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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Galaxy Energy Corp. | AMEX:GAX | AMEX | Ordinary Share |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.00 | - |
ý
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Preliminary
Proxy Statement
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¨
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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¨
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Definitive
Proxy Statement
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¨
|
Definitive
Additional Materials
|
¨
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Soliciting
Material Pursuant to §240.14a-12
|
ý
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No
fee required.
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¨
|
Fee
computed on table below per Exchange Act Rule 14c-5(g) and 0-11.
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1)
|
Title
of each class of securities to which transaction applies:
|
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2)
|
Aggregate
number of securities to which transaction applies:
|
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3)
|
Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is
calculated and state how it was determined):
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4)
|
Proposed
maximum aggregate value of transaction:
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5)
|
Total
fee paid:
|
¨
|
Fee
paid previously with preliminary materials
|
¨
|
Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid
previously. Identify the previous filing by registration statement
number,
or the Form or Schedule and the date of its filing.
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|
1)
|
Amount
Previously Paid:
|
|
2)
|
Form,
Schedule or Registration Statement No.:
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3)
|
Filing
Party:
|
|
4)
|
Date
Filed:
|
By
order of the Board of Directors,
|
||
Denver,
Colorado
|
Marc
E. Bruner
|
|
___________,
2008
|
President
and Chief Executive Officer
|
Q.
|
What
proposal are shareholders
being asked to consider at the upcoming special
meeting?
|
A.
|
The
Company is seeking approval of the Reverse Stock Split whereby any
block
of 20 shares of Common Stock held by a shareholder will be converted
into
one share of Common Stock and fractional shares will be rounded up
to the
nearest whole share. The Company is also seeking approval to issue
Common
Stock upon the conversion of or in lieu of cash payments on the principal
and interest of the Subordinated Debts to the extent such issuance
equals
or exceeds 20% of the Company’s outstanding Common Stock.
|
Q.
|
Are
the two proposals
related?
|
A.
|
Yes.
The two proposals are part of management’s plan to restructure the
Company. The Company is proposing these actions to eliminate
its Subordinated Debts by converting them into
equity. Management considers the elimination of the Company’s
debts to be an indispensable step toward allowing the Company to
refocus
its efforts upon profitable development of its properties. If
the Company does not eliminate its debts, it will need to obtain
cash to
service those debts, instead of obtaining cash to develop its
properties. If the Company cannot obtain the necessary cash, it
may default upon its obligations as they become due and may not be
able to
continue operations of its properties.
The
Reverse Stock Split is an integral part of management’s plans to eliminate
debt and maintain the listing of its Common Stock on the American
Stock
Exchange (“AMEX”). The Company’s stock price has declined to a
level where AMEX is concerned that the Company’s Common Stock may not be
suitable for auction market trading. Also, at current market
prices, conversion of the Subordinated Debts may not be possible
because
the Company may not have enough authorized shares of Common Stock
to
convert all of the outstanding Subordinated Debts to equity. By
undertaking the Reverse Stock Split, the Company can increase its
market
price for the Common Stock and, therefore, enable conversion of the
Subordinated Debts at a higher conversion price. A higher
conversion price will result in fewer shares of Common Stock needed
for
issuance in order to satisfy the Subordinated
Debts.
|
Q.
|
Why
is the Company seeking
shareholder approval to implement the Reverse Stock Split of the
Company’s
outstanding Common Stock?
|
A.
|
Colorado
Revised Statutes require a vote of shareholders to implement the
Reverse
Stock Split. Also, the Company is proposing the Reverse Stock Split
as a
strategy to increase the trading price of the Company’s Common Stock in an
effort to maintain its listing on AMEX.
|
Q:
|
What
do I do with my stock
certificates after the Reverse Stock
Split?
|
A:
|
It
will not be necessary for shareholders to exchange their existing
stock
certificates for post-Reverse Stock Split certificates. Outstanding
stock
certificates should not be destroyed or sent to the Company. Delivery
of
your certificates issued prior to the effective date of the Reverse
Stock
Split will constitute “good delivery” of shares in transactions subsequent
to the Reverse Stock Split. Certificates representing
post-Reverse Stock Split shares will be issued with respect to transfers
completed after the Reverse Stock Split. New certificates will
also be issued upon the request of any shareholder, subject to normal
requirements as to proper endorsement, signature guarantee, if required,
and payment of applicable taxes.
|
Q:
|
What
if I have lost my
certificate?
|
A:
|
If
you have lost your certificate, you can contact the Company’s transfer
agent to have a new certificate issued. You may be required to
post a bond or other security to reimburse the Company for any damages
or
costs if the certificate is later delivered for sale of
transfer. Our transfer agent may be reached at:
Computershare
Trust Company, Inc.
350
Indiana St., Suite 800
Golden,
Colorado 80401
Phone:
(303) 262-0600
Fax:
(303) 262-0632
|
Q.
|
Why
is the Company seeking
shareholder approval to issue Common Stock upon the conversion of
or in
lieu of cash payments on the Subordinated Debts to the extent such
issuance equals or exceeds 20% of the Company’s outstanding Common
Stock?
|
A.
|
The
AMEX rules require shareholder approval for any sale, issuance, or
potential issuance of stock at a price below the greater of the book
or
market value, where the amount of stock being issued or potentially
issuable is equal to or in excess of 20% of the common stock outstanding.
Because of this rule, the Company is seeking approval to issue Common
Stock upon the conversion of or in lieu of cash payments on the
Subordinated Debts to the extent such issuance would equal or exceed
20%
of the Company’s outstanding Common Stock.
|
Q.
|
Why
does the Company want to
convert the Subordinated Debts into Common
Stock?
|
A.
|
The
Company is seeking to restructure its Subordinated Debts so that
the
Company has the financial strength to continue to operate and make
the
necessary capital investments in its properties. In addition, such
debt
conversion will bring the Company into compliance with one of the
AMEX
listing requirements with which the Company is currently out of
compliance. AMEX has rules that require listed companies to maintain
the
balance of shareholders’ equity at or above $2,000,000, $4,000,000, and
$6,000,000 if such companies have sustained losses from continuing
operations and/or net losses in two out of three, in three out of
four,
and in the preceding five most recent fiscal years,
respectively. The Company must satisfy the $6,000,000 threshold
and the Company’s current shareholders’ equity balance does not satisfy
this minimum requirement. Therefore, the Company is seeking to
convert its Subordinated Debt into equity to increase shareholders’ equity
on its balance sheet and maintain its listing of Common Stock on
AMEX.
|
Q.
|
Why
were the Subordinated Debts
issued?
|
A.
|
On
March 1, 2005, the Company completed a private placement of $7,695,000
in
subordinated convertible notes to fund the Company’s entry into the
Piceance Basin project. On April 25, 2006 and June 20, 2006,
the Company issued $7,000,000 of subordinated convertible debentures
to
cover general working capital needs and development costs for the
Company’s existing properties. On August 31, 2007, the Company
issued an unsecured subordinated promissory note to PetroHunter
Energy
Corporation (“PetroHunter”) in the amount of $2,493,778 for earnest money
and operating costs paid by PetroHunter. On
December 29, 2007, the Company issued a promissory note to Partner
Marketing AG in the principal amount of $600,000 to cover general
working
capital needs. From September 2006 through December 31, 2007,
the Company has issued a series of promissory notes to the Bruner
Family
Trust UTD March 28, 2005 (the “Bruner Trust”) totaling $14,775,000 in
order to service the Company’s other outstanding debts and to cover
general working capital needs. In addition, the Bruner Trust
purchased a note in the principal amount of $2,049,728 from one
of the
Company’s creditors.
|
Q.
|
What
happens if the proposals
are approved?
|
A.
|
If
the proposals are approved, then (1) the Company will reverse split
the
Common Stock on a 20-to-1 basis and issue one whole share in lieu
of
issuing any fractional shares and (2) the holders of the Subordinated
Debts may, at their option, convert their Subordinated Debts into
Common
Stock even if the number of shares issued equals or exceeds 20% of
the
Company’s outstanding Common Stock. We have not reached an
agreement with any Subordinated Debt holders to convert their debt
into
Common Stock.
|
Q.
|
What
if the proposals not are
approved?
|
A.
|
If
the Reverse Stock Split does not receive shareholder approval, the
Company
may not be able to maintain its listing of the Common Stock on AMEX
and it
may not have enough authorized Common Stock to convert the Subordinated
Debts to Common Stock. If the proposal to issue Common Stock in lieu
of
cash payments on the Subordinated Debts does not receive shareholder
approval, and if the issuance equals or exceeds 20% of the Company’s
outstanding Common Stock, then the Company may be required to redeem
for
cash the portion of the Subordinated Debts that is not convertible
due to
such 20% limitation. Since the Company has not been generating
sufficient revenue to support its operations and does not have sufficient
cash to make such a redemption, the Company is likely to default
on its
obligations under the Subordinated Debts.
|
Q.
|
What
if Proposal 2 is approved
and Proposal 1 is not
approved?
|
A.
|
If
the Reverse Stock Split does not receive shareholder approval, the
Company
will not undertake the conversion of the Subordinated Debts into
Common
Stock, even if the conversion of the Subordinated Debts is approved.
Both
Proposal 1 and Proposal 2 are integral parts of management’s plan to
restructure and refocus the Company. The Company seeks approval
of both proposals in order to maintain its listing of Common Stock
on
AMEX.
|
Q.
|
Can
the conversion of the
Subordinated Debts allow the holders of the debt instruments to obtain
control of the Company?
|
A.
|
The
issuance of Common Stock to convert the Subordinated Debts will
concentrate control of the Company in the Bruner Trust. Marc E.
Bruner is
one of the trustees of the Bruner Trust and is the president and
a
director of the Company. Assuming conversion of all the Subordinated
Debts, Marc E. Bruner could beneficially own and control 43.0%
of the
issued and outstanding post-Reverse Stock Split shares of Common
Stock,
based on a conversion price of $0.03 per pre-Reverse Stock Split
Share.
