form10ksb.htm
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-KSB/A
Amendment
No. 2
Mark
One:
þ Annual Report pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the fiscal year ended December 31, 2004;
or
¨ Transition Report
pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
For the transition period from
__________ to __________.
Commission
File No. 0-25136
GEOGLOBAL
RESOURCES INC.
(Name
of Small Business Issuer in its Charter)
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Delaware
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33-0464753
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(State
or Other Jurisdiction of Incorporation or Organization)
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(IRS
Employer Identification No.)
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Suite
200, 630- 4 Avenue SW, Calgary, Alberta T2P
0J9 Canada
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(Address
of Principal Executive
Offices) (Zip
Code)
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(403)
777-9250
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(Issuer’s
Telephone Number, Including Area Code)
Securities
registered under Section 12(b) of the Exchange Act:
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Title
of Each Class
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Name
of Each Exchange on Which Registered
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None
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Securities
Registered Pursuant to Section 12(g) of the Exchange
Act:
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Common
Stock, par value $.001 per share
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(Title
of Each Class)
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Check
whether the Issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past twelve (12) months (or for such
shorter period that the Issuer was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. þ Yes ¨ No
Check if there is no disclosure of
delinquent filers in response to Item 405 of Regulation S-B in this form, and no
disclosure will be contained, to the best of Issuer’s knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-KSB, or any amendment to this Form 10-KSB. ¨
State Issuer’s revenues for its most
recent fiscal year: $-0-.
The aggregate market value of the
voting and non-voting equity held by non-affiliates computed by reference to the
price at which the common equity was sold, or the average bid and asked prices
of such common equity, as of December 29, 2004, was $19,642,332. (Non-affiliates
have been determined on the basis of holdings set forth in Item 11 of this
Annual Report on Form 10-KSB.)
The number of shares outstanding of
each of the Issuer’s classes of common equity, as of March 15, 2005, was
55,207,455.
DOCUMENTS
INCORPORATED BY REFERENCE
None
This Form
10-KSB/A Amendment No. 2 is being filed to amend the GeoGlobal Resources Inc.
(the “Company”) Annual Report on Form 10-KSB for the year ended December 31,
2004. The amendment arose out of a need to restate certain financial statements
previously filed with the Securities and Exchange Commission in order to correct
certain errors relating to the Company’s reporting of stock based compensation
in compliance with FAS 123R.
This Form
10-KSB/A does not reflect events occurring after the filing of the original Form
10-KSB or the 10-KSB/A Amendment No. 1 or modify or update those
disclosures. Information not affected by the amendment is unchanged
and reflects the disclosure made at the time of the original filing of the Form
10-KSB with the Securities and Exchange Commission on March 31, 2005 and the
subsequent filing of the Form 10-KSB/A Amendment No. 1 on August 2, 2005. The
following items have been amended as a result of the restatement:
Annual
Report on Form 10-KSB/A
December
31, 2004
Table
of Contents
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Page
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Item
6.
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Management’s
Discussion and Analysis or Plan of Operation
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3
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Item
7.
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Financial
Statements
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16
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Item
8A.
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Controls
and Procedures
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16
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Item
13.
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Exhibits
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17
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Item
6. Management’s Discussion and Analysis or Plan of
Operation
General
The
following discussion and analysis of our financial condition or plan of
operation should be read in conjunction with, and is qualified in its entirety
by, the more detailed information including our Financial Statements and the
related Notes appearing elsewhere in this Annual Report. This Annual Report
contains forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from the
results and business plans discussed in the forward-looking statements. Factors
that may cause or contribute to such differences include those discussed in
"Risk Factors," as well as those discussed elsewhere in this Annual
Report.
Our
Business Activities
We are
engaged, through subsidiaries and joint ventures in which we are a participant,
in the exploration for and development of oil and gas reserves. We
initiated these activities in 2003. Through December 31, 2004, our
activities have been undertaken in locations where we and our joint venture
participants have been granted exploration rights pursuant to Production Sharing
Contracts entered into with the Government of India.
At March
15, 2005, we claim no reserves of hydrocarbons. We have entered into
three Production Sharing Contracts each relating to a separate drilling block
and each providing for multi-year and multi-phase exploration and drilling
activities. Exploration and development activities pursuant to the
terms of these agreements are expected to continue throughout 2005.
Operations
Update
KG Block
Gujarat
State Petroleum Corporation (“GSPC”), as operator of the KG Block, has completed
the acquisition, processing and interpretation of a 1,298 square kilometer
marine 3D seismic program on the KG Block. Geological mapping has
been completed and a number of drillable prospects have been
identified.
On April
15, 2004, GSPC contracted Saipem SPA, part of ENI, Italy, for the Saipem Perro
Negro 3 jack-up drilling rig to commence a 4 well exploratory drilling program
on the KG Block for a period of 200 days. Under the terms of the
contract, GSPC has the option of extending the contract for 6 additional
exploratory wells.
On July
31, 2004, drilling operations commenced on the KG#1 well location which was
situated in shallow waters of approximately 70 meters deep. On
November 11, 2004, we announced that the KG#1 well had been drilled to a depth
of 2,620 meters and that a logging and testing program had been completed. We
further announced that GSPC elected to abandon the KG#1 well.
On
November 23, 2004, drilling operations commenced on the KG#11 well which was
situated ten kilometers north of the KG#1 well in shallow waters of
approximately 46 meters deep. On January 11, 2005, we announced that
the KG#11 well had been drilled to a depth of 2,875 meters and a logging program
had been completed. We further announced that GSPC abandoned the
KG#11 well and elected to move to our third location.
The KG #8
well commenced drilling on January 17, 2005 and as of March 15, 2005 drilling
operations were still in progress. The KG#8 well is situated
approximately 19 kilometers southwest of the KG#1 well and approximately 27
kilometers south of the KG#11 well in the southwestern corner of the KG Block in
shallow waters of approximately 60 meters.
The KG#8
well location has been selected to test both a shallow stratigraphic sandstone
channel fan complex at a 2,500 meter depth and a structural four-way closure at
a 4,000 meter depth as defined by 3-D seismic. The well is being drilled
vertically to a minimum 4,200 meter depth and will test the syn-rift sedimentary
section that is expected in the southern area of the KG Block.
The KG#8
well is the third well of the 14 well drilling program intended to be completed
during the first exploration phase of the KG Block Production Sharing Contract
ending in September 2005. GeoGlobal has a 5% net carried
interest in the wells drilled on the KG Block.
Cambay
Blocks
On
February 6, 2004, The Company and our joint venture participants, signed
Production Sharing Contracts with respect to two onshore exploration blocks in
the Cambay Basin located in the State of Gujarat in northwest
India. We hold a 10% participating interest under each of the
contracts.
Mehsana (Exploration Block
CB-ONN-2002/2)
We expect
that Jubilant Enpro Private Ltd. as operator, will commence a 100 square
kilometer onshore 3D seismic acquisition program in the second quarter of
2005. Thereafter, this data will be processed and
interpreted. We do not expect any drilling activities to be conducted
on this block any earlier than the fourth quarter of 2005. We expect
the total capital we will be required to contribute to the exploration
activities on the Mehsana Block during 2005 based on our participating interest
will be approximately $1.1 million.
Sanand and Mirola
(Exploration Block CB-ONN-2002/3)
We expect
that GSPC as operator, will commence a 260 square kilometer onshore 3D seismic
acquisition program in the second quarter of 2005. Thereafter, this
data will be processed and interpreted. We do not expect drilling
activities commence on this block any earlier than the first quarter of
2006. We expect the total capital we will be required to contribute
to the exploration activities on the Sanand and Mirola Block during 2005 based
on our participating interest will be approximately $800,000.
Statements
of Operations
YEARS
ENDED DECEMBER 31, 2004 AND 2003
Oil and Gas
Operations
Our oil
and gas exploration and development activities commenced at our inception on
August 21, 2002. We have not since our inception earned any revenues
from these operations.
During
the year ended December 31, 2004, we had expenses of $1,216,094 compared with
expenses of $544,626 during the year ended December 31, 2003. This
increase is primarily the result of the increased scale of our participation in
oil and gas exploration activities as well as the additional costs incurred in
compliance with periodic reporting and other requirements in having our
securities publicly traded and listed on the American Stock Exchange for 12
months in 2004 versus four months in 2003.
Our
general and administrative expenses increased to $451,788 from
$151,404. These general and administrative expenses include costs
related to the corporate head office including administrative salaries and
services, rent and office costs, insurance, American Stock Exchange listing and
filing fees and transfer agent fees and services. Our
consulting fees increased to $541,617 during the year ended December 31, 2004
from $210,953 in the prior year. The majority of this increase can be
attributed to an increase in the compensation costs recognized during the year
of $304,002 for stock arrangements with non-employee consultants of the Company
as compared to $40,682 for the year ending December 31,
2003. Further, these consulting fees reflect $50,000 (2003 - $16,667)
paid under our Technical Services Agreement with a corporation wholly owned by
Mr. Roy and other fees and expenses we incurred in employing various technical
and corporate consultants who advised us on a variety of
matters. Professional fees increased to $161,381 during the year
ended December 31, 2004 from $131,819 during the year ended December 31,
2003. Professional fees include those paid to our auditors for audit,
accounting and tax advice and fees paid to our legal advisors primarily for
services provided with regard
to filing
various periodic reports and other documents and reviewing our various oil and
gas and other agreements.
