that we will be
successful in these efforts. Our inability to locate additional
opportunities, to hire additional management and other personnel or to enhance
our management systems could have a material adverse effect on our results of
operations.
Our Future Performance
Depends Upon Our Ability And The Ability Of The Ventures In Which We Participate
To Find Or Acquire Oil And Gas Reserves That Are Economically
Recoverable
Our
success in developing our oil and gas exploration and development activities
will be dependent upon establishing, through our participation with others in
joint ventures and other similar activities, reserves of oil and gas and
maintaining and possibly expanding the levels of those reserves. We
and the joint ventures in which we may participate may not be able to locate and
thereafter replace reserves from exploration and development activities at
acceptable costs. Lower prices of oil and gas may further limit the kinds of
reserves that can be developed at an acceptable cost. The business of
exploring for, developing or acquiring reserves is capital intensive. We may not
be able to make the necessary capital investment to enter into joint ventures or
similar arrangements to maintain or expand our oil and gas reserves if capital
is unavailable to us and the ventures in which we participate. In
addition, exploration and development activities involve numerous risks that may
result in dry holes, the failure to produce oil and gas in commercial
quantities, the inability to fully produce discovered reserves and the inability
to enhance production from existing wells.
We expect
that we will continually seek to identify and evaluate joint venture and other
exploration opportunities for our participation as a joint venture participant
or through some other arrangement. Our ability to enter into
additional exploration activities will be dependent to a large extent on our
ability to negotiate arrangements with others and with various governments and
governmental entities whereby we can be granted a participation in such
ventures. There can be no assurance that we will be able to locate
and negotiate such arrangements, have sufficient capital to meet the costs
involved in entering into such arrangements or that, once entered into, that
such exploration activities will be successful. Successful acquisition of
exploration opportunities can be expected to require, among other things,
accurate assessments of potential recoverable reserves, future oil and gas
prices, projected operating costs, potential environmental and other liabilities
and other factors. Such assessments are necessarily inexact, and as
estimates, their accuracy is inherently uncertain. We cannot assure
you that we will successfully consummate any further exploration opportunities
or joint venture or other arrangements leading to such
opportunities.
18
Estimating Reserves And
Future Net Revenues Involves Uncertainties And Oil And Gas Price Declines May
Lead To Impairment Of Oil And Gas Assets
Currently,
we do not claim any proved reserves of oil or natural gas. Any
reserve information that we may provide in the future will represent estimates
based on reports prepared by independent petroleum engineers, as well as
internally generated reports. Petroleum engineering is not an exact
science. Information relating to proved oil and gas reserves is based
upon engineering estimates derived after analysis of information we furnish or
furnished by the operator of the property. Estimates of economically
recoverable oil and gas reserves and of future net cash flows necessarily depend
upon a number of variable factors and assumptions, such as historical production
from the area compared with production from other producing areas, the assumed
effects of regulations by governmental agencies and assumptions concerning
future oil and gas prices, future operating costs, severance and excise taxes,
capital expenditures and workover and remedial costs, all of which may in fact
vary considerably from actual results. Oil and gas prices, which
fluctuate over time, may also affect proved reserve estimates. For
these reasons, estimates of the economically recoverable quantities of oil and
gas attributable to any particular group of properties, classifications of such
reserves based on risk of recovery and estimates of the future net cash flows
expected therefrom prepared by different engineers or by the same engineers at
different times may vary substantially. Actual production, revenues
and expenditures with respect to reserves we may claim will likely vary from
estimates, and such variances may be material. Either inaccuracies in
estimates of proved undeveloped reserves or the inability to fund development
could result in substantially reduced reserves. In addition, the
timing of receipt of estimated future net revenues from proved undeveloped
reserves will be dependent upon the timing and implementation of drilling and
development activities estimated by us for purposes of the reserve
report.
Quantities
of proved reserves are estimated based on economic conditions in existence in
the period of assessment. Lower oil and gas prices may have the impact of
shortening the economic lives on certain fields because it becomes uneconomic to
produce all recoverable reserves on such fields, thus reducing proved property
reserve estimates. If such revisions in the estimated quantities of proved
reserves occur, it will have the effect of increasing the rates of depreciation,
depletion and amortization on the affected properties, which would decrease
earnings or result in losses through higher depreciation, depletion and
amortization expense. The revisions may also be sufficient to trigger impairment
losses on certain properties that would result in a further non-cash charge to
earnings.
Risks
Relating To The Market For Our Common Stock
Volatility Of Our Stock
Price
The
public market for our common stock has been characterized by significant price
and volume fluctuations. There can be no assurance that the market
price of our common stock will not decline below its current or historic price
ranges. The market price may bear no relationship to the prospects, stage of
development, existence of oil and gas reserves, revenues, earnings, assets or
potential of our company and may not be indicative of our future business
performance. The trading price of our common stock could be subject to wide
fluctuations. Fluctuations in the price of oil and gas and related
international political events can be expected to affect the price of our common
stock. In addition, the stock market in general has experienced
extreme price and volume fluctuations that have affected the market price for
many companies which fluctuations have been unrelated to the operating
performance of these companies. These market fluctuations, as well as general
economic, political and market conditions, may have a material adverse effect on
the market price of our company's common stock. In the past, following periods
of volatility in the market price of a company's securities, securities class
action litigation has often been instituted against such companies. Such
litigation, if instituted, and irrespective of the outcome of such litigation,
could result in substantial costs and a diversion of management's attention and
resources and have a material adverse effect on our company's business, results
of operations and financial condition.
Our
Financial Statements are included in a separate section of this
report. See page F-1.
19
Under the
supervision and with the participation of our management, including Jean Paul
Roy, our President and Chief Executive Officer, and Allan J. Kent, our Executive
Vice President and Chief Financial Officer, we have evaluated the effectiveness
of the design and operation of our disclosure controls and procedures within 90
days of the filing date of this annual report, and, based on their evaluation,
Mr. Roy and Mr. Kent have concluded that these controls and procedures are
effective. There were no significant changes in our internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their evaluation.
Disclosure
controls and procedures are our controls and other procedures that are designed
to ensure that information required to be disclosed by us in the reports that we
file or submit under the Exchange Act are recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is accumulated and communicated to our management,
including Mr. Roy and Mr. Kent, as appropriate to allow timely decisions
regarding required disclosure.
Based on
the restatement of the financial statements for the year ended December 31, 2006
due to an error in the classification and calculation for stock-based
compensation for non-employee consultants, the Chief Executive Officer and the
Chief Financial Officer have concluded that the Company's disclosure controls
and procedures were not effective as of December 31, 2006.
|
Exhibit
|
Description
|
|
3.1
|
Certificate
of Incorporation of the Registrant, as amended.
(1)
|
|
3.2
|
Bylaws
of the Registrant, as amended. (4)
|
|
3.3
|
Certificate
of Amendment filed with the State of Delaware on November 25, 1998. (2)
|
|
3.4
|
Certificate
of Amendment filed with the State of Delaware on December 4, 1998. (2)
|
|
3.5
|
Certificate
of Amendment filed with the State of Delaware on March 18, 2003. (5)
|
|
3.6
|
Certificate
of Amendment filed with the State of Delaware on January 8, 2004. (5)
|
|
4.1
|
Specimen
stock certificate of the Registrant. (5)
|
|
10.1
|
Restated
1993 Stock Incentive Plan. (1)
|
|
10.2
|
1994
Directors Stock Option Plan. (1)
|
|
10.3
|
1994
Stock Option Plan. (1)
|
|
10.4
|
1993
Stock Incentive Plan. (1)
|
|
10.5
|
1998
Stock Incentive Plan. (2)
|
|
10.6
|
Stock
Purchase Agreement dated April 4, 2003 by and among Suite101.com, Inc.,
Jean Paul Roy and GeoGlobal Resources (India) Inc. (3)
|
|
10.7
|
Amendment
dated August 29, 2003 to Stock Purchase Agreement dated April 4, 2003.
(4)
|
|
10.8
|
Technical
Services Agreement dated August 29, 2003 between Suite101.com, Inc. and
Roy Group (Barbados) Inc. (4)
|
|
10.8.1
|
Amendment
to Technical Services Agreement dated January 31, 2006 between GeoGlobal
Resources Inc. and Roy Group (Barbados) Inc. (8)
|
|
10.9
|
Participating
Interest Agreement dated March 27, 2003 between GeoGlobal Resources
(India) Inc. and Roy Group (Mauritius) Inc. (4)
|
|
10.10
|
Escrow
Agreement dated August 29, 2003 among Registrant, Jean Paul Roy and
Computershare Trust Company of Canada. (4)
|
|
10.11
|
Promissory
Note dated August 29, 2003 payable to Jean Paul Roy. (4)
|
|
10.12
|
Production
Sharing Contract dated February 4, 2003, among The Government of India,
Gujarat State Petroleum Corporation Limited, Jubilant Enpro Limited and
GeoGlobal Resources (India) Inc. (6)
|
20
|
10.13
|
Production
Sharing Contract dated February 6, 2004 among The Government of India,
Gujarat State Petroleum Corporation Limited, Jubilant Enpro Private
Limited and GeoGlobal Resources (Barbados) Inc. (6)
|
|
10.14
|
Production
Sharing Contract dated February 6, 2004 among The Government of India,
Gujarat State Petroleum Corporation Limited, Jubilant Enpro Private
Limited, Prize Petroleum Company Limited and GeoGlobal Resources
(Barbados) Inc. (6)
|
|
10.15
|
Carried
Interest Agreement dated August 27, 2002 between Gujarat State Petroleum
Corporation Limited and GeoGlobal Resources (India) Inc. (5)
|
|
10.16
|
Agency
Agreement dated September 9, 2005 between the Company and Jones, Gable
& Company Limited.
(7)
|
|
10.17
|
Form
of Subscription Agreement entered into by subscribers relating to offers
and sales of Units by Jones, Gable & Company Limited.
(7)
|
|
Form
of Subscription Agreement with respect to sales of an aggregate of
1,000,000 of the Units.
(7)
|
|
|
10.18
|
Registration
Rights Agreement dated September 9, 2005 between the Company and
Jones, Gable & Company Limited.
(7)
|
|
10.19
|
Production
Sharing Contract dated September 23, 2005, between the Government of
India and GeoGlobal Resources (Barbados) Inc.
(7)
|
|
10.20
|
Production
Sharing Contract dated September 23, 2005, between the Government of
India, Gujarat State Petroleum Corporation Limited, GAIL (India) Ltd.,
Jubilant Capital Pvt. Ltd. and GeoGlobal Resources (Barbados) Inc.
(7)
|
|
10.21
|
Production
Sharing Contract dated March 2, 2007, between the Government of India, Oil
India Limited and GeoGlobal Resources (Barbados) Inc.
(9)
|
|
10.22
|
Production
Sharing Contract dated March 2, 2007, between the Government of India, Oil
India Limited and GeoGlobal Resources (Barbados) Inc.
(9)
|
|
10.23
|
Production
Sharing Contract dated March 2, 2007, between the Government of India, Oil
India Limited, Hindustan Petroleum Corpn. Ltd. and GeoGlobal Resources
(Barbados) Inc.
(9)
|
|
10.24
|
Production
Sharing Contract dated March 2, 2007, between the Government of India and
GeoGlobal Resources (Barbados) Inc.
(9)
|
|
14
|
Code
of Ethics. (5)
|
|
21
|
Subsidiaries
of the Registrant:
|
|
|
Name
|
State
or Jurisdiction of Incorporation
|
|
|
GeoGlobal
Resources (India) Inc.
|
Barbados
|
|
|
GeoGlobal
Resources (Canada) Inc.
|
Alberta
|
|
|
GeoGlobal
Resources (Barbados) Inc.
|
Barbados
|
|
|
23
|
Consent
of experts and counsel:
|
|
|
(1)
|
Filed
as an Exhibit to Neuro Navigational Corporation Form 10-KSB No. 0-25136
dated September 30, 1994.
|
|
(2)
|
Filed
as an Exhibit to our Current Report on Form 8-K dated December 10,
1998.
|
|
(3)
|
Filed
as exhibit 10.1 to our Quarterly Report on Form 10-QSB for the quarter
ended March 31, 2003.
|
|
(4)
|
Filed
as an exhibit to our Current Report on Form 8-K for August 29,
2003.
|
|
(5)
|
Filed
as an Exhibit to our Form 10-KSB dated April 1,
2004.
|
|
(6)
|
Filed
as an Exhibit to our Form 10-KSB/A dated April 28,
2004.
|
|
(7)
|
Filed
as an Exhibit to our Quarterly Report on Form 10-QSB for the quarter ended
September 30, 2005.
|
|
(8)
|
Filed
as an Exhibit to our Current Report on Form 8-K dated January 31,
2006.
|
|
(9)
|
To
be filed as an Exhibit to our Quarterly Report on Form 10Q for the quarter
ending March 31, 2007.
|
|
|
(10)
Filed herewith.
|
21
GEOGLOBAL
RESOURCES INC.
(a
development stage enterprise)
CONSOLIDATED
FINANCIAL STATEMENTS
F-1
CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER
31, 2006 AND DECEMBER 31, 2005
(in
United States dollars)
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Index
to Consolidated Financial Statements
December
31, 2006 and December 31, 2005
|
Report
of Independent Registered Public Accounting Firm
|
F-3
|
||
|
Financial
Statements
|
|||
|
F-4
|
|||
|
F-5
|
|||
|
F-6
|
|||
|
F-7
|
|||
|
F-8
to F-36
|
|||
F-2
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Board of Directors and Stockholders Of
GeoGlobal
Resources Inc.
We have
audited the accompanying restated consolidated balance sheets of GeoGlobal
Resources Inc., a development stage enterprise, as of December 31, 2006 and 2005
and the related consolidated statements of operations, stockholders' equity and
cash flows for the years ended December 31, 2006, 2005 and 2004, and for the
cumulative period from inception on August 21, 2002 to December 31, 2006. These
financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Company's internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the restated consolidated financial position of GeoGlobal
Resources Inc. as at December 31, 2006 and 2005 and the consolidated results of
its operations and its cash flows for the years ended December 31, 2006, 2005,
and 2004, and for the cumulative period from inception on August 21, 2002 to
December 31, 2006 in conformity with United States generally accepted accounting
principles.
As
explained in note 6(c), the consolidated balance sheets as at December 31, 2006,
2005 and 2004 and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended December 31, 2006, 2005,
and 2004 and for the cumulative period from inception on August 21,
2002 to December 31, 2006 have been restated.
"Ernst & Young LLP"
(signed)
CALGARY,
ALBERTA CHARTERED
ACCOUNTANTS
March 23,
2007 except for Note 6(c),
which is
as of June 5, 2008
F-3
|
GEOGLOBAL
RESOURCES INC.