Marc E. Bruner’s beneficial ownership position upon conversion of the
Subordinated Debts, together with his position as president and
a director
of the Company, will give him significant influence over the Company
after
conversion of the Subordinated Debts.
|
Q:
|
Can
I require the Company to
purchase my stock?
|
A:
|
No,
the transactions contemplated by the proposals do not give rise to
dissenters’ rights. Pursuant to the Colorado Revised Statutes
Section 7-113-102, you are not entitled to an appraisal and purchase
of
your Common Stock as a result of the Reverse Stock Split or the issuance
of Common Stock upon the conversion of the Subordinated Debts into
Common
Stock.
|
Shares
of Common Stock Authorized
|
Shares
of Common Stock Issued and Outstanding
|
Shares
of Common Stock Available for Issuance
|
|
As
of [RECORD DATE]
|
400,000,000
|
83,661,968
|
316,338,032
|
After
20-to-1 Reverse Stock Split
|
400,000,000
|
4,183,099
(1)
|
395,816,901
(1)
|
______________________ | |||
(1)
These numbers are approximate.
|
·
|
There
can be no assurance that the market price per share of the Common
Stock
after the Reverse Stock Split will remain unchanged or increase in
proportion to the reduction in the number of shares of the Common
Stock
outstanding before the Reverse Stock Split. Accordingly, the
total market capitalization of the Company after the Reverse Stock
Split
may be lower than the total market capitalization before the Reverse
Stock
Split.
|
·
|
After
the Reverse Stock Split, if the market price of the Common Stock
declines,
the percentage decline may be greater than would occur in the absence
of a
Reverse Stock Split.
|
·
|
There
can be no assurance that the market price of the Common Stock will
not
decline below the AMEX minimum listing requirements after the Reverse
Stock Split.
|
·
|
The
reduced number of shares that would be outstanding after the Reverse
Stock
Split could adversely affect the liquidity of the Common
Stock.
|
Principal
and Interest as of January 31, 2008
|
Company
Plans
|
|||
Senior
Secured Debt
|
$
|
11,126,877
|
(1)
|
The
Company does not plan to convert this debt into equity, rather
the plan is
to sell enough property to pay off this debt entirely.
|
Subordinated
Debt
|
41,443,162
|
(2)
|
The
Company plans to convert all of this debt into equity, subject
to the
Subordinated Debt holders’ agreement.
|
|
$
|
52,570,040
|
(3)
|
||
_________________________ | ||||
(1) Assumes
the payment of $500,000 on January 2, 2008, pursuant to the terms
of the
debt agreements. Includes $11,000,000 of principal and $126,877
of accrued
interest, accruing at the rate of Prime + 7.5%. Note terms require
$500,000 monthly payments, a $6,000,000 principal payment on March
1,
2008, and a final balloon payment of all principal and interest
on October
1, 2008.
|
||||
(2) Assumes
an additional $250,000 borrowed in January 2008.
|
||||
(3) This
total does not include outstanding trade accounts
payable.
|
Principal
|
Accrued
Interest as of January 31, 2008
|
Total
|
||||||
March
2005
|
$
|
7,695,000
|
$
|
3,166,124
|
$
|
10,861,124
|
||
April
and June 2006
|
7,000,000
|
1,810,068
|
8,810,068
|
|||||
PetroHunter
|
2,493,777
|
83,627
|
2,577,404
|
|||||
Partner
Marketing
AG
|
600,000
|
4,471
|
604,471
|
|||||
Bruner
Trust
(1)
|
17,074,728
|
1,515,367
|
18,590,095
|
|||||
$
|
34,863,505
|
$
|
6,579,657
|
$
|
41,443,162
|
|||
_________________________ | ||||||||
(1) Assumes
an additional $250,000 borrowed in January
2008.
|
Issue
Date
|
Due
Date
|
Principal
Amount
|
|
January
14,
2004
|
June
30,
2007
|
$
|
2,049,728
|
September
28, 2006
|
January
26, 2007
|
2,500,000
|
|
November
1, 2006
|
March
1, 2007
|
1,000,000
|
|
November
13, 2006
|
March
13, 2007
|
500,000
|
|
November
30, 2006
|
March
30, 2007
|
1,500,000
|
|
January
31, 2008
|
May
31, 2007
|
500,000
|
|
February
28, 2007
|
June
28, 2007
|
900,000
|
|
March
30, 2007
|
July
28, 2007
|
1,350,000
|
|
April
25, 2007
|
August
23, 2007
|
1,200,000
|
|
May
4, 2007
|
September
1, 2007
|
450,000
|
|
May
31, 2007
|
September
28, 2007
|
600,000
|
|
June
29, 2007
|
October
27, 2007
|
750,000
|
|
August
22, 2007
|
December
20, 2007
|
125,000
|
|
August
29, 2007
|
December
27, 2007
|
250,000
|
|
September
12, 2007
|
January
10, 2008
|
125,000
|
|
September
28, 2007
|
January
26, 2008
|
600,000
|
|
October
11, 2007
|
February
8, 2008
|
250,000
|
|
November
1, 2007
|
February
29, 2008
|
75,000
|
|
November
9, 2007
|
March
8, 2008
|
750,000
|
|
December
3, 2007
|
April
1, 2008
|
550,000
|
|
December
14, 2007
|
April
12, 2008
|
200,000
|
|
December
31, 2007
|
April
29, 2008
|
600,000
|
|
January
15, 2008
(1)
|
May
14, 2008
(1)
|
250,000
|
|
$
|
17,074,728
|
||
_________________________ | |||
(1)
The Company anticipates that it will borrow these additional funds
from
the Bruner Trust upon the same terms as the previous
notes.
|
Range
of
Estimates
|
Targeted
Price
|
|||
Pre-Reverse
Stock Split Price Per Share
|
$0.03
|
$0.05
|
$0.07
|
$0.06
|
Post-Reverse
Stock Split Price Per Share
|
$0.60
|
$1.00
|
$1.40
|
$1.20
|
Estimated
Principal and Interest to be Converted as of January 31,
2008
|
$41,443,163
|
$41,443,163
|
$41,443,163
|
$41,443,163
|
Number
of Shares of Common Stock Needed for Conversion
|
69,071,938
|
41,443,163
|
29,602,259
|
34,535,969
|
Number
of Issued and Outstanding Shares Post-Reverse Stock Split
|
4,183,099
|
4,183,099
|
4,183,099
|
4,183,099
|
Total
Shares Issued and Outstanding after the Reverse Stock Split and
Conversion
of Subordinated Debts
|
73,255,037
|
45,626,262
|
33,785,358
|
38,719,068
|
Nine
Months Ended August 31,
2007
|
Year
ended November 30,
|
From
Inception (June 18, 2002) to November 30,
2002
|
||||
2006
|
2005
|
2004
|
2003
|
|||
Summary
of Operations:
|
||||||
Revenue
|
$447,232
|
$1,274,116
|
$1,538,342
|
$122,455
|
$-
|
$-
|
Lease
operating costs
|
704,151
|
781,136
|
965,069
|
59,247
|
-
|
-
|
General
& administrative expense
|
2,801,617
|
5,016,534
|
5,316,588
|
3,517,218
|
2,095,495
|
1,140,066
|
Depreciation,
depletion and amortization
|
511,168
|
779,446
|
1,887,074
|
76,390
|
685
|
-
|
Impairment
of oil and gas properties
|
3,866,195
|
1,328,432
|
5,273,795
|
-
|
-
|
-
|
Net
(loss)
|
(14,541,647)
|
(26,163,107)
|
(24,876,200)
|
(9,831,104)
|
(2,579,595)
|
(1,140,066)
|
Net
(loss) per share
|
(0.17)
|
(0.36)
|
(0.37)
|
(0.18)
|
(0.08)
|
(0.04)
|
As
of August 31, 2007
|
As
of November 30,
|
|||||
2006
|
2005
|
2004
|
2003
|
2002
|
||
Balance
Sheet:
|
||||||
Working
capital (deficiency)
|
$(4,068,451)
|
$(19,868,880)
|
$(7,085,181)
|
$(626,108)
|
$1,756,776
|
$(1,012,916)
|
Cash
and cash equivalents
|
52,170
|
608,180
|
1,328,469
|
10,513,847
|
2,239,520
|
41,320
|
Oil
and gas properties, net
|
43,254,484
|
44,793,140
|
44,358,725
|
37,491,529
|
2,799,720
|
873,797
|
Total
assets
|
44,531,323
|
47,760,258
|
48,459,378
|
49,648,165
|
5,655,433
|
954,359
|
Long-term
debt
|
43,576,404
|
16,881,267
|
11,188,252
|
10,915,928
|
2,483,557
|
50,000
|
Stockholders’
equity (deficit)
|
(5,320,089)
|
7,919,911
|
25,418,378
|
26,681,207
|
2,634,559
|
(149,897)
|
Name
and Address of Beneficial Owner
(1)
|
Amount
and Nature of
Beneficial
Ownership
|
Percent
of Class (2)
|
Marc
A. Bruner
29
Blauenweg
Metzerlen,
Switzerland 4116
|
11,701,799
(3)
|
14.0%
|
Resource
Venture Management
29
Blauenweg
Metzerlen,
Switzerland 4116
|
4,899,525
|
5.9%
|
Bruner
Group, LLP
1775
Sherman Street #1375
Denver,
Colorado 80203
|
4,500,000
|
5.4%
|
Marc
E. Bruner
|
2,127,500
(4)
|
2.5%
|
Cecil
D. Gritz
|
533,750
(5)
|
*
|
Dr.
James Edwards
|
300,000
(6)
|
*
|
Robert
Thomas Fetters, Jr.
|
240,000
(7)
|
*
|
Nathan
C. Collins
|
240,000
(7)
|
*
|
Christopher
S. Hardesty
|
211,000
(8)
|
*
|
Ronald
P. Trout
|
60,000
(9)
|
*
|
All
officers and directors as a group (7 persons)
|
3,712,250
(10)
|
4.5%
|
(1)
|
To
our knowledge, except as set forth in the footnotes to this table
and
subject to applicable community property laws, each person named
in the
table has sole voting and investment power with respect to the shares
set
forth opposite such person’s name.
|
(2)
|
This
table is based on 83,661,968 shares of Common Stock outstanding as
of
[RECORD DATE]. If a person listed on this table has the right to
obtain
additional shares of Common Stock within sixty (60) days from [RECORD
DATE], the additional shares are deemed to be outstanding for the
purpose
of computing the percentage of class owned by such person, but are
not
deemed to be outstanding for the purpose of computing the percentage
of
any other person.
|
(3)
|
Included
in Mr. Bruner’s share ownership are shares owned of record by Resource
Venture Management and Bruner Group, LLP. Mr. Bruner is a
control person of both these entities. Also included in Mr.
Bruner’s share ownership are 203,390 shares issuable upon exercise of
warrants.
|
(4)
|
Includes
627,500 shares issuable upon exercise of stock options.
|
(5)
|
Includes
533,750 shares issuable upon exercise of stock options.
|
(6)
|
Includes
300,000 shares issuable upon exercise of stock options.
|
(7)
|
Includes
240,000 shares issuable upon exercise of stock options.
|
(8)
|
Includes
195,000 shares issuable upon exercise of stock options.
|
(9)
|
Includes
60,000 shares issuable upon exercise of stock options.
|
(10)
|
Includes
2,196,250 shares issuable upon exercise of stock options.