Our other
expenses and income during the year ended December 31, 2004 resulted in income
of $44,596 versus $26,249 for the same period in 2003. Included in
other expenses and income is a foreign exchange loss of $3,495 (2003 - $18,634)
which loss declined mainly as a result of a more stable US dollar in 2004 as
compared to 2003. During the year ended December 31, 2004, we recovered fees and
costs of $16,500 (2003 - $38,775) resulting from services provided and billed
out to the Gujarat State Petroleum Corporation. The decline in these
recovered fees and costs was primarily the result of the consultants billing for
their fees and costs directly to third parties versus through our
company. Our interest income of $31,591 (2003 - $1,863) arose out of
interest earned on our cash balances we held during the year as compared to 4
months in 2003.
Reflecting
the increased scope of our activities during the year ended December 31, 2004 as
compared to the year ended December 31, 2003, we had a net loss of $1,171,498
compared to a net loss of $518,377 in 2003.
Prior
Operations
We
discontinued our Internet-based activities on May 31,
2002. Accordingly, subsequent to our acquisition of GeoGlobal India,
we have no income from continuing operations of Internet-based activities and
all of our operations are related to the redirection of our
activities.
Liquidity and Capital
Resources
Our net
cash used in operating activities during the year ended December 31, 2004 was
$1,069,706 as compared to $297,873 to December 31, 2003. This
increase is mostly as a result of our increased activities and the additional
compliance costs incurred as a public reporting company for 12 months in 2004
versus four months in 2003.
Cash used
by investing activities during the year ended December 31, 2004 was $754,153 as
compared to cash provided by investing activities during the year ended December
31, 2003 of $2,737,821. This latter amount included cash of
$3,034,666 acquired by GeoGlobal India from our legal parent on the
acquisition. Funds of $547,357 were used for the acquisition of
property and equipment as compared to $296,845 in 2003. The property
and equipment acquired included computer equipment totaling $87,341 with the
balance of $460,016 incurred as exploration costs for our oil and gas interests
in India. The restricted cash of $206,796 represents term deposits we
made which are used as collateral for two letters of credit given to the
Government of India as a minimum work commitment guarantee on the Cambay
Blocks.
Cash used
in financing activities was $786,450 for the year ended December 31, 2004 versus
$4,589,687 provided by financing activities during the year ended December 31,
2003. As partial consideration for the purchase of GeoGlobal India,
we incurred indebtedness of $2,000,000 to Mr. Roy of which $1,000,000 was paid
by December 31, 2003, $500,000 was paid on January 15, 2004 and the remaining
balance of $500,000 was paid on June 30, 2004. During the year ended
December 31, 2004, proceeds from the issuance of common shares was $213,550
resulting from options exercised to purchase an aggregate of 115,000 common
shares at various prices between $1.18 and $1.50 for gross proceeds of $154,000
and broker warrants exercised at $1.50 for gross proceeds of
$58,650. This compared to the prior year when $5,800,000 was provided
from the issuance of our securities in a brokered private placement together
with a concurrent private placement for an additional $200,000 both of which
were completed on December 23, 2003. The balance of gross
proceeds of $101,650 was provided from the exercise of options to acquire
396,668 shares at various prices between $0.17 and $0.50. Share
issuance costs of $550,175 were expended in issuing the above securities in the
brokered private placement and in the acquisition of GeoGlobal
India.
At
December 31, 2004, our cash and cash equivalents were $4,419,598 (December 31,
2003 - $7,029,907). The majority of these funds are currently held as
US funds in our bank accounts and in term deposits earning interest based on the
US prime rate.
The KG Block and Our Carried
Interest Agreement
At
December 31, 2004, the operator of the KG Block, Gujarat State Petroleum
Corporation, has expended on exploration activities Rs 22.77 crore or
approximately $5.0 million (December 31, 2003 - Rs 4.56 crore or approximately
$1.0 million) attributable to us under the Carried Interest
Agreement. Under the terms of the Production Sharing Contract, the
operator is committed to expend further funds for the exploration of and
drilling on the KG Block. We estimate that these minimum expenditures
attributable to us will total approximately $11 million over the 6.5 year term
of the Production Sharing Agreement, assuming all three exploration phases are
completed. Additional expenditures may be required for the completion
of commercially successful wells. Of the expenditures attributable to
us, 50% are for the account of Roy Group (Mauritius) Inc. under the terms of the
Participating Interest Agreement.
We will
not realize cash flow from this venture until such time as the expenditures
attributed to us, and including those expenditures made for the account of Roy
Group (Mauritius) Inc. under the Carried Interest Agreement have been recovered
by Gujarat State Petroleum Corporation from future production
revenue. We further describe this in Item 1. – Description of
Business – Our Carried Interest Agreement.
The Cambay Block
Agreements
We have
committed to expend a minimum aggregate of approximately $2.5 million for
exploration activities under the terms of the Production Sharing Contracts on
the Cambay Blocks over a period of 6 years. We estimate that our
expenditures for these purposes during the 2005 fiscal year will be
approximately $1.9 million based upon our 10% participating interest in these
Production Sharing Contracts. In that connection, we also anticipate
that we will be required to increase the amount of collateral under the letters
of credit given to the Government of India as our minimum work
commitment. The amount of this increase will not be known until the
budget for activities for the year is established.
Plan of Operations in
2005
We expect
our exploration and development activities pursuant to the three Production
Sharing Contracts we are parties to will continue throughout 2005 in accordance
with the terms of those agreements. In addition, we may seek to
participate in joint ventures bidding for the award of further Production
Sharing Contracts for exploration blocks expected to be awarded by the
Government of India in the future. As of March 15, 2005, we have no
specific plans to join with others in bidding for any specific Production
Sharing Contracts. We expect that our interest in any such ventures
would involve a minority participating interest in the venture. In
addition, as opportunities arise, we may seek to acquire minority participating
interests in exploration blocks where Production Sharing Contracts have been
heretofore awarded by the Government of India. The acquisition of any
such interests would be subject to the execution of a definitive agreement and
obtaining the requisite government consents and other
approvals. Depending upon the scope of our activities during the year
2005, we may require additional capital for the possible acquisition of further
minority participating interests in Production Sharing Contracts in drilling
blocks heretofore awarded by the Government of India. We may also require
additional capital in order to participate in ventures bidding for the grant of
Production Sharing Contracts for future exploration blocks to be awarded by the
Government of India. We believe it can be expected that our interest
in such ventures would be a participating interest. As of March 15,
2005, the scope of any possible such activities has not been definitively
established and, accordingly, we are unable to disclose the amount of any funds
that may be required for these purposes. As the holder of a
participating interest in any such possible activities, it can be expected that
we will be required to contribute capital to any such ventures.
We may
during the year 2005 also seek to raise additional capital to support an
expanded level of activities as well as our ongoing operations. No
specific plans or arrangements have been made to raise additional capital and we
have not entered into any agreements in that regard. We expect that
if we seek to raise additional capital it will be through the sale of equity
securities. As of March 15, 2005, we are unable to estimate the terms
on which any such capital may be raised, the price per share or possible number
of shares involved.
We
believe that our available cash resources will be sufficient to meet all our
expenses and cash requirements during the year ended December 31, 2005 for our
present level of operations. We do not expect to have any
significant change in 2005 in our number of employees.
Critical
Accounting Policies and Estimates
The
Company’s Significant Accounting Policies are outlined in Note 2 to our
Consolidated Financial Statements in Item 7 of this Annual Report. In
the ordinary course of business, we have made a number of estimates and
assumptions relating to the reporting of our consolidated financial position and
the consolidated results of our operations and our cash flows in conformity with
U.S. generally accepted accounting principles. Actual results could
differ significantly from those estimates under different assumptions and
conditions. We believe that the following discussion addresses our
most critical accounting policies.
Property and
equipment
The
Company follows the full cost method of accounting for its petroleum and natural
gas operations. Upon the commencement of economic production
quantities of petroleum and natural gas, depletion of our Exploration costs in
India included in Property and Equipment, will be provided on a
country-by-country basis using the unit-of-production method based upon
estimated proven petroleum and natural gas reserves. The costs of
acquiring and evaluating our unproven properties in India will not be depleted
until it is determined whether or not proven reserves are attributable to the
properties, the major development projects are completed, or impairment
occurs. To date we are currently in the development stage and have
not yet found any commercial reserves in India. We are continuing
with our exploratory drilling programs in India and have no basis for impairment
of the costs incurred to date.
Recent
Accounting Standards
On
December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 123 (revised 2004), Share-Based Payment, which is
a revision of FASB Statement No. 123, Accounting for Stock-Based
Compensation. Statement 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to
Employees, and amends FASB Statement No. 95, Statement of Cash Flows.
Generally, the approach in Statement 123(R) is similar to the approach described
in Statement 123. However, Statement 123(R) requires all share-based
payments to employees, including grants of employee stock options, to be
recognized in the income statement based on their fair values. Pro
forma disclosure is no longer an alternative.
Statement
123(R) must be adopted no later than January 1, 2006. Early adoption will be
permitted in periods in which financial statements have not yet been issued.