(a
development stage enterprise)
|
||||||||
|
December
31, 2006
US
$
|
December
31, 2005
US
$
|
|||||||
|
Restated
note
6c
|
Restated
note
6c
|
|||||||
|
Assets
|
||||||||
|
Current
|
||||||||
|
Cash
and cash equivalents (note 2i)
|
32,362,978 | 36,037,388 | ||||||
|
Accounts
receivable
|
202,821 | 139,035 | ||||||
|
Prepaids
and deposits
|
31,232 | 5,718 | ||||||
|
Cash
call receivable
|
-- | 49,947 | ||||||
| 32,597,031 | 36,232,088 | |||||||
|
Restricted
cash (note11a)
|
3,590,769 | 392,485 | ||||||
|
Property
and equipment (note 3)
|
183,427 | 89,826 | ||||||
|
Oil
and gas interests, not subject to depletion (note 4)
|
12,121,334 | 3,957,723 | ||||||
| 48,492,561 | 40,672,122 | |||||||
|
Liabilities
|
||||||||
|
Current
|
||||||||
|
Accounts
payable
|
1,888,103 | 159,145 | ||||||
|
Accrued
liabilities
|
33,487 | 43,500 | ||||||
|
Due
to related companies (notes 8c, 8d and 8e)
|
33,605 | 244,452 | ||||||
| 1,955,195 | 447,097 | |||||||
|
Stockholders'
Equity (note 5)
|
||||||||
|
Capital
stock
|
||||||||
|
Authorized
|
||||||||
|
100,000,000
common shares with a par value of US$0.001 each
|
||||||||
|
1,000,000
preferred shares with a par value of US$0.01 each
|
||||||||
|
Issued
|
||||||||
|
66,208,255
common shares (December 31, 2005 – 62,954,255)
|
51,617 | 48,361 | ||||||
|
Additional
paid-in capital
|
52,900,900 | 45,043,012 | ||||||
|
Deficit
accumulated during the development stage
|
(6,415,151 | ) | (4,866,348 | ) | ||||
| 46,537,366 | 40,225,025 | |||||||
| 48,492,561 | 40,672,122 | |||||||
|
See
Commitments, Contingencies and Guarantees (note 11)
The
accompanying notes are an integral part of these Consolidated Financial
Statements
|
||||||||
F-4
|
GEOGLOBAL
RESOURCES INC.
(a
development stage enterprise)
|
||||||||||||||||
|
Year
ended
Dec
31, 2006
US
$
|
Year
ended
Dec
31, 2005
US
$
|
Year
ended
Dec
31, 2004
US
$
|
Period
from
Inception,
Aug
21, 2002
to
Dec 31, 2006
US
$
|
|||||||||||||
|
Restated
note
6c
|
Restated
note
6c
|
Restated
note
6c
|
Restated
note
6c
|
|||||||||||||
|
Expenses
(notes 8c, 8d, 8e and 6b)
|
||||||||||||||||
|
General
and administrative
|
1,890,926 | 495,326 | 451,788 | 2,995,642 | ||||||||||||
|
Consulting
fees
|
1,104,106 | 2,947,126 | 541,617 | 4,803,802 | ||||||||||||
|
Professional
fees
|
251,261 | 201,298 | 161,381 | 752,676 | ||||||||||||
|
Depreciation
|
49,323 | 49,531 | 61,308 | 211,310 | ||||||||||||
| 3,295,616 | 3,693,281 | 1,216,094 | 8,763,430 | |||||||||||||
|
Other
expenses (income)
|
||||||||||||||||
|
Consulting
fees recovered
|
-- | (12,950 | ) | (14,300 | ) | (66,025 | ) | |||||||||
|
Equipment
costs recovered
|
-- | (12,950 | ) | (2,200 | ) | (19,395 | ) | |||||||||
|
Gain
on sale of equipment
|
-- | (42,228 | ) | -- | (42,228 | ) | ||||||||||
|
Foreign
exchange (gain) loss
|
4,737 | (319 | ) | 3,495 | 26,547 | |||||||||||
|
Interest
income
|
(1,751,550 | ) | (462,174 | ) | (31,591 | ) | (2,247,178 | ) | ||||||||
| (1,746,813 | ) | (530,621 | ) | (44,596 | ) | (2,348,279 | ) | |||||||||
|
Net
loss and comprehensive loss for
the
period (note 9)
|
(1,548,803 | ) | (3,162,660 | ) | (1,171,498 | ) | (6,415,151 | ) | ||||||||
|
Net
loss per share
–
basic and diluted (note 5f)
|
(0.03 | ) | (0.06 | ) | (0.03 | ) | ||||||||||
The accompanying notes are an integral
part of these Consolidated Financial Statements
F-5
|
GEOGLOBAL
RESOURCES INC.
(a
development stage enterprise)
|
||||||||||||||||
|
Capital Stock
US
$
|
Additional
paid-in
capital
US
$
|
Accumulated
Deficit
US
$
|
Stockholders'
Equity
US
$
|
|||||||||||||
|
Restated
note
6c
|
Restated
note
6c
|
Restated
note
6c
|
||||||||||||||
|
Common
shares issued on incorporation on Aug 21, 2002
|
64 | -- | -- | 64 | ||||||||||||
|
Net
loss and comprehensive loss for the period
|
-- | -- | (13,813 | ) | (13,813 | ) | ||||||||||
|
Balance
at December 31, 2002
|
64 | -- | (13,813 | ) | (13,749 | ) | ||||||||||
|
Common
shares issued during the year
|
||||||||||||||||
|
On
acquisition (note 7)
|
34,000 | 1,072,960 | -- | 1,106,960 | ||||||||||||
|
Options
exercised for cash
|
397 | 101,253 | -- | 101,650 | ||||||||||||
|
December
2003 private placement financing (note 5c)
|
6,000 | 5,994,000 | -- | 6,000,000 | ||||||||||||
|
Share
issuance costs on private placement
|
-- | (550,175 | ) | -- | (550,175 | ) | ||||||||||
|
Stock-based
compensation
|
-- | 62,913 | -- | 62,913 | ||||||||||||
|
Net
loss and comprehensive loss for the year
|
-- | -- | (518,377 | ) | (518,377 | ) | ||||||||||
|
Balance
at December 31, 2003
|
40,461 | 6,680,951 | (532,190 | ) | 6,189,222 | |||||||||||
|
Common
shares issued during the year
|
||||||||||||||||
|
Options
exercised for cash
|
115 | 154,785 | -- | 154,900 | ||||||||||||
|
Broker
Warrants exercised for cash (note 5c)
|
39 | 58,611 | -- | 58,650 | ||||||||||||
|
Stock-based
compensation
|
-- | 350,255 | -- | 350,255 | ||||||||||||
|
Net
loss and comprehensive loss for the year
|
-- | -- | (1,171,498 | ) | (1,171,498 | ) | ||||||||||
|
Balance
at December 31, 2004
|
40,615 | 7,244,602 | (1,703,688 | ) | 5,581,529 | |||||||||||
|
Common
shares issued during the year
|
||||||||||||||||
|
Options
exercised for cash (note 5e(i))
|
739 | 1,004,647 | -- | 1,005,386 | ||||||||||||
|
2003
Purchase Warrants exercised for cash (note 5d(i))
|
2,214 | 5,534,036 | -- | 5,536,250 | ||||||||||||
|
Broker
Warrants exercised for cash (note 5c)
|
541 | 810,809 | -- | 811,350 | ||||||||||||
|
September
2005 private placement financing (note 5b)
|
4,252 | 27,636,348 | -- | 27,640,600 | ||||||||||||
|
Share
issuance costs on private placement (note 5b)
|
-- | (1,541,686 | ) | -- | (1,541,686 | ) | ||||||||||
|
Stock-based
compensation
|
-- | 4,354,256 | -- | 4,354,256 | ||||||||||||
|
Net
loss and comprehensive loss for the year
|
-- | -- | (3,162,660 | ) | (3,162,660 | ) | ||||||||||
|
Balance
at December 31, 2005
|
48,361 | 45,043,012 | (4,866,348 | ) | 40,225,025 | |||||||||||
|
Common
shares issued during the year
|
||||||||||||||||
|
Options
exercised for cash (note 5e(i))
|
2,285 | 2,706,895 | -- | 2,709,180 | ||||||||||||
|
Options
exercised for notes receivable (note 6f)
|
185 | 249,525 | -- | 249,710 | ||||||||||||
|
2003
Purchase Warrants exercised for cash (note 5d(i))
|
786 | 1,962,964 | -- | 1,963,750 | ||||||||||||
|
Share
issuance costs
|
-- | (74,010 | ) | -- | (74,010 | ) | ||||||||||
|
Stock-based
compensation (note 6b)
|
-- | 3,012,514 | -- | 3,012,514 | ||||||||||||
|
Net
loss and comprehensive loss for the year
|
-- | -- | (1,548,803 | ) | (1,548,803 | ) | ||||||||||
|
Balance
at December 31, 2006
|
51,617 | 52,900,900 | (6,415,151 | ) | 46,537,366 | |||||||||||
|
See
note 5 for further information
The
accompanying notes are an integral part of these Consolidated Financial
Statements
|
||||||||||||||||
F-6
|
GEOGLOBAL
RESOURCES INC.
(a
development stage enterprise)
|
||||||||||||||||
|
Year
ended
Dec
31, 2006
US
$
|
Year
ended
Dec
31, 2005
US
$
|
Year
ended
Dec
31, 2004
US
$
|
Period
from
Inception,
Aug
21, 2002
to
Dec 31, 2006
US
$
|
|||||||||||||
|
Restated
note
6c
|
Restated
note
6c
|
Restated
note
6c
|
Restated
note
6c
|
|||||||||||||
|
Cash
flows provided by (used in) operating activities:
|
||||||||||||||||
|
Net
loss
|
(1,548,803 | ) | (3,162,660 | ) | (1,171,498 | ) | (6,415,151 | ) | ||||||||
|
Adjustments
to reconcile net loss to
net
cash used in operating activities:
|
||||||||||||||||
|
Depreciation
|
49,323 | 49,531 | 61,308 | 211,310 | ||||||||||||
|
Gain
on sale of equipment
|
-- | (42,228 | ) | -- | (42,228 | ) | ||||||||||
|
Stock-based
compensation (note 6b)
|
1,588,289 | 2,681,680 | 304,002 | 4,614,653 | ||||||||||||
|
Changes
in operating assets and liabilities:
|
||||||||||||||||
|
Accounts
receivable
|
(63,786 | ) | 42,202 | (99,750 | ) | (127,821 | ) | |||||||||
|
Prepaids
and deposits
|
(25,514 | ) | (5,718 | ) | -- | (31,232 | ) | |||||||||
|
Accounts
payable
|
(23,720 | ) | 24,307 | (147,060 | ) | 34,651 | ||||||||||
|
Accrued
liabilities
|
(10,013 | ) | 22,500 | 4,600 | 33,487 | |||||||||||
|
Due
to related companies
|
(210,847 | ) | 224,828 | (27,239 | ) | (8,151 | ) | |||||||||
| (245,071 | ) | (165,558 | ) | (1,075,637 | ) | (1,730,482 | ) | |||||||||
|
Cash
flows provided by (used in) investing activities:
|
||||||||||||||||
|
Oil
and gas interests
|
(6,739,386 | ) | (1,578,124 | ) | (460,016 | ) | (8,956,049 | ) | ||||||||
|
Property
and equipment
|
(142,924 | ) | (36,876 | ) | (87,341 | ) | (435,309 | ) | ||||||||
|
Proceeds
on sale of equipment
|
-- | 82,800 | -- | 82,800 | ||||||||||||
|
Cash
acquired on acquisition (note 7)
|
-- | -- | -- | 3,034,666 | ||||||||||||
|
Restricted
cash (note 11a)
|
(3,198,284 | ) | (185,689 | ) | (206,796 | ) | (3,590,769 | ) | ||||||||
|
Changes
in investing assets and liabilities:
|
||||||||||||||||
|
Cash
call receivable
|
49,947 | (22,436 | ) | (27,511 | ) | -- | ||||||||||
|
Accounts
payable
|
1,763,478 | 94,415 | -- | 1,804,444 | ||||||||||||
|
Accrued
liabilities
|
-- | (33,442 | ) | 33,442 | -- | |||||||||||
| (8,267,169 | ) | (1,679,352 | ) | (748,222 | ) | (8,060,217 | ) | |||||||||
|
Cash
flows provided by (used in) financing activities:
|
||||||||||||||||
|
Proceeds
from issuance of common shares
|
4,922,640 | 34,993,586 | 213,550 | 46,231,490 | ||||||||||||
|
Share
issuance costs
|
(74,010 | ) | (1,541,686 | ) | -- | (2,165,871 | ) | |||||||||
|
Changes
in financing liabilities:
|
||||||||||||||||
|
Note
payable (note 8a)
|
-- | -- | (1,000,000 | ) | (2,000,000 | ) | ||||||||||
|
Accounts
payable
|
(10,800 | ) | 10,800 | -- | 61,078 | |||||||||||
|
Due
to shareholder
|
-- | -- | -- | -- | ||||||||||||
|
Due
to related companies
|
-- | -- | -- | 26,980 | ||||||||||||
| 4,837,830 | 33,462,700 | (786,450 | ) | 42,153,677 | ||||||||||||
|
Net
increase (decrease) in cash and cash equivalents
|
(3,674,410 | ) | 31,617,790 | (2,610,309 | ) | 32,362,978 | ||||||||||
|
Cash
and cash equivalents, beginning of period
|
36,037,388 | 4,419,598 | 7,029,907 | -- | ||||||||||||
|
Cash
and cash equivalents, end of period
|
32,362,978 | 36,037,388 | 4,419,598 | 32,362,978 | ||||||||||||
|
Cash
and cash equivalents
|
||||||||||||||||
|
Current
bank accounts
|
316,329 | 127,803 | 90,670 | 316,329 | ||||||||||||
|
Term
deposits
|
32,046,649 | 35,909,585 | 4,328,928 | 32,046,649 | ||||||||||||
| 32,362,978 | 36,037,388 | 4,419,598 | 32,362,978 | |||||||||||||
|
Cash
taxes paid during the period
|
17,775 | 15,500 | 2,750 | 39,463 | ||||||||||||
|
The
accompanying notes are an integral part of these Consolidated Financial
Statements
|
||||||||||||||||
F-7
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
The
Company is engaged primarily in the pursuit of petroleum and natural gas through
exploration and development in India. Since inception, the efforts of
GeoGlobal have been devoted to the pursuit of Production Sharing Contracts
(“PSC”) with the Gujarat State Petroleum Corporation ("GSPC"), Oil India Limited
("OIL") and the Government of India ("GOI") and the development
thereof. To date, the Company has not earned revenue from these
operations and is considered to be in the development stage. The
recoverability of the costs incurred to date is uncertain and dependent upon
achieving commercial production or sale, the ability of the Company to obtain
sufficient financing to fulfill its obligations under the PSC’s in India and
upon future profitable operations and upon finalizing agreements with GSPC and
OIL.
On August
29, 2003, all of the issued and outstanding shares of GeoGlobal Resources
(India) Inc. ("GeoGlobal India") were acquired by GeoGlobal Resources Inc.,
formerly Suite101.com, Inc. As a result of the transaction, the
former shareholder of GeoGlobal India held approximately 69.3% of the issued and
outstanding shares of GeoGlobal Resources Inc. This transaction is
considered an acquisition of GeoGlobal Resources Inc. (the accounting subsidiary
and legal parent) by GeoGlobal India (the accounting parent and legal
subsidiary) and has been accounted for as a purchase of the net assets of
GeoGlobal Resources Inc. by GeoGlobal India. Accordingly, this
transaction represents a recapitalization of GeoGlobal India, the legal
subsidiary, effective August 29, 2003. These consolidated financial
statements are issued under the name of GeoGlobal Resources Inc. but are a
continuation of the financial statements of the accounting acquirer, GeoGlobal
India. The assets and liabilities of GeoGlobal India are included in
the consolidated financial statements at their historical carrying
amounts. As a result, the stockholders' equity of GeoGlobal Resources
Inc. is eliminated and these consolidated financial statements reflect the
results of operations of GeoGlobal Resources Inc. only from the date of the
acquisition.
