☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Colorado
|
88-0218499
|
|
(State of Incorporation)
|
(I.R.S. Employer Identification No.)
|
Large accelerated filer ☐
|
Accelerated filer☐
|
Non-accelerated filer ☒
|
Smaller reporting company☐
|
Part I. Financial Information
|
Page
|
|
Item 1.
|
5
|
|
5
|
||
6
|
||
7
|
||
8
|
||
9
|
||
Item 2.
|
16
|
|
Item 3.
|
29
|
|
Item 4.
|
29
|
|
Part II. Other Information
|
||
Item 1.
|
30
|
|
Item 6.
|
32
|
|
33
|
● | business strategy; |
● | growth opportunities; |
● | future development of concessions, exploitation of assets and other business operations; |
● | future market conditions and the effect of such conditions on the Company's future activities or results of operations; |
● | future uses of and requirements for financial resources; |
● | interest rate and foreign exchange risk; |
● | future contractual obligations; |
● | outcomes of legal proceedings including; |
● | future operations outside the United States; |
● | competitive position; |
● | expected financial position; |
● | future cash flows; |
● | future liquidity and sufficiency of capital resources; |
● | future dividends; |
● | financing plans; |
● | tax planning; |
● | budgets for capital and other expenditures; |
● | plans and objectives of management; |
● | compliance with applicable laws; and, |
● | adequacy of insurance or indemnification. |
● | general economic and business conditions; |
● | worldwide demand for oil and natural gas; |
● | changes in foreign and domestic oil and gas exploration, development and production activity; |
● | oil and natural gas price fluctuations and related market expectations; |
● | termination, renegotiation or modification of existing contracts; |
● | the ability of the Organization of Petroleum Exporting Countries, commonly referred to as "OPEC", to set and maintain production levels and pricing, and the level of production in non-OPEC countries; |
● | policies of the various governments regarding exploration and development of oil and gas reserves; |
● | advances in exploration and development technology; |
● | the political environment of oil-producing regions; |
● |
political instability in the Democratic Republic of Săo Tomé and Príncipe ("DRSTP"), the Federal Republic of Nigeria, Republic of Kenya, and the Republic of Chad;
|
● | casualty losses; |
● | competition; |
● | changes in foreign, political, social and economic conditions; |
● | risks of international operations, compliance with foreign laws and taxation policies and expropriation or nationalization of equipment and assets; |
● | risks of potential contractual liabilities; |
● | foreign exchange and currency fluctuations and regulations, and the inability to repatriate income or capital; |
● | risks of war, military operations, other armed hostilities, terrorist acts and embargoes; |
● | regulatory initiatives and compliance with governmental regulations; |
● | compliance with tax laws and regulations; |
● | customer preferences; |
● | effects of litigation and governmental proceedings; |
● | cost, availability and adequacy of insurance; |
● | adequacy of the Company's sources of liquidity; |
● | labor conditions and the availability of qualified personnel; and, |
● | various other matters, many of which are beyond the Company's control. |
December 31, 2014
|
September 30, 2014
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
1,448,771
|
$
|
2,182,406
|
||||
Investment in Oando Energy Resources
|
452,038
|
671,402
|
||||||
Deferred debt origination cost – short term
|
173,926
|
147,079
|
||||||
Prepaid expenses and other
|
255,805
|
246,922
|
||||||
Total current assets
|
2,330,540
|
3,247,809
|
||||||
Oil and gas concession fees
|
6,036,050
|
6,006,235
|
||||||
Furniture and equipment, net of accumulated depreciation of $387,924 and $368,587 at December 31, 2014 and September 30, 2014
|
186,936
|
206,273
|
||||||
Deferred debt origination cost – long term
|
36,363
|
43,755
|
||||||
Income tax receivable
|