|
GALAXY
ENERGY CORPORATION
|
||
Denver,
Colorado
|
Marc
E. Bruner
|
|
[MAILING
DATE]
|
President
and Chief Executive Officer
|
Page
|
||
For
the Nine Month Period Ended
August 31, 2007
|
||
Consolidated
Balance Sheets –
August 31, 2007
|
A-2
|
|
Consolidated
Statements of
Operations – Three and Nine Months Ended August 31, 2007 and 2006, and
Cumulative Amounts from Inception to August 31,
2007
|
A-3
|
|
Consolidated
Statements of Cash
Flows – Nine Months Ended August 31, 2007 and 2006, and Cumulative Amounts
from Inception to August 31, 2007
|
A-5
|
|
Notes
to Consolidated Financial
Statements
|
A-7
|
|
For
the Year Ended November 30,
2006 and 2005
|
||
Report
of Independent Registered
Public Accounting Firm
|
A-21
|
|
Consolidated
Balance Sheets –
November 30, 2006 and 2005
|
A-22
|
|
Consolidated
Statements of
Operations – Years ended November 30, 2006, 2005 and 2004, and Cumulative
Amounts from Inception to November 30, 2006
|
A
-23
|
|
Consolidated
Statement of
Stockholders’ Equity – Period from Inception (June 18, 2002) to November
30, 2003, and Years ended November 30, 2006, 2005 and
2004
|
A-24
|
|
Consolidated
Statements of Cash
Flows – Years ended November 30, 2006, 2005 and 2004, and Cumulative
Amounts from Inception to November 30, 2006
|
A-26
|
|
Notes
to Consolidated Financial
Statements
|
A-28
|
August
31, 2007
(unaudited)
|
November
30, 2006
|
|||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
and cash
equivalents
|
$ |
52,170
|
$ |
608,180
|
||||
Accounts
receivable, joint
interest
|
16,914
|
60,475
|
||||||
Accounts
receivable, joint
interest, related party
|
95,309
|
923,172
|
||||||
Accounts
receivable,
other
|
11,624
|
102,800
|
||||||
Prepaid
and
other
|
116,726
|
107,236
|
||||||
Total
Current
Assets
|
292,743
|
1,801,863
|
||||||
Oil
and gas properties, at cost, full cost method of
accounting
|
||||||||
Unevaluated
oil and gas
properties
|
43,254,484
|
42,767,330
|
||||||
Evaluated
oil and gas
properties
|
13,013,975
|
10,991,945
|
||||||
Less
accumulated depletion,
amortization and impairment
|
(13,013,975 | ) | (8,966,135 | ) | ||||
43,254,484
|
44,793,140
|
|||||||
Furniture
and equipment, net
|
71,141
|
121,945
|
||||||
Other
assets
|
||||||||
Deferred
financing costs,
net
|
423,391
|
565,524
|
||||||
Restricted
investments
|
428,261
|
459,783
|
||||||
Other
|
61,303
|
18,003
|
||||||
912,955
|
1,043,310
|
|||||||
Total
Assets
|
$ |
44,531,323
|
$ |
47,760,258
|
||||
Current
liabilities
|
||||||||
Accounts
payable and accrued
expenses
|
$ |
1,506,654
|
$ |
1,548,168
|
||||
Accounts
payable – related
party
|
49,413
|
64,400
|
||||||
Current
portion convertible
notes payable, net
|
10,019,996
|
|||||||
Notes
payable – related
party
|
2,049,728
|
7,549,728
|
||||||
Interest
payable
|
755,399
|
2,488,451
|
||||||
Total
Current
liabilities
|
4,361,194
|
21,670,743
|
||||||
Non-current
obligations
|
||||||||
Convertible
notes payable,
net
|
24,764,284
|
16,308,801
|
||||||
Notes
payable – related
party
|
14,118,777
|
|||||||
Interest
payable
|
3,763,957
|
572,466
|
||||||
Interest
payable – related party
|
929,386
|
|||||||
Asset
retirement
obligation
|
1,913,815
|
1,288,337
|
||||||
Total
Non-current
obligations
|
45,490,219
|
18,169,604
|
||||||
Stockholders’
equity (deficit)
|
||||||||
Preferred
stock, $001 par
value; Authorized – 25,000,000shares; Issued – none
|
||||||||
Common
stock, $.001 par value;
Authorized – 400,000,000shares;Issued and outstanding – 83,661,968 shares
and
81,661,968
shares
|
83,662
|
81,662
|
||||||
Capital
in excess of par
value
|
72,837,413
|
71,537,766
|
||||||
Deficit
accumulated during the
development stage
|
(78,241,164 | ) | (63,699,517 | ) | ||||
Total
Stockholders’ equity
(deficit)
|
(5,320,089 | ) |
7,919,911
|
|||||
Total
Liabilities and
Stockholders’ Equity (deficit)
|
$ |
44,531,323
|
$ |
47,760,258
|
Three
Months Ended August 31,
|
||||||||
2007
|
2006
|
|||||||
Revenue
|
||||||||
Natural
gas
sales
|
$ |
76,303
|
$ |
281,559
|
||||
76,303
|
281,559
|
|||||||
Operating
expenses
|
||||||||
Lease
operating
expense
|
445,817
|
189,493
|
||||||
General
and
administrative
|
761,617
|
1,172,301
|
||||||
Impairment
of oil and gas
properties
|
2,370,880
|
1,031,160
|
||||||
Depreciation,
depletion and
amortization
|
232,056
|
318,379
|
||||||
3,810,370
|
2,711,333
|
|||||||
Other
income (expense)
|
||||||||
Interest
and other
income
|
4,749
|
3,283
|
||||||
Interest
expense and financing
costs
|
(2,044,630 | ) | (3,970,113 | ) | ||||
(2,039,881 | ) | (3,966,830 | ) | |||||
Net
Loss
|
$ | (5,773,948 | ) | $ | (6,396,604 | ) | ||
Net
loss per common share – basic & diluted
|
$ | (.07 | ) | $ | (.09 | ) | ||
Weighed
average number of common shares outstanding
-
basic and
diluted
|
83,661,968
|
70,536,771
|
Nine
Months Ended August 31,
|
From
Inception
(June
18, 2002) to
|
|||||||||||
2007
|
2006
|
August
31, 2007
|
||||||||||
Revenue
|
||||||||||||
Natural
gas sales
|
$ |
447,232
|
$ |
955,895
|
$ |
3,061,523
|
||||||
Gain
on disposition of oil and
gas property
|
197,676
|
|||||||||||
Gain
on disposition of oil and
gas property and
other
income, related
party
|
122,946
|
|||||||||||
447,232
|
955,895
|
3,382,145
|
||||||||||
Costs
and expenses
|
||||||||||||
Lease
operating
expense
|
704,151
|
590,311
|
2,509,602
|
|||||||||
General
and
administrative
|
2,801,617
|
3,652,158
|
19,887,519
|
|||||||||
Impairment
of oil and gas
properties
|
3,866,195
|
1,031,160
|
10,534,191
|
|||||||||
Depreciation,
depletion and
amortization
|
511,168
|
680,707
|
3,254,763
|
|||||||||
7,883,131
|
5,954,336
|
36,186,075
|
||||||||||
Other
income (expense)
|
||||||||||||
Interest
and other
income
|
14,043
|
12,588
|
244,344
|
|||||||||
Interest
expense and financing
costs
|
(7,119,791 | ) | (12,918,109 | ) | (45,681,578 | ) | ||||||
(7,105,748 | ) | (12,905,521 | ) | (45,437,234 | ) | |||||||
Net
Loss
|
(14,541,647 | ) | (17,903,962 | ) | (78,241,164 | ) | ||||||
Net
loss per common share – basic and diluted
|
(.17 | ) | (.26 | ) | (1.45 | ) | ||||||
Weighed
average number of common shares
Outstanding
–
basic
and
diluted
|
83,321,309
|
69,290,943
|
54,119,024
|
Nine
Months Ended August 31,
|
Cumulative
From
Inception
(June
18, 2002) to
|
|||||||||||
2007
|
2006
|
August
31, 2007
|
||||||||||
Cash
flows from operating activities
|
||||||||||||
Net
loss
|
$ | (14,541,647 | ) | $ | (17,903,962 | ) | $ | (78,241,164 | ) | |||
Adjustments
to reconcile net loss
to net cash usedby operating activities
|
||||||||||||
Stock
for
interest
|
45,913
|
4,352,508
|
||||||||||
Stock
for
services
|
264,600
|
|||||||||||
Stock
for services – related
party
|
90,000
|
|||||||||||
Oil
and gas properties for
services
|
732,687
|
|||||||||||
Stock
for debt – related
party
|
233,204
|
|||||||||||
Amortization
of discount and
deferred financing
costs
on convertible
debt
|
2,738,126
|
8,849,726
|
20,646,688
|
|||||||||
Deferred
selling costs
|
410,000
|
410,000
|
||||||||||
Finance
costs incurred for waiver
of triggering
event
|
3,457,101
|
|||||||||||
Write-off
of discount and
deferred financing costsupon conversion of convertible
debt
|
346,083
|
2,979,404
|
||||||||||
Write-off
of discount and
deferred financing costsupon extinguishment of convertible
debt
|
2,162,597
|
|||||||||||
Compensation
expense on vested
stock options
|
891,647
|
999,660
|
2,619,057
|
|||||||||
Depreciation,
depletion and
amortization and aaccretion of ARO expense
|
262,582
|
680,707
|
3,001,176
|
|||||||||
Gain
on disposition of oil and
gas assets
|
(270,389 | ) | ||||||||||
Impairment
of oil and gas
properties
|
3,866,195
|
1,031,160
|
10,534,191
|
|||||||||
Other
|
11,178
|
|||||||||||
Changes
in assets and
liabilities
|
||||||||||||
Accounts
payable – trade,
accruals, bank overdrafts
|
(41,515 | ) |
3,025,023
|
513,410
|
||||||||
Accounts
payable – related
party
|
(14,987 | ) | (3,259 | ) |
49,413
|
|||||||
Interest
payable
|
2,387,825
|
1,363,098
|
5,448,742
|
|||||||||
Accounts
receivable, prepaid and
other current assets
|
953,110
|
(1,729,278 | ) | (234,666 | ) | |||||||
Other
|
(43,300 | ) |
2,642
|
(61,743 | ) | |||||||
Net
cash used by operating activities
|
(3,131,964 | ) | (3,292,487 | ) | (21,302,006 | ) | ||||||
Cash
flows from investing activities
|
||||||||||||
Additions
to oil and gas
properties
|
(1,967,853 | ) | (2,817,603 | ) | (47,908,147 | ) | ||||||
Management
fees earned on
operating properties
|
56,303
|
1,506,394
|
1,752,133
|
|||||||||
Purchase
of furniture and
equipment
|