GeoGlobal
Resources Inc. changed its name from Suite101.com, Inc. after receiving
shareholder approval at the Annual Shareholders Meeting held on January 8,
2004. Collectively, GeoGlobal Resources Inc., GeoGlobal India and its
other wholly-owned direct and indirect subsidiaries, are referred to as the
"Company" or “GeoGlobal”.
2. Significant
Accounting Policies
a) Basis
of presentation
These
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States within the
framework of the accounting policies summarized below.
These
consolidated financial statements include the accounts of (i) GeoGlobal
Resources Inc., from the date of acquisition, being August 29, 2003, (ii)
GeoGlobal Resources (India) Inc., incorporated under the Business Corporations Act
(Alberta), Canada on August 21, 2002 and continued under the Companies Act of Barbados,
West Indies on June 27, 2003, which is a wholly-owned subsidiary of GeoGlobal
Resources Inc., (iii) GeoGlobal Resources (Canada) Inc., incorporated under the
Business Corporations Act
(Alberta), Canada on September 4, 2003, which is a wholly-owned
subsidiary of GeoGlobal Resources Inc., and (iv) GeoGlobal Resources (Barbados)
Inc. incorporated under the Companies Act of Barbados,
West Indies on September 24, 2003, which is the wholly-owned subsidiary of
GeoGlobal Resources (Canada) Inc.
F-8
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
2. Significant
Accounting Policies (continued)
b) Oil
and gas interests
|
i)
|
Capitalized
costs
|
The
Company follows the full cost method of accounting for its petroleum and natural
gas operations. Under this method all costs related to the
exploration for and development of petroleum and natural gas reserves are
capitalized. Costs include land acquisition costs, geological and
geophysical expenditures, costs of drilling both productive and non-productive
wells and related overhead costs. Proceeds from the sale of
properties will be applied against capitalized costs, without any gain or loss
being realized, unless such sale would significantly alter the relationship
between capital costs and proven reserves of petroleum and natural gas
attributable to the cost center.
ii) Depletion
Upon the
commencement of production of economic quantities of oil and gas, depletion of
exploration and development costs and depreciation of production equipment will
be provided on a country-by-country basis using the unit-of-production method
based upon estimated proven petroleum and natural gas reserves. The
costs of acquiring and evaluating unproven properties and major development
projects will be excluded from costs subject to depletion until it is determined
whether or not proven reserves are attributable to the properties, the major
development projects are completed, or impairment occurs. For
depletion and depreciation purposes, relative volumes of petroleum and natural
gas production and reserves will be converted into equivalent units based upon
estimated relative energy content.
iii) Ceiling
test
In
applying the full cost method, the Company will be calculating a ceiling test
whereby the carrying value of petroleum and natural gas properties and
production equipment, net of recorded deferred income taxes is limited to the
present value of after-tax future net revenues from proven reserves, discounted
at 10% (based on prices and costs at the balance sheet date calculated
quarterly), plus the lower of cost and fair value of unproven
properties. Should this comparison indicate an excess carrying value,
the excess will be charged against earnings as additional depletion and
depreciation. Unproven properties are assessed quarterly for possible
impairments or reductions in value.
|
iv)
|
Asset retirement obligations
|
The
Company recognizes the fair value of a liability for an asset retirement
obligation in the period in which it is incurred and a corresponding increase in
the carrying value of the related long-lived asset. The fair value is
determined through a review of engineering and environmental studies, industry
guidelines, and management’s estimate on a site by site basis. The
liability is subsequently adjusted for the passage of time, and is recognized as
accretion expense in the consolidated statement of operations. The
liability is also adjusted due to revisions in either the timing or the amount
of the original estimated cash flows associated with the
liability. The increase in the carrying value of the asset is
amortized over the useful life of the related productive assets.
v) Revenue
recognition
Revenue
associated with the production and sales of crude oil, natural gas and natural
gas liquids owned by the Company will be recognized when production is sold to a
purchaser at a fixed or determinable price, and when delivery has occurred and
title passes from the Company to its customer, and if the collectibility of the
revenue is probable.
c) Property
and Equipment
Computer
and office equipment are recorded at cost, with depreciation provided for on a
declining-balance basis at 30% per annum.
F-9
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
2. Significant
Accounting Policies (continued)
|
|
d)
|
Joint
operations
|
All of
the Company's petroleum and natural gas activities are conducted jointly with
others. The Company’s undivided interests in joint ventures are
consolidated on a proportionate basis.
e) Net
loss per share
|
|
Net
loss per share is calculated based upon the weighted-average number of
shares outstanding during the period. The treasury stock method
is used to determine the dilutive effect of the stock
options. The treasury stock method assumes any proceeds
obtained upon exercise of options would be used to purchase common shares
at the average market price during the period. There are no
differences between net loss and the weighted-average number of shares
used in the calculation of the basic net loss per share and those used in
the calculation of diluted net loss per share as the effect of the options
and warrants on the diluted net loss per share calculations is
anti-dilutive for all periods
presented.
|
f) Comprehensive
loss
|
|
Comprehensive
loss includes all changes in equity except those resulting from
investments made by owners and distributions to
owners. Comprehensive loss consists only of net loss for all
periods presented.
|
|
|
g)
|
Use
of estimates
|
|
|
The
preparation of the consolidated financial statements in accordance 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 at the date of the consolidated
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results may differ from
these estimated amounts.
|
|
|
h)
|
Financial
instruments
|
|
|
The
Company has estimated the fair value of its financial instruments which
include cash and cash equivalents, restricted cash, accounts receivable,
accounts payable and due to related companies. The Company used
valuation methodologies and market information available as at period end
to determine that the carrying amounts of such financial instruments
approximate fair value in all cases. It is management’s opinion
that the Company is not exposed to significant interest, currency or
credit risks arising from its financial
instruments.
|
i) Cash
and cash equivalents
|
|
Cash
and cash equivalents include cash on hand, balances with banks and
short-term deposits with original maturities of three months or less,
earning interest based upon the US prime rate. Interest earned
during the year ended December 31, 2006 was US$1,751,550 (December 31,
2005 – US$462,174) which included US$1,744,697 (December 31, 2005 –
US$454,887) of interest earned on our cash and cash equivalents held in
term deposits representing an average rate of 4.81% (December 31, 2005 –
2.57%).
|
j) Foreign
currency translation
|
|
The
Company translates integrated foreign operations into the functional
currency of the parent. Monetary assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at
rates of exchange in effect at the date of the balance
sheet. Non-monetary items are translated at the rate of
exchange in effect when the assets are acquired or obligations
incurred. Revenues and expenses are translated at average rates
in effect during the period, with the exception of depreciation which is
translated at historic rates. Exchange gains and losses are
charged to operations.
|
F-10
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
2. Significant
Accounting Policies (continued)
k) Income
taxes
|
|
The
Company follows the liability method of tax allocation. Under
this method, assets and liabilities are determined based on differences
between the tax basis of an asset or liability and its carrying value
using enacted tax rates anticipated to apply in the periods when the
temporary differences are expected to
reverse.
|
The
effect on deferred income tax assets and liabilities of changes in tax rates is
recognized in income or loss in the period in which the change is
enacted.
|
l)
|
Stock-based
compensation plan
|
In prior
years, reporting of the impact of stock-based compensation, such as employee
stock options, on the Company's net loss and net loss per share was required
only on a pro-forma basis.
In
December, 2004, the Financial Accounting Standards Board issued a revision to
Standard 123, Accounting for
Stock-Based Compensation. The Statement of Financial Accounting Standards
123(R), Share-Based Payment
("FAS 123(R)"), requires the recognition of compensation cost for
stock-based compensation arrangements with employees, consultants and directors
based on their grant date fair value using the Modified Black-Scholes
option-pricing model. Compensation expense is recorded over the awards'
respective requisite service, with corresponding entries to paid-in
capital.
The
Company adopted FAS 123(R) using the modified-prospective-transition method on
January 1, 2006. The impact of this adoption required the Company to recognize a
charge for past stock-based compensation options granted of US$367,596 over the
subsequent 3 years in accordance with their respective vesting
periods.
m) Warrants
In
accordance with EITF 00-19, "Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Company's Own Stock", the warrants
were reported as equity instruments and recorded at fair market value on the
date of issuance.
3. Property
and Equipment
|
December
31, 2006
US$
|
December
31, 2005
US$
|
|||||||
|
Computer
and office equipment
|
324,419 | 209,585 | ||||||
|
Accumulated
depreciation
|
(169,082 | ) | (119,759 | ) | ||||
| 155,337 | 89,826 | |||||||
|
Office
condominium deposit (note 13b)
|
28,090 | -- | ||||||
| 183,427 | 89,826 | |||||||
F-11
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
4. Oil
and Gas Interests
|
December
31, 2006
US$
|
December
31, 2005
US$
|
|||||||
|
Restated
note
6c
|
Restated
note
6c
|
|||||||
|
Exploration
– India
|
||||||||
|
Exploration
costs incurred in:
|
||||||||
|
2002
|
21,925 | 21,925 | ||||||
|
2003
|
178,829 | 178,829 | ||||||
|
2004
|
506,269 | 506,269 | ||||||
|
2005
|
3,250,700 | 3,250,700 | ||||||
| 3,957,723 | 3,957,723 | |||||||
|
2006
|
8,163,611 | -- | ||||||
| 12,121,334 | 3,957,723 | |||||||
a) Exploration
costs – India
The
exploration costs incurred to date are not subject to depletion and cover six
exploration blocks, known as the KG Offshore Block, the Mehsana Block, the
Sanand/Miroli Block, the Ankleshwar Block, the DS 03 Block and the Tarapur
Block. It is anticipated that all or certain of these exploration
costs may be subject to depletion commencing in the year 2007.
b) Capitalized overhead costs
(Restated note 6c)
Included
in the US$8,163,611 of exploration cost additions during the year ended December
31, 2006 (year ended December 31, 2005 - US$3,250,700) are certain overhead
costs capitalized by the Company in the amount of US$2,791,520 (year ended
December 31, 2005 - US$2,141,844) directly related to the exploration activities
in India. The capitalized overhead amount includes capitalized
stock-based compensation of US$1,424,225 (year ended December 31, 2005 –
US$1,672,576) (see note 6b) of which US$323,283 (year ended December 31, 2005 –
US$nil) was for the account of a related party (see note
8c). Further, the capitalized overhead amount includes US$1,000,705
(year ended December 31, 2005 - US$145,773) which was paid to third parties and
US$nil (year ended December 31, 2005 - US$51,800) was recovered from third
parties. The balance of US$366,590 was paid to and on behalf of a
related party (year ended December 31, 2005 - US$375,295) (see note
8c). These costs are incurred solely by and on behalf of the Company
in providing its services under the Carried Interest Agreement (“CIA”) and are
therefore not reimbursable under the CIA (see note 4c).
|
|
c)
|
Carried
Interest Agreement
|
|
|
On
August 27, 2002, GeoGlobal entered into a CIA with GSPC, which grants the
Company a 10% Carried Interest (“CI”) (net 5% - see note 4d) in the KG
Offshore Block. The CIA provides that GSPC is responsible for GeoGlobal's
entire share of any and all costs incurred during the Exploration Phase
prior to the date of initial commercial
production.
|
Under the
terms of the CIA, all of GeoGlobal's and Roy Group (Mauritius) Inc.'s (“RGM”), a
related party (note 8b) proportionate share of capital costs for exploration and
development activities will be recovered by GSPC without interest over the
projected production life or ten years, whichever is less, from oil and natural
gas produced on the Exploration Block. GeoGlobal is not entitled to any share of
production until GSPC has recovered the Company's share of the costs and
expenses that were paid by GSPC on behalf of the Company and RGM.
As at
December 31, 2006, GSPC has incurred costs of Rs 114.96 crore (approximately
US$26.1 million) (December 31, 2005 - Rs 63.31 crore (approximately US$14.1
million)) attributable to GeoGlobal under the CIA of which 50% is for the
account of RGM.
F-12
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
4. Oil
and Gas Interests (continued)
|
|
d)
|
Participating
Interest Agreement
|
On March
27, 2003, GeoGlobal entered into a Participating Interest Agreement (“PIA”) with
RGM, whereby GeoGlobal assigned and holds in trust for RGM subject to GOI
consent, 50% of the benefits and obligations of the PSC covering the Exploration
Block KG-OSN-2001/3 ("PSC-KG") and the CIA leaving GeoGlobal with a net 5%
participating interest in the PSC-KG and a net 5% carried interest in the
CIA. Under the terms of the PIA, until the GOI consent is obtained,
GeoGlobal retains the exclusive right to deal with the other parties to the
PSC-KG and the CIA and is entitled to make all decisions regarding the interest
assigned to RGM, RGM has agreed to be bound by and be responsible for the
actions taken by, obligations undertaken and costs incurred by GeoGlobal in
regard to RGM's interest and to be liable to GeoGlobal for its share of all
costs, interests, liabilities and obligations arising out of or relating to the
RGM interest. RGM has agreed to indemnify GeoGlobal against any and
all costs, expenses, losses, damages or liabilities incurred by reason of RGM's
failure to pay the same. Subject to obtaining the government consent
to the assignment, RGM is entitled to all income, receipts, credits,
reimbursements, monies receivable, rebates and other benefits in respect of its
5% interest which relate to the PSC-KG. GeoGlobal has a right of
set-off against sums owing to GeoGlobal by RGM. In the event that the
Indian government consent is delayed or denied, resulting in either RGM or
GeoGlobal being denied an economic benefit it would have realized under the PIA,
the parties agreed to amend the PIA or take other reasonable steps to assure
that an equitable result is achieved consistent with the parties' intentions
contained in the PIA. As a consequence of this transaction the
Company reports its holdings under the PSC-KG and CIA as a net 5% participating
interest ("PI").
e) Deed
of Assignment and Assumption
On April
7, 2005, the Company entered into a Deed of Assignment and Assumption with GSPC
whereby, subject to the terms of the agreement, the Company agreed to acquire
and assume and GSPC agreed to assign a 20% PI in the onshore Tarapur exploration
block (CB-ON/2). The assignment of the 20% PI was subject to
obtaining the consent of the GOI to the assignment, which consent was received
effective August 24, 2006. As a condition to receiving the GOI
consent, the Company provided to the GOI an irrevocable letter of credit in the
amount of US$1,200,000 secured by a term deposit of the Company in the same
amount (see note 11a). This amount represents the Company’s
performance guarantee for its 20% PI share (Rs. 5.3 crore) of the estimated
exploration costs budgeted for the period April 1, 2006 through March 31,
2007.