Our company is adopting Statement 123(R) on January 1, 2005.
Statement
123(R) permits public companies to adopt its requirements using one of two
methods:
1.
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A
“modified prospective” method in which compensation cost is recognized
beginning with the effective date (a) based on the requirements of
Statement 123(R) for all share-based payments granted after the effective
date and (b) based on the requirements of Statement 123 for all awards
granted to employees prior to the effective date of Statement 123(R) that
remain unvested on the effective
date.
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2.
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A
“modified retrospective” method which includes the requirements of the
modified prospective method described above, but also permits entities to
restate based on the amounts previously recognized under Statement 123 for
purposes of pro forma disclosures either (a) all prior periods presented
or (b) prior interim periods of the year of
adoption.
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Our
company is adopting Statement 123(R) using the modified prospective
method.
Prior to
January 1, 2005, as permitted by Statement 123, our company accounted for
share-based payments to employees using APB Opinion No. 25’s intrinsic value
method and, as such, generally recognized no compensation cost for employee
stock options. Accordingly, the adoption of Statement 123(R)’s fair value
method will have a significant impact on our company’s result of operations,
although it will have no impact on our company’s overall financial position. The
impact of adoption of Statement 123(R) cannot be predicted at this time because
it will depend on levels of share-based payments granted in the future.
However, had our company adopted Statement 123(R) in prior periods, the
impact of that standard would have approximated the impact of Statement 123 as
described in the disclosure of pro forma net loss and loss per share in Note
5(b) to our company’s consolidated financial statements.
Cautionary
Statement For Purposes Of The “Safe Harbor” Provisions Of The Private Securities
Litigation Reform Act Of 1995
With the
exception of historical matters, the matters discussed in this annual report are
“forward-looking statements” as defined under the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, that involve risks
and uncertainties. Forward-looking statements made herein include,
but are not limited to, the statements in this annual report regarding our plans
and objectives relating to our future operations, plans and objectives regarding
the exploration, development and production activities conducted on the
exploration blocks in India which are the subject of the three Production
Sharing Contracts we have entered into, plans regarding drilling activities
intended to be conducted through the ventures in which we are a participant, the
success of those drilling activities and our ability and the ability of the
ventures to complete any wells on the exploration blocks, to develop reserves of
hydrocarbons in commercially marketable quantities, to establish facilities for
the collection, distribution and marketing of hydrocarbons, to produce oil and
natural gas in commercial quantities, and to realize revenues from the sales of
those hydrocarbons. Forward looking statements also include our plans
and objectives to join with others or to directly seek to enter into or acquire
interests in additional production sharing contracts with the Government of
India. Our assumptions, plans and expectations regarding our future
capital requirements, our plans and intentions regarding the possibility of us
raising additional capital in 2005 and beyond, the costs and expenses to be
incurred in conducting any exploration, well drilling, development, and
production activities and the adequacy of our capital to meet our requirements
for our present level of activities are all forward-looking
statements. These statements appear, among other places, under the
following captions: Item 1. - Description of Business, Item 6. - Management’s
Discussion and Analysis or Plan of Operations, and Risk Factors. We cannot
assure you that our assumptions or our business plans and objectives discussed
herein will prove to be accurate or be able to be attained. We
cannot assure you that any commercially recoverable quantities of hydrocarbon
reserves will be discovered on the exploration blocks in which we have an
interest. Our ability to realize revenues cannot be
assured. We cannot assure you that we will have available to us the
capital required to meet our plans and objectives at the times and in the
amounts required. We cannot assure you that we will be successful in
joining any further ventures seeking to be granted Production Sharing Contracts
by the Government of India or that we will be successful in acquiring interests
in existing ventures. If our plans fail to materialize, your
investment will be in jeopardy. Our inability to meet our goals and
objectives or the consequences to us from adverse developments in general
economic or capital market conditions, events having international consequences,
or military activities could have a material adverse effect on us. We
caution you that various risk factors accompany those forward looking statements
and are described, among other places, under the caption "Risk Factors" herein,
beginning below. They are also described in our Quarterly Reports on
Form 10-QSB, and our Current Reports on Form 8-K. These risk factors
could cause our operating results, financial condition and ability to fulfill
our plans to differ materially from those expressed in any forward-looking
statements made in this annual report and could adversely affect our financial
condition and our ability to pursue our business strategy and
plans.
Risk
Factors
An
investment in shares of our common stock involves a high degree of
risk. You should consider the following factors, in addition to the
other information contained in this Annual Report, in evaluating our business
and current and proposed activities before you purchase any shares of our common
stock. You should also see the “Cautionary Statement for Purposes of
the Safe Harbor Provisions of the Private Securities Litigation Reform Act of
1995” regarding risks and uncertainties relating to us and to forward-looking
statements in this Annual Report.
There can
be no assurance that the exploratory drilling to be conducted on the exploration
blocks in which we hold an interest will result in any discovery of hydrocarbons
or that any hydrocarbons that are discovered will be in commercially recoverable
quantities. In addition, the realization of any revenues from
commercially recoverable hydrocarbons is dependent upon the ability to deliver,
store and market any hydrocarbons that are discovered. The presence
of hydrocarbon reserves on contiguous properties is no assurance or necessary
indication that hydrocarbons will be found in commercially marketable quantities
on the exploration blocks in which we hold an interest.
Risks
Relating to Our Oil and Gas Activities
Because We Are In the Early
Stage Of Developing Our Activities, There Are Considerable Risks We Will Be
Unsuccessful
We are in
the early stage of developing our operations. Our only activities in the oil and
natural gas exploration and production industry have involved entering into
three PSC’s involving 3D seismic acquisition and exploratory drilling in
India. We have realized no revenues from our oil and natural gas
exploration and development activities and claim no reserves of oil or natural
gas. As of March
15, 2005 a venture in which we have a 5% net carried interest in, has drilled
and abandoned two wells, and is currently drilling the third well. We
claim no reserves of hydrocarbons as a result of those drilling activities
through that date. Our current plans are to
conduct the exploration and development activities on the areas offshore and
onshore India in accordance with the terms of the three PSC’s we have entered
into. There can be no assurance that the exploratory drilling to be
conducted on the exploration blocks in which we hold an interest will result in
any discovery of hydrocarbons or that any hydrocarbons that are discovered will
be in commercially recoverable quantities. In addition, the
realization of any revenues from commercially recoverable hydrocarbons is
dependent upon the ability to deliver, store and market any hydrocarbons that
are discovered. The presence of hydrocarbon reserves on contiguous
properties is no assurance or necessary indication that hydrocarbons will be
found in commercially marketable quantities on the exploration blocks in which
we hold an interest. Our exploration opportunities are highly
speculative and should any of these opportunities not result in the discovery of
commercial quantities of oil and gas reserves, our investment in the venture
could be lost.
Our
business plans also include seeking to enter into additional joint ventures or
other arrangements to acquire interests in additional government created and
granted hydrocarbon exploration opportunities, primarily located onshore or in
the offshore waters of India. Opportunities to acquire interests in
exploration opportunities will be dependent upon our ability to identify,
negotiate and enter into joint venture or other similar arrangements with
respect to specific exploration opportunities and upon our ability to raise
sufficient capital to fund our participation in those joint ventures or other
exploration activities. Our success will be dependent upon the
success of the exploration activities of the ventures in which we acquire an
interest.
Our
Interest In The Production Sharing Contracts Involve Highly Speculative
Exploration Opportunities That Involve Material Risks That We Will Be
Unsuccessful
Our
interests in the exploration blocks should be considered to be highly
speculative exploration opportunities that will involve material
risks. None of the exploration blocks in which we have an interest
have any proven reserves and are not producing any quantities of oil or natural
gas. Exploratory drilling activities are subject to many risks,
including the risk that no commercially productive reservoirs will be
encountered. There can be no assurance that wells drilled on any of
the exploration blocks in which we have an interest or by any venture in which
we may acquire an interest in the future will be productive or that we will
receive any return or recover all or any portion of our
investment. Drilling for oil and gas may involve unprofitable
efforts, not only from dry wells, but from wells that are productive but do not
produce sufficient net revenues to return a profit after drilling, operating and
other costs. The cost of drilling, completing and operating wells is
often uncertain. Drilling operations may be curtailed, delayed or canceled as a
result of numerous factors, many of which are beyond the operator’s control,
including economic conditions, mechanical problems, title problems, weather
conditions, compliance with governmental requirements and shortages or delays of
equipment and services. Drilling activities on the exploration blocks
in which we hold an interest may not be successful and, if unsuccessful, such
failure may have a material adverse effect on our future results of operations
and financial condition.