2,018,533
|
2,018,533
|
||||||
Prepaid expenses – long term
|
78,450
|
172,433
|
||||||
Total assets
|
$
|
10,686,872
|
$
|
11,695,038
|
||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable and accrued liabilities
|
$
|
296,166
|
$
|
379,639
|
||||
Convertible note payable, net of discount – short term
|
457,876
|
625,533
|
||||||
Derivative liability – short term
|
894,400
|
751,404
|
||||||
Total current liabilities
|
1,648,442
|
1,756,576
|
||||||
Convertible note payable, net of discount – long term
|
43,923
|
38,076
|
||||||
Derivative liability – long term
|
270,218
|
270,538
|
||||||
Total liabilities
|
1,962,583
|
2,065,190
|
||||||
Commitments and contingencies:
|
||||||||
Shareholders’ equity:
|
||||||||
Preferred stock, par value $0.0001; authorized 10,000,000 shares; none issued and outstanding
|
-
|
-
|
||||||
Common stock, par value $0.0001; authorized 3,000,000,000 shares; issued and outstanding 822,609,037 and 765,194,088 shares at December 31, 2014 and September 30, 2014
|
82,260
|
76,520
|
||||||
Additional paid-in capital
|
102,077,585
|
101,080,306
|
||||||
Accumulated other comprehensive loss
|
(897,961
|
)
|
(678,598
|
)
|
||||
Accumulated deficits
|
(92,537,595
|
)
|
(90,848,380
|
)
|
||||
Total shareholders’ equity
|
8,724,289
|
9,629,848
|
||||||
Total liabilities and shareholders’ equity
|
$
|
10,686,872
|
$
|
11,695,038
|
Three Months Ended December 31,
|
||||||||
2014
|
2013
|
|||||||
Costs and expenses:
|
||||||||
General and administrative
|
$
|
828,473
|
$
|
973,578
|
||||
Exploration expenses
|
445,988
|
173,819
|
||||||
Depreciation
|
19,336
|
23,457
|
||||||
Gain on sale of partial interest in Kenya concession
|
(239,515
|
)
|
-
|
|||||
Total costs and expenses
|
1,054,282
|
1,170,854
|
||||||
Other income and (expenses):
|
||||||||
Interest income
|
705
|
1,504
|
||||||
Gain on MTM of derivative liability
|
114,674
|
-
|
||||||
Loss on embedded derivative
|
(532,188
|
)
|
-
|
|||||
Interest expense
|
(218,124
|
)
|
-
|
|||||
Total other income and (expense)
|
(634,933
|
)
|
1,504
|
|||||
Loss before benefit (provision) for income taxes
|
(1,689,215
|
)
|
(1,169,350
|
)
|
||||
Benefit (provision) for income taxes:
|
||||||||
Current
|
-
|
-
|
||||||
Deferred
|
-
|
-
|
||||||
Total benefit (provision)for income taxes
|
-
|
-
|
||||||
Net loss
|
$
|
(1,689,215
|
)
|
$
|
(1,169,350
|
)
|
||
Net loss per common share -basic and diluted
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
||
Weighted average number of common shares outstanding - basic and diluted
|
782,790,988
|
764,849,260
|
Three Months Ended December 31,
|
||||||||
2014
|
2013
|
|||||||
Net loss
|
$
|
(1,689,215
|
)
|
$
|
(1,169,350
|
)
|
||
Other comprehensive income – unrealized loss on available for sale securities
|
(219,363
|
)
|
(81,006
|
)
|
||||
Total other comprehensive loss
|
$
|
(1,908,578
|
)
|
$
|
(1,250,356
|
)
|
Three Months Ended December 31,
|
||||||||
2014
|
2013
|
|||||||
Cash Flows From Operating Activities:
|
||||||||
Net loss
|
$
|
(1,689,215
|
)
|
$
|
(1,169,350
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and depletion expense
|
19,337
|
23,457
|
||||||
Compensatory stock options
|
-
|
6,843
|
||||||
Loss on embedded derivative
|
532,188
|
-
|
||||||
Gain on change in fair value of derivatives
|
(114,674
|
)
|
-
|
|||||
Gain on sale of partial interest in Kenya concession
|
(239,515
|
)
|
-
|
|||||
Amortization of convertible debt discount
|
116,259
|
-
|
||||||
Amortization of debt issuance cost
|
30,645
|
-
|
||||||
Stock issued for board compensation
|
8,400
|
-
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Prepaid expenses and other current assets
|
85,100
|
(105,602
|
||||||
Accounts payable and other accrued liabilities
|
(83,473
|
)
|
(70,829
|
)
|
||||
Accounts payable and accrued liabilities, related party
|
-
|
19,667
|
||||||
Net cash used in operating activities
|
(1,334,948
|
)
|
(1,295,814
|
)
|
||||
Cash Flows From Investing Activities:
|
||||||||
Deposit, and accrued interest