Under the
terms of the Company's agreement with GSPC, the Company is to fund its 20% PI
share of all past exploration costs incurred on the Tarapur exploration
block. As at December 31, 2006, the amount of US$3,972,765 has been
included in oil and gas interests for our PI share of costs incurred in the
previous drilling of eight exploration wells and a recently completed 500 sq.
km. 3D seismic acquisition.
f) Production
Sharing Contracts
|
|
i)
|
Exploration
Block KG-OSN-2001/3 (also referred to as “KG Offshore
Block”)
|
|
|
On
February 4, 2003, GeoGlobal, as to a 10% PI (net 5% - see note 4d)
together with its joint venture participants, Jubilant Enpro Limited
("Enpro") and GSPC, as to their 10% and 80% PI respectively, entered into
a PSC with respect to the KG Offshore Block ("PSC-KG") with the
GOI. The KG Offshore Block is located offshore on the east
coast of India in the Krishna Godavari Basin. See also Carried
Interest Agreement note 4c.
|
|
|
The
PSC-KG allows the joint venture participants to explore for petroleum and
natural gas over a 6.5 year period commencing March 12, 2003 on the KG
Offshore Block subject to the work commitment as outlined in note
11c.
|
F-13
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
4. Oil
and Gas Interests (continued)
|
|
ii)
|
Exploration Block CB-ONN-2002/2
(also referred to as “Mehsana
Block”)
|
|
|
On
February 6, 2004, GeoGlobal as to its 10% PI, along with its joint venture
participants, Enpro and GSPC as to their 30% and 60% PI respectively,
entered into a PSC with respect to the Mehsana Block ("PSC-Mehsana") with
the GOI. The Mehsana Block covers an area of approximately 125
square kilometers ("sq. kms.") in the Cambay Basin, located in the
province of Gujarat in Northwest
India.
|
|
|
The
PSC-Mehsana allows the joint venture participants to explore for petroleum
and natural gas over a 6 year period commencing May 31, 2004 on the
Exploration Block subject to the work commitment as outlined in note
11b.
|
|
|
iii)
|
Exploration
Block CB-ONN-2002/3 (also
referred to as “Sanand/Miroli
Block”)
|
|
|
On
February 6, 2004, GeoGlobal as to its 10% PI, along with its joint venture
participants, Enpro, GSPC, and Prize Petroleum Company Limited as to their
20%, 55% and 15% PI respectively, entered into a PSC with respect to the
Sanand/Miroli Block ("PSC-Sanand/Miroli") with the GOI. The
Sanand/Miroli Block covers an area of approximately 285 sq. kms. in the
Cambay Basin, located in the province of Gujarat in Northwest
India.
|
|
|
The
PSC-Sanand/Miroli allows the joint venture participants to explore for
petroleum and natural gas over a 6 year period commencing July 29, 2004 on
the Exploration Block subject to the work commitment as outlined in note
11b.
|
|
|
iv)
|
Exploration
Block CB-ONN-2003/2 (also
referred to as “Ankleshwar
Block”)
|
|
|
On
September 28, 2005, GeoGlobal as to its 10% PI, along with its joint
venture participants, Gail (India) Ltd., Jubilant Capital Pvt. Ltd. and
GSPC as to their 20%, 20% and 50% PI respectively, entered into a PSC with
respect to the Ankleshwar Block ("PSC-Ankleshwar") with the
GOI. The Ankleshwar Block covers an area of approximately 448
sq. kms. in the Cambay Basin, located in the province of Gujarat in
Northwest India.
|
|
|
The
PSC-Ankleshwar allows the joint venture participants to explore for
petroleum and natural gas over a 7 year period commencing April 1, 2006 on
the Exploration Block subject to the work commitment as outlined in note
11b.
|
|
|
v)
|
Exploration
Block DS-ONN-2003/1 (also
referred to as “DS 03
Block”)
|
|
|
On
September 28, 2005, GeoGlobal as to its 100% PI entered into a PSC with
respect to the DS 03 Block ("PSC-DS") with the GOI. The DS 03
Block covers an area of approximately 3,155 sq. kms. in the Deccan
Syneclise Basin, located in the northern portion of the State of
Maharashtra in West Central India.
|
|
|
The
PSC-DS allows GeoGlobal to explore for petroleum and natural gas over a 7
year period commencing September 4, 2006 on the Exploration Block subject
to the work commitment as outlined in note
11b.
|
F-14
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
5. Capital
Stock
a) Common
shares
|
Number
of
shares
|
Capital
stock
US
$
|
Additional
paid-in
capital
US
$
|
||||||||||
|
Restated
note
6c
|
||||||||||||
|
Balance
at December 31, 2002
|
1,000 | 64 | -- | |||||||||
|
2003
Transactions
|
||||||||||||
|
Capital
stock of GeoGlobal at August 29, 2003
|
14,656,687 | 14,657 | 10,914,545 | |||||||||
|
Common
shares issued by GeoGlobal to acquire
GeoGlobal
India
|
34,000,000 | 34,000 | 1,072,960 | |||||||||
|
Share
issuance costs on acquisition
|
-- | -- | (66,850 | ) | ||||||||
|
Elimination
of GeoGlobal capital stock in recognition of
reverse
takeover (note 7)
|
(1,000 | ) | (14,657 | ) | (10,914,545 | ) | ||||||
|
Options
exercised for cash
|
396,668 | 397 | 101,253 | |||||||||
|
December
2003 private placement financing (note 5c)
|
6,000,000 | 6,000 | 5,994,000 | |||||||||
|
Share
issuance costs on private placement
|
-- | -- | (483,325 | ) | ||||||||
|
Stock-based
compensation (note 6b)
|
-- | -- | 62,913 | |||||||||
| 55,052,355 | 40,397 | 6,680,951 | ||||||||||
|
Balance
as at December 31, 2003
|
55,053,355 | 40,461 | 6,680,951 | |||||||||
|
2004
Transactions
|
||||||||||||
|
Options
exercised for cash
|
115,000 | 115 | 154,785 | |||||||||
|
Broker
Warrants exercised for cash (note 5c)
|
39,100 | 39 | 58,611 | |||||||||
|
Stock-based
compensation (note 6b)
|
-- | -- | 350,255 | |||||||||
| 154,100 | 154 | 563,651 | ||||||||||
|
Balance
as at December 31, 2004
|
55,207,455 | 40,615 | 7,244,602 | |||||||||
|
2005
Transactions
|
||||||||||||
|
Options
exercised for cash (note 5e(i)
|
739,000 | 739 | 1,004,647 | |||||||||
|
2003
Purchase Warrants exercised for cash (note 5d(i))
|
2,214,500 | 2,214 | 5,534,036 | |||||||||
|
Broker
Warrants exercised for cash (note 5c)
|
540,900 | 541 | 810,809 | |||||||||
|
September
2005 private placement financing (note 5b)
|
4,252,400 | 4,252 | 27,636,348 | |||||||||
|
Share
issuance costs on private placement (note 5b)
|
-- | -- | (1,541,686 | ) | ||||||||
|
Stock-based
compensation (note 6b)
|
-- | -- | 4,354,256 | |||||||||
| 7,746,800 | 7,746 | 37,798,410 | ||||||||||
|
Balance
as at December 31, 2005
|
62,954,255 | 48,361 | 45,043,012 | |||||||||
|
2006
Transactions
|
||||||||||||
|
Options
exercised for cash (note 5e(i))
|
2,284,000 | 2,285 | 2,706,895 | |||||||||
|
Options
exercised for notes receivable (note 6f)
|
184,500 | 185 | 249,525 | |||||||||
|
2003
Purchase Warrants exercised for cash (note 5d(i))
|
785,500 | 786 | 1,962,964 | |||||||||
|
Share
issuance costs
|
-- | -- | (74,010 | ) | ||||||||
|
Stock-based
compensation (note 6b)
|
-- | -- | 3,012,514 | |||||||||
| 3,254,000 | 3,256 | 7,857,888 | ||||||||||
|
Balance
as at December 31, 2006
|
66,208,255 | 51,617 | 52,900,900 | |||||||||
F-15
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
5. Capital
Stock (continued)
b) September
2005 Financing
During
September 2005, GeoGlobal completed the sale of 3,252,400 Units of its
securities at US$6.50 per Unit, together with a concurrent sale of an additional
1,000,000 Units on the same terms, for aggregate gross cash total proceeds of
US$27,640,600.
Each Unit
is comprised of one common share and one half of one warrant. One
full warrant ("2005 Purchase Warrant") entitles the holder to purchase one
additional common share for US$9.00, for a term of two years expiring September
2007. The 2005 Purchase Warrants are subject to accelerated
expiration in the event that the price of the Company's common shares on the
American Stock Exchange is US$12.00 or more for 20 consecutive trading days, the
resale of the shares included in the Units and issuable on exercise of the 2005
Purchase Warrants has been registered under the US Securities Act of 1933, as
amended (the “Act”), and the hold period for Canadian subscribers has
expired. In such events, the warrant term will be reduced to 30 days
from the date of issuance of a news release announcing such accelerated
expiration of the warrant term. At March 23, 2007 since not all such
events have occurred, the accelerated expiration of the warrant term was not
triggered.
Costs of
US$1,541,686 were incurred in issuing shares in these transactions which
included a fee of US$1,268,436 paid to Jones Gable & Company Limited with
respect to the sale of the 3,252,400 Units, and, in addition, Compensation
Options were issued to Jones Gable & Company Limited entitling it to
purchase an additional 195,144 Units at an exercise price of US$6.50 per Unit
through their expiration in September 2007. Compensation Options
are also subject to accelerated expiration on the same terms and conditions as
the warrants issued in the transaction.
c) December
2003 Financing
On
December 23, 2003, GeoGlobal completed a brokered private placement of 5,800,000
units at US$1.00 each, together with a concurrent private placement of an
additional 200,000 units on the same terms, for aggregate gross cash total
proceeds of US$6,000,000.
Each unit
is comprised of one common share and one half of one warrant. One
full warrant ("2003 Purchase Warrant"), entitles the holder to purchase one
additional common share for US$2.50, for a term of two years from date of
closing. The 2003 Purchase Warrants are subject to accelerated
expiration 30 days after issuance of a news release to that effect in the event
that the common shares trade at US$4.00 or more for 20 consecutive trading days
and if the resale of the shares has been registered under the 1933 Act and the
hold period for Canadian subscribers has expired. Also issued as
additional consideration for this transaction were 580,000 Broker
Warrants.
The
580,000 Broker Warrants described above entitled the holder to purchase 580,000
common shares at an exercise price of US$1.50 per share which were fully
exercised before they expired on December 23, 2005 for gross proceeds of
US$870,000.
F-16
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
5. Capital
Stock (continued)
d) Warrants
i) 2003
Purchase Warrants
During
the year ended December 31, 2006, 785,500 (December 31, 2005 - 2,214,500)
2003 Purchase Warrants were exercised for gross proceeds of
US$1,963,750 (December 31, 2005 - US$5,536,250). As at December 31,
2006, there were no 2003 Purchase Warrants remaining to be
exercised.
ii) 2005
Purchase Warrants
As at
December 31, 2006, all of the 2005 Purchase Warrants remained
outstanding, which if exercised, would result in the issuance of 2,126,200
common shares for gross proceeds of US$19,135,800.
iii) Compensation
Option Warrants
|
|
As
at December 31, 2006, none of the 97,572 Compensation Option Warrants
have been issued as a result of the Compensation Options not being
exercised. If the Compensation Options are exercised and the
Compensation Option Warrants issued, if exercised, would result in gross
proceeds of US$878,148.
|
e) Options
i) Stock
Options
During
the year ended December 31, 2006, 2,468,500 (December 31, 2005 - 739,000)
options were exercised at various prices between US$1.01 and US$1.50 for gross
proceeds of US$2,709,180 (December 31, 2005 - US$1,005,386) and notes receivable
for US$249,710 (see note 6f).
ii) Compensation
Options
|
|
As
at December 31, 2006, none of the 195,144 Compensation Options were
exercised. If fully exercised, the Compensation Options would
result in gross proceeds of
US$1,268,436.
|
f) Weighted-average
number of shares
For
purposes of the determination of net loss per share, the basic and diluted
weighted-average number of shares outstanding for the year ended December 31,
2006 was 59,763,629 (December 31, 2005 - 53,058,660 and December 31, 2004 -
41,671,136). The numbers exclude the 5,000,000 shares currently held
in escrow (see note 7).
6. Stock
Options
a) The
Company’s 1998 Stock Incentive Plan
Under the
terms of the 1998 Stock Incentive Plan (the "Plan"), as amended, 12,000,000
common shares have been reserved for issuance on exercise of options granted
under the Plan. As at December 31, 2006, the Company had 3,650,697
(December 31, 2005 - 1,875,697) common shares remaining for issuance under the
Plan. The Board of Directors of the Company may amend or modify the
Plan at any time, subject to any required stockholder approval. The
Plan will terminate on the earliest of: (i) 10 years after the Plan Effective
Date, being December 2008; (ii) the date on which all shares available for
issuance under the Plan have been issued as fully-vested shares; or, (iii) the
termination of all outstanding options in connection with certain changes in
control or ownership of the Company.
At the
annual stockholder meeting held on June 14, 2006, shareholder approval was
obtained to amend the Plan to increase the shares reserved for grant of options
from 8,000,000 to 12,000,000.
F-17
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
6. Stock
Options (continued)
b) Stock-based
compensation
The
Company adopted FAS 123(R), using the modified-prospective-transition method on
January 1, 2006. Under this method, the Company is required to
recognize compensation cost for stock-based compensation arrangements with
employees and directors based on their grant date fair value using the
Black-Scholes option-pricing model, such cost to be expensed over the
compensations’ respective vesting periods. For awards with graded
vesting, in which portions of the award vest in difference periods, the Company
recognized compensation costs on a straight-line basis over the vesting periods
for each separate vested tranche.