Because Our Activities Have
Only Recently Commenced And We Have No Operating History And Reserves Of Oil And
Gas, We Anticipate Future Losses; There Is No Assurance Of Our
Profitability
Our oil
and natural gas operations have been only recently established and we have no
operating history, oil and gas reserves or assets upon which an evaluation of
our business, our current business plans and our prospects can be
based. Our prospects must be considered in light of the risks,
expenses and problems frequently encountered by all companies in their early
stages of development and, in particular, those engaged in exploratory oil and
gas activities. Such risks include, without limitation:
§
|
We
will experience failures to discover oil and gas in commercial
quantities;
|
§
|
There
are uncertainties as to the costs to be incurred in our exploratory
drilling activities and cost overruns are
possible;
|
§
|
There
are uncertain costs inherent in drilling into unknown formations, such as
over-pressured zones and tools lost in the hole;
and
|
§
|
We
may make changes in our drilling plans and locations as a result of prior
exploratory drilling.
|
During
the exploration phase prior to the start date of initial commercial production,
we have a carried interest in the exploration activities on KG
Block. Our interests in both Cambay Blocks, are participating
interests which require us to pay our proportionate share of exploration,
drilling and development expenses on these Blocks substantially as those
expenses are incurred. Unexpected or additional costs can affect the
commercial viability of producing oil and gas from a well and will affect the
time when and amounts that we can expect to receive from any production from a
well. Because our carried costs of exploration and drilling on KG
Bock are to be repaid in full before we are entitled to any share of production,
additional exploration and development expenses will reduce and delay any share
of production and revenues we will receive.
There can
be no assurance that the ventures in which we are a participant will be
successful in addressing these risks, and any failure to do so could have a
material adverse effect on our prospects for the future. Due to the
foregoing factors, the development of our business plan, prospects and
exploratory drilling activities, as well as our quarterly and annual operating
results, are difficult to forecast. Consequently, we believe that period to
period comparisons of our exploration, development, drilling and operating
results will not necessarily be meaningful and should not be relied upon as an
indication of our stage of development or future prospects. Through
March 15, 2005, we have had to abandon two wells drilled on the KG Block and it
is likely that in some future quarters our stage of development or operating or
drilling results may fall below our expectations or the expectations of
securities analysts and investors and that some of our drilling results will be
unsuccessful and the wells plugged. In such event, the trading price
of our common stock may be materially and adversely affected.
India’s
Regulatory Regime May Increase Our Risks And Expenses In Doing
Business
All
phases of the oil and gas exploration, development and production activities in
which we are participating are regulated in varying degrees by the Indian
government, either directly or through one or more governmental
entities. The areas of government regulation include matters relating
to restrictions on production, price controls, export controls, income taxes,
expropriation of property, environmental protection and rig
safety. As a consequence, all future drilling and production programs
and operations we undertake or are undertaken by the ventures in which we
participate must be approved by the Indian government. Shifts in
political conditions in India could adversely affect the business in India and
the ability to obtain requisite government approvals in a timely fashion or at
all. We, and our joint venture participants, must maintain
satisfactory working relationships with the Indian government. This
regulatory environment may increase the risks associated with our intended
exploration and productivity activities and increase our costs of doing
business.
Our Control By Directors And
Executive Officers May Result In Those Persons Having Interests Divergent From
Our Other Stockholders
As of
March 15, 2005, our Directors and executive officers and their respective
affiliates, in the aggregate, beneficially hold 34,086,667 shares or
approximately 61.7% of our outstanding Common Stock. As a result,
these stockholders possess significant influence over us, giving them the
ability, among other things, to elect a majority of our Board of Directors and
approve significant corporate transactions. These persons will retain
significant control over our present and future activities and our other
stockholders and investors may be unable to meaningfully influence the course of
our actions. These persons may have interests regarding our future
activities and transactions we engage in that diverge from the interests of our
other stockholders. Such share ownership and control may also have
the effect of delaying or preventing a change in control of us, impeding a
merger, consolidation, takeover or other business combination involving us, or
discourage a potential acquiror from making a tender offer or otherwise
attempting to obtain control of us which could have a material adverse effect on
the market price of our Common Stock. Although management has no
intention of engaging in such activities, there is also a risk that the existing
management will be viewed as pursuing an agenda which is beneficial to
themselves at the expense of other stockholders.
Our
Reliance On A Limited Number Of Key Management Personnel Imposes Risks On Us
That We Will Have Insufficient Management Personnel Available If The Services Of
Any Of Them Are Unavailable
We are
dependent upon the services of our President and Chief Executive Officer, Jean
Paul Roy, and Executive Vice President and Chief Financial Officer, Allan J.
Kent. The loss of either of their services could have a material
adverse effect upon us. We currently do not have employment
agreements with either of such persons or key man life insurance. The
services of both Mr. Roy and Mr. Kent are provided pursuant to the terms of
agreements with corporations wholly-owned by each of them. At
present, Mr. Kent’s services are provided through an oral agreement with the
corporation he owns. Accordingly, these agreements do not contain any
provisions whereby Mr. Roy and Mr. Kent have direct obligations to us to provide
services or refrain from other activities.
At
present, our future is substantially dependent upon the geological and
geophysical capabilities of Mr. Roy to locate oil and gas exploration
opportunities for us and the ventures in which we are a
participant. His inability to do the foregoing could materially
adversely affect our future activities. We have entered into a
Technical Services Agreement with Roy Group (Barbados) Inc. dated August 29,
2003, a company owed 100% by Mr. Roy, to perform such geological and geophysical
duties and exercise such powers related thereto as we may from time to time
assign to it. We have no agreement directly with Mr. Roy regarding
his services to us.
Our
Success Is Largely Dependent On The Success Of The Operators Of The Ventures In
Which We Participate And Their Failure Or Inability To Operate The Oil And Gas
Exploration, Development And Production Activities On An Exploration Block
Properly Or Successfully Could Materially Adversely Affect
Us
At
present, our only oil and gas interests are our rights under the terms of the
three PSC’s. We are not the operator of any of the exploration,
drilling and production activities conducted on any of the three exploration
blocks. Accordingly, the realization of successes in the exploration
of the blocks is substantially dependent upon the success of the operators in
exploring for and developing reserves of oil and gas and their ability to market
those reserves at prices that will yield a return to us.
Under the
terms of our Carried Interest Agreement for the KG Block, we have a carried
interest in the exploration activities conducted by the parties on the KG Block
prior to the start date of initial commercial production. However,
under the terms of that agreement, all of our proportionate share of capital
costs for exploration and development activities will be repaid without interest
over the projected production life or ten years, whichever is
less. Our proportionate share of these costs and expenses expected to
be incurred over the 6.5 year term of the PSC for which our interest is carried
is estimated to be approximately $22 million, including the $5.0 million
attributable to us as of December 31, 2004. Additional expenditures
may be required for cost overruns and completions of commercially successful
wells. We are unable to estimate the amount of additional
expenditures GSPC will make attributable to us prior to the start date of
initial commercial production under the Carried Interest Agreement or when, if
ever, any commercial production will commence. Of these expenditures,
50% are for the account of Roy Group (Mauritius) Inc. under the terms of the
Participating Interest Agreement. We are not entitled to any
share of production from the KG Block until such time as the expenditures
attributed to us, including those expenditures made for the account of Roy Group
(Mauritius) Inc., under the Carried Interest Agreement have been recovered by
GSPC from future production revenue. Therefore, we are unable to
estimate when we may commence to receive distributions from any production of
hydrocarbon reserves found on the KG Block. As provided in the
Carried Interest Agreement, we will be required to bear the expenditures
attributable to us after the start date of initial commercial production on the
KG Block.
Certain
Terms Of The Production Sharing Contracts May Create Additional Expenses And
Risks That Could Adversely Affect Our Revenues And
Profitability
The PSC’s
contain certain terms that may affect the revenues of the joint venture
participants to the agreements and create additional risks for
us. These terms include, possibly among others, the
following:
§
|
The
venture participants are required to complete certain minimum work
programs during the three phases of the term of the PSC’s. In
the event the venture participants fail to fulfill any of these minimum
work programs, the parties to the venture must pay to the Government of
India their proportionate share of the amount that would be required to
complete the minimum work program. Accordingly, we could be
called upon to pay our proportionate share of the estimated costs of any
incomplete work programs;
|
§
|
Until
such time as the Government of India attains self sufficiency in the
production of crude oil and condensate and is able to meet its national
demand, the parties to the venture are required to sell in the Indian
domestic market their entitlement under the PSC’s to crude oil and
condensate produced from the exploration blocks. In addition,
the Indian domestic market has the first call on natural gas produced from
the exploration blocks and the discovery and production of natural gas
must be made in the context of the government’s policy of utilization of
natural gas and take into account the objectives of the government to
develop its resources in the most efficient manner and promote
conservation measures. Accordingly, this provision could
interfere with our ability to realize the maximum price for our share of
production of hydrocarbons;
|
§
|
The
parties to the agreement that are not Indian companies, which includes us,
are required to negotiate technical assistance agreements with the
Government of India or its nominee whereby such foreign company can render
technical assistance and make available commercially available technical
information of a proprietary nature for use in India by the government or
its nominee, subject, among other things, to confidentiality
restrictions. Although not intended, this could increase the
venture’s and our cost of operations;
and
|
§
|
The
parties to the venture are required to give preference, including the use
of tender procedures, to the purchase and use of goods manufactured,
produced or supplied in India provided that such goods are available on
equal or better terms than imported goods, and to employ Indian
subcontractors having the required skills insofar as their services are
available on comparable standards and at competitive prices and
terms. Although not intended, this could increase the ventures
and our cost of operations.
|
These
provisions of the PSC’s, possibly among others, may increase our costs of
participating in the ventures and thereby affect our profitability.