|
-
|
(546
|
)
|
|||||
Purchase of oil and gas concessions
|
(29,815
|
)
|
-
|
|||||
Proceeds from deferred farm-out fees
|
239,515
|
2,731,558
|
||||||
Net cash provided by investing activities
|
209,700
|
2,731,012
|
||||||
Cash Flows From Financing Activities:
|
||||||||
Proceeds from convertible debt
|
391,613
|
-
|
||||||
Net cash provided by financing activities
|
391,613
|
-
|
||||||
Net increase (decrease) in cash and cash equivalents
|
(733,635
|
)
|
1,435,198
|
|||||
Cash and cash equivalents, beginning of period
|
2,182,406
|
1,184,204
|
||||||
Cash and cash equivalents, end of period
|
$
|
1,448,771
|
$
|
2,619,402
|
||||
Non-cash investing and financing activities:
|
||||||||
Unrealized loss on investment in Exile Resources
|
$
|
219,364
|
$
|
81,006
|
||||
Discount from derivative |
$
|
260,032 |
$
|
- | ||||
Conversion of note payable to common stock
|
$
|
459,750
|
$
|
-
|
||||
Derivative liabilities extinguished on conversion |
$
|
534,870 |
$
|
- |
● | Level 1 — Quoted prices in active markets for identical assets or liabilities. |
● | Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or, other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
● | Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. |
Derivative
Liability
|
||||
Balance at September 30, 2014
|
$
|
1,021,942
|
||
Increase in derivative value due to issuances of convertible promissory notes
|
260,032
|
|||
Decrease in derivative value due to convertible promissory notes converted to common stocks
|
(534,870
|
)
|
||
Day 1 loss on derivative liabilities
|
532,188
|
|||
Change in fair market value of derivative liabilities on convertible notes due to the mark to market adjustment
|
(108,812
|
)
|
||
Change in fair market value of derivative liabilities on tainted warrants due to the mark to market adjustment
|
(5,862
|
)
|
||
Balance at December 31, 2014
|
$
|
1,164,618
|
December 31, 2014
|
September 30, 2014
|
|||||||
DRSTP concession
|
$
|
3,113,795
|
$
|
3,113,795
|
||||
Chad concession
|
2,827,615
|
2,800,600
|
||||||
Kenya concession
|
-
|
|||||||
Pending concessions in other African countries
|
94,640
|
91,840
|
||||||
$
|
6,036,050
|
$
|
6,006,235
|
Lender
|
Date of
Agreement
|
Term
(Months)
|
Annual
Interest
Rate
|
Face Value
|
Accrued
Interest
|
Discount (c)
|
Deferred Debt
Origination Costs
Due at Maturity (d)
|
Net Convertible
Note Payable
|
Note
Derivative
Liability
|
|||||||||||||||||||||||||
JMJ Financial #1
|
4/15/2014
|
24
|
5.83
|
%
|
(a)
|
$
|
14,890
|
$
|
1,342
|
$
|
13,062
|
$
|
11,111
|
$
|
14,281
|
$
|
26,830
|
|||||||||||||||||
KBM Worldwide #2
|
6/26/2014
|
9
|
8.00
|
%
|
53,000
|
2,091
|
55,091
|
-
|
-
|
86,237
|
||||||||||||||||||||||||
Redwood Fund III
|
5/15/2014
|
18
|
7.85
|
%
|
(b)
|
40,000
|
5,918
|
45,918
|
-
|
-
|
63,046
|
|||||||||||||||||||||||
Vista Capital Investments #1
|
6/16/2014
|
24
|
5.83
|
%
|
(b)
|
50,000
|
6,791
|
42,412
|
5,556
|
19,935
|
56,586
|
|||||||||||||||||||||||
Tonaquint, Inc
|
7/10/2014
|
12
|
12.00
|
%
|
115,000
|
6,579
|
93,510
|
-
|
28,069
|
150,283
|
||||||||||||||||||||||||
Union Capital
|
7/16/2014
|
12
|
8.00
|
%
|
30,000
|
3,027
|
-
|
-
|
33,027
|
-
|
||||||||||||||||||||||||
Iconic Holding, LLC
|
7/16/2014
|
12
|
10.00
|
%
|
75,000
|
3,452
|
62,574
|
-
|
15,878
|
63,076
|
||||||||||||||||||||||||
Acutus Private
|
7/29/2014
|
9
|
8.00
|
%
|
58,750
|
1,772
|
-
|
-
|
60,522
|
-
|
||||||||||||||||||||||||
KBM Worldwide #3
|
8/15/2014
|
9
|
8.00
|
%
|
53,000
|
2,137
|
-
|
-
|
55,137
|
-
|
||||||||||||||||||||||||
Vista Capital Investments #2
|
8/26/2014
|
24
|
5.83
|
%
|
25,000
|
254
|
27,339
|
2,777
|
692
|
26,064
|
||||||||||||||||||||||||
KBM Worldwide #4
|
9/2/2014
|
9
|
8.00
|
%
|
47,500
|
2,666
|
-
|
-
|
50,166
|
-
|
||||||||||||||||||||||||
JMJ Financial #2
|
9/3/2014
|
24
|
5.83
|
%
|
50,000
|
475
|
46,844
|
5,556
|
9,187
|
54,231
|
||||||||||||||||||||||||
JSJ Investments #2
|
9/8/2014
|
6
|
12.00
|
%
|
100,000
|
6,411
|
64,990
|
-
|
41,421
|
189,882
|
||||||||||||||||||||||||