(2,289 | ) | (232 | ) | (283,461 | ) | ||||||
Purchase
surety
bonds
|
(80,000 | ) | (459,783 | ) | ||||||||
Proceeds
from surety bonds
|
31,521
|
31,521
|
||||||||||
Proceeds
from sale of oil and gas
asset
|
340,000
|
|||||||||||
Deposit
on oil and gas property
sale, net of sellingcosts
|
||||||||||||
Advance
to
affiliated
|
(60,000 | ) | ||||||||||
Cash
received upon
recapitalization and merger
|
4,234
|
|||||||||||
Net
cash (used for) investing activities
|
(1,882,318 | ) | (1,391,441 | ) | (46,583,503 | ) |
Nine
Months Ended August 31,
|
Cumulative
From
Inception
(June
18, 2002) to
|
|||||||||||
2007
|
2006
|
August
31, 2007
|
||||||||||
Cash
flows from financing activities
|
||||||||||||
Proceeds
from sale of common
stock
|
17,905,300
|
|||||||||||
Proceeds
from sale of convertible
notes payable
|
7,000,000
|
44,695,000
|
||||||||||
Proceeds
from sale of convertible
debentures
|
5,040,000
|
|||||||||||
Proceeds
from sale on notes
payable – related party
|
8,618,777
|
14,118,777
|
||||||||||
Proceeds
from exercise of
warrants
|
1,019,306
|
|||||||||||
Debt
and stock offering
costs
|
(127,700 | ) | (3,980,569 | ) | ||||||||
Payment
of convertible notes
payable
|
(4,160,505 | ) | (3,333,333 | ) | (10,180,285 | ) | ||||||
Payment
of note payable – related
party
|
(16,909 | ) | (129,578 | ) | ||||||||
Payment
of note
payable
|
(550,272 | ) | ||||||||||
Net
cash provided by financing activities
|
4,458,272
|
3,522,058
|
67,937,679
|
|||||||||
Net
(decrease) increase in cash
|
(556,010 | ) | (1,161,870 | ) |
52,170
|
|||||||
Cash
and cash equivalents, beginning of period
|
608,180
|
1,328,469
|
||||||||||
Cash
and cash equivalents, end of period
|
$ |
52,170
|
$ |
166,599
|
$ |
52,170
|
||||||
Supplemental
schedule of cash flow information
|
||||||||||||
Cash
paid for
interest
|
$ |
1,585,045
|
$ |
2,238,288
|
$ |
6,144,329
|
||||||
Supplemental
disclosures of non-cash investing and financing activities
|
||||||||||||
Debt
incurred for oil and gas
properties
|
$ | $ | $ |
3,646,000
|
||||||||
Debt
incurred for finance
costs
|
$ | $ | $ |
3,547,101
|
||||||||
Stock
issued for
services
|
$ | $ | $ |
354,600
|
||||||||
Stock
issued for interest and
debt
|
$ | $ |
3,076,780
|
$ |
13,742,538
|
|||||||
Stock
issued for convertible
debentures
|
$ | $ | $ |
5,640,000
|
||||||||
Warrants
issued for offering and
financing costs
|
$ | $ |
27,274
|
$ |
1,685,850
|
|||||||
Discount
on convertible debt
issued
|
$ | $ |
566,540
|
$ |
14,883,630
|
|||||||
Conversion
of interest to
debt
|
$ | $ | $ |
11,178
|
||||||||
Stock
issued for subsidiary –
related
|
$ | $ | $ | (202,232 | ) | |||||||
Stock
issued for oil and gas
properties
|
$ | $ | $ |
9,146,800
|
||||||||
Stock
issued in connection with
oil and gas
asset
sale
|
$ |
410,000
|
$ |
|
$ |
410,000
|
2007
|
2006
|
|||||||
Balance
beginning of period
|
$ |
1,288,337
|
$ |
1,242,967
|
||||
Liabilities
incurred
|
-
|
52,975
|
||||||
Revisions
|
543,025
|
(106,878 | ) | |||||
Liabilities
settled
|
-
|
-
|
||||||
Accretion
|
82,453
|
66,724
|
||||||
Balance
end of period
|
$ |
1,913,815
|
$ |
1,255,788
|
Issue
Date
|
Due
Date
|
August
31, 2007
|
November
30, 2006
|
|
Current
liabilities
|
||||
January
14, 2004
|
November
30, 2007
|
$ 2,049,728
|
$
2,049,728
|
|
Non-current
obligations
|
||||
September
28, 2006
|
January
26, 2007
|
$
2,500,000
|
$
2,500,000
|
|
November
1, 2006
|
March
1, 2007
|
1,000,000
|
1,000,000
|
|
November
13, 2006
|
March
13, 2007
|
500,000
|
500,000
|
|
November
30, 2006
|
March
30, 2007
|
1,500,000
|
1,500,000
|
|
February
1, 2007
|
June
1, 2007
|
500,000
|
-
|
|
February
26, 2007
|
June
26, 2007
|
900,000
|
-
|
|
March
30, 2007
|
July
28, 2007
|
1,350,000
|
-
|
|
April
25, 2007
|
August
23, 2007
|
1,200,000
|
-
|
|
May
4, 2007
|
September
1, 2007
|
450,000
|
-
|
|
May
31, 2007
|
September
28, 2007
|
600,000
|
-
|
|
June
29, 2007
|
October
27, 2007
|
750,000
|
||
August
22, 2007
|
December
20, 2007
|
125,000
|
||
August
29, 2007
|
December
27, 2007
|
250,000
|
||
$ 1,625,000
|
$
5,500,000
|
·
|
The
waiver of the holders’ right to make an early repayment election as a
result of the July 2006 Equity Liquidity Test Failure and any Equity
Liquidity Test Failure as of August 1, 2006 and/or September 1,
2006;
|
·
|
The
deferral of the August 2006 and September 2006 installment payments
on the
2004 Notes until October 2, 2006, unless earlier converted by the
holders;
|
·
|
The
Company gave the holders the right to convert up to $5,000,000
in principal amount of the 2004 Notes, plus related interest, as
a
“Company Alternative Conversion” under the notes through September 30,
2006, with the amounts converted to be applied first to the August
2006
installment payment, second to the September 2006 installment payment,
and
then to those installments nearest to the maturity date of the 2004
Notes;
and
|
·
|
The
waiver of the Company’s right to prepay any part of the 2004 or 2005
Notes.
|
|
On
April 27, 2007 the Company and the Holders of the March 2005 Notes
entered
into an Waiver and Amendment Agreement, which, among other things,
extended the term of the March 2005 notes to the earliest of (A)
the date
of consummation of the PRB Sale,(B) October 31, 2007, and (C) such
date as
all amounts due under the Notes have been fully paid. In
addition each of the Holders agreed and confirmed the 2005 Subordinated
Notes continue to be subordinate to the senior secured indebtedness.
As
the PRB Sale was not consummated and the Company is prohibited from
paying
the March 2005 Notes until the senior secured indebtedness is paid
in full
(currently scheduled for May 31, 2010), the March 2005 Notes are
recorded
as non-current obligations on the Company’s August 31, 2007 Balance
Sheet.
|
2007
|
2006
|
|||||||
2004
Notes
|
$ |
-
|
$ |
4,160,505
|
||||
Less
unamortized discount
|
-
|
(663,002 | ) | |||||
March
2005 Notes
|
7,695,000
|
7,695,000
|
||||||
Less
unamortized discount
|
-
|
(1,172,506 | ) | |||||
May
2005 Notes
|
12,500,000
|
12,500,000
|
||||||
Less
unamortized discount
|
(2,159,936 | ) | (2,750,577 | ) | ||||
April
2006 Notes
|
4,500,000
|
4,500,000
|
||||||
Less
unamortized discount
|
(181,963 | ) | (300,671 | ) | ||||
June
2006 Notes
|
2,500,000
|
2,500,000
|
||||||
Less
unamortized discount
|
(88,823 | ) | (139,951 | ) | ||||
24,764,278
|
26,328,798
|
|||||||
Less
current portion, net
|
-
|
(10,019,996 | ) | |||||
long
term portion, net
|
$ |
24,764,278
|
$ |
16,308,802
|
|
Subsequent
to August 31, 2007 and through the date of the filing of this report,
the
Company has borrowed an additional $975,000 from the Bruner Trust,
under
the same terms and conditions as the other
notes.
|
|
On
August 30, 2007, the Company submitted a revised plan of action,
which
took the termination of the PSA with PetroHunter into account, to
bring the Company into compliance with AMEX’s continued listing
standards. On October 15, 2007 AMEX notified the Company that
AMEX accepted such revised plan based on the expectation that the
Company will complete a sale of certain assets and utilize the
proceeds to pay down a significant portion of its
outstanding debt, and continued the Company’s listing pursuant to an
extension until December 31, 2007. The Company will be subject
to periodic review by AMEX staff during the extension
period.
|
2006
|
2005
|
|||||||
ASSETS
|
||||||||
Current
assets
|
||||||||
Cash
and cash equivalents
|
$ |
608,180
|
$ |
1,328,469
|
||||
Accounts
receivable, joint interest
|
60,475
|
744,037
|
||||||
Accounts
receivable, joint interest, related party
|
923,172
|
32,845
|
||||||
Accounts
receivable, other
|
102,800
|
510,196
|
||||||
Prepaid
and other
|
107,236
|
167,513
|
||||||
Total
Current Assets
|
1,801,863
|
2,783,060
|
||||||
Oil
and gas properties, at cost, full cost method of
accounting
|
||||||||
Evaluated
oil and gas properties
|
10,991,945
|
9,991,629
|
||||||
Unevaluated
oil and gas properties
|
42,767,330
|
41,464,395
|
||||||
Less
accumulated depletion, amortization and impairment
|
(8,966,135 | ) | (7,097,299 | ) | ||||
44,793,140
|
44,358,725
|
|||||||
Furniture
and equipment, net
|
121,945
|
194,877
|
||||||
Other
assets
|
||||||||
Deferred
financing costs, net
|
565,524
|
721,024
|
||||||
Restricted
investments
|
459,783
|
379,782
|
||||||
Other
|
18,003
|
21,910
|
||||||
1,043,310
|
1,122,716
|
|||||||
Total
Assets
|
$ |
47,760,258
|
$ |
48,459,378
|
||||
LIABILITIES
AND STOCKHOLDERS'
EQUITY
|
||||||||
Current
liabilities
|
||||||||
Accounts