The
following table summarized stock-based compensation for employees and
non-employee consultants.
|
Year
ended
Dec
31, 2006
US
$
|
Year
ended
Dec
31, 2005
US
$
|
Year
ended
Dec
31, 2004
US
$
|
Period
from
Inception
Aug
21, 2002 to Dec 31, 2006
US
$
|
|||||||||||||
|
Restated
note
6c
|
Restated
note
6c
|
Restated
note
6c
|
Restated
note
6c
|
|||||||||||||
|
Stock
based compensation
|
||||||||||||||||
|
Consolidated
Statements of Operations
|
||||||||||||||||
|
General
and administrative
|
1,048,477 | -- | -- | 1,048,477 | ||||||||||||
|
Consulting
fees
|
539,812 | 2,681,680 | 304,002 | 3,566,176 | ||||||||||||
| 1,588,289 | 2,681,680 | 304,002 | 4,614,653 | |||||||||||||
|
Consolidated
Balance Sheets
|
||||||||||||||||
|
Oil
and gas interests
|
1,424,225 | 1,672,576 | 46,253 | 3,165,285 | ||||||||||||
| 3,012,514 | 4,354,256 | 350,255 | 7,779,938 | |||||||||||||
|
Prior
to the adoption of FAS 123(R), the Company used the intrinsic value method
of accounting for employee and director stock-based compensation. As
all options have been granted at exercise prices based on the market value
of the Company's common shares at the date of grant, no compensation cost
was recognized under the intrinsic value based method of
accounting. For the years ended December 31, 2005, 2004 and the
period from inception August 21, 2002 to December 31, 2005, had employee
compensation expense been determined based on the fair value at the grant
date consistent with FAS123(R) pro-forma oil and gas interests, net loss
and pro-forma net loss per share would have been as
follows:
|
||||||||||||||||
|
Year
ended
Dec
31, 2005
|
Year
ended
Dec
31, 2004
|
Period
from Inception,
Aug
21, 2002 to
Dec
31, 2005
|
||||||||||||||
|
Restated
note
6c
|
Restated
note
6c
|
Restated
note
6c
|
||||||||||||||
|
Pro-forma
basis
|
||||||||||||||||
|
Stock-based
compensation
|
||||||||||||||||
|
Oil
and gas interests
|
337,113 | 56,654 | 438,309 | |||||||||||||
|
General
and administrative
|
458,766 | 132,767 | 679,882 | |||||||||||||
|
Oil
and gas interests
|
||||||||||||||||
|
As
reported
|
3,957,723 | 707,023 | 3,957,723 | |||||||||||||
|
Pro-forma
|
4,396,032 | 808,219 | 4,396,032 | |||||||||||||
|
Net
loss
|
||||||||||||||||
|
As
reported
|
(3,162,660 | ) | (1,171,498 | ) | (4,866,348 | ) | ||||||||||
|
Pro-forma
|
(3,621,426 | ) | (1,304,265 | ) | (5,546,230 | ) | ||||||||||
|
Net
loss per share - basic and diluted
|
||||||||||||||||
|
As
reported
|
(0.06 | ) | (0.03 | ) | ||||||||||||
|
Pro-forma
|
(0.07 | ) | (0.03 | ) | ||||||||||||
F-18
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
6. Stock
Options (continued)
|
Year
ended
Dec
31, 2006
|
Year
ended
Dec
31, 2005
|
Year
ended
Dec
31, 2004
|
|
|
Restated
note
6c
|
Restated
note
6c
|
||
|
Black-Scholes
Assumptions
|
|||
|
Fair
value of stock options granted
|
$1.52
|
$1.06
|
--
|
|
Risk-free
interest rate
|
4.13%
|
2.75%
|
--
|
|
Volatility
|
70%
|
102%
|
--
|
|
Weighted
average expected life
|
1.6
years
|
1.8
years
|
--
|
|
Dividend
yield
|
0%
|
0%
|
--
|
|
|
i)
|
At
January 1, 2006, the impact of the adoption of FAS123(R) required the
Company to recognize a charge for past stock-based compensation options
granted of US$367,596 over the next 3 years in accordance with their
respective vesting periods. In the year ended December 31,
2006, US$211,128 of this charge was recognized in the Consolidated
Statements of Operations as general and administrative
expense. This resulted in an increase in the net loss and
comprehensive loss for the period in the same amount and no impact on the
net loss per share – basic and diluted for the period. In the
year ended December 31, 2006, US$89,900 of this charge was recognized in
the Consolidated Balance Sheets as Oil and gas interests, not subject to
depletion.
|
|
|
ii)
|
No
income tax benefit has been recognized relating to stock-based
compensation expense and no tax benefits have been realized from the
exercise of stock options. There was no impact on cash flows
during years ended December 31, 2006 and
2005.
|
F-19
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
6. Stock
Options (continued)
c) Restatement
The years
ended December 31, 2006, 2005, 2004 and the period from inception August 21,
2002 to December 31, 2006 have been restated due to an error in the
classification and calculation for stock-based compensation for non-employee
consultants.
The
following is a summary of the effects of this restatement on the Company's
Consolidated Balance Sheets and Statements of Stockholders' Equity at December
31, 2006 and 2005 and 2004 and the Consolidated Statements of Operations for the
years ended December 31, 2006 and 2005 and 2004 and the period from inception of
August 21, 2002 to December 31, 2006.
|
As
Reported
|
Adjustment
|
As
Restated
|
||||||||||||||||||||||
|
Dec
31, 2006
US$
|
Dec
31, 2006
US$
|
Period
of Inception,
Aug
21, 2002
to
Dec 31, 2005
US$
|
Dec
31, 2006
US$
|
|||||||||||||||||||||
|
Balance
Sheets
|
||||||||||||||||||||||||
|
Oil
and gas interests
|
9,722,738 | 657,536 | 1,741,060 | 12,121,334 | ||||||||||||||||||||
|
Additional
paid-in
capital
|
47,077,827 | 1,055,649 | 4,767,424 | 52,900,900 | ||||||||||||||||||||
|
Deficit
accumulated
|
(2,990,674 | ) | (398,113 | ) | (3,026,364 | ) | (6,415,151 | ) | ||||||||||||||||
|
Stockholders'
equity
|
44,138,770 | 657,536 | 1,741,060 | 46,537,366 | ||||||||||||||||||||
|
Statement
of
Stockholders'
Equity
|
||||||||||||||||||||||||
|
Additional
paid-in
capital
|
47,077,827 | 1,055,649 | 4,767,424 | 52,900,900 | ||||||||||||||||||||
|
Accumulated
deficit
|
(2,990,674 | ) | (398,113 | ) | (3,026,364 | ) | (6,415,151 | ) | ||||||||||||||||
|
Stockholders'
equity
|
44,138,770 | 657,536 | 1,741,060 | 46,537,366 | ||||||||||||||||||||
|
As
Reported
|
Adjustment
|
As
Restated
|
||||||||||||||||||||||
|
Year
ended
Dec
31, 2006
US$
|
Period
of Inception,
Aug
21, 2002
to
Dec 31, 2006
US$
|
Year
ended
Dec
31, 2006
US$
|
Period
of Inception,
Aug
21, 2002
to
Dec 31, 2006
US$
|
Year
ended
Dec
31, 2006
US$
|
Period
of Inception,
Aug
21, 2002
to
Dec 31, 2006
US$
|
|||||||||||||||||||
|
Statements
of Operations
|
||||||||||||||||||||||||
|
General
and
administrative
|
1,406,000 | 2,510,716 | 484,926 | 484,926 | 1,890,926 | 2,995,642 | ||||||||||||||||||
|
Consulting
fees
|
1,190,919 | 1,864,251 | (86,813 | ) | 2,939,551 | 1,104,106 | 4,803,802 | |||||||||||||||||
|
Net
loss and
comprehensive
loss
|
(1,150,690 | ) | (2,990,674 | ) | (398,113 | ) | (3,424,477 | ) | (1,548,803 | ) | (6,415,151 | ) | ||||||||||||
|
Net
loss per share
-
basic and diluted
|
(0.02 | ) | (0.01 | ) | (0.03 | ) | ||||||||||||||||||
F-20
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
6. Stock
Options (continued)
|
As
Reported
|
Adjustment
|
As
Restated
|
||||||||||||||||
|
Dec
31, 2005
US$
|
Dec
31, 2005
US$
|
Period
of Inception,
Aug
21, 2002
to
Dec 31, 2004
US$
|
Dec
31, 2005
US$
|
|||||||||||||||
|
Balance
Sheets
|
||||||||||||||||||
|
Oil
and gas interests
|
2,216,663 | 1,672,576 | 68,484 | 3,957,723 | ||||||||||||||
|
Additional
paid-in
capital
|
40,275,588 | 4,354,256 | 413,168 | 45,043,012 | ||||||||||||||
|
Deficit
accumulated
|
(1,839,984 | ) | (2,681,680 | ) | (344,684 | ) | (4,866,348 | ) | ||||||||||
|
Stockholders'
equity
|
38,483,965 | 1,672,576 | 68,484 | 40,225,025 | ||||||||||||||
|
Statement
of
Stockholders'
Equity
|
||||||||||||||||||
|
Additional
paid-in
capital
|
40,275,588 | 4,354,256 | 413,168 | 45,043,012 | ||||||||||||||
|
Accumulated
deficit
|
(1,839,984 | ) | (2,681,680 | ) | (344,684 | ) | (4,866,348 | ) | ||||||||||
|
Stockholders'
equity
|
38,483,965 | 1,672,576 | 68,484 | 40,225,025 | ||||||||||||||
|
As
Reported
|
Adjustment
|
As
Restated
|
||||||||||||||||
|
Year
ended
Dec
31, 2005
US$
|
Period
of Inception,
Aug
21, 2002
to
Dec 31, 2005
US$
|
Year
ended
Dec
31, 2005
US$
|
Period
of Inception,
Aug
21, 2002
to
Dec 31, 2005
US$
|
Year
ended
Dec
31, 2005
US$
|
Period
of Inception,
Aug
21, 2002
to
Dec 31, 2005
US$
|
|||||||||||||
|
Statements
of Operations
|
||||||||||||||||||
|
Consulting
fees
|
265,446 |
673,332
|
2,681,680 | 3,026,364 | 2,947,126 |
3,699,696
|
||||||||||||
|
Net
loss and
comprehensive
loss
|
(480,980 | ) |
(1,839,984))
|
(2,681,680 | ) | (3,026,364 | ) | (3,162,660 | ) |
(4,866,348))
|
||||||||
|
Net
loss per share
-
basic and diluted
|
(0.01 | ) | (0.05 | ) | (0.06 | ) | ||||||||||||
F-21
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
6. Stock
Options (continued)
|
As
Reported
|
Adjustment
|
As
Restated
|
||||||||||||||||
|
Dec
31, 2004
US$
|
Dec
31, 2004
US$
|
Period
of Inception,
Aug
21, 2002
to
Dec 31, 2003
US$
|
Dec
31, 2004
US$
|
|||||||||||||||
|
Balance
Sheets
|
||||||||||||||||||
|
Oil
and gas interests
|
638,539 | 46,253 | 22,231 | 707,023 | ||||||||||||||
|
Additional
paid-in
capital
|
6,831,434 | 350,255 | 62,913 | 7,244,602 | ||||||||||||||
|
Deficit
accumulated
|
(1,359,004 | ) | (304,002 | ) | (40,682 | ) | (1,703,688 | ) | ||||||||||
|
Stockholders'
equity
|
5,513,045 | 46,253 | 22,231 | 5,581,529 | ||||||||||||||
|
Statement
of
Stockholders'
Equity
|
||||||||||||||||||
|
Additional
paid-in
capital
|
6,831,434 | 350,255 | 62,913 | 7,244,602 | ||||||||||||||
|
Accumulated
deficit
|
(1,359,004 | ) | (304,002 | ) | (40,682 | ) | (1,703,688 | ) | ||||||||||
|
Stockholders'
equity
|
5,513,045 | 46,253 | 22,231 | 5,581,529 | ||||||||||||||
|
As
Reported
|
Adjustment
|
As
Restated
|
||||||||||||||||
|
Year
ended
Dec
31, 2004
US$
|
Period
of Inception,
Aug
21, 2002
to
Dec 31, 2004
US$
|
Year
ended
Dec
31, 2004
US$
|
Period
of Inception,
Aug
21, 2002
to
Dec 31, 2004
US$
|
Year
ended
Dec
31, 2004
US$
|
Period
of Inception,
Aug
21, 2002
to
Dec 31, 2004
US$
|
|||||||||||||
|
Statements
of Operations
|
||||||||||||||||||
|
Consulting
fees
|
237,615 |
407,886
|
304,002 | 344,684 | 541,617 |
752,570
|
||||||||||||
|
Net
loss and
comprehensive
loss
|
(867,496 | ) |
(1,359,004))
|
(304,002 | ) | (344,684 | ) | (1,171,498 | ) |
(1,703,688))
|
||||||||
|
Net
loss per share
-
basic and diluted
|
(0.02 | ) | (0.01 | ) | (0.03 | ) | ||||||||||||
The
restatement had no impact on the Consolidated Statements of Cash Flows for the
year ended December 31, 2006 and from inception of August 21, 2002 to December
31, 2006 and therefore, no changes have been reflected.
F-22
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
6. Stock
Options (continued)
d) Black-Scholes
Assumptions
The
Company believes that the estimated fair value of the stock options is more
readily measurable than the fair value of services rendered. The fair
value of the stock options granted to non-employees is calculated at each
reporting date using the Black-Scholes option-pricing model. Weighted
average assumptions used in the valuation are disclosed in the following
table:
|
Year
ended
Dec
31, 2006
|
Year
ended
Dec
31, 2005
|
Year
ended
Dec
31, 2004
|
|
|
Restated
note
6c
|
Restated
note
6c
|
Restated
note
6c
|
|
|
Fair
value of stock options at reporting date
|
US$4.15
|
US$4.52
|
US$0.73
|
|
Risk-free
interest rate
|
4.89%
|
3.33%
|
1.67%
|
|
Volatility
|
86%
|
103%
|
98%
|
|
Expected
life
|
0.9
years
|
0.5
years
|
0.5
years
|
|
Dividend
yield
|
0%
|
0%
|
0%
|
e) Stock
option table
These
options were granted for services provided to the Company:
|
Fair
Value
|
Cancelled
(c)
|
||||||||
|
Option
|
at
Original
|
Granted
|
Expired
(x)
|
Balance
|
|||||
|
Grant
|
exercise
|
Grant
|
Expiry
|
Vesting
|
Balance
|
during
|
Exercised
(e)
|
Balance
|
exercisable
|
|
date
|
price
|
Date
|
date
|
date
|
Dec
31/05
|
the
year
|
during
the year
|
Dec
31/06
|
Dec
31/06
|
|
(mm/dd/yy)
|
US
$
|
US$
|
(mm/dd/yy)
|
(mm/dd/yy)
|
#
|
#
|
#
|
#
|
#
|
|
12/09/03
|
1.18
|
.241
|
08/31/06
|
Vested
|
1,751,500
|
--
|
1,721,500
(e)
|
--
|
--
|
|
30,000
(x)
|
--
|
--
|
|||||||
|
12/30/03
|
1.50
|
.317
|
08/31/06
|
Vested
|
345,000
|
--
|
345,000
(e)
|
--
|
--
|
|
01/17/05
|
1.01
|
.380
|
(i)
06/30/07
|
Vested
|
579,500
|
--
|
377,000
(e)
|
202,500
|
202,500
|
|
01/17/05
|
1.01
|
.380
|
(i)
06/30/07
|
05/31/07
|
150,000
|
--
|
--
|
150,000
|
--
|
|
01/18/05
|
1.10
|
.622
|
08/31/08
|
Vested
|
600,000
|
--
|
--
|
600,000
|
600,000
|
|
01/25/05
|
1.17
|
.434
|
08/31/06
|
Vested
|
25,000
|
--
|
25,000
(e)
|
--
|
--
|
|
06/14/05
|
3.49
|
1.553
|
06/14/15
|
Vested
|
150,000
|
--
|
--
|
150,000
|
150,000
|
|
08/24/05
|
6.50
|
2.380
|
08/24/08
|
Vested
|
110,000
|
--
|
--
|
110,000
|
110,000
|
|
10/03/05
|
6.81
|
3.070
|
10/03/15
|
Vested
|
16,666
|
--
|
-
|
16,666
|
16,666
|
|
10/03/05
|
6.81
|
3.833
|
10/03/15
|
10/03/07
|
16,667
|
--
|
--
|
16,667
|
--
|
|
10/03/05
|
6.81
|
4.383
|
10/03/15
|
10/03/08
|
16,667
|
--
|
--
|
16,667
|
--
|
|
06/14/06
|
5.09
|
2.057
|
06/14/16
|
06/14/07
|
--
|
200,000
|
--
|
200,000
|
--
|
|
07/25/06
|
3.95
|
1.141
|
12/31/09
|
Vested
|
--
|
100,000
|
--
|
100,000
|
100,000
|
|
07/25/06
|
3.95
|
1.393
|
12/31/09
|
07/25/07
|
--
|
660,000
|
--
|
660,000
|
--
|
|
07/25/06
|
3.95
|
1.601
|
12/31/09
|
12/31/07
|
--
|
50,000
|
--
|
50,000
|
--
|
|
07/25/06
|
3.95
|
1.779
|
12/31/09
|
07/25/08
|
--
|
145,000
|
--
|
145,000
|
--
|
|
07/25/06
|
3.95
|
2.006
|
12/31/09
|
07/25/09
|
--
|
70,000
|
--
|
70,000
|
--
|
|
07/25/06
|
3.95
|
1.141
|
07/25/16
|
Vested
|
--
|
500,000
|
--
|
500,000
|
500,000
|
|
07/25/06
|
3.95
|
1.141
|
07/25/16
|
07/25/07
|
--
|
500,000
|
--
|
500,000
|
--
|
|
11/24/06
|
7.52
|
2.467
|
11/24/09
|
06/30/07
|
--
|
10,000
|
--
|
10,000
|
--
|
|
11/24/06
|
7.52
|
2.919
|
11/24/09
|
12/31/07
|
--
|
10,000
|
--
|
10,000
|
--
|
|
11/24/06
|
7.52
|
3.695
|
11/24/09
|
12/31/08
|
--
|
10,000
|
--
|
10,000
|
--
|
|
3,761,000
|
2,255,000
|
2,498,500
|
3,517,500
|
1,679,166
|
F-23
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
6. Stock
Options (continued)
|
|
i)
|
On
August 30, 2006, the Board of Directors of the Company passed a resolution
with respect to the remaining stock options issued on January 17, 2005 to
(a) extend the expiry date of all then outstanding options from August 31,
2006 to the earlier of June 30, 2007 or 60 days following the date of a
“Commercial Discovery” as defined under the terms of the PSC on Block
KG-OSN-2001/3 and (b) to extend the vesting date of certain of these
options to the earlier of the date of a “Commercial Discovery” as defined
under the terms of the PSC on Block KG-OSN-2001/3 or May 31, 2007, as long
as drilling operations are continuing on the KG Offshore
Block. This resolution resulted in an added incremental
stock-based compensation cost of $9,040 with respect to the three
employees and three consultants.