Macallan Partners, LLC
|
9/9/2014
|
12
|
10.00
|
%
|
120,000
|
3,715
|
106,411
|
-
|
17,304
|
112,502
|
||||||||||||||||||||||||
Tonaquint, Inc #2
|
10/7/2014
|
12
|
12.00
|
%
|
55,000
|
1,537
|
49,833
|
-
|
6,704
|
76,964
|
||||||||||||||||||||||||
Tonaquint, Inc #3
|
10/7/2014
|
12
|
12.00
|
%
|
55,000
|
1,537
|
49,833
|
-
|
6,704
|
76,964
|
||||||||||||||||||||||||
JMJ Financial #3
|
10/22/2014
|
24
|
5.83
|
%
|
50,000
|
280
|
47,446
|
-
|
2,834
|
53,336
|
||||||||||||||||||||||||
KBM Worldwide #5
|
10/23/2014
|
9
|
8.00
|
%
|
78,500
|
1,583
|
-
|
-
|
80,083
|
-
|
||||||||||||||||||||||||
LG Capital
|
10/23/2014
|
12
|
8.00
|
%
|
52,500
|
1,530
|
50,584
|
-
|
3,446
|
75,446
|
||||||||||||||||||||||||
Cardinal Capital Group
|
11/6/2014
|
24
|
12.00
|
%
|
50,000
|
452
|
47,903
|
-
|
2,549
|
53,135
|
||||||||||||||||||||||||
KBM Worldwide #6
|
12/8/2014
|
9
|
8.00
|
%
|
53,500
|
360
|
-
|
-
|
53,860
|
-
|
||||||||||||||||||||||||
$
|
1,226,640
|
$
|
53,909
|
$
|
803,750
|
$
|
25,000
|
$
|
501,799
|
$
|
1,164,582
|
(a) | Implied interest rate. The note is subject to a one time 12% interest charge unless repaid within 90 days |
(b) | Implied interest rate. The note is subject to a one time 12% interest charge regardless of how long it has been outstanding |
(c) | Original Issue Discount due at maturity of the note |
Lender
|
Date of Agreement
|
Conversion Rate
|
Calculation Period
|
Eligible for Conversion
|
|||||
JMJ Financial
|
April 15, September 3 and October 27, 2014
|
Lesser of $0.06 or 60%
|
25 trading days prior to conversion
|
180 after the effective dates
|
|||||
KBM Worldwide
|
April 24, June 26, August 11, September 2, October 23 and December 23, 2014
|
61%
|
10 trading days prior to conversion
|
180 after the effective dates
|
|||||
Redwood Fund III
|
May 15, and November 11, 2014
|
55%
|
20 trading days prior to conversion
|
180 after the effective date
|
|||||
Vista Capital Investments
|
June 16 and August 26, 2014
|
Lesser of $0.075 or 60%
|
25 trading days prior to conversion
|
180 after the effective dates
|
|||||
Tonaquint, Inc
|
July 10 and October 7, 2014
|
65%
|
25 trading days prior to conversion
|
180 after the effective date
|
|||||
Union Capital
|
July 16, 2014
|
55%
|
20 trading days prior to conversion
|
180 after the effective date
|
|||||
Iconic Holding, LLC
|
July 16, 2014
|
Lesser of $0.085 or 60%
|
20 trading days prior to conversion
|
180 after the effective date
|
|||||
Auctus Private
|
July 29, 2014
|
55%
|
|
25 trading days prior to conversion
|
180 after the effective date
|
||||
JSJ Investments
|
September 8, 2014
|
60%
|
|
20 trading days prior to conversion
|
180 after the effective date
|
||||
Macallan Partners, LLC
|
September 9, 2014
|
55%
|
|
20 trading days prior to conversion
|
180 after the effective date
|
||||
LG Capital #2
|
October 23, 2014
|
60%
|
|
20 trading days prior to conversion
|
180 after the effective date
|
||||
Cardinal Capital Group
|
November 6, 2014
|
Lesser of $0.05 or 60%
|
25 trading days prior to conversion
|
180 after the effective dates
|
Lender
|
Date of
Agreement
|
Transaction Costs
|
Deferred Debt
Origination
Costs Due at
Maturity (b)
|
Legal and Other Debt Origination Costs
|
Initial Deferred Origination Costs
|
Amortization (c)
|
Net Deferred
Debt Origination
Costs
|
||||||||||||||||||||
JMJ Financial
|
4/15/2014
|
$
|
10,000
|
$
|
11,111
|
$
|
-
|
$
|
21,111
|
$
|
18,461
|
$
|
2,650
|
||||||||||||||
KBM Worldwide
|
6/26/2014
|
5,000
|
-
|
3,000
|
8,000
|
534
|
7,466
|
||||||||||||||||||||
Redwood Fund III
|
5/15/2014
|
10,000
|
-
|
-
|
10,000
|
5,104
|
4,896
|
||||||||||||||||||||
Vista Capital Investments
|
6/16/2014
|
5,000
|
5,556
|
-
|
10,556
|
1,308
|
9,248
|
||||||||||||||||||||
Various
|
(a)
|
Various
|
-
|
-
|
41,400
|
41,400
|
7,831
|
33,569
|
|||||||||||||||||||
Tonaquint, Inc
|
7/10/2014
|
10,000
|
-
|
15,000
|
25,000
|
2,353
|
22,647
|
||||||||||||||||||||
Union Capital
|
7/16/2014
|
-
|
-
|
4,500
|
4,500
|
-
|
4,500
|
||||||||||||||||||||