Oil And Gas Prices Fluctuate
Widely And Low Oil And Gas Prices Could Adversely Affect Our Financial
Results
There is
no assurance that there will be any market for oil or gas produced from the
exploration blocks in which we hold an interest and our ability to deliver the
production from any wells may be constrained by the absence of or limitations on
collector systems and pipelines. Future price fluctuations could have
a major impact on the future revenues from any oil and gas produced on these
exploration blocks and thereby our revenue, and materially affect the return
from and the financial viability of any reserves that are
claimed. Historically, oil and gas prices and markets have been
volatile, and they are likely to continue to be volatile in the
future. A significant decrease in oil and gas prices could have
a material adverse effect on our cash flow and profitability and would adversely
affect our financial condition and the results of our operations. In
addition, because world oil prices are quoted in and trade on the basis of U.S.
dollars, fluctuations in currency exchange rates that affect world oil prices
could also affect our revenues. Prices for oil and gas fluctuate in
response to relatively minor changes in the supply of and demand for oil and
gas, market uncertainty and a variety of additional factors that are beyond our
control, including:
§
|
political
conditions in oil producing regions, including the Middle East and
elsewhere;
|
§
|
the
domestic and foreign supply of oil and
gas;
|
§
|
quotas
imposed by the Organization of Petroleum Exporting Countries upon its
members;
|
§
|
the
level of consumer demand;
|
§
|
domestic
and foreign government regulations;
|
§
|
the
price and availability of alternative
fuels;
|
§
|
overall
economic conditions; and
|
§
|
international
political conditions.
|
In
addition, various factors may adversely affect the ability to market oil and gas
production from the exploration block, including:
§
|
the
capacity and availability of oil and gas gathering systems and
pipelines;
|
§
|
the
ability to produce oil and gas in commercial quantities and to enhance and
maintain production from existing wells and wells proposed to be
drilled;
|
§
|
the
proximity of future hydrocarbon discoveries to oil and gas transmission
facilities and processing equipment (as well as the capacity of such
facilities);
|
§
|
the
effect of governmental regulation of production and transportation
(including regulations relating to prices, taxes, royalties, land tenure,
allowable production, importing and exporting of oil and condensate and
matters associated with the protection of the
environment);
|
§
|
the
imposition of trade sanctions or embargoes by other
countries;
|
§
|
the
availability and frequency of delivery
vessels;
|
§
|
changes
in supply due to drilling by
others;
|
§
|
the
availability of drilling rigs; and
|
We May Have Substantial
Requirements For Capital In The Future That May Be Unavailable To Us Which Could
Limit Our Ability To Participate In Additional Ventures Or Pursue Other
Opportunities
In order
to participate under the terms of our three existing PSC’s as well as in further
joint venture arrangements leading to the possible grant of exploratory drilling
opportunities, we will be required to contribute or have available to us
material amounts of capital. Under the terms of our Carried Interest
Agreement, after the start date of initial commercial production on the KG
Block, and under the terms of the two PSC’s relating to the Cambay Basin, we are
required to bear our proportionate share of costs during the exploration phases
of those agreements. There can be no assurance that this capital will
be available to us in the amounts and at the times required. Such
capital also may be required to secure bonds in connection with the grant of
exploration rights, to conduct or participate in exploration activities or be
engaged in drilling and completion activities. We expect to seek the
additional capital to meet our requirements from equity and debt offerings of
our securities. Our ability to access additional capital will depend
in part on the success of the ventures in which we are a participant in locating
reserves of oil and gas and developing producing wells on the exploration
blocks, the results of our management in locating, negotiating and entering into
joint venture or other arrangements on terms considered acceptable, as well as
the status of the capital markets at the time such capital is
sought. There can be no assurance that capital will be available to
us from any source or that, if available, it will be at prices or on terms
acceptable to us. Should we be unable to access the capital markets
or should sufficient capital not be available, our activities could be delayed
or reduced and, accordingly, any future exploration opportunities, revenues and
operating activities may be adversely affected and could also result in our
breach of the terms of a PSC which could result in the loss of our rights under
the contract.
We
currently expect that our available cash will be sufficient to fund at the
present level of operations our required capital expenditures on the three
exploration blocks in which we are a participant through
2005. However, any further production sharing contracts we enter into
or any expanded scope of our operations or other transactions that we may enter
into may require us to fund our participation or capital expenditures with
amounts of capital not currently available to us. We may be
unsuccessful in raising the capital necessary to meet these capital
requirements. There can be no assurance that we will be able to raise
the capital.
Our
Ability To Locate And Participate In Additional Exploration Opportunities And To
Manage Growth May Be Limited By Reason Of Our Limited History Of Operations And
The Limited Size Of Our Staff
While our
President and Executive Vice President have had extensive experience in the oil
and gas exploration business, we have been engaged in limited activities in the
oil and gas business over the past approximately two years and have a limited
history of activities upon which you may base your evaluation of our
performance. As a result of our brief operating history and limited
activities in oil and gas exploration activities, our success to date in
entering into ventures to acquire interests in exploration blocks may not be
indicative that we will be successful in entering into any further
ventures. There can be no assurance that we will be successful in
growing our oil and gas exploration and development activities.
Any
future significant growth in our oil and gas exploration and development
activities will place demands on our executive officers, and any increased scope
of our operations will present challenges to us due to our current limited
management resources. Our future performance will depend upon our
management and their ability to locate and negotiate opportunities to
participate in joint venture and other arrangements whereby we can participate
in exploration opportunities. There can be no assurance that we will
be successful in these efforts. Our inability to locate additional
opportunities, to hire
additional
management and other personnel or to enhance our management systems could have a
material adverse effect on our results of operations.
Our Future Performance
Depends Upon Our Ability And The Ability Of The Ventures In Which We Participate
To Find Or Acquire Oil And Gas Reserves That Are Economically
Recoverable
Our
success in developing our oil and gas exploration and development activities
will be dependent upon establishing, through our participation with others in
joint ventures and other similar activities, reserves of oil and gas and
maintaining and possibly expanding the levels of those reserves. We
and the joint ventures in which we may participate may not be able to locate and
thereafter replace reserves from exploration and development activities at
acceptable costs. Lower prices of oil and gas may further limit the kinds of
reserves that can be developed at an acceptable cost. The business of
exploring for, developing or acquiring reserves is capital intensive. We may not
be able to make the necessary capital investment to enter into joint ventures or
similar arrangements to maintain or expand our oil and gas reserves if capital
is unavailable to us and the ventures in which we participate. In
addition, exploration and development activities involve numerous risks that may
result in dry holes, the failure to produce oil and gas in commercial
quantities, the inability to fully produce discovered reserves and the inability
to enhance production from existing wells.
We expect
that we will continually seek to identify and evaluate joint venture and other
exploration opportunities for our participation as a joint venture participant
or through some other arrangement. Our ability to enter into
additional exploration activities will be dependent to a large extent on our
ability to negotiate arrangements with others and with various governments and
governmental entities whereby we can be granted a participation in such
ventures. There can be no assurance that we will be able to locate
and negotiate such arrangements, have sufficient capital to meet the costs
involved in entering into such arrangements or that, once entered into, that
such exploration activities will be successful. Successful acquisition of
exploration opportunities can be expected to require, among other things,
accurate assessments of potential recoverable reserves, future oil and gas
prices, projected operating costs, potential environmental and other liabilities
and other factors. Such assessments are necessarily inexact, and as
estimates, their accuracy is inherently uncertain. We cannot assure
you that we will successfully consummate any further exploration opportunities
or joint venture or other arrangements leading to such
opportunities.
Estimating Reserves And
Future Net Revenues Involves Uncertainties And Oil And Gas Price Declines May
Lead To Impairment Of Oil And Gas Assets
Currently,
we have no proved reserves of oil or gas. Any reserve information
that we may provide in the future will represent estimates based on reports
prepared by independent petroleum engineers, as well as internally generated
reports. Petroleum engineering is not an exact science. Information
relating to proved oil and gas reserves is based upon engineering estimates
derived after analysis of information we furnish or furnished by the operator of
the property. Estimates of economically recoverable oil and gas
reserves and of future net cash flows necessarily depend upon a number of
variable factors and assumptions, such as historical production from the area
compared with production from other producing areas, the assumed effects of
regulations by governmental agencies and assumptions concerning future oil and
gas prices, future operating costs, severance and excise taxes, capital
expenditures and workover and remedial costs, all of which may in fact vary
considerably from actual results. Oil and gas prices, which fluctuate
over time, may also affect proved reserve estimates. For these
reasons, estimates of the economically recoverable quantities of oil and gas
attributable to any particular group of properties, classifications of such
reserves based on risk of recovery and estimates of the future net cash flows
expected therefrom prepared by different engineers or by the same engineers at
different times may vary substantially. Actual production, revenues
and expenditures with respect to reserves we may claim will likely vary from
estimates, and such variances may be material. Either inaccuracies in
estimates of proved undeveloped reserves or the inability to fund development
could result in substantially reduced reserves. In addition, the
timing of receipt of estimated future net revenues from proved undeveloped
reserves will be dependent upon the timing and implementation of drilling and
development activities estimated by us for purposes of the reserve
report.