payable and accrued expenses
|
$ |
1,548,168
|
$ |
1,880,290
|
||||
Accounts
payable - related party
|
64,400
|
99,078
|
||||||
Notes
payable - related party
|
7,549,728
|
-
|
||||||
Current
portion convertible notes payable, net
|
10,019,996
|
5,041,524
|
||||||
Notes
payable
|
-
|
2,049,728
|
||||||
Interest
payable
|
2,488,451
|
402,884
|
||||||
Total
Current Liabilities
|
21,670,743
|
9,473,504
|
||||||
Non-current
obligations
|
||||||||
Convertible
notes payable, net
|
16,308,801
|
10,392,434
|
||||||
Interest
Payable
|
572,466
|
744,833
|
||||||
Asset
retirement obligation
|
1,288,337
|
1,242,967
|
||||||
Total
Non-current Obligations
|
18,169,603
|
12,380,234
|
||||||
Commitments
and contingencies ( Notes 2 and 10)
|
-
|
-
|
||||||
Stockholders'
equity
|
||||||||
Preferred
stock, $001 par value
|
||||||||
Authorized
- 25,000,000 shares
|
||||||||
Issued
- none
|
-
|
-
|
||||||
Common
stock, $.001 par value
|
||||||||
Authorized
- 400,000,000 shares
|
||||||||
Issued and outstanding - 81,661,968 shares |
|
|||||||
and
68,668,029 shares
|
81,662
|
68,668
|
||||||
Capital
in excess of par value
|
71,537,766
|
64,073,382
|
||||||
Deficit
accumulated during the development stage
|
(63,699,517 | ) | (37,536,410 | ) | ||||
Total
Stockholders' Equity
|
7,919,911
|
26,605,640
|
||||||
Total
Liabilities and
Stockholders' Equity
|
$ |
47,760,258
|
$ |
48,459,378
|
||||
Cumulative
|
||||||||||||||||
Year
Ended
|
Year
Ended
|
Year
Ended
|
From
Inception
|
|||||||||||||
November
30,
|
November
30,
|
November
30,
|
(June
18, 2002) to
|
|||||||||||||
2006
|
2005
|
2004
|
November
30, 2006
|
|||||||||||||
Revenue
|
||||||||||||||||
Natural
gas sales
|
$ |
1,194,642
|
$ |
1,297,194
|
$ |
122,455
|
$ |
2,614,291
|
||||||||
Gain
on disposition of oil and gas property
|
-
|
197,676
|
-
|
197,676
|
||||||||||||
Gain
on disposition of oil and gas property,
|
||||||||||||||||
and
other income, related party
|
79,474
|
43,472
|
122,946
|
|||||||||||||
1,274,116
|
1,538,342
|
122,455
|
2,934,913
|
|||||||||||||
Costs
and expenses
|
||||||||||||||||
Lease
operating expense
|
781,136
|
965,069
|
59,247
|
1,805,451
|
||||||||||||
General
and administrative
|
5,016,534
|
5,316,588
|
3,517,218
|
17,085,902
|
||||||||||||
Impairment
of oil and gas properties
|
1,328,432
|
5,273,795
|
-
|
6,667,996
|
||||||||||||
Depreciation,
depletion and amortization
|
779,446
|
1,887,074
|
76,390
|
2,743,595
|
||||||||||||
7,905,548
|
13,442,526
|
3,652,855
|
28,302,944
|
|||||||||||||
Other
income (expense)
|
||||||||||||||||
Interest
and other income
|
15,614
|
163,291
|
51,396
|
230,301
|
||||||||||||
Interest
expense and financing costs
|
(19,547,289 | ) | (12,244,752 | ) | (6,352,100 | ) | (38,561,787 | ) | ||||||||
(19,531,675 | ) | (12,081,461 | ) | (6,300,704 | ) | (38,331,486 | ) | |||||||||
Net
Loss
|
$ | (26,163,107 | ) | $ | (23,985,645 | ) | $ | (9,831,104 | ) | $ | (63,699,517 | ) | ||||
Net
loss per common share - basic and diluted
|
$ | (0.36 | ) | $ | (0.37 | ) | $ | (0.18 | ) | $ | (1.21 | ) | ||||
Weighed
average number of common
|
||||||||||||||||
shares
outstanding - basic and diluted
|
72,094,609
|
64,698,889
|
53,488,853
|
52,553,620
|
||||||||||||
Deficit
|
||||||||||||||||
Accumulated
|
||||||||||||||||
Capital
|
During
the
|
|||||||||||||||
Common
Stock
|
In
Excess
|
Development
|
||||||||||||||
Shares
|
Amount
|
Par
Value
|
Stage
|
|||||||||||||
Balance,
June 18, 2002 (Inception)
|
-
|
$ |
-
|
$ |
-
|
$ |
-
|
|||||||||
Issuance
of common stock for services
|
||||||||||||||||
at
$0.05 per share
|
4,000,000
|
4,000
|
196,000
|
|||||||||||||
Sale
of common stock for cash at:
|
||||||||||||||||
$0.001
per share
|
11,500,000
|
11,500
|
-
|
|||||||||||||
$0.02
per share
|
500,000
|
500
|
9,500
|
|||||||||||||
$0.05
per share
|
3,000,000
|
3,000
|
147,000
|
|||||||||||||
$0.34
per share
|
1,997,058
|
1,997
|
677,003
|
|||||||||||||
Recapitalization
of shares issued
|
||||||||||||||||
prior
to merger
|
9,028,000
|
9,028
|
(69,359 | ) | ||||||||||||
Net
loss
|
(1,140,066 | ) | ||||||||||||||
Balance,
November 30, 2002
|
30,025,058
|
30,025
|
960,144
|
(1,140,066 | ) | |||||||||||
Issuance
of common stock for cash
|
||||||||||||||||
at
$1.00 per share
|
1,602,000
|
1,602
|
1,598,228
|
|||||||||||||
Issuance
of common stock for services at:
|
||||||||||||||||
$1.00
per share
|
10,000
|
10
|
9,990
|
|||||||||||||
$
.91 per share
|
60,000
|
60
|
54,540
|
|||||||||||||
Issuance
of common stock to related party
|
||||||||||||||||
upon
conversion of outstanding debt at $1.00 per share
|
233,204
|
233
|
232,971
|
|||||||||||||
Issuance
of common stock to related party
|
||||||||||||||||
for
services at $1.00 per share
|
90,000
|
90
|
89,910
|
|||||||||||||
Common
stock issued to acquire subsidiary
|
1,951,241
|
1,952
|
(204,184 | ) | ||||||||||||
Warrants
to acquire common stock in conjunction with
|
||||||||||||||||
convertible
debenture issuance
|
1,285,995
|
|||||||||||||||
Intrinsic
value of debentures beneficial conversion feature
|
2,292,654
|
|||||||||||||||
Net
Loss
|
(2,579,595 | ) | ||||||||||||||
Balance,
November 30, 2003
|
33,971,503
|
33,972
|
6,320,248
|
(3,719,661 | ) | |||||||||||
Issuance
of common stock upon warrant conversion
|
45,763
|
46
|
26,954
|
|||||||||||||
Issuance
of common stock for cash at $1.40 per share
|
2,503,571
|
2,504
|
3,502,496
|
|||||||||||||
Warrants
issued to placement agents in connection with
|
157,599
|
|||||||||||||||
common
stock
|
||||||||||||||||
Costs
of offering
|
(1,784,448 | ) | ||||||||||||||
Issuance
of common stock for oil and gas properties
|
||||||||||||||||
at
$1.40 per share
|
2,000,000
|
2,000
|
2,798,000
|
|||||||||||||
Issuance
of common stock for oil and gas properties
|
||||||||||||||||
at
$1.80 per share
|
3,000,000
|
3,000
|
5,397,000
|
|||||||||||||
Issuance
of common stock for cash at $1.80 per share
|
6,637,671
|
6,638
|
11,941,161
|
|||||||||||||
Warrants
issued to placement agents in connection with
|
||||||||||||||||
common
stock
|
900,504
|
|||||||||||||||
Costs
of offering
|
(449,439 | ) | ||||||||||||||
Issuance
of common stock upon conversion of
|
||||||||||||||||
convertible
debenture
|
1,525,424
|
1,525
|
898,475
|
|||||||||||||
Issuance
of common stock for oil and gas properties
|
||||||||||||||||
at
$2.63 per share
|
360,000
|
360
|
946,440
|
|||||||||||||
Issuance
of common stock upon conversion of
|
||||||||||||||||
convertible
debenture and accrued interest
|
8,054,364
|
8,054
|
4,744,021
|
Deficit
|
||||||||||||||||
Accumulated
|
||||||||||||||||
Capital
|
During
the
|
|||||||||||||||
Common
Stock
|
In
Excess
|
Development
|
||||||||||||||
Shares
|
Amount
|
Par
Value
|
Stage
|
|||||||||||||
Issuance of common stock for cashless exercise of | ||||||||||||||||
placement
agent warrants
|
719,213
|
719
|
(719 | ) | ||||||||||||
Discount
on convertible notes payable due to issuance
|
||||||||||||||||
of
detachable warrants
|
4,336,316
|
|||||||||||||||
Warrants
issued to placement agents in connection with
|
||||||||||||||||
convertible
notes payable
|
404,021
|
|||||||||||||||
Stock
based compensation costs for stock options granted
|
||||||||||||||||
to
non-employees
|
34,525
|
|||||||||||||||
Net
Loss
|
-
|
(9,831,104 | ) | |||||||||||||
Balance,
November 30, 2004
|
58,817,509
|
58,818
|
40,173,154
|
(13,550,765 | ) | |||||||||||
Issuance
of common stock upon warrant
|
||||||||||||||||
conversion
|
1,332,676
|
1,332
|
990,970
|
|||||||||||||
Issuance
of common stock for cashless
|
||||||||||||||||
exercise
of warrants
|
577,033
|
577
|
(577 | ) | ||||||||||||
Issuance
of common stock upon conversion of
|
||||||||||||||||
convertible
notes and accrued interest
|
7,940,811
|
7,941
|
8,677,068
|
|||||||||||||
Discount
on convertible notes payable due to
|
||||||||||||||||
issuance
of detachable warrants
|
12,902,328
|
|||||||||||||||
Discount
on issuance of common stock
|
||||||||||||||||
below
market value
|
1,074,428
|
|||||||||||||||
Warrants
issued to placement agents in
|
||||||||||||||||
connection
with convertible notes payable
|
88,874
|
|||||||||||||||
Stock
based compensation costs for stock
|
||||||||||||||||
options
granted to non-employees
|
167,137
|
|||||||||||||||
Net
loss
|
(23,985,645 | ) | ||||||||||||||
Balance,
November 30, 2005
|
68,668,029
|
68,668
|
64,073,382
|
(37,536,410 | ) | |||||||||||
Warrants
issued to placement agents in
|
||||||||||||||||
connection
with convertible notes payable
|
27,274
|
|||||||||||||||
Discount