Iconic Holding, LLC
|
7/16/2014
|
6,750
|
-
|
7,500
|
14,250
|
-
|
14250
|
||||||||||||||||||||
Auctus Private
|
7/29/2014
|
5,250
|
-
|
6,250
|
11,500
|
2,973
|
8,527
|
||||||||||||||||||||
KBM Worldwide
|
8/11/2014
|
5,000
|
-
|
3,000
|
8,000
|
2,521
|
5,479
|
||||||||||||||||||||
Vista Capital Investments
|
8/26/2014
|
2,500
|
2,777
|
-
|
5,277
|
-
|
5,277
|
||||||||||||||||||||
KBM Worldwide
|
9/2/2014
|
4,500
|
-
|
2,500
|
7,000
|
2,466
|
4,534
|
||||||||||||||||||||
JMJ Financial
|
9/3/2014
|
5,000
|
5,556
|
-
|
10,556
|
1,256
|
9,300
|
||||||||||||||||||||
JSJ Investments
|
9/8/2014
|
10,000
|
-
|
2,000
|
12,000
|
-
|
12,000
|
||||||||||||||||||||
Macallan Partners, LLC
|
9/9/2014
|
-
|
-
|
12,000
|
12,000
|
-
|
12,000
|
||||||||||||||||||||
Tonaquint, Inc #2
|
10/7/2014
|
5,000
|
-
|
5,000
|
10,000
|
573
|
9,427
|
||||||||||||||||||||
Tonaquint, Inc #3
|
10/7/2014
|
5,000
|
-
|
5,000
|
10,000
|
573
|
9,427
|
||||||||||||||||||||
JMJ Financial #3
|
10/22/2014
|
5,000
|
-
|
-
|
5,000
|
-
|
5,000
|
||||||||||||||||||||
KBM Worldwide #5
|
10/23/2014
|
7,500
|
-
|
3,500
|
11,000
|
1,890
|
9,110
|
||||||||||||||||||||
LG Capital
|
10/23/2014
|
5,000
|
-
|
2,500
|
7,500
|
4,486
|
3,014
|
||||||||||||||||||||
Cardinal Capital Group
|
11/6/2014
|
5,000
|
-
|
5,000
|
10,000
|
112
|
9,888
|
||||||||||||||||||||
KBM Worldwide #6
|
12/8/2014
|
5,000
|
-
|
3,500
|
8,500
|
420
|
8,080
|
||||||||||||||||||||
$
|
116,500
|
$
|
25,000
|
$
|
121,650
|
$
|
263,150
|
$
|
52,861
|
$
|
210,289
|
(a) | An aggregate of lesser deferred debt origination costs |
(b) | Original Issue Discount due at maturity of the note |
(c) | Charged to the period's interest expense |
(d) | At December 31, 2014, Net Deferred Origination Costs in the amount of $36,363 had remaining useful lives exceeding twelve months, and were accordingly classified as long term. |
· | The stock price would fluctuate with the Company projected volatility; |
· | The Derivative Convertible Notes (held by JMJ Financial, LG Capital, Adar Bay, Vista Capital Investment, Tonaquint Inc., KBM Worldwide, JSJ Investments, Iconic Holding LLC, Macallan Partners LLC, Union Capital, Auctus Private, and Redwood Fund III) convert at 40% to 60% of the market prices; |
· | An event of default would occur initially 0% of the time, increasing 1.00% per month until it reaches 10%; |
· | The projected volatility curve for each valuation period was based on the historical volatility of the Company, ranging between 101% and 108%; |
· | The Company would redeem the notes initially 0% of the time, and increase monthly by 1.00% to a maximum of 5.00%; |
· | The holders of the notes would automatically convert the notes at the maximum of two times the conversion price if the Company is not in default, with the target conversion price dropping as maturity approaches; and |
· | The Holder would convert the note early after 0-90-180 days and at maturity if the registration was effective and the Company was not in default. |
· | The stock price would fluctuate with the Company projected volatility; |
· | The stock price would fluctuate with an annual volatility. The projected volatility curve for each valuation period was based on the historical volatility of the Company, ranging between 101% and 103%; |
· | The Holder would exercise the warrant as they become exercisable at target prices of two times the higher of the projected reset price or stock price; |
· | The Warrants with the $0.355; $0.28; and $0.275 exercise prices are fixed and not projected to adjust; and |
· | The Feltang Warrants have expired in the period ending December 31, 2014 without being exercised. |
Ministry Training Fund
|
$175,000 per annum during the exploration period
|
|
$200,000 per annum (minimum) from adoption of first development plan
|
||
Social Projects:
|
$50,000 per annum (minimum)
|
|
Surface Rentals:
|
$5/km2 per annum (exploration phase 1); $10/km2 per annum (exploration phase 2); $15/km2 per annum (exploration phase 3)
|
a.