Quantities
of proved reserves are estimated based on economic conditions in existence in
the period of assessment. Lower oil and gas prices may have the impact of
shortening the economic lives on certain fields because it becomes uneconomic to
produce all recoverable reserves on such fields, thus reducing proved property
reserve estimates. If such revisions in the estimated quantities of proved
reserves occur, it will have the effect of increasing the rates of depreciation,
depletion and amortization on the affected properties, which would decrease
earnings or result in losses through higher depreciation, depletion and
amortization expense. The revisions may also be sufficient to trigger impairment
losses on certain properties that would result in a further non-cash charge to
earnings.
Risks
Relating To The Market For Our Common Stock
Volatility Of Our Stock
Price
The
public market for our common stock has been characterized by significant price
and volume fluctuations. There can be no assurance that the market
price of our common stock will not decline below its current or historic price
ranges. The market price may bear no relationship to the prospects, stage of
development, existence of oil and gas reserves, revenues, earnings, assets or
potential of our company and may not be indicative of our future business
performance. The trading price of our common stock could be subject to wide
fluctuations. Fluctuations in the price of oil and gas and related
international political events can be expected to affect the price of our common
stock. In addition, the stock market in general has experienced
extreme price and volume fluctuations that have affected the market price for
many companies which fluctuations have been unrelated to the operating
performance of these companies. These market fluctuations, as well as general
economic, political and market conditions, may have a material adverse effect on
the market price of our company's common stock. In the past, following periods
of volatility in the market price of a company's securities, securities class
action litigation has often been instituted against such companies. Such
litigation, if instituted, and irrespective of the outcome of such litigation,
could result in substantial costs and a diversion of management's attention and
resources and have a material adverse effect on our company's business, results
of operations and financial condition.
Item
7. Financial Statements
Our
Financial Statements are included in a separate section of this
report. See page F-1.
Item 8A. Controls
and Procedures
Under the
supervision and with the participation of our management, including Jean Paul
Roy, our President and Chief Executive Officer, and Allan J. Kent, our Executive
Vice President and Chief Financial Officer, we have evaluated the effectiveness
of the design and operation of our disclosure controls and procedures as of the
end of the period covered by this annual report, and, based on their evaluation,
Mr. Roy and Mr. Kent have concluded that these controls and procedures are
effective. There were no significant changes in our internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation.
Disclosure
controls and procedures are our controls and other procedures that are designed
to ensure that information required to be disclosed by us in the reports that we
file or submit under the Exchange Act are recorded, processed, summarized and
reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act is accumulated and communicated to our management, including Mr.
Roy and Mr. Kent, as appropriate to allow timely decisions regarding required
disclosure.
Based on
the restatement of the financial statements for the year ended December 31, 2004
due to an error in the classification and calculation for stock-based
compensation for non-employee consultants, the Chief Executive Officer and the
Chief Financial Officer have concluded that the Company's disclosure controls
and procedures were not effective as of December 31, 2004.
Item
13. Exhibits
Exhibit
|
Description
|
3.1
|
Certificate
of Incorporation of the Registrant, as amended.
(1)
|
3.2
|
Bylaws
of the Registrant, as amended. (4)
|
3.3
|
Certificate
of Amendment filed with the State of Delaware on November 25, 1998. (2)
|
3.4
|
Certificate
of Amendment filed with the State of Delaware on December 4, 1998. (2)
|
3.5
|
Certificate
of Amendment filed with the State of Delaware on March 18, 2003. (5)
|
3.6
|
Certificate
of Amendment filed with the State of Delaware on January 8, 2004. (5)
|
4.1
|
Specimen
stock certificate of the Registrant. (5)
|
10.1
|
Restated
1993 Stock Incentive Plan. (1)
|
10.2
|
1994
Directors Stock Option Plan. (1)
|
10.3
|
1994
Stock Option Plan. (1)
|
10.4
|
1993
Stock Incentive Plan. (1)
|
10.5
|
1998
Stock Incentive Plan. (2)
|
10.6
|
Stock
Purchase Agreement dated April 4, 2003 by and among Suite101.com, Inc.,
Jean Paul Roy and GeoGlobal Resources (India) Inc. (3)
|
10.7
|
Amendment
dated August 29, 2003 to Stock Purchase Agreement dated April 4, 2003.
(4)
|
10.8
|
Technical
Services Agreement dated August 29, 2003 between Suite101.com, Inc. and
Roy Group (Barbados) Inc. (4)
|
10.9
|
Participating
Interest Agreement dated March 27, 2003 between GeoGlobal Resources
(India) Inc. and Roy Group (Mauritius) Inc. (4)
|
10.10
|
Escrow
Agreement dated August 29, 2003 among Registrant, Jean Paul Roy and
Computershare Trust Company of Canada. (4)
|
10.11
|
Promissory
Note dated August 29, 2003 payable to Jean Paul Roy. (4)
|
10.12
|
Production
Sharing Contract dated February 4, 2003, among The Government of India,
Gujarat State Petroleum Corporation Limited, Jubilant Enpro Limited and
GeoGlobal Resources (India) Inc. (6)
|
10.13
|
Production
Sharing Contract dated February 6, 2004 among The Government of India,
Gujarat State Petroleum Corporation Limited, Jubilant Enpro Private
Limited and GeoGlobal Resources (Barbados) Inc. (6)
|
10.14
|
Production
Sharing Contract dated February 6, 2004 among The Government of India,
Gujarat State Petroleum Corporation Limited, Jubilant Enpro Private
Limited, Prize Petroleum Company Limited and GeoGlobal Resources
(Barbados) Limited. (6)
|
10.15
|
Carried
Interest Agreement dated August 27, 2002 between Gujarat State Petroleum
Corporation Limited and GeoGlobal Resources (India) Inc. (5)
|
14
|
Code
of Ethics. (5)
|
21
|
Subsidiaries
of the Registrant:
|
|
|
Name
|
State
or Jurisdiction of Incorporation
|
GeoGlobal
Resources
(India)
Inc.
|
Barbados
|
GeoGlobal
Resources (Canada) Inc.
|
Alberta
|
GeoGlobal
Resources (Barbados) Inc.
|
Barbados
|
|
|
23
|
Consent
of experts and counsel:
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Filed
as an Exhibit to Neuro Navigational Corporation Form 10-KSB No. 0-25136
dated September 30, 1994.
|
(2) Filed
as an Exhibit to our Current Report on Form 8-K dated December 10,
1998.
(3) Filed
as exhibit 10.1 to our Quarterly Report on Form 10-QSB for the quarter ended
March 31, 2003.
(4) Filed
as an exhibit to our Current Report on Form 8-K for August 29,
2003.
(5) Filed
as an Exhibit to our Form 10-KSB dated April 1, 2004.
(6) Filed
as an Exhibit to our Form 10-KSB/A dated April 28, 2004.
(7) Filed
herewith.
GEOGLOBAL
RESOURCES INC.
(a
development stage enterprise)
(formerly
Suite101.com, Inc.)
CONSOLIDATED
FINANCIAL STATEMENTS
DECEMBER
31, 2004 AND DECEMBER 31, 2003
(in
United States dollars)
GeoGlobal
Resources Inc.
(a
development stage enterprise)
Index
to Consolidated Financial Statements
December
31, 2004 and December 31, 2003
Report of Independent Registered
Public Accounting Firm F-3
Financial
Statements
Consolidated Balance
Sheets F-4
Consolidated Statements of
Operations F-5
Consolidated Statements of Changes in
Stockholders’ Equity F-5
Consolidated Statements of Cash
Flows F-6
Notes to the Consolidated Financial
Statements F-7 to F-29
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Board of Directors and Stockholders Of
GeoGlobal
Resources Inc.
We have
audited the accompanying restated consolidated balance sheets of GeoGlobal
Resources Inc., a development stage enterprise (formerly Suite101.com, Inc.), as
of December 31, 2004 and 2003 and the related consolidated statements of
operations, stockholders' equity and cash flows for the years ended December 31,
2004 and 2003, for the period from inception on August 21, 2002 to December 31,
2002, and for the cumulative period from inception on August 21, 2002 to
December 31, 2004. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Company’s internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of GeoGlobal Resources
Inc. at December 31, 2004 and 2003 and the consolidated results of its
operations and its cash flows for the years ended December 31, 2004 and 2003,
for the period from inception on August 21, 2002 to December 31, 2002, and for
the cumulative period from inception on August 21, 2002 to December 31, 2004 in
conformity with United States generally accepted accounting
principles.
As
explained in note 5(c), the consolidated balance sheets as at December 31, 2004
and 2003 and the related consolidated statements of operations, stockholders'
equity and cash flows for the years ended December 31, 2004 and 2003, for the
period from inception on August 21, 2002 to December 31, 2002, and for the
cumulative period from inception on August 21, 2002 to December 31, 2004 have
been restated.
"Ernst & Young LLP"
(signed)
CALGARY,
ALBERTA CHARTERED
ACCOUNTANTS
March 14,
2005 except for Note 5(c),
which is
as of June 5, 2008
GEOGLOBAL
RESOURCES INC.