on convertible notes payable due to
|
||||||||||||||||
issuance
of detachable warrants
|
395,986
|
|||||||||||||||
Stock
based compensation costs for stock
|
||||||||||||||||
options
granted to employees & non-employees
|
1,525,751
|
|||||||||||||||
Discount
on convertible notes payable due to
|
||||||||||||||||
issuance
of detachable warrants
|
170,555
|
|||||||||||||||
Issuance
of common stock upon conversion of
|
||||||||||||||||
convertible
notes and accrued interest
|
12,993,939
|
12,994
|
4,799,255
|
|||||||||||||
Discount
on issuance of common stock
|
||||||||||||||||
below
market value
|
545,563
|
|||||||||||||||
Net
loss
|
(26,163,107 | ) | ||||||||||||||
Balance,
November 30, 2006
|
81,661,968
|
$ |
81,662
|
$ |
71,537,766
|
$ | (63,699,517 | ) |
Cumulative
|
||||||||||||||||
Year
Ended
|
Year
Ended
|
Year
Ended
|
From
Inception
|
|||||||||||||
November
30,
|
November
30,
|
November
30,
|
(June
18, 2002) to
|
|||||||||||||
2006
|
2005
|
2004
|
November
30, 2006
|
|||||||||||||
Cash
flows from operating activities
|
||||||||||||||||
Net
loss
|
$ | (26,163,107 | ) | $ | (23,985,645 | ) | $ | (9,831,104 | ) | $ | (63,699,517 | ) | ||||
Adjustments
to reconcile net loss to net
|
||||||||||||||||
cash
(used) by operating activities
|
||||||||||||||||
Stock
for interest
|
644,549
|
3,695,884
|
12,075
|
4,352,508
|
||||||||||||
Stock
for services
|
-
|
-
|
-
|
264,600
|
||||||||||||
Stock
for services - related party
|
-
|
-
|
-
|
90,000
|
||||||||||||
Oil
and gas properties for services
|
-
|
732,687
|
-
|
732,687
|
||||||||||||
Stock
for debt - related party
|
-
|
-
|
-
|
233,204
|
||||||||||||
Amortization
of discount and deferred financing costs
|
||||||||||||||||
on
convertible debt
|
10,611,349
|
4,870,043
|
2,085,491
|
17,908,562
|
||||||||||||
Finance
costs incurred for waiver of triggering event
|
3,457,101
|
-
|
-
|
3,457,101
|
||||||||||||
Write-off
of discount and deferred financing costs
|
||||||||||||||||
upon
conversion of convertible debt
|
-
|
-
|
2,979,404
|
2,979,404
|
||||||||||||
Write-off
of discount and deferred financing costs
|
||||||||||||||||
upon
extiguishment of convertible debt
|
-
|
2,162,597
|
-
|
2,162,597
|
||||||||||||
Compensation
expense on vested stock options
|
1,525,752
|
167,137
|
34,521
|
1,727,410
|
||||||||||||
Depreciation,
depletion and amortization
|
||||||||||||||||
and
accretion of ARO expense
|
779,446
|
1,887,074
|
76,390
|
2,738,594
|
||||||||||||
Gain
on disposition of oil and gas assets
|
(72,713 | ) | (197,676 | ) |
-
|
(270,389 | ) | |||||||||
Impairment
of oil and gas properties
|
1,328,432
|
5,273,795
|
-
|
6,667,996
|
||||||||||||
Other
|
-
|
-
|
-
|
11,178
|
||||||||||||
Changes
in assets and liabilities:
|
||||||||||||||||
Accounts
payable - trade, accruals, bank overdrafts
|
(332,121 | ) |
454,463
|
(63,539 | ) |
39,658
|
||||||||||
Accounts
payable - related
|
(34,679 | ) | (14,679 | ) | (46,274 | ) |
64,400
|
|||||||||
Interest
payable
|
1,913,199
|
441,998
|
631,000
|
3,060,917
|
||||||||||||
Accounts
receivable, prepaids and other
|
||||||||||||||||
current
assets
|
260,908
|
(1,256,589 | ) | (142,523 | ) | (1,187,776 | ) | |||||||||
Other
|
4,405
|
(17,861 | ) |
4,973
|
(18,443 | ) | ||||||||||
Net
cash used by operating activities
|
(6,077,479 | ) | (5,786,772 | ) | (4,259,586 | ) | (18,685,309 | ) | ||||||||
Cash
flows from investing activities
|
||||||||||||||||
Additions
to oil and gas properties
|
(4,145,612 | ) | (18,873,239 | ) | (20,266,368 | ) | (45,425,027 | ) | ||||||||
Management
fees earned on operated properties
|
1,695,830
|
-
|
-
|
1,695,830
|
||||||||||||
Purchase
of furniture and equipment
|
(1,995 | ) | (128,056 | ) | (145,909 | ) | (281,172 | ) | ||||||||
Purchase
surety bonds
|
(80,000 | ) | (379,783 | ) |
-
|
(459,783 | ) | |||||||||
Proceeds
from sale of oil and gas asset
|
100,000
|
240,000
|
-
|
340,000
|
||||||||||||
Advance
to affiliate
|
-
|
-
|
(60,000 | ) | ||||||||||||
Cash received upon recapitalization and merger | - | - | 4,234 | |||||||||||||
Net
cash used by investing activities
|
(2,431,777 | ) | (19,141,078 | ) | (20,412,277 | ) | (44,185,918 | ) |
Cumulative
|
||||||||||||||||
|
|
|
From
Inception
|
|||||||||||||
Year
Ended
|
Year
Ended
|
Year
Ended
|
(June
18, 2002)
|
|||||||||||||
November
30, 2006
|
November
30, 2005
|
November
30, 2004
|
to
November
30,
2006
|
|||||||||||||
Cash
flows from financing activities
|
||||||||||||||||
Proceeds
from sale of common stock
|
-
|
-
|
15,452,800
|
17,905,300
|
||||||||||||
Proceeds
from sale of convertible notes payable
|
7,000,000
|
17,695,000
|
20,000,000
|
44,695,000
|
||||||||||||
Proceeds
from sale of convertible debentures
|
-
|
-
|
-
|
5,040,000
|
||||||||||||
Proceed
for sale on notes payable - related party
|
5,500,000
|
5,500,000
|
||||||||||||||
Proceeds
from exercise of warrants
|
-
|
992,306
|
27,000
|
1,019,306
|
||||||||||||
Debt
and stock offering costs
|
(127,700 | ) | (942,169 | ) | (2,419,978 | ) | (3,980,569 | ) | ||||||||
Payment
of convertible notes payable
|
(4,583,333 | ) | (1,436,447 | ) |
-
|
(6,019,780 | ) | |||||||||
Payment
of note payable - related party
|
-
|
(15,946 | ) | (113,632 | ) | (129,578 | ) | |||||||||
Payment
of note payable
|
(550,272 | ) |
-
|
(550,272 | ) | |||||||||||
Net
cash provided by financing activities
|
7,788,967
|
15,742,472
|
32,946,190
|
63,479,407
|
||||||||||||
Net
(decrease) increase in cash
|
(720,289 | ) | (9,185,378 | ) |
8,274,327
|
608,180
|
||||||||||
Cash
and cash equivalents, beginning of period
|
1,328,469
|
10,513,847
|
2,239,520
|
-
|
||||||||||||
Cash
and cash equivalents, end of period
|
$ |
608,180
|
$ |
1,328,469
|
$ |
10,513,847
|
$ |
608,180
|
||||||||
Supplemental
schedule of cash flow information
|
||||||||||||||||
Cash
paid for interest
|
$ |
2,846,091
|
$ |
1,065,442
|
$ |
205,084
|
$ |
4,559,284
|
||||||||
Supplemental
disclosures of non-cash investing and
|
||||||||||||||||
financing
activities
|
||||||||||||||||
Debt
incurred for oil and gas properties
|
$ |
-
|
$ |
-
|
$ |
2,600,000
|
$ |
3,646,000
|
||||||||
Debt
incurred for finance costs
|
$ |
3,547,101
|
$ |
-
|
$ |
-
|
$ |
3,547,101
|
||||||||
Stock
issued for services
|
$ |
-
|
$ |
-
|
$ |
-
|
$ |
354,600
|
||||||||
Stock
issued for interest and debt
|
$ |
4,812,249
|
$ |
8,685,009
|
$ |
12,075
|
$ |
13,742,538
|
||||||||
Stock
issued for convertible debentures
|
$ |
-
|
$ |
-
|
$ |
5,640,000
|
$ |
5,640,000
|
||||||||
Warrants
issued for offering and financing costs
|
$ |
27,274
|
$ |
88,874
|
$ |
1,462,124
|
$ |
1,685,850
|
||||||||
Discount
on convertible debt issued
|
$ |
566,541
|
$ |
16,538,498
|
$ |
4,336,316
|
$ |
14,883,630
|
||||||||
Conversion
of interest to debt
|
$ |
-
|
$ |
-
|
$ |
-
|
$ |
11,178
|
||||||||
Stock
issued for subsidiary - related
|
$ |
-
|
$ |
-
|
$ |
-
|
$ | (202,232 | ) | |||||||
Stock
issued for oil and gas properties
|
$ |
-
|
$ |
-
|
$ |
9,146,800
|
$ |
9,146,800
|
||||||||
Net
cash acquired
|
$ |
2,974
|
||
Liabilities
assumed
|
(63,305 | ) | ||
Net
liabilities assumed
|
$ | (60,331 | ) |
Net
cash acquired
|
$ |
1,260
|
||
Undeveloped
oil and gas properties
|
75,680
|
|||
Liabilities
assumed
|
(279,173 | ) | ||
Net
liabilities assumed
|
$ | (202,233 | ) |
2006
|
2005
|
|||||||
Balance
beginning of period
|
$ |
1,242,967
|
$ |
713,073
|
||||
Change in estimate
|
(161,483 | ) |
-
|
|||||
Liabilities incurred
|
42,238
|
481,193
|
||||||
Liabilities settled
|
-
|
-
|
||||||
Accretion
|
164,613
|
48,701
|
||||||
Balance
end of period
|
$ |
1,288,335
|
$ |
1,242,967
|
Year
Ended
|
Year
Ended
|
|||||||
Net
loss:
|
November
30, 2005
|
November
30, 2004
|
||||||
As
reported
|
$ | (23,985,645 | ) | $ | (9,831,104 | ) | ||
Add:
Stock-based compensation included in net loss
|
167,132
|
34,525
|
||||||
Less:
Stock-based compensation determined under the fair value based
method
|
(1,253,350 | ) | (1,561,351 | ) | ||||
Pro
forma
|
$ | (25,071,863 | ) | $ | (11,357,930 | ) | ||
Net
loss per common share:
|
||||||||
As
reported
|
$ | (0.37 | ) | $ | (0.18 | ) | ||
Pro
forma
|
$ | (0.40 | ) | $ | (0.21 | ) |
Year
ended November 30,
|
||||||||||||
2006
|
2005
|
2004
|
||||||||||
Expected
dividend yield
|
--
|
--
|
--
|
|||||||||
Expected
price volatility
|
75.51—64.34 | % | 80.33-75.51 | % | 84.19-80.50 | % | ||||||
Risk
free interest rate
|
4.25 | % |
3.5%
to 4.5%
|
3.5 | % | |||||||
Expected
term of
options
(in years)
|
5
years
|
5—6.5
years
|
5—6.5
years
|
2006
|
2005
|
2004
|
|
Enserco
Energy Inc.