|
|
|
ii)
|
During
the year ended December 31, 2006, the Company granted options to purchase
2,255,000 shares exercisable at various prices and expiry dates, which
vest in their entirety on the vesting
date.
|
|
|
iii)
|
As
at December 31, 2006, there were 3,517,500 options outstanding at various
prices which, if exercised, would result in total proceeds of
US$11,837,375.
|
|
|
iv)
|
Of
the 2,498,500 options exercised or expired during the year, 195,000,
415,000, 1,853,500 and 5,000 were exercised during the three months ending
March 31, June 30, September 30 and December 31, respectively for gross
cash proceeds of US$206,050, US$548,100, US$1,949,980 and US$5,050
respectively, and the remaining 30,000 expired during the three months
ended September 30, 2006.
|
|
|
v)
|
At
the annual stockholder meeting held on June 14, 2006, the stockholders of
the Company approved amendments to the Plan to increase the shares of
Common Stock reserved for issuance under the Plan from 8,000,000 shares to
12,000,000.
|
|
f)
|
Notes
receivable
|
|
|
Pursuant
to the terms of the Company's 1998 Stock Incentive Plan, during the third
quarter of 2006, certain employees and consultants to the Company
exercised 184,500 options to purchase shares of common stock of the
Company and delivered to the Company their promissory notes in the
aggregate principal amount of US$249,710 in payment of the exercise
price. The promissory notes were due December 31, 2006 and bore
interest at 8.25% per annum. All promissory notes were repaid
on or before December 31, 2006.
|
7. Acquisition
On August
29, 2003, pursuant to an agreement dated April 4, 2003 and amended August 29,
2003, the Company completed a transaction with Mr. Roy and GeoGlobal Resources
(India) Inc. ("GeoGlobal India"), a corporation then wholly-owned by Mr. Roy,
whereby the Company acquired from Mr. Roy all of the outstanding capital stock
of GeoGlobal India. In exchange for the outstanding capital stock of
GeoGlobal India, the Company issued 34.0 million shares of its Common
Stock. Of the 34.0 million shares, 14.5 million shares were delivered
to Mr. Roy at the closing of the transaction on August 29, 2003 and an aggregate
of 19.5 million shares were held in escrow by an escrow agent. The
terms of the escrow provide for the release of the shares upon the occurrence of
certain developments relating to the outcome of oil and natural gas exploration
and development activities conducted on the KG Offshore Block. On
August 27, 2004, 14.5 million shares were released to Mr. Roy from escrow upon
the commencement of a drilling program on the KG Offshore Block. The
final 5.0 million shares remaining in escrow will be released only if a
commercial discovery as defined under the PSC is declared on the KG Offshore
Block. In addition to the shares of Common Stock, the Company
delivered to Mr. Roy a US$2.0 million promissory note, of which US$500,000 was
paid on the closing of the transaction on August 29, 2003, US$500,000 was paid
on October 15, 2003, US$500,000 was paid on January 15, 2004 and US$500,000 was
paid on June 30, 2004. The note did not accrue
interest. The note was secured by the
F-24
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
outstanding
stock of GeoGlobal India which has subsequently been released. As a
consequence of the transaction, Mr. Roy held as of the closing of the
transaction an aggregate of 34.0 million shares of our outstanding Common Stock,
or approximately 69.3% of the shares outstanding, assuming all shares held in
escrow are released to him. The terms of the transaction provide that
Mr. Roy has the right to vote all 34.0 million shares following the closing,
including the shares during the period they are held in
escrow. Shares not released from the escrow will be surrendered back
to GeoGlobal.
As
discussed in note 1, the acquisition of GeoGlobal India by GeoGlobal was
accounted for as a reverse takeover transaction. As a result, the
cost of the transaction was determined based upon the net assets of GeoGlobal
deemed to have been acquired. These consolidated financial statements
include the results of operations of GeoGlobal from the date of
acquisition. The net identifiable assets acquired of GeoGlobal were
as follows:
|
US
$
|
||||
|
Net
assets acquired
|
||||
|
Cash
|
3,034,666 | |||
|
Other
current assets
|
75,000 | |||
|
Current
liabilities
|
(2,706 | ) | ||
|
Net
book value of identifiable assets acquired
|
3,106,960 | |||
|
Consideration
paid
|
||||
|
Promissory
note issued
|
2,000,000 | |||
|
34,000,000
common shares issued par value $0.001
|
34,000 | |||
|
Additional
paid-in capital
|
1,072,960 | |||
| 3,106,960 | ||||
8. Related
Party Transactions
Related
party transactions are measured at the exchange amount which is the amount of
consideration established and agreed by the related parties.
a) Note
payable
On August
29, 2003, as part of the Acquisition (note 7), a US$2,000,000 promissory note
was issued to the sole shareholder of GeoGlobal India. On each of
August 29, 2003, October 15, 2003, January 15, 2004 and June 30, 2004,
US$500,000 of the note was repaid. The promissory note was
non-interest bearing and the capital stock of GeoGlobal India collateralized the
repayment of the note. The collateral has been released.
b) Roy
Group (Mauritius) Inc.
Roy Group
(Mauritius) Inc. is related to the Company by common management and is
controlled by a director of the Company who is also a principal shareholder of
the Company. On March 27, 2003, the Company entered into a
Participating Interest Agreement (note 4d) with the related party.
F-25
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
8. Related
Party Transactions
(continued)
c) Roy
Group (Barbados) Inc. (“Roy Group”)
Roy Group
is related to the Company by common management and is controlled by a director
of the Company who is also a principal shareholder of the Company. On
August 29, 2003, the Company entered into a Technical Services Agreement ("TSA")
with Roy Group to provide services to the Company as assigned by the Company and
to bring new oil and gas opportunities to the Company. On January 31,
2006, the terms of the agreement were amended to extend the term of the
agreement from August 31, 2006 to December 31, 2007. Roy Group
receives consideration of US$350,000 per year, as outlined and recorded
below:
|
Year
ended
Dec
31, 2006
|
Year
ended
Dec
31, 2005
|
Year
ended
Dec
31, 2004
|
Period
from
Inception,
Aug
21, 2002
to
Dec 31, 2006
|
|||||||||||||
|
US
$
|
US
$
|
US
$
|
US$
|
|||||||||||||
|
Consolidated
Statement of Operations
|
||||||||||||||||
|
Consulting
fees
|
70,000 | 62,000 | 50,000 | 198,667 | ||||||||||||
|
Consolidated
Balance Sheets
|
||||||||||||||||
|
Oil
& gas interests
|
||||||||||||||||
|
Exploration
costs - India (note 4b)
|
280,000 | 248,000 | 200,000 | 794,666 | ||||||||||||
| 350,000 | 310,000 | 250,000 | 993,333 | |||||||||||||
During
the year, the Company recognized compensation cost for stock-based compensation
arrangements with the principal of Roy Group as outlined and recorded
below:
|
Consolidated
Statement of Operations
|
||||||||||||||||
|
Consulting
fees
|
80,821 | -- | -- | 80,821 | ||||||||||||
|
Consolidated
Balance Sheets
|
||||||||||||||||
|
Oil
& gas interests
|
||||||||||||||||
|
Exploration
costs - India (note 4b)
|
323,283 | -- | -- | 323,283 | ||||||||||||
| 404,104 | -- | -- | 404,104 | |||||||||||||
Roy Group
was also reimbursed on a cost recovery basis, for medical insurance and
expenses; travel, hotel, meals and entertainment expenses; computer costs; and
amounts billed by third parties incurred during the periods as outlined and
recorded below:
|
Consolidated
Statement of Operations
|
||||||||||||||||
|
General
and administrative
|
47,820 | 45,430 | 19,640 | 153,539 | ||||||||||||
|
Consolidated
Balance Sheets
|
||||||||||||||||
|
Accounts
receivable
|
227 | 1,020 | 20,350 | 21,597 | ||||||||||||
|
Oil
& gas interests
|
||||||||||||||||
|
Exploration
costs - India (note 4b)
|
86,590 | 127,295 | 87,165 | 384,387 | ||||||||||||
|
Property
and equipment
|
-- | 1,610 | 8,064 | 37,595 | ||||||||||||
| 134,637 | 175,355 | 135,219 | 597,118 | |||||||||||||
At
December 31, 2006, the Company owed Roy Group (Barbados) Inc.
US$29,976 (December 31, 2005 - US$169,181) for services provided and
expenses incurred on behalf of the Company and pursuant to the
TSA. These amounts bear no interest and have no set terms of
repayment.
F-26
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
8. Related
Party Transactions
(continued)
d) D.I.
Investments Ltd. (“D.I.”)
D.I. is
related to the Company by common management and is controlled by a director of
the Company. DI charged consulting fees for management, financial and
accounting services rendered, as outlined and recorded below:
|
Year
ended
Dec
31, 2006
|
Year
ended
Dec
31, 2005
|
Year
ended
Dec
31, 2004
|
Period
from
Inception,
Aug
21, 2002
to
Dec 31, 2006
|
|||||||||||||
|
US
$
|
US
$
|
US
$
|
US$
|
|||||||||||||
|
Consolidated
Statement of Operations
|
||||||||||||||||
|
Consulting
fees
|
185,000 | 150,000 | 120,000 | 516,715 | ||||||||||||
During
the year, the Company recognized compensation cost for stock-based compensation
arrangements with the principal of the related party as outlined and recorded
below:
|
Consolidated
Statement of Operations
|
||||||||||||||||
|
Consulting
fees
|
404,104 | -- | -- | 404,104 | ||||||||||||
DI was
also reimbursed on a cost recovery basis, for office costs, including rent,
parking, office supplies and telephone as well as travel, hotel, meals and
entertainment expenses incurred during the periods as outlined and recorded
below:
|
Consolidated
Statement of Operations
|
||||||||||||||||
|
General
and administrative
|
||||||||||||||||
|
Office
costs
|
19,935 | 54,062 | 65,073 | 179,070 | ||||||||||||
|
Travel,
hotel, meals and
entertainment
|
1,176 | 5,121 | 3,344 | 48,686 | ||||||||||||
|
Consolidated
Balance Sheets
|
||||||||||||||||
|
Accounts
receivable
|
13,224 | 14,165 | -- | 27,389 | ||||||||||||
|
Property
and equipment
|
4,107 | -- | -- | 4,107 | ||||||||||||
| 38,442 | 73,348 | 68,417 | 259,252 | |||||||||||||
At
December 31, 2006, the Company owed D.I. US$nil (December 31, 2005 -
US$70,309) as a result of services provided and expenses incurred on behalf of
the Company. These amounts bear no interest and have no set terms of
repayment.
F-27
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
8. Related
Party Transactions
(continued)
e) Amicus
Services Inc. (“Amicus”)
Amicus is
related to the Company by virtue of being controlled by the brother of a
director of the Company. Amicus charged consulting fees for IT and
computer related services rendered, as outlined below:
|
Year
ended
Dec
31, 2006
|
Year
ended
Dec
31, 2005
|
Year
ended
Dec
31, 2004
|
Period
from
Inception,
Aug
21, 2002
to
Dec 31, 2006
|
|||||||||||||
|
US
$
|
US
$
|
US
$
|
US$
|
|||||||||||||
|
Consolidated
Statement of Operations
|
||||||||||||||||
|
Consulting
fees
|
56,257 | 35,713 | 33,921 | 140,360 | ||||||||||||
Amicus
was also reimbursed on a cost recovery basis, for office costs, including
parking, office supplies and telephone as well as travel and hotel expenses
incurred during the periods as outlined and recorded below:
|
Consolidated
Statement of Operations
|
||||||||||||||||
|
General
and administrative
|
1,654 | 685 | 1,961 | 4,468 | ||||||||||||
|
Consolidated
Balance Sheets
|
||||||||||||||||
|
Accounts
receivable
|
3,725 | 2,530 | 967 | 10,274 | ||||||||||||
|
Property
and equipment
|
-- | -- | 1,599 | 1,599 | ||||||||||||
| 5,379 | 3,215 | 4,527 | 16,341 | |||||||||||||
At
December 31, 2006, the Company owed Amicus Services Inc. US$3,629 (December 31,
2005 - US$4,962) as a result of services provided and expenses incurred on
behalf of the Company. These amounts bear no interest and have no set
terms of repayment.