(a
development stage enterprise)
CONSOLIDATED
BALANCE SHEETS
|
|
December
31
|
|
2004
US
$
|
|
|
2003
US
$
|
|
|
|
Restated
note
5c
|
|
|
Restated
note
5c
|
|
Assets
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
4,419,598 |
|
|
|
7,029,907 |
|
Restricted
cash (note 10d)
|
|
|
206,796 |
|
|
|
-- |
|
|
|
|
4,626,394 |
|
|
|
7,029,907 |
|
Accounts
receivable (note 2e)
|
|
|
208,748 |
|
|
|
81,487 |
|
|
|
|
4,835,142 |
|
|
|
7,111,394 |
|
|
|
|
|
|
|
|
|
|
Property
and equipment (note 3)
|
|
|
|
|
|
|
|
|
Exploration
costs, not subject to depletion
|
|
|
707,023 |
|
|
|
200,754 |
|
Computer
and office equipment, net
|
|
|
143,053 |
|
|
|
117,020 |
|
|
|
|
850,076 |
|
|
|
317,774 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5,685,218 |
|
|
|
7,429,168 |
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
29,623 |
|
|
|
176,683 |
|
Accruals
|
|
|
54,442 |
|
|
|
16,400 |
|
Due
to related companies (notes 7c, 7d and 7e)
|
|
|
19,624 |
|
|
|
46,863 |
|
Note
payable (note 7a)
|
|
|
-- |
|
|
|
1,000,000 |
|
|
|
|
103,689 |
|
|
|
1,239,946 |
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
|
|
|
|
Capital
stock (note 4)
|
|
|
|
|
|
|
|
|
Authorized
|
|
|
|
|
|
|
|
|
100,000,000
common shares with a par value of $0.001 each
|
|
|
|
|
|
|
|
|
1,000,000
preferred shares with a par value of $0.01 each
|
|
|
|
|
|
|
|
|
Issued
|
|
|
|
|
|
|
|
|
55,207,455
common shares (2003 – 55,053,355)
|
|
|
40,615 |
|
|
|
40,461 |
|
Additional
paid-in capital (note 4)
|
|
|
7,244,602 |
|
|
|
6,680,951 |
|
Deficit
accumulated during the development stage
|
|
|
(1,703,688 |
) |
|
|
(532,190 |
) |
|
|
|
5,581,529 |
|
|
|
6,189,222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
5,685,218 |
|
|
|
7,429,168 |
|
See
Commitments (note 10)
The
accompanying notes are an integral part of these Consolidated Financial
Statements
|
|
GEOGLOBAL
RESOURCES INC.
(a
development stage enterprise)
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
|
|
Year
ended
Dec
31-2004
US
$
|
|
|
Year
ended
Dec
31-2003
US
$
|
|
|
Period
from
Inception,
Aug
21-2002 to Dec 31-2002
US
$
|
|
|
Period
from
Inception,
Aug
21-2002 to Dec 31-2004
US
$
|
|
|
|
Restated
note
5c
|
|
|
Restated
note
5c
|
|
|
|
|
|
Restated
note
5c
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
(notes 7c, 7d and 7e)
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
451,788 |
|
|
|
151,404 |
|
|
|
6,198 |
|
|
|
609,390 |
|
Consulting
fees
|
|
|
541,617 |
|
|
|
210,953 |
|
|
|
-- |
|
|
|
752,570 |
|
Professional
fees
|
|
|
161,381 |
|
|
|
131,819 |
|
|
|
6,917 |
|
|
|
300,117 |
|
Depreciation
and depletion
|
|
|
61,308 |
|
|
|
50,450 |
|
|
|
698 |
|
|
|
112,456 |
|
|
|
|
1,216,094 |
|
|
|
544,626 |
|
|
|
13,813 |
|
|
|
1,774,533 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
expenses (income)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
fees recovered
|
|
|
(14,300 |
) |
|
|
(38,775 |
) |
|
|
-- |
|
|
|
(53,075 |
) |
Equipment
costs recovered
|
|
|
(2,200 |
) |
|
|
(4,245 |
) |
|
|
-- |
|
|
|
(6,445 |
) |
Foreign
exchange
|
|
|
3,495 |
|
|
|
18,634 |
|
|
|
-- |
|
|
|
22,129 |
|
Interest
|
|
|
(31,591 |
) |
|
|
(1,863 |
) |
|
|
-- |
|
|
|
(33,454 |
) |
|
|
|
(44,596 |
) |
|
|
(26,249 |
) |
|
|
-- |
|
|
|
(70,845 |
) |
Net
loss and comprehensive loss
for
the period
|
|
|
(1,171,498 |
) |
|
|
(518,377 |
) |
|
|
(13,813 |
) |
|
|
(1,703,688 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share
–
basic and diluted (note 4d)
|
|
|
(0.03 |
) |
|
|
(0.03 |
) |
|
|
(0.00 |
) |
|
|
|
|
GEOGLOBAL
RESOURCES INC.
(a
development stage enterprise)
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Stock
US
$
|
|
|
Additional
paid-in
capital
US
$
|
|
|
Accumulated
Deficit
US
$
|
|
|
Stockholders'
Equity
US
$
|
|
|
|
|
|
|
Restated
note
5c
|
|
|
Restated
note
5c
|
|
|
Restated
note
5c
|
|
Common
shares issued on incorporation on
August
21, 2002
|
|
|
64 |
|
|
|
-- |
|
|
|
-- |
|
|
|
64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss and comprehensive loss for the period
|
|
|
-- |
|
|
|
-- |
|
|
|
(13,813 |
) |
|
|
(13,813 |
) |
Balance
at December 31, 2002
|
|
|
64 |
|
|
|
-- |
|
|
|
(13,813 |
) |
|
|
(13,749 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
shares issued during the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On
acquisition (note 6)
|
|
|
34,000 |
|
|
|
1,072,960 |
|
|
|
-- |
|
|
|
1,106,960 |
|
Exercise
of options
|
|
|
397 |
|
|
|
101,253 |
|
|
|
-- |
|
|
|
101,650 |
|
Private
placement financing
|
|
|
6,000 |
|
|
|
5,994,000 |
|
|
|
-- |
|
|
|
6,000,000 |
|
Share
issuance costs
|
|
|
-- |
|
|
|
(550,175 |
) |
|
|
-- |
|
|
|
(550,175 |
) |
Stock-based
compensation
|
|
|
-- |
|
|
|
62,913 |
|
|
|
-- |
|
|
|
62,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss and comprehensive loss for the year
|
|
|
-- |
|
|
|
-- |
|
|
|
(518,377 |
) |
|
|
(518,377 |
) |
Balance
at December 31, 2003
|
|
|
40,461 |
|
|
|
6,680,951 |
|
|
|
(532,190 |
) |
|
|
6,189,222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
shares issued during the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
of options
|
|
|
115 |
|
|
|
154,785 |
|
|
|
-- |
|
|
|
154,900 |
|
Exercise
of warrants
|
|
|
39 |
|
|
|
58,611 |
|
|
|
-- |
|
|
|
58,650 |
|
Stock-based
compensation
|
|
|
-- |
|
|
|
350,255 |
|
|
|
-- |
|
|
|
350,255 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss and comprehensive loss for the year
|
|
|
-- |
|
|
|
-- |
|
|
|
(1,171,498 |
) |
|
|
(1,171,498 |
) |
Balance
at December 31, 2004
|
|
|
40,615 |
|
|
|
7,244,602 |
|
|
|
(1,703,688 |
) |
|
|
5,581,529 |
|
See
note 4 for further information
The
accompanying notes are an integral part of these Consolidated Financial
Statements
|
|
GEOGLOBAL
RESOURCES INC.