|
94%
|
82%
|
100%
|
Western
Gas Resources
|
-
|
13%
|
-
|
For
the Years Ended November 30,
|
||||||||||||
2006
|
2005
|
2004
|
||||||||||
Acquisition
of unevaluated properties
|
$ |
374,756
|
$ |
8,051,122
|
$ |
19,365,549
|
||||||
Exploration
costs
|
||||||||||||
United
States
|
3,607,563
|
9,613,262
|
14,645,548
|
|||||||||
Europe
|
-
|
-
|
18,675
|
|||||||||
Development
costs
|
163,292
|
499,945
|
-
|
|||||||||
Oil and gas expenditures | 4,145,611 | 18,164,329 | 34,029,772 | |||||||||
Asset
retirement obligations
|
42,238
|
481,193
|
710,731
|
|||||||||
$ |
4,187,849
|
$ |
18,645,522
|
$ |
34,740,503
|
|||||||
2006
|
2005
|
2004
|
||||||||||
Full
Cost Pool - Evaluated Properties
|
||||||||||||
Balance beginning of period
|
$ |
9,991,629
|
$ |
-
|
$ |
-
|
||||||
Properties with proved reserves
|
204,525
|
4,640,738
|
-
|
|||||||||
Reclassification of impaired, unevaluated
|
||||||||||||
properties
|
473,265
|
5,055,320
|
-
|
|||||||||
Asset retirement obligation
|
322,526
|
295,571
|
-
|
|||||||||
Balance end of period
|
$ |
10,991,945
|
$ |
9,991,629
|
$ |
-
|
||||||
Depreciation,
Depletion, Amortization
|
||||||||||||
and Impairment
|
||||||||||||
Balance beginning of period
|
$ |
7,097,299
|
$ |
48,394.00
|
$ |
-
|
||||||
Depreciation, depletion and amortization
|
540,404
|
1,775,110
|
48,394
|
|||||||||
Impairment of oil and gas properties
|
1,328,432
|
5,273,795
|
-
|
|||||||||
Balance end of period
|
$ |
8,966,135
|
$ |
7,097,299
|
$ |
48,394
|
2006
|
2005
|
2004
|
||||||||||
United
States Cost Center
|
||||||||||||
Powder River Basin
|
||||||||||||
Wyoming
|
$ |
33,225,926
|
$ |
31,071,223
|
$ |
32,280,054
|
||||||
Montana
|
2,064,659
|
1,974,470
|
3,724,593
|
|||||||||
Piceance Basin
|
||||||||||||
Colorado
|
7,022,463
|
7,022,099
|
||||||||||
Other
|
||||||||||||
Texas
|
-
|
473,265
|
739,336
|
|||||||||
ARO Asset and other
|
454,282
|
896,052
|
710,031
|
|||||||||
42,767,330
|
41,437,109
|
37,454,014
|
||||||||||
German
Cost Center
|
-
|
-
|
42,234
|
|||||||||
Romania
Cost Center
|
-
|
27,286
|
43,585
|
|||||||||
Total
Unevaluated Properties
|
$ |
42,767,330
|
$ |
41,464,395
|
$ |
37,539,833
|
Net
Costs Incurred During Periods Ended
|
||||
November 30, 2006
|
$ |
2,095,726
|
||
November 30, 2005
|
17,870,729
|
|||
November 30, 2004
|
21,734,634
|
|||
November 30, 2003
|
603,991
|
|||
November 30, 2002
|
462,250
|
|||
$ |
42,767,330
|
2006
|
2005
|
|||||||
Furniture and equipment
|
$ |
280,429
|
$ |
279,178
|
||||
Less accumulated depreciation
|
(158,484 | ) | (84,301 | ) | ||||
$ |
121,945
|
$ |
196,882
|
Issue
Date
|
Due
Date
|
Amount
|
|||
September
28, 2006
|
January
26, 2007
|
$ |
2,500,000
|
||
November
1, 2006
|
March
1, 2007
|
1,000,000
|
|||
November
13, 2006
|
March
13, 2007
|
500,000
|
|||
November
30, 2006
|
March
30, 2007
|
1,500,000
|
|||
January
14, 2004
|
December
1, 2006
|
2,049,728
|
|||
$ |
7,549,728
|
·
|
The
waiver of the holders’ right to make an early repayment election as a
result of the July 2006 Equity Liquidity Test Failure and any
Equity
Liquidity Test Failure as of August 1, 2006 and/or September
1,
2006;
|
·
|
The
deferral of the August 2006 and September 2006 installment payments
on the
2004 Notes until October 2, 2006, unless earlier converted by
the
holders;
|
·
|
The
ability of the holders to convert up to $5,000,000 in principal
amount of
the 2004 Notes, plus related interest, at their option as a “Company
Alternative Conversion” under the notes through September 30, 2006, with
the amounts converted to be applied first to the August 2006
installment
payment, second to the September 2006 installment payment, and
then to
those installments nearest to the maturity date of the 2004 Notes;
and
|
·
|
The
waiver of the Company’s right to prepay any part of the 2004 or 2005
Notes.
|
As
of November 30,
|
||||||||
2006
|
2005
|
|||||||
2004
Notes
|
$ |
4,160,505
|
$ |
12,500,000
|
||||
Less
unamortized discount
|
(663,002 | ) | (7,675,920 | ) | ||||
March
2005 Notes
|
7,695,000
|
7,695,000
|
||||||
Less
unamortized discount
|
(1,172,506 | ) | (3,543,431 | ) | ||||
May
2005 Notes
|
12,500,000
|
10,000,000
|
||||||
Less
unamortized discount
|
(2,750,577 | ) | (3,541,691 | ) | ||||
April
2006 Notes
|
4,500,000
|
-
|
||||||
Less
unamortized discount
|
(300,671 | ) |
-
|
|||||
June
2006 Notes
|
2,500,000
|
-
|
||||||
Less
unamortized discount
|
(139,951 | ) |
-
|
|||||
26,328,798
|
15,433,958
|
|||||||
Less
current portion, net
|
(10,019,996 | ) | (5,041,524 | ) | ||||
long
term portion, net
|
$ |
16,308,801
|
$ |
10,392,434
|
2007
|
$ |
19,405,233
|
||
2008
|
4,500,000
|
|||
2009
|
2,500,000
|
|||
2010
|
12,500,000
|
|||
$ |
38,905,233
|
·
|
12,993,939
shares issued Holders of Senior Secured Convertible Notes in
connection
with the conversion of $4,812,248 of principal and accrued interest
at
various conversion rates, ranging from $0.28 to $0.60 per
share.
|
·
|
305,656
shares issued in conjunction with the cashless exercise of 508,475
Series
“A” warrants associated with the convertible debentures dated September
24, 2003.
|
·
|
271,377
shares issued in conjunction with the cashless exercise of 508,475
Series
“B” warrants associated with the convertible debentures dated October
3,
2003
|
·
|
1,332,676
shares for $992,302 cash for the exercise of 1,332,676 of warrants
at
exercise prices ranging from $0.71 to $1.54 per
share.
|
·
|
7,940,811
shares issued to Holders of Senior Secured Convertible Notes
in connection
with the conversion of $8,685,009 of principal and accrued interest
at
various conversion rates, ranging from $0.90 to $1.55 per
share.
|
·
|
45,763
shares for $27,000 cash for the exercise 45,763 warrants at an
exercise
price of $0.59 per share
|
·
|
2,503,571
shares for cash at $1.40 per share
|
·
|
2,000,000
shares for partial consideration of acquired oil and gas properties
at
$1.40 per share
|
·
|
6,637,671
shares for cash of $1.80 per share
|
·
|
3,000,000
shares for partial consideration of acquired oil and gas properties
at
$1.80 per share
|
·
|
360,000
shares for partial consideration of acquired oil and gas properties
at
$2.63 share
|
·
|
1,525,424
shares upon conversion of $900,000 of convertible debentures
at a
conversion price of $.59 per share
|
·
|
8,033,898
shares upon conversion of $4,740,000 of convertible debentures
at a
conversion price of $.59 per share
|
·
|
20,466
shares upon conversion of $12,075 of accrued interest on convertible
debentures at a conversion price of $.59 per
share
|
·
|
371,206
shares issued in conjunction with the cashless exercise of 508,475
Series
“A” warrants associated with the convertible debentures dated September
24, 2003
|
·
|
348,005
shares issued in conjunction with the cashless exercise of 508,475
Series
“B” warrants associated with the convertible debentures dated October
3,
2003
|
·
|
1,602,000
shares for cash at $1.00 per share
|
·
|
10,000
shares for services at $1.00 per
share
|
·
|
60,000
shares for services at $.91 per
share
|
·
|
233,204
shares to Resource Venture Management (RVM), a related party,
an entity
owned by a founder of the Company, as payment of an outstanding
debt, at
$1.00 per share
|
·
|
90,000
shares to RVM for services rendered, valued at $90,000 ($1.00
per
share)
|
·
|
1,951,241
shares to the shareholders of Pannonian in accordance with the
Share
Exchange Agreement to acquire all the outstanding shares of Pannonian
(Note 1).
|
·
|
11,500,000
shares at inception to officers/directors/founders for cash at
$.001 per
share
|
·
|
500,000
shares for cash at $.02 per share
|
·
|
4,000,000
shares to RVM, for services rendered, valued at $200,000 ($.05
per
share)
|
·
|
3,000,000
shares for cash at $.05 per share
|
·
|
1,997,058
shares for cash at $.34 per share
|
Issue
Date
|
Shares
Exercisable
|
Exercise
Price
|
Expiration
Date
|
||||||
September 24, 2003
|
2,008,474
|
$ |
.59
- $ .83
|
September 24, 2008
|
|||||
October 3, 2003
|
551,186
|
$ |
.59
- $ .83
|
October 3, 2008
|
|||||
December 18, 2003
|
605,880
|
$ |
$1.25
|
December 18, 2007
|
|||||
January 15, 2004
|
1,680,414
|
$ |
1.25
|
January 15, 2009
|
|||||
August 19, 2004
|
5,494,805
|
$ |
1.25
|
August 19, 2009
|
|||||
October 27, 2004
|
100,000
|
$ |
1.25
|
October 27, 2009
|
|||||
March 1, 2005
|
1,637,234
|
$ |
1.25
|
March 1, 2008
|
|||||
May 31, 2005
|
200,000
|
$ |
1.25
|
May 31, 2010
|
|||||
December 1, 2005
|
1,205,196
|
$ |
1.25
|
August 19, 2009
|
|||||
April 26, 2006
|
868,383
|
$ |
1.60
|
April 26, 2011
|
|||||
June 20, 2006
|
480,769
|
$ |
1.60
|
June 20, 2011
|
|||||
14,832,341
|
Weighted
Avg
|
||||||||||
Number
of
|
Weighted
Avg
|
Remaining
|
Aggregate
|
|||||||
Shares
|
Exercise
Price
|
Contractual
Term
|
Intrinsic
Value
|
|||||||
Options
outstanding - December 1, 2004
|
3,500,000
|
$ |
2.37
|
|||||||
Granted
during period
|
975,000
|
$ |
1.32
|
|||||||
Exercised
during period
|
-
|
-
|
||||||||
Forfeited
during period
|
-
|
-
|
||||||||
Expired
during period
|
-
|
-
|
||||||||
Options
outstanding -November 30, 2005
|
4,475,000
|
$ |
2.15
|
|||||||
Options
outstanding - December 1, 2005
|
4,475,000
|
$ |
2.15
|
|||||||
Granted
during period
|
240,000
|
$ |
1.19
|
|||||||
Exercised
during period
|
-
|
-
|
||||||||
Forfeited
during period
|
-
|
-
|
||||||||