|
$2,000,000 as the entire signature bonus
|
b.
|
$320,600 in advisers' and ancillary costs related to the PSC
|
c.
|
$480,000 as legal fees and costs for the drafting and negotiation of the PSC, as provided for in the PSC
|
d.
|
$190,872 as costs of Environmental Impact Study, as provided for in the PSC
|
e.
|
$385,500 on Aeromagnetic data acquisition survey
|
Ministry Training Fund
|
$250,000 per annum during the exploration period
|
|
$500,000 per annum during the exploitation period
|
||
Social Projects:
|
None specified in the PSC
|
|
Surface Rentals:
|
$1/km2 per annum (Exploration Phase 1); $5/ km2 per annum (Exploration Phase 2); $10// km2 per annum (Extension)
|
|
$100/ km2 per annum (Exploitation Phase 1); $150/ km2 per annum (Exploitation Phase 1)
|
KENYA BLOCK 11A
|
||
LICENSE:
|
PSC with the Government of Kenya (effective September 2012)
|
|
PARTIES:
|
ERHC (35%); CEPSA (55%); Government of Kenya (10%)1
|
Minimum Work
|
Minimum Expenditure
|
Status
|
|||
Acquire and interpret 1,000 square kilometers of gravity and magnetic data
|
$
|
250,000
|
Completed: 14,943.8 line kilometers of FTG data acquired by January 2014 at an estimated total cost of $2,700,000.
|
||
Acquire and interpret 1,000 kilometers of 2D seismic data
|
$
|
10,000,000
|
Completed: 1,086.6 line kilometers of 2D seismic data acquired by August 2014 at an estimated total cost of $28,300,000
|
Minimum Work
|
Minimum Expenditure
|
Status
|
|||
Acquire 750 square kilometers of 3D seismic data
|
$
|
30,000,000
|
Decision taken not to acquire 3D seismic but to proceed to drilling based on FTG and 2D seismic
|
||
OR
|
OR
|
||||
Drill one (1) well to a minimum depth of 3,000m
|
$
|
30,000,000
|
Preparation underway for drilling exploration well in Q4 2015 or Q1 2016
|
Minimum Work
|
Minimum Expenditure
|
Status
|
|||
Drill one (1) well to a minimum depth of 3,000m
|
$
|
30,000,000
|
Not yet arisen
|
Ministry Training Fund
|
$175,000 per annum during the exploration period
|
|
$200,000 per annum (minimum) from adoption of first development plan
|
||
Social Projects:
|
$50,000 per annum (minimum)
|
|
Surface Rentals:
|
$5/km2 per annum (exploration phase 1); $10/km2 per annum (exploration phase 2); $15/km2 per annum (exploration phase 3)
|
|
$100/km2 per annum (development and production period)
|
Cost Recovery:
|
||
Cost Oil
|
Up to 60% of Cost Oil each fiscal year
|
Incremental Production Tranches
|
Government Share
|
Contractor Share
|
||||||
0-30,000 barrels per day
|
50
|
%
|
50
|
%
|
||||
Next 25,000 barrels per day
|
60
|
%
|
40
|
%
|
||||
Next 25,000 barrels per day
|
65
|
%
|
35
|
%
|
||||
Next 20,000 barrels per day
|
70
|
%
|
30
|
%
|
||||
Above 100,000 barrels per day
|
78
|
%
|
22
|
%
|
LICENSE:
|
PSC with the Government of Chad signed June 20112
|
|
PARTIES:
|
ERHC (100%)
|
Minimum Work
|
Minimum Expenditure
|
Status
|
|
Unspecified: annual work program to be proposed yearly by contractor
|
$15,000,000 in total for the exploration phase
|
EIA completed;
|
|
Aero gravity and magnetic survey completed;
|
|||
·
|
4,720 line kilometers of high precision gravity and magnetic data acquired by November 2014;
|
||
·
|
Three leads identified;
|
||
Seismic in preparation;
|
|||
·
|
2D seismic on focus areas planned for 2015-16
|
Minimum Work
|
Minimum Expenditure
|
Status
|
|||
Unspecified: annual work program to be proposed yearly by contractor
|
$
|
1,000,000
|
Not yet arisen; ERHC proposes an exploration well in this period if Phase 1 G&G studies justify
|
OTHER FINANCIAL OBLIGATIONS:
|
||
Ministry Training Fund