9. Income
Taxes
a) Income
tax expense
The
provision for income taxes in the consolidated financial statements differs from
the result which would have been obtained by applying the combined Federal,
State and Provincial tax rates to the loss before income taxes. This
difference results from the following items:
|
Year
ended
Dec
31, 2006
|
Year
ended
Dec
31, 2005
|
Year
ended
Dec
31, 2004
|
Period
from
Inception,
Aug
21, 2002
to
Dec 31, 2006
|
|||||||||||||
|
US
$
|
US
$
|
US
$
|
US$
|
|||||||||||||
|
Restated
note
5c
|
Restated
note
5c
|
Restated
note
5c
|
Restated
note
5c
|
|||||||||||||
|
Net
loss
|
(1,548,803 | ) | (3,162,660 | ) | (1,171,498 | ) | (6,415,151 | ) | ||||||||
|
Expected
tax rate
|
35.00 | % | 35.00 | % | 35.00 | % | ||||||||||
|
Expected
income tax recovery
|
(542,081 | ) | (1,106,931 | ) | (410,024 | ) | (2,246,286 | ) | ||||||||
|
Excess
of expected tax rate over tax
rate
of foreign affiliates
|
90,323 | 55,912 | 54,623 | 227,622 | ||||||||||||
|
Non-deductible
expenditures
|
605,618 | 965,779 | 122,589 | 1,716,006 | ||||||||||||
|
Utilization
of non-capital losses
|
(112,501 | ) | -- | -- | (112,501 | ) | ||||||||||
|
Acquisition
of losses
|
-- | -- | -- | 4,355,268 | ||||||||||||
|
Other
|
(175,173 | ) | 165,772 | 298,110 | 614,520 | |||||||||||
| (133,814 | ) | 80,532 | 65,298 | 4,554,629 | ||||||||||||
|
Valuation
allowance
|
133,814 | (80,532 | ) | (65,298 | ) | (4,554,629 | ) | |||||||||
|
Provision
for income taxes
|
-- | -- | -- | -- | ||||||||||||
F-28
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
9. Income
Taxes (continued)
b) Deferred
income taxes
The
Company has not recognized the deferred income tax asset because the benefit is
not more likely than not to be realized. The components of the net
deferred income tax asset consist of the following temporary
differences:
|
Dec
31, 2006
US
$
|
Dec
31, 2005
US
$
|
|||||||
|
Difference
between tax base and reported amounts of depreciable
assets
|
25,873 | 25,871 | ||||||
|
Non-capital
loss carry forwards
|
2,525,363 | 2,645,060 | ||||||
| 2,551,236 | 2,670,931 | |||||||
|
Valuation
allowance
|
(2,551,236 | ) | (2,670,931 | ) | ||||
|
Deferred
income tax asset
|
-- | -- | ||||||
c) Loss
carry forwards
At
December 31, 2006, the Company has US$7,820,966 of available loss carry forwards
to reduce taxable income for income tax purposes in the various jurisdictions as
outlined below which have not been reflected in these consolidated financial
statements.
|
Tax
Jurisdiction
|
Amount
US
$
|
Expiry
Dates
Commence
|
|||
|
United
States
|
7,168,590 |
2023
|
|||
|
Canada
|
152 |
2010
|
|||
|
Barbados
|
652,224 |
2012
|
|||
| 7,820,966 | |||||
10. Segmented
Information
The
Company’s petroleum and natural gas exploration activities are conducted in
India. Management of the Company considers the operations of the
Company as one operating segment. The following information relates
to the Company’s geographic areas of operation.
|
Dec
31, 2006
US
$
|
Dec
31, 2005
US
$
|
|||||||
|
Oil
& gas interests
|
||||||||
|
India
|
12,121,334 | 3,957,723 | ||||||
F-29
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
11. Commitments,
Contingencies and Guarantees
|
a)
|
Restricted
cash
|
|
|
i)
|
The
PSC's contain provisions whereby the joint venture participants must
provide the GOI a bank guarantee in the amount of 35% of the participant's
share of the minimum work program for a particular phase, to be undertaken
annually during the budget period April 1 to March 31. These
bank guarantees have been provided to the GOI and serve as guarantees for
the performance of such minimum work program and are in the form of
irrevocable letters of credit which are secured by restricted cash term
deposits of the Company in the same
amount.
|
|
|
The
restricted cash term deposits securing these bank guarantees are as
follows:
|
|
December
31, 2006
|
December
31, 2005
|
|||||||
|
US
$
|
US
$
|
|||||||
|
Exploration
Block
|
||||||||
|
Mehsana
|
711,445 | 195,055 | ||||||
|
Sanand/Miroli
|
905,000 | 197,430 | ||||||
|
Ankleshwar
|
600,000 | -- | ||||||
|
Tarapur
|
1,200,000 | -- | ||||||
|
DS
|
110,000 | -- | ||||||
| 3,526,445 | 392,485 | |||||||
|
|
ii)
|
The
Company has provided to its bankers as security for credit cards issued to
employees for business purposes two restricted cash term deposits, one in
the amount of US$30,000 and the other in the amount of
US$34,324 (Cdn$40,000).
|
|
|
b)
|
Production
Sharing Contracts
|
|
|
The
Company is required to expend funds on the exploration activities to
fulfill the terms of the minimum work commitment based on our
participating interest for Phase I pursuant to the PSC’s in respect of
each of our exploration blocks as
follows:
|
|
|
i)
|
Mehsana
Block - Acquire, process and interpret 75 sq kms of 3D seismic and drill 7
exploratory wells between 1,000 and 2,200
meters.
|
|
|
ii)
|
Sanand/Miroli
Block - Acquire, process and interpret 200 sq kms of 3D seismic and drill
12 exploratory wells between 1,500 and 3,000
meters.
|
|
|
iii)
|
Ankleshwar
Block - Acquire, process and interpret 448 sq kms of 3D seismic and drill
14 exploratory wells between 1,500 and 2,500
meters.
|
iv) DS
03 Block - Gravity and geochemical surveys and a 12,000 LKM aero magnetic
survey.
Under the
terms of all the PSC's, the Company is required to keep in force a financial and
performance guarantee.
F-30
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
11. Commitments,
Contingencies and Guarantees (continued)
|
|
c)
|
KG
Offshore Block
|
The first
phase of the exploration period relating to the PSC for the KG Offshore Block
has expired, as extended on August 29, 2005 through March 11, 2006, without the
required minimum of at least fourteen wells being drilled during the first
phase. On February 24, 2006, the management committee for the KG
Offshore Block recommended a further extension of the first phase of twelve
months to March 11, 2007. On February 9 2007 the parties to the PSC,
through GSPC as operator, gave notice under Article 3 of the PSC to the
Directorate General of Hydrocarbons, a body under the Ministry of Petroleum
& Natural Gas (“DGH”) and to the GOI to proceed to the next exploration
phase (Phase II) upon completion of Phase I which was expiring on March 11,
2007. It was also requested to not relinquish any of the contract
area at the end of Phase I. On March 12, 2007 DGH issued its approval
to enter into Phase II of the exploration program with an effective date of
March 12, 2007 subject to the following conditions: (1) Any decision by the GOI
on the substitution of the Work Program of Phase I will be binding on the
contractor; and (2) Any decision by the GOI on relinquishment of the 25% of
Original Contract Area (ie. 462 sq. kms.) as per Article 4.1 of the PSC would be
binding on the contractor. The extension of the first phase for the
18 months to March 11, 2007 would be deducted from the next succeeding
exploration phase. As such the second phase would have a term of one
year and expire March 11, 2008. As at March 23, 2007, five
exploratory wells have been drilled and one exploratory well, the KG#16 well, is
currently being drilled on the exploration block leaving eight exploration wells
to be drilled. A seventh well, the KG#28 is also being drilled on the
exploration block, but currently as an appraisal well and not as an exploration
well. Approval of entering into the second phase of exploration
under the PSC from the GOI is currently outstanding. Unless this
approval is granted, the Company may be liable for consequences of
non-fulfillment of the minimum work commitment in a given time frame under the
PSC. The PSC has provisions for termination of the PSC on account of
various reasons specified therein including material breach of the
contract. Termination rights can be exercised after giving ninety
days written notice. This failure to timely complete the minimum work
commitment, though there is no precedence, may be deemed by the
GOI to be a failure to comply with the provisions of the contract in a material
particular. The Company has been advised by GSPC, the operator, that
it is unaware of any precedent for such an occurrence.
The
termination of the PSC by the GOI would result
in the loss of the Company’s interest in the KG Offshore Block other than areas
determined to encompass "commercial discoveries". The PSC sets forth
procedures whereby the operator can obtain the review of the management
committee under the PSC as to whether a discovery on the exploration block
should be declared a commercial discovery under the PSC. Those
procedures have not been completed at present with respect to the discovery on
the KG Offshore Block and, accordingly, as of March 23, 2007, no areas on the KG
Offshore Block have been determined formally to encompass "commercial
discoveries" as that
term is defined under the PSC.
In the
event the PSC is terminated by the GOI, or in the event the work program is not
fulfilled by the end of the relevant exploration phase, each party to the PSC is
to pay to the GOI its participating interest share of an amount which is equal
to the amount that would be required to complete the minimum work program for
that phase.
Certain
exploration costs related to the KG Offshore Block are incurred solely by and on
behalf of the Company in providing its services under the CIA and are therefore
not reimbursable under the CIA. As such, these costs have been
capitalized in the Company's accounts under Oil and gas interests and at
December 31, 2006 amount to US$3,111,676.
F-31
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
11. Commitments,
Contingencies and Guarantees (continued)
d) Tarapur
Block
|
|
As
the holder of a participating interest in the Tarapur Block, the Company
is required to fund its 20% share of all exploration and development costs
incurred on the exploration block. To December 31, 2006,
US$3,972,765 has been incurred under the terms of the Company's agreement
with GSPC. Of this amount, US$3,017,646 has been paid to GSPC
and US$955,119 is in accounts payable at December 31, 2006. The
Company has budgeted to expend approximately US$2.7 million for
exploration activities under the terms of the agreement over the period
April 1, 2007 to November 22, 2007. These activities include
the drilling of 3 exploration wells and the acquisition of 90 sq kms of
3-D seismic. Under the terms of the agreement, the Company is
required to keep in force a financial and performance guarantee securing
its performance under the Tarapur
PSC.
|
|
|
e)
|
Corporate
Head Office
|
Our
corporate head office is located at Suite #310, 605 – 1 Street SW, Calgary,
Alberta, T2P 3S9 Canada. These premises are leased for a term of one year ending
April 30, 2007 at an annual rental of $56,261 for base rent and operating
costs. These premises include approximately 2,927 square feet which
we consider adequate for our present activities. We are currently in
negotiations to renew this lease at market prices for a further two year term to
April 30, 2009.
|
|
12.
|
Comparative
Figures
|
|
|
a)
|
As
the Company is in its development stage, these figures represent the
accumulated amounts of the continuing entity for the period from
inception, being August 21, 2002 to December 31,
2006.
|
|
b)
|
Certain
comparative figures have been reclassified to conform with the
presentation adopted in the current
year.
|
13. Subsequent
Event
a) NELP-VI
Blocks
On March
2, 2007, the Company along with its joint venture partners executed PSC's with
the GOI covering four new exploration blocks awarded under the sixth round of
the New Exploration Licensing Policy (NELP-VI).
The
Company is required to fund its participating interest for Phase I exploration
and development costs incurred in fulfilling the minimum work commitments under
these PSC's as outlined below. The Company's share of these costs is
estimated to total approximately US$28.0 million for all four blocks over the
four years of Phase I.
|
|
i)
|
Exploration
Block KG-ONN-2004/1 (KG Onshore Block) - Reprocess 564 LKM of 2-D seismic;
conduct a gravity and magnetic and geochemical survey; acquire, process
and interpret 548 sq kms of 3-D seismic; and drill 12 exploratory wells
between 2,000 and 5,000 meters.
|
|
|
ii)
|
Exploration
Block RJ-ONN-2004/2 (RJ Block 20) - Reprocess 463 LKM of 2-D seismic;
conduct a gravity and magnetic and geochemical survey; acquire, process
and interpret 250 LKM of 2-D seismic and 700 sq kms of 3-D seismic; and
drill a total of 12 exploratory wells between 2,000 and 2,500
meters.
|
|
|
iii)
|
Exploration
Block RJ-ONN-2004/3 (RJ Block 21) - Reprocess 463 LKM of 2-D seismic;
conduct a gravity and magnetic and geochemical survey; acquire, process
and interpret 310 LKM of 2-D seismic and 611 sq kms of 3-D seismic; and
drill a total of 8 exploratory wells between 2,000 and 2,500
meters.
|
F-32
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
|
|
iv)
|
Exploration
Block DS-ONN-2004/1 (DS 04 Block) - Gravity and magnetic and geochemical
surveys; acquire, process and interpret 325 LKM of 2-D seismic; and drill
10 core holes to a depth of approximately 500
meters.
|
Under the
terms of all the PSC's, the Company will be required to keep in force a
financial and performance guarantee.
b) India
office condominium
On
November 21, 2006 the Company entered into a Memorandum of Understanding with
Creative InfoCity Ltd of Gandhinagar, India to acquire an office condominium of
approximately 11,203 sq. ft. A deposit of US$28,090 was paid which is
reflected in the financial statements in Property and Equipment (note
3). As a formal agreement has not yet been executed, the preliminary
costs and resulting liability in the amount of $365,880 is not yet reflected in
these financial statements.
14. Recent
Accounting Standards
a) Accounting
for Uncertainty in Income Taxes
In June
2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
Income Taxes” (“FIN 48”), an interpretation of FASB Statement No. 109,
“Accounting for Income Taxes”. FIN 48 prescribes a recognition
threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax
return. The Interpretation requires that the Corporation recognize in
the financial statements, the impact of a tax position, if that position is more
likely than not of being sustained on audit, based on the technical merits of
the position. FIN 48 also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods and
disclosure. The provisions of FIN 48 are effective beginning January
1, 2007 with the cumulative effect of the change in accounting principle
recorded as an adjustment to the opening balance of deficit. The
Corporation is currently evaluating the impact FIN 48 will have on its
consolidated financial statements.
b) Fair
Value Measurements
In
September 2006, the FASB issued FAS No. 157, “Fair Value Measurements” (“FAS
157”), which defines fair value, establishes a framework for measuring fair
value and expands disclosures about fair value measurements. FAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years, and is
applicable beginning in the first quarter of 2008. The Company is currently
evaluating the impact that FAS 157 will have on its consolidated financial
statements.
c) The
Fair Value Option for Financial Assets and Financial Liabilities
In
February 2007, the FASB issued FAS No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities – Including an amendment of FASB Statement No.
115”, (“FAS 159”) which permits entities to choose to measure many financial
instruments and certain other items at fair value at specified election dates. A
business entity is required to report unrealized gains and losses on items for
which the fair value option has been elected in earnings at each subsequent
reporting date. This statement is expected to expand the use of fair value
measurement. FAS 159 is effective for financial statements issued for fiscal
years beginning after November 15, 2007, and interim periods within those fiscal
years, and is applicable beginning in the first quarter of 2008. The Company is
currently evaluating the impact that FAS 159 will have on its consolidated
financial statements.