Expired
during period
|
-
|
-
|
||||||||
Options
outstanding -November 30, 2006
|
4,715,000
|
$ |
2.10
|
7.61
|
$ 7,207,557
|
|||||
Exercisable
at November 30, 2006
|
2,825,000
|
$ |
2.10
|
7.63
|
$ 5,919,800
|
Number
of Shares
|
Weighted
Average
Fair
Value
|
|||||||
Non-Vested
Options - December 1, 2004
|
2,566,250
|
$ |
1.77
|
|||||
Granted
during period
|
975,000
|
$ |
0.97
|
|||||
Exercised
during period
|
-
|
$ |
-
|
|||||
Vested
during period
|
(841,250 | ) | $ |
1.49
|
||||
Forfeited
during period
|
-
|
$ |
-
|
|||||
Non-Vested
Options - November 30, 2005
|
2,700,000
|
$ |
1.55
|
|||||
Granted
during period
|
240,000
|
$ |
0.69
|
|||||
Exercised
during period
|
-
|
$ |
-
|
|||||
Vested
during period
|
(1,050,000 | ) | $ |
1.29
|
||||
Forfeited
during period
|
-
|
$ |
-
|
|||||
Non-Vested
Options - November 30, 2006
|
1,890,000
|
$ |
1.47
|
Weighted
average
|
||||||||||||||
Exercise
price
|
Number
of options
|
Number
of options
|
remaining
contractual
|
|||||||||||
per
share
|
outstanding
|
Exercisable
|
life
(Years)
|
|||||||||||
$ |
1.00
|
60,000
|
40,000
|
6.5
|
||||||||||
1.07
|
50,000
|
10,000
|
9.0
|
|||||||||||
1.19
|
240,000
|
240,000
|
9.1
|
|||||||||||
1.26
|
50,000
|
50,000
|
8.1
|
|||||||||||
1.30
|
200,000
|
200,000
|
7.7
|
|||||||||||
1.34
|
875,000
|
153,750
|
8.0
|
|||||||||||
1.50
|
300,000
|
112,500
|
7.4
|
|||||||||||
1.55
|
325,000
|
137,500
|
7.6
|
|||||||||||
2.24
|
60,000
|
60,000
|
7.4
|
|||||||||||
2.64
|
2,375,000
|
831,250
|
7.4
|
|||||||||||
3.51
|
180,000
|
180,000
|
7.3
|
|||||||||||
4,475,000
|
1,775,000
|
7.6
|
Years
Ended November 30,
|
||||||||||||
2006
|
2005
|
2004
|
||||||||||
Federal
statutory income tax rate
|
(35.0 | %) | (35.0 | %) | (34.0 | %) | ||||||
State
income taxes
|
(3.25 | %) | (3.3 | %) | (3.3 | %) | ||||||
Permanent
differences – interest on convertible
Debt
Other
|
16.25 | % | 6.5 | % | 15.1 | % | ||||||
Increase
in valuation allowance
|
22.0 | % | 31.8 | % | 22.2 | % | ||||||
Net
income tax provision (benefit)
|
-
|
-
|
-
|
2006
|
2005
|
2004
|
||||||||||
Deferred
tax assets
|
||||||||||||
Federal
and state net operating
loss
Carryovers
|
$ |
13,700,000
|
$ |
13,155,000
|
$ |
3,671,000
|
||||||
Asset
retirement
obligation
|
712,000
|
472,000
|
265,000
|
|||||||||
Oil
and gas property
|
657,000
|
-
|
||||||||||
Accrued
related party interest and interest on
convertible
debt
|
952,000
|
- | - | |||||||||
Deferred compensation | 661,000 | - | - | |||||||||
Other
|
-
|
10,000
|
-
|
|||||||||
Total
deferred
taxes
|
$ |
16,025,000
|
$ |
14,294,000
|
$ |
3,936,000
|
||||||
Deferred
tax liabilities
|
||||||||||||
Intangible
drilling costs and other exploration costs capitalized for financial
reporting purposes
|
$ | (3,085,000 | ) |
-
|
(319,000 | ) | ||||||
Deferred
financing
costs
|
(216,000 | ) | ||||||||||
Property
and
equipment
|
(2,000 | ) | ||||||||||
Other
|
___________
|
____________
|
(15,000 | ) | ||||||||
Total
deferred
liabilities
|
(3,303,000 | ) |
-
|
(334,000 | ) | |||||||
Net
deferred tax
asset
|
12,722,000
|
14,294,000
|
3,602,000
|
|||||||||
Less: valuation
allowance
|
(12,722,000 | ) | (14,294,000 | ) | (3,602,000 | ) | ||||||
Deferred
tax
liability
|
$ |
-
|
$ |
-
|
$ |
-
|
2007
|
$103,881
|
2008
|
$107,834
|
2009
|
$109,416
|
2010
|
$
45,454
|
Three
months ended
|
||||||||||||||||
02/28/06
|
05/31/06
|
08/31/06
|
11/30/06
|
|||||||||||||
Revenues
|
||||||||||||||||
Natural
gas
sales
|
$ |
425,675
|
$ |
248,661
|
$ |
281,559
|
$ |
238,747
|
||||||||
Gain
on disposition of oil and
gas property and other income, related party
|
-
|
-
|
-
|
79,474
|
||||||||||||
Operating
revenues
|
-
|
-
|
-
|
-
|
||||||||||||
425,675
|
248,661
|
281,559
|
318,221
|
|||||||||||||
Operating
expenses
|
||||||||||||||||
Lease
operating
expenses
|
294,308
|
106,510
|
189,493
|
190,825
|
||||||||||||
General
and
administrative
|
1,154,718
|
1,327,423
|
1,172,301
|
1,362,092
|
||||||||||||
Impairment
oil and gas properties
|
-
|
-
|
1,031,160
|
297,272
|
||||||||||||
Depreciation
and amortization
|
176,344
|
185,984
|
318,379
|
98,739
|
||||||||||||
Other
income (expense)
|
||||||||||||||||
Interest
and
other
|
4,199
|
7,390
|
3,283
|
742
|
||||||||||||
Interest
and financing
costs
|
(4,582,103 | ) | (4,365,863 | ) | (3,970,113 | ) | (6,629,210 | ) | ||||||||
(4,577,904
|
(4,358,473 | ) | (3,966,830 | ) | (6,628468 | ) | ||||||||||
Net
(loss)
|
$ | (5,777,599 | ) | $ | (5,729,729 | ) | $ | (6,396,604 | ) | $ | (8,259,175 | ) | ||||
Net
(loss) per common share
|
||||||||||||||||
Basic
and
diluted
|
$ | (0.08 | ) | $ | (0.08 | ) | $ | (0.09 | ) | $ | (0.11 | ) | ||||
Three
months ended
|
||||||||||||||||
02/28/05
|
05/31/05
|
08/31/05
|
11/30/05
|
|||||||||||||
Revenues
|
||||||||||||||||
Natural
gas
sales
|
$ |
111,877
|
$ |
247,399
|
$ |
323,313
|
$ |
614,605
|
||||||||
Gain
on disposition of oil and
gas properties
|
-
|
197,676
|
-
|
|||||||||||||
Operating
revenues
|
-
|
-
|
-
|
43,472
|
||||||||||||
111,877
|
445,075
|
323,313
|
658,077
|
|||||||||||||
Operating
expenses
|
||||||||||||||||
Lease
operating
expenses
|
172,137
|
204,273
|
377,435
|
211,224
|
||||||||||||
General
and
administrative
|
1,255,511
|
1,247,864
|
906,760
|
1,906,453
|
||||||||||||
Impairment
oil and gas properties
|
-
|
-
|
-
|
5,273,795
|
||||||||||||
Depreciation
and amortization
|
68,904
|
104,990
|
160,258
|
1,552,922
|
||||||||||||
1,496,552
|
1,557,127
|
1,444,453
|
8,944,394
|
|||||||||||||
Other
income (expense)
|
||||||||||||||||
Interest
and
other
|
36,560
|
43,922
|
37,087
|
45,722
|
||||||||||||
Interest
and financing
costs
|
(2,035,355 | ) | (2,474,651 | ) | (2,745,696 | ) | (2,826,453 | ) | ||||||||
(1,998,795 | ) | (2,233,053 | ) | (2,708,609 | ) | (2,780,731 | ) | |||||||||
Net
(loss)
|
$ | (3,383,470 | ) | $ | (3,542,781 | ) | $ | (3,829,749 | ) | $ | (11,067,048 | ) | ||||
Net
(loss) per common share
|
||||||||||||||||
Basic
and
diluted
|
$ | (0.06 | ) | $ | (0.06 | ) | $ | (0.02 | ) | $ | (0.17 | ) | ||||
Three
months ended
|
||||||||||||||||
02/28/04
|
05/31/04
|
08/31/04
|
11/30/04
|
|||||||||||||
Revenues
|
||||||||||||||||
Natural
gas
sales
|
$ |
-
|
$ |
-
|
$ |
23,780
|
$ |
98,675
|
||||||||
Operating
expenses
|
||||||||||||||||
Lease
operating
expenses
|
-
|
-
|
15,215
|
44,032
|
||||||||||||
General
and
administrative
|
676,424
|
1,047,625
|
874,001
|
919,168
|
||||||||||||
Abandoned
oil and gas
properties
|
-
|
-
|
-
|
-
|
||||||||||||
Depreciation
and
amortization
|
1,335
|
21,767
|
18,207
|
35,081
|
||||||||||||
677,759
|
1,069,392
|
907,423
|
998,281
|
|||||||||||||
Other
income (expense)
|
||||||||||||||||
Interest
|
13,337
|
9,897
|
7,652
|
20,510
|
||||||||||||
Interest
and financing
costs
|
(771,594 | ) | (2,288,633 | ) | (191,268 | ) | (3,100,605 | ) | ||||||||
(758,257 | ) | (2,278,736 | ) | (183,616 | ) | (3,080,095 | ) | |||||||||
Net
(loss)
|
$ | (1,436,016 | ) | $ | (3,348,128 | ) | $ | (1,067,259 | ) | $ | (3,979,701 | ) | ||||
Net
(loss) per common share
|
||||||||||||||||
Basic
and
diluted
|
$ | (0.03 | ) | $ | (0.06 | ) | $ | (0.02 | ) | $ | (0.07 | ) | ||||
Proved
Reserves
|
Gas
(Mcf)
|
Oil
(Bbls)
|
||||||
Balance,
November 30, 2004
|
-
|
-
|
||||||
Extensions
and Discoveries
|
1,171,425
|
353
|
||||||
Production
|
(211,481 | ) |
-
|
|||||
Balance,
November 30, 2005
|
959,944
|
353
|
||||||
Revisions
to previous estimates
|
254,143
|
(8 | ) | |||||
Extensions
and discoveries
|
1,773
|
20
|
||||||
Production
|
(210,439 | ) | (45 | ) | ||||
Balance,
November 30, 2006
|
1,005,421
|
320
|
||||||
Proved
Developed Reserves as of
November 30
|
||||||||
2006
|
2005
|
|||||||
Gas
(Mcf)
|
1,005,421
|
648,302
|
||||||
Oil
( Bbls)
|
320
|
353
|
||||||
Standardized
Measure of Discounted Future Cash Flows
|
||||||||
November
30
|
November
30
|
|||||||
2006
|
2005
|
|||||||
Future
cash inflows
|
$ |
6,769,792
|
$ |
6,529,934
|
||||
Future
cash outflows
|
||||||||
Production
costs
|
(2,954,112 | ) | (2,498,340 | ) | ||||
Development
costs
|
(340,000 | ) | (84,000 | ) | ||||
Future
income taxes
|
-
|
-
|
||||||
Future
net cash flows
|
3,475,680
|
3,947,594
|
||||||
Adjustment
to discount future annual net cash flows at 10%
|
(732,608 | ) | (1,005,320 | ) | ||||
Standardized
measure of discounted future net cash flows
|
$ |
2,743,072
|
$ |
2,942,274
|
Changes
in the Standardized Measure of Discounted Future Net Cash
Flows
|
||||||||
Standardized
measure, beginning of period
|
$ |
2,942,274
|
$ |
-
|
||||
Sale
of oil and gas, net of production costs and taxes
|
(414,000 | ) | (332,125 | ) | ||||
Net
change in sales prices, net of production cots
|
(242,000 | ) |
-
|
|||||
Discoveries,
extensions and improved recoveries, net of
|
3,274,399
|
|||||||
future
development cost
|
2,000
|
-
|
||||||
Change
in future development costs
|
(276,000 | ) |
-
|
|||||
Revisions
of quantity estimates
|
449,000
|
-
|
||||||
Accretion
of discount
|
294,000
|
-
|
||||||
Other
|
(12,202 | ) |
-
|
|||||
Standardized
measure, end of period
|
$ |
2,743,072
|
$ |
2,942,274
|
||||
FOR
|
o
|
AGAINST
|
o
|
ABSTAIN
|
o
|
FOR
|
o
|
AGAINST
|
o
|
ABSTAIN
|
o
|
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|
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|
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