|
$250,000 per annum during the exploration period
|
|
$500,000 per annum during the exploitation period
|
||
Social Projects:
|
None specified in the PSC
|
|
Surface Rentals
|
$1/km2 per annum (Exploration Phase 1); $5/ km2 per annum (Exploration Phase 2); $10// km2 per annum (Extension)
|
|
$100/ km2 per annum (Exploitation Phase 1); $150/ km2 per annum (Exploitation Phase 1)
|
COST RECOVERY AND PRODUCTION SHARING:
|
||
Royalty
|
14.25% for crude oil
|
|
5% for natural gas
|
||
Cost Oil
|
Up to 70% of net production after deduction of royalty
|
R-Factor, as defined by the PSC4
|
Less than or equal to 2.25
|
Between 2.25 and 3
|
Greater than 3
|
|||||||||
Contractor’s share of profit oil
|
60
|
%
|
50
|
%
|
40
|
%
|
||||||
State’s share of profit oil
|
40
|
%
|
50
|
%
|
60
|
%
|
JDZ Block
|
ERHC Original
Participating Interest
|
ERHC Joint Bid
Participating Interest
|
Participating
Interest(s) Assigned
|
Current ERHC
Retained Participating
Interest
|
||||||||
2
|
30.00%
|
|
35.00%
|
|
43.00%
|
|
22.00%
|
|
||||
3
|
20.00%
|
|
5.00%
|
|
15.00%
|
|
10.00%
|
|
||||
4
|
25.00%
|
|
35.00%
|
|
40.50%
|
|
19.50%
|
|
||||
5
|
15.00%
|
|
-
|
-
|
15.00% (in arbitration)
|
|||||||
6
|
15.00%
|
|
-
|
-
|
15.00% (in arbitration )
|
|||||||
9
|
20.00%
|
|
-
|
-
|
20.00%
|
|
Date of Participation
Agreement
|
Party(ies)
to the Participation Agreement
|
Participating
Interest(s)
Assigned
|
Participating
Interest Assigned
Price
|
||||||
JDZ Block 2 - Participation Agreement - ERHC Retained Interest of 22.00%
|
|||||||||
March 2, 2006
|
Sinopec International Petroleum Exploration Production Co. Nigeria Ltd - a subsidiary of Sinopec International Petroleum and Production Corporation
|
28.67
|
%
|
$
|
13,600,000
|
||||
Addax Energy Nigeria Limited - an Addax Petroleum Corporation subsidiary
|
14.33
|
%
|
$
|
6,800,000
|
|||||
JDZ Block 3 - Participation Agreement - ERHC Retained Interest of 10.00%
|
|||||||||
February 15, 2006
|
Addax Petroleum Resources Nigeria Limited - a subsidiary of Addax Petroleum Corporation
|
15.00
|
%
|
$
|
7,500,000
|
||||
JDZ Block 4 - Participation Agreement - ERHC Retained Interest of 19.50%
|
|||||||||
November 15, 2005
|
Addax Petroleum Nigeria (Offshore 2) Limited - a subsidiary of Addax Petroleum Corporation
|
40.50
|
%
|
$
|
18,000,000
|
●
|
JDZ Block 2: 22.0%
|
●
|
JDZ Block 3: 10.0%
|
●
|
JDZ Block 4: 19.5%
|
●
|
JDZ Block 5: 15.0% (in arbitration)
|
●
|
JDZ Block 6: 15.0% (in arbitration)
|
●
|
JDZ Block 9: 20.0%
|
SAO TOME & PRINCIPE EEZ BLOCK 11
|
||
LICENSE
|
PSC with the Government of STP signed July 2014
|
|
PARTIES
|
ERHC (85%); Government of STP (15%)5
|
Minimum Work
|
Minimum Expenditure
|
Status
|
Purchase and reprocess all existing 2D seismic on the Block
|
$2,500,000 for the entire
exploration phase
|
Not yet commenced; budgeting for first year
being discussed with ANP-STP
|
Geological and Geophysical studies (including AVO, geochemical studies and sequence stratigraphy)
|
||
EIA
|
||
Magnetic and gravity surveys
|
||
Acquire, process and interpret 2,500km 2D seismic
|
||
Handover all data and an evaluation report to ANP-STP at least 3 months to end of phase
|
Minimum Work
|
Minimum Expenditure
|
Status
|
|||
EIA
|
$
|
40,000,000
|
Not yet arisen
|
||
Acquire, process and interpret 1,100 square kilometers 3D seismic
|
|||||
Drill one exploration well
|
|||||
Evaluate discoveries and remaining prospectivity
|
Minimum Work
|
Minimum Expenditure
|
Status
|
|||
EIA
|
$
|
40,000,000
|
Not yet arisen
|
||
Drill one exploration well
|
|||||
Evaluate discoveries