F-33
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
15. Selected
Quarterly Information (Unaudited)
The
following represents selected quarterly financial information:
|
3
months ended
|
3
months ended
|
6
months ended
|
3
months ended
|
9
months ended
|
Year
ended
|
|||||||||||||||||||
|
Mar
31
|
June
30
|
June
30
|
Sept
30
|
Sept
30
|
Dec
31
|
|||||||||||||||||||
|
2006
|
US$
|
US$
|
US$
|
US$
|
US$
|
US$
|
||||||||||||||||||
|
Interest
income
|
399,869 | 427,749 | 827,618 | 461,123 | 1,288,741 | 1,751,550 | ||||||||||||||||||
|
Net
earnings (loss) and
comprehensive
earnings (loss)
|
||||||||||||||||||||||||
|
As
previously reported
|
(31,726 | ) | (125,873 | ) | (157,599 | ) | (368,527 | ) | (526,126 | ) | (1,150,690 | ) | ||||||||||||
|
Adjustment
|
33,713 | -- | 33,713 | (87,769 | ) | (54,056 | ) | (398,113 | ) | |||||||||||||||
|
As
restated
|
1,987 | (125,873 | ) | (123,886 | ) | (456,296 | ) | (580,182 | ) | (1,548,803 | ) | |||||||||||||
|
Net
earnings (loss) per share
-
basic and diluted
|
||||||||||||||||||||||||
|
As
previously reported
|
0.00 | 0.00 | 0.00 | (0.01 | ) | (0.01 | ) | (0.02 | ) | |||||||||||||||
|
Adjustment
|
0.00 | 0.00 | 0.00 | 0.00 | 0.00 | (0.01 | ) | |||||||||||||||||
|
As
restated
|
0.00 | 0.00 | 0.00 | (0.01 | ) | (0.01 | ) | (0.03 | ) | |||||||||||||||
|
Deficit
|
||||||||||||||||||||||||
|
As
previously reported
|
(1,871,710 | ) | (1,997,583 | ) | (2,366,110 | ) | (2,990,674 | ) | ||||||||||||||||
|
Adjustment
- prior years
|
(3,026,364 | ) | (3,026,364 | ) | (3,026,364 | ) | (3,026,364 | ) | ||||||||||||||||
|
Adjustment
- current period
|
33,713 | 33,713 | (54,056 | ) | (398,113 | ) | ||||||||||||||||||
|
As
restated
|
(4,864,361 | ) | (4,990,234 | ) | (5,446,530 | ) | (6,415,151 | ) | ||||||||||||||||
|
Oil
and gas interests
|
||||||||||||||||||||||||
|
As
previously reported
|
2,226,981 | 1,821,069 | 4,048,050 | 1,495,199 | 5,543,249 | 7,506,075 | ||||||||||||||||||
|
Adjustment
- current period
|
515,776 | (78,376 | ) | 437,400 | 37,858 | 475,258 | 657,536 | |||||||||||||||||
|
As
restated - current period
|
2,742,757 | 1,742,693 | 4,485,450 | 1,533,057 | 6,018,507 | 8,163,611 | ||||||||||||||||||
|
Opening
balance - beginning of year
|
3,957,723 | 3,957,723 | 3,957,723 | 3,957,723 | ||||||||||||||||||||
|
As
restated
|
6,700,480 | 8,443,173 | 9,976,230 | 12,121,334 | ||||||||||||||||||||
|
Stock-based
compensation
|
||||||||||||||||||||||||
|
As
previously reported
|
||||||||||||||||||||||||
|
General
and administrative
|
-- | -- | -- | 167,419 | 380,460 | 563,551 | ||||||||||||||||||
|
Consulting
|
-- | -- | -- | 252,090 | 252,090 | 626,625 | ||||||||||||||||||
|
Stock-based
compensation
|
118,808 | 94,233 | 213,041 | -- | -- | -- | ||||||||||||||||||
| 118,808 | 94,233 | 213,041 | 419,509 | 632,550 | 1,190,176 | |||||||||||||||||||
|
Oil
and gas interests
|
-- | 33,712 | 67,425 | 326,385 | 393,810 | 766,689 | ||||||||||||||||||
| 118,808 | 127,945 | 280,466 | 745,894 | 1,026,360 | 1,956,865 | |||||||||||||||||||
|
Adjustment
|
||||||||||||||||||||||||
|
General
and administrative
|
85,095 | 94,233 | 179,328 | 193,970 | 373,298 | 484,926 | ||||||||||||||||||
|
Consulting
|
-- | -- | -- | (106,201 | ) | (106,201 | ) | (86,813 | ) | |||||||||||||||
|
Stock-based
compensation
|
(118,808 | ) | (94,233 | ) | (213,041 | ) | -- | -- | -- | |||||||||||||||
| (33,713 | ) | -- | (33,713 | ) | 87,769 | 267,097 | 398,113 | |||||||||||||||||
|
Oil
and gas interests
|
515,776 | (78,376 | ) | 437,400 | 37,857 | 475,258 | 657,536 | |||||||||||||||||
| 482,063 | (78,376 | ) | 403,687 | 125,626 | 742,355 | 1,055,649 | ||||||||||||||||||
|
As
restated
|
||||||||||||||||||||||||
|
General
and administrative
|
85,095 | 94,233 | 179,328 | 361,389 | 753,758 | 1,048,477 | ||||||||||||||||||
|
Consulting
|
-- | -- | -- | 145,889 | 145,889 | 539,812 | ||||||||||||||||||
|
Stock-based
compensation
|
-- | -- | -- | -- | -- | -- | ||||||||||||||||||
| 85,095 | 94,233 | 179,328 | 507,278 | 899,647 | 1,588,289 | |||||||||||||||||||
|
Oil
and gas interests
|
515,776 | (44,664 | ) | 504,825 | 364,242 | 869,068 | 1,424,225 | |||||||||||||||||
| 600,871 | 49,569 | 684,153 | 871,520 | 1,768,715 | 3,012,514 | |||||||||||||||||||
F-34
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
15. Selected
Quarterly Information (Unaudited) (continued)
|
3
months ended
|
3
months ended
|
6
months ended
|
3
months ended
|
9
months ended
|
Year
ended
|
|||||||||||||||||||
|
Mar
31
|
June
30
|
June
30
|
Sept
30
|
Sept
30
|
Dec
31
|
|||||||||||||||||||
|
2005
|
US$
|
US$
|
US$
|
US$
|
US$
|
US$
|
||||||||||||||||||
|
Interest
income
|
14,677 | 19,609 | 34,286 | 77,693 | 111,979 | 462,174 | ||||||||||||||||||
|
Net
earnings (loss) and
comprehensive
earnings (loss)
|
||||||||||||||||||||||||
|
As
previously reported
|
(176,847 | ) | (198,511 | ) | (375,358 | ) | (217,348 | ) | (592,706 | ) | (480,980 | ) | ||||||||||||
|
Adjustment
- current period
|
(78,791 | ) | (1,187,023 | ) | (1,265,814 | ) | (316,583 | ) | (1,582,397 | ) | (2,681,680 | ) | ||||||||||||
|
As
restated
|
(255,638 | ) | (1,385,534 | ) | (1,641,172 | ) | (533,931 | ) | (2,175,103 | ) | (3,162,660 | ) | ||||||||||||
|
Net
earnings (loss) per share
-
basic and diluted
|
||||||||||||||||||||||||
|
As
previously reported
|
0.00 | 0.00 | (0.01 | ) | 0.00 | (0.01 | ) | (0.01 | ) | |||||||||||||||
|
Adjustment
- current period
|
(0.01 | ) | (0.03 | ) | (0.02 | ) | (0.01 | ) | (0.03 | ) | (0.05 | ) | ||||||||||||
|
As
restated
|
(0.01 | ) | (0.03 | ) | (0.03 | ) | (0.01 | ) | (0.04 | ) | (0.06 | ) | ||||||||||||
|
Deficit
|
||||||||||||||||||||||||
|
As
previously reported
|
(1,535,851 | ) | (1,734,362 | ) | (1,951,710 | ) | (1,839,984 | ) | ||||||||||||||||
|
Adjustment
- prior years
|
(344,684 | ) | (344,684 | ) | (344,684 | ) | (344,684 | ) | ||||||||||||||||
|
Adjustment
- current period
|
(78,791 | ) | (1,265,814 | ) | (1,582,397 | ) | (2,681,680 | ) | ||||||||||||||||
|
As
restated
|
(1,959,326 | ) | (3,344,860 | ) | (3,878,791 | ) | (4,866,348 | ) | ||||||||||||||||
| ) | ||||||||||||||||||||||||
|
Oil
and gas interests
|
||||||||||||||||||||||||
|
As
previously reported
|
916,506 | 38,742 | 955,248 | 146,809 | 1,102,057 | 1,578,124 | ||||||||||||||||||
|
Adjustment
- current period
|
31,153 | 744,651 | 775,804 | 200,732 | 976,536 | 1,672,576 | ||||||||||||||||||
|
As
restated - current period
|
947,659 | 783,393 | 1,731,052 | 347,541 | 2,078,593 | 3,250,700 | ||||||||||||||||||
|
Opening
balance - beginning of year
|
707,023 | 707,023 | 707,023 | 707,023 | ||||||||||||||||||||
|
As
restated
|
1,654,682 | 2,438,075 | 2,785,616 | 3,957,723 | ||||||||||||||||||||
|
Stock-based
compensation
|
||||||||||||||||||||||||
|
As
previously reported
|
||||||||||||||||||||||||
|
Consulting
|
-- | -- | -- | -- | -- | -- | ||||||||||||||||||
|
Oil
and gas interests
|
-- | -- | -- | -- | -- | -- | ||||||||||||||||||
| -- | -- | -- | -- | -- | -- | |||||||||||||||||||
|
Adjustment
|
||||||||||||||||||||||||
|
Consulting
|
78,791 | 1,187,023 | 1,265,814 | 316,583 | 1,582,397 | 2,681,680 | ||||||||||||||||||
|
Oil
and gas interests
|
31,153 | 744,651 | 775,804 | 200,732 | 976,536 | 1,672,576 | ||||||||||||||||||
| 109,944 | 1,931,674 | 2,041,618 | 517,315 | 2,558,933 | 4,354,256 | |||||||||||||||||||
|
As
restated
|
||||||||||||||||||||||||
|
Consulting
|
78,791 | 1,187,023 | 1,265,814 | 316,583 | 1,582,397 | 2,681,680 | ||||||||||||||||||
|
Oil
and gas interests
|
31,153 | 744,651 | 775,804 | 200,732 | 976,536 | 1,672,576 | ||||||||||||||||||
| 109,944 | 1,931,674 | 2,041,618 | 517,315 | 2,558,933 | 4,354,256 | |||||||||||||||||||
F-35
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Notes
to the Consolidated Financial Statements
December
31, 2006
15. Selected
Quarterly Information (Unaudited) (continued)
|
3
months ended
|
3
months ended
|
6
months ended
|
3
months ended
|
9
months ended
|
Year
ended
|
|||||||||||||||||||
|
Mar
31
|
June
30
|
June
30
|
Sept
30
|
Sept
30
|
Dec
31
|
|||||||||||||||||||
|
2004
|
US$
|
US$
|
US$
|
US$
|
US$
|
US$
|
||||||||||||||||||
|
Interest
income
|
5,883 | 7,092 | 12,975 | 6,386 | 19,361 | 31,591 | ||||||||||||||||||
|
Net
earnings (loss) and
comprehensive
earnings (loss)
|
||||||||||||||||||||||||
|
As
previously reported
|
(201,539 | ) | (306,205 | ) | (507,744 | ) | (163,165 | ) | (670,909 | ) | (867,496 | ) | ||||||||||||
|
Adjustment
- current period
|
(396,065 | ) | (240,838 | ) | (636,903 | ) | 111,139 | (525,764 | ) | (304,002 | ) | |||||||||||||
|
As
restated
|
(597,604 | ) | (547,043 | ) | (1,144,647 | ) | (52,026 | ) | (1,196,673 | ) | (1,171,498 | ) | ||||||||||||
|
Net
earnings (loss) per share
-
basic and diluted
|
||||||||||||||||||||||||
|
As
previously reported
|
(0.01 | ) | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.02 | ) | (0.02 | ) | ||||||||||||
|
Adjustment
- current period
|
(0.01 | ) | (0.01 | ) | (0.02 | ) | 0.01 | (0.01 | ) | (0.01 | ) | |||||||||||||
|
As
restated
|
(0.02 | ) | (0.02 | ) | (0.03 | ) | 0.00 | (0.03 | ) | (0.03 | ) | |||||||||||||
|
Deficit
|
||||||||||||||||||||||||
|
As
previously reported
|
(693,047 | ) | (999,252 | ) | (1,162,417 | ) | (1,359,004 | ) | ||||||||||||||||
|
Adjustment
- prior years
|
(40,682 | ) | (40,682 | ) | (40,682 | ) | (40,682 | ) | ||||||||||||||||
|
Adjustment
- current period
|
(396,065 | ) | (636,903 | ) | (525,764 | ) | (304,002 | ) | ||||||||||||||||
|
As
restated
|
(1,129,794 | ) | (1,676,837 | ) | (1,728,863 | ) | (1,703,688 | ) | ||||||||||||||||
|
Oil
and gas interests
|
||||||||||||||||||||||||
|
As
previously reported
|
83,568 | 186,650 | 270,218 | 67,741 | 337,959 | 460,016 | ||||||||||||||||||
|
Adjustment
- current period
|
59,424 | 35,918 | 95,342 | (14,789 | ) | 80,553 | 46,253 | |||||||||||||||||
|
As
restated - current period
|
142,992 | 222,568 | 365,560 | 52,952 | 418,512 | 506,269 | ||||||||||||||||||
|
Opening
balance - beginning of year
|
200,754 | 200,754 | 200,754 | 200,754 | ||||||||||||||||||||
|
As
restated
|
343,746 | 566,314 | 619,266 | 707,023 | ||||||||||||||||||||
|
Stock-based
compensation
|
||||||||||||||||||||||||
|
As
previously reported
|
||||||||||||||||||||||||
|
Consulting
|
-- | -- | -- | -- | -- | -- | ||||||||||||||||||
|
Oil
and gas interests
|
-- | -- | -- | -- | -- | -- | ||||||||||||||||||
| -- | -- | -- | -- | -- | -- | |||||||||||||||||||
|
Adjustment
|
||||||||||||||||||||||||
|
Consulting
|
396,065 | 240,838 | 636,903 | (111,139 | ) | 525,764 | 304,002 | |||||||||||||||||
|
Oil
and gas interests
|
59,424 | 35,918 | 95,342 | (14,789 | ) | 80,553 | 46,253 | |||||||||||||||||
| 455,489 | 276,756 | 732,245 | (125,928 | ) | 606,317 | 350,255 | ||||||||||||||||||
|
As
restated
|
||||||||||||||||||||||||
|
Consulting
|
396,065 | 240,838 | 636,903 | (111,139 | ) | 525,764 | 304,002 | |||||||||||||||||
|
Oil
and gas interests
|
59,424 | 35,918 | 95,342 | (14,789 | ) | 80,553 | 46,253 | |||||||||||||||||
| 455,489 | 276,756 | 732,245 | (125,928 | ) | 606,317 | 350,255 | ||||||||||||||||||
Quarterly
net earnings (loss) and comprehensive earnings (loss) and net earnings (loss)
per share - basic and diluted have been restated due to an error in the
classification and calculation for stock-based compensation for non-employee
consultants.
F-36
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
GeoGlobal
Resources Inc.
By: /s/ Allan J.
Kent
Allan
J. Kent
Executive
Vice President and CFO
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Company and in the
capacities and on the dates indicated.
|
Signature
|
Title
|
Date
|
||
|
/s/ Jean Paul Roy
Jean
Paul Roy
|
President,
Chief Executive Officer and Director
|
June
3, 2008
|
||
|
/s/ Allan J. Kent
Allan
J. Kent
|
Executive
Vice President, Chief Financial Officer and Director
|
June
3, 2008
|
||
|
/s/ Brent J. Peters
Brent
J. Peters
|
Director
|
June
3, 2008
|
||
|
/s/ Peter R. Smith
Peter
R. Smith
|
Chairman
of the Board and Director
|
June
3, 2008
|
||
|
/s/ Michael J. Hudson
Michael
J. Hudson
|
Director
|
June
3, 2008
|
||
|
/s/ Dr. Avinash Chandra
Dr.
Avinash Chandra
|
Director
|
June
3, 2008
|