(a
development stage enterprise)
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
|
|
Year
ended
Dec
31-2004
US
$
|
|
|
Year
ended
Dec
31-2003
US
$
|
|
|
Period
from
Inception,
Aug
21-2002 to Dec 31-2002
US
$
|
|
|
Period
from
Inception,
Aug
21-2002 to Dec 31-2004
US
$
|
|
|
|
Restated
note
5c
|
|
|
Restated
note
5c
|
|
|
|
|
|
Restated
note
5c
|
|
Cash
flows provided by (used in) operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(1,171,498 |
) |
|
|
(518,377 |
) |
|
|
(13,813 |
) |
|
|
(1,703,688 |
) |
Adjustment
to reconcile net loss to net
cash
used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and depletion
|
|
|
61,308 |
|
|
|
50,450 |
|
|
|
698 |
|
|
|
112,456 |
|
Stock-based
compensation (note 5c)
|
|
|
304,002 |
|
|
|
40,682 |
|
|
|
-- |
|
|
|
344,684 |
|
Changes
in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(127,261 |
) |
|
|
(6,487 |
) |
|
|
-- |
|
|
|
(133,748 |
) |
Accounts
payable
|
|
|
(147,060 |
) |
|
|
121,304 |
|
|
|
6,371 |
|
|
|
(19,385 |
) |
Accruals
|
|
|
38,042 |
|
|
|
16,400 |
|
|
|
-- |
|
|
|
54,442 |
|
Due
to shareholder
|
|
|
-- |
|
|
|
(6,952 |
) |
|
|
6,952 |
|
|
|
-- |
|
Due
to related companies
|
|
|
(27,239 |
) |
|
|
5,107 |
|
|
|
-- |
|
|
|
(22,132 |
) |
|
|
|
(1,069,706 |
) |
|
|
(297,873 |
) |
|
|
208 |
|
|
|
(1,367,371 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows provided by (used in) investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment
|
|
|
(547,357 |
) |
|
|
(296,845 |
) |
|
|
(49,846 |
) |
|
|
(894,048 |
) |
Cash
acquired on acquisition (note 6)
|
|
|
-- |
|
|
|
3,034,666 |
|
|
|
-- |
|
|
|
3,034,666 |
|
Restricted
cash (note 10d)
|
|
|
(206,796 |
) |
|
|
-- |
|
|
|
-- |
|
|
|
(206,796 |
) |
|
|
|
(754,153 |
) |
|
|
2,737,821 |
|
|
|
(49,846 |
) |
|
|
1,933,822 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows provided by (used in) financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of common shares
|
|
|
213,550 |
|
|
|
6,101,650 |
|
|
|
64 |
|
|
|
6,315,264 |
|
Share
issuance costs
|
|
|
-- |
|
|
|
(550,175 |
) |
|
|
-- |
|
|
|
(550,175 |
) |
Changes
in financing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
payable (note 7a)
|
|
|
(1,000,000 |
) |
|
|
(1,000,000 |
) |
|
|
-- |
|
|
|
(2,000,000 |
) |
Accounts
payable
|
|
|
-- |
|
|
|
61,078 |
|
|
|
-- |
|
|
|
61,078 |
|
Due
to shareholder
|
|
|
-- |
|
|
|
(37,998 |
) |
|
|
37,998 |
|
|
|
-- |
|
Due
to related companies
|
|
|
-- |
|
|
|
15,132 |
|
|
|
11,848 |
|
|
|
26,980 |
|
|
|
|
(786,450 |
) |
|
|
4,589,687 |
|
|
|
49,910 |
|
|
|
3,853,147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and
cash
equivalents
|
|
|
(2,610,309 |
) |
|
|
7,029,635 |
|
|
|
272 |
|
|
|
4,419,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, beginning of year
|
|
|
7,029,907 |
|
|
|
272 |
|
|
|
-- |
|
|
|
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents, end of year
|
|
|
4,419,598 |
|
|
|
7,029,907 |
|
|
|
272 |
|
|
|
4,419,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
bank accounts
|
|
|
90,670 |
|
|
|
36,631 |
|
|
|
272 |
|
|
|
90,670 |
|
Term
deposits
|
|
|
4,328,928 |
|
|
|
6,993,276 |
|
|
|
-- |
|
|
|
4,328,928 |
|
|
|
|
4,419,598 |
|
|
|
7,029,907 |
|
|
|
272 |
|
|
|
4,419,598 |
|
The
accompanying notes are an integral part of these Consolidated Financial
Statements
|
|
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2004
1. NATURE
OF OPERATIONS
On August
29, 2003, all of the issued and outstanding shares of GeoGlobal Resources
(India) Inc. ("GeoGlobal India") were acquired by GeoGlobal Resources Inc.,
formerly Suite101.com, Inc. As a result of the transaction, the
former shareholder of GeoGlobal India held approximately 69.3% of the issued and
outstanding shares of GeoGlobal Resources Inc. This transaction is
considered an acquisition of GeoGlobal Resources Inc. (the accounting subsidiary
and legal parent) by GeoGlobal India (the accounting parent and legal
subsidiary) and has been accounted for as a purchase of the net assets of
GeoGlobal Resources Inc. by GeoGlobal India. Accordingly, this
transaction represents a recapitalization of GeoGlobal India, the legal
subsidiary, effective August 29, 2003. These consolidated financial
statements are issued under the name of GeoGlobal Resources Inc. but are a
continuation of the financial statements of the accounting acquirer, GeoGlobal
India. The assets and liabilities of GeoGlobal India are included in
the consolidated financial statements at their historical carrying amounts. As a
result, the stockholders' equity of GeoGlobal Resources Inc. is eliminated and
these consolidated financial statements reflect the results of operations of
GeoGlobal Resources Inc. only from the date of the acquisition (refer to
acquisition note 6).
GeoGlobal
Resources Inc. changed its name from Suite101.com, Inc. after receiving
shareholder approval at the Annual Shareholders Meeting held on January 8,
2004. Collectively, GeoGlobal Resources Inc., GeoGlobal India and its
other wholly-owned direct and indirect subsidiaries, are referred to as the
"Company" or “GeoGlobal”.
The
Company is engaged primarily in the pursuit of petroleum and natural gas through
exploration and development in India. Since inception, the efforts of
GeoGlobal have been devoted to the pursuit of Production Sharing Contracts
(“PSC”) with the Gujarat State Petroleum Corporation ("GSPC") and the Government
of India and the development thereof. To date, the Company has not
earned revenue from these operations and is considered to be in the development
stage. The recoverability of the costs incurred to date
is uncertain and dependent upon achieving commercial production or sale, the
ability of the Company to obtain sufficient financing to complete its
obligations in India and upon future profitable operations.
2. SIGNIFICANT
ACCOUNTING POLICIES
a) Basis
of presentation
These
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States within the
framework of the accounting policies summarized below.
These
consolidated financial statements include the accounts of GeoGlobal Resources
Inc., from the date of acquisition, being August 29, 2003 as well as the
accounts of GeoGlobal's direct and indirect wholly-owned subsidiaries: (i)
GeoGlobal Resources (India) Inc., incorporated under the Business Corporations Act
(Alberta), Canada on August 21, 2002 which was continued under the Companies Act of Barbados,
West Indies on June 27, 2003 and (ii) GeoGlobal Resources (Canada) Inc.,
incorporated under the Business Corporations Act
(Alberta), Canada on September 4, 2003 and (iii) GeoGlobal Resources
(Barbados) Inc. incorporated under the Companies Act of Barbados,
West Indies on September 24, 2003, which is the wholly-owned subsidiary of
GeoGlobal Resources (Canada) Inc.
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2004
2. SIGNIFICANT
ACCOUNT POLICIES (continued)
b) Property
and equipment
The
Company follows the full cost method of accounting for its petroleum and natural
gas operations. Under this method all costs related to the
exploration for and development of petroleum and natural gas reserves are
capitalized. Costs include land acquisition costs, geological and
geophysical expenditures, costs of drilling both productive and non-productive
wells and related overhead costs. Proceeds from the sale of
properties will be applied against capitalized costs, without any gain or loss
being realized, unless such sale would significantly alter the relationship
between capital costs and proven reserves of petroleum and natural gas
attributable to the cost center.
ii)
|
Depreciation
and depletion
|
Computer
equipment is recorded at cost, with depreciation provided for on a
declining-balance basis at 30% per annum.
Upon the
commencement of economic production quantities of oil and gas, depletion of
exploration and development costs and depreciation of production equipment will
be provided on a country-by-country basis using the unit-of-production method
based upon estimated proven petroleum and natural gas reserves. The
costs of acquiring and evaluating unproven properties and major development
properties will be excluded from costs until it is determined whether or not
proven reserves are attributable to the properties, the major development
projects are completed, or impairment occurs. For depletion and
depreciation purposes, relative volumes of petroleum and natural gas production
and reserves will be converted into equivalent units based upon estimated
relative energy content.
In
applying the full cost method, the Company will be calculating a ceiling test
whereby the carrying value of petroleum and natural gas properties and
production equipment, net of recorded deferred income taxes is limited to the
present value of after tax future net revenues from proven reserves, discounted
at 10% (based on prices and costs at the balance sheet date calculated
quarterly), plus the lower of cost and fair value of unproven
properties. Should this comparison indicate an excess carrying value,
the excess will be charged against earnings as additional depletion and
depreciation.
iv)
|
Asset
retirement obligations
|
The
Company recognizes the fair value of a liability for an asset retirement
obligation in the period in which it is incurred and a corresponding increase in
the carrying value of the related long-lived asset. The fair value is
determined through a review of engineering and environmental studies, industry
guidelines, and management’s estimate on a site by site basis. The
liability is subsequently adjusted for the passage of time, and is recognized as
accretion expense in the consolidated statement of operations. The
liability is also adjusted due to revisions in either the timing or the amount
of the original estimated cash flows associated with the
liability. The increase in the carrying value of the asset is
amortized over the useful life of the related productive assets.
All of
the Company's petroleum and natural gas activities are conducted jointly with
others. The Company’s undivided interests in joint ventures are
consolidated on a proportionate basis.
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2004
2. SIGNIFICANT
ACCOUNTING POLICIES (continued)
|
Net
loss per share is calculated based upon the weighted average number of
shares outstanding during the period. The treasury stock method
is used to determine the dilutive effect of the stock
options. The treasury stock method assumes any proceeds
obtained upon exercise of options would be used to purchase common shares
at the average market price during the period. There are no
differences between net loss and the weighted average number of shares
used in the calculation of the basic net loss per share and that used in
the calculation of diluted net loss per
share.
|
|
The
Company has estimated the fair value of its financial instruments which
include cash and cash equivalents, restricted cash, accounts receivable,
accounts payable, note payable, due to shareholder and due to related
companies. The Company used valuation methodologies and market
information available as at period end to determine that the carrying
amounts of such financial instruments approximate fair value in all cases,
unless otherwise noted. Of the Company’s accounts receivable,