|
OTHER FINANCIAL OBLIGATIONS
|
||
Signature Bonus
|
None payable
|
|
Training
|
Between $100,000 (min) and $250,000 (max) per calendar year during the exploration period
|
|
$550,000 per annum during the production period
|
||
Social Projects
|
Exploration Phase 1: $300,000 per annum (minimum)
|
|
Exploration Phase 2: $500,000 per annum (minimum)
|
||
Exploration Phase 3: $400,000 per annum (minimum)
|
||
On production, $2million worth of projects if cumulative production is 20mmboe, $4million if 40mmboe and $6m if 60mmboe
|
COST RECOVERY AND PRODUCTION SHARING
|
||
Royalty
|
2% (first charge on production)
|
|
Cost Oil
|
Up to 80% of available crude after deduction of royalty oil in any accounting period
|
Contractor’s Rate of Return6 for Contract Area (% per annum)
|
Government Share
|
Contractor Share
|
||||
<16%
|
0%
|
|
100%
|
|
||
>=16%<19%
|
10%
|
|
90%
|
|
||
>=19%<23%
|
20%
|
|
80%
|
|
||
>=23%<26%
|
40%
|
|
60%
|
|
||
>=26%
|
50%
|
|
50%
|
|
· | Farm-outs of part of the Company’s assets in Kenya, Chad and the Săo Tomé and Príncipe Exclusive Economic Zone |
· | Issue shares of common stock through a registered direct offering |
· | Convertible Loans and other debt instruments |
· |
Other available financing options
|
Item 1A. | Risk Factors |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Item 3. | Defaults Upon Senior Securities |
Item 4. | Submission of Matters to A Vote of Security Holders |
Item 5. | Other Information |
Signatures
|
|
Rule 13a-14(a) Certification of the Chief Executive Officer
|
|
Rule 13a-14(a) Certification of the Principal Accounting Officer
|
|
Certification Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Executive Officer
|
|
Certification Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Principal Accounting Officer
|
|
101.INS*
|
Instance Document
|
101.SCH*
|
XBRL Taxonomy Extension Schema Document
|
101.CAL*
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.LAB*
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE*
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
* Filed or furnished herewith.
|
Name
|
Title
|
Date
|
/s/ Peter Ntephe
|
President
|
February 13, 2015
|
Peter Ntephe
|
Chief Executive Officer
|
|
/s/ Sylvan Odobulu
|
Vice President (Admin) and Controller
|
February 13, 2015
|
Sylvan Odobulu
|
Principal Accounting Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of ERHC Energy, Inc.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and,
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and,
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
February 13, 2015
|
/s/ Peter Ntephe
|
Peter Ntephe
|
Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of ERHC Energy, Inc.
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and,
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
February 13, 2015
|
/s/ Sylvan Odobulu
|
Sylvan Odobulu
|
Vice President (Admin.) and Controller
|
Principal Accounting Officer
|
(1)
|
The Report fully complies with the requirements of Section13 (a) or 15(d) of the Securities Exchange Act of 1934, as amended; and,
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Peter Ntephe
|
February 13, 2015
|
Peter Ntephe
|
|
Chief Executive Officer
|
(1)
|
The Report fully complies with the requirements of Section13 (a) or 15(d) of the Securities Exchange Act of 1934, as amended; and,
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
/s/ Sylvan Odobulu
|
February 13, 2015
|
Sylvan Odobulu
|
|
Principal Accounting Officer
|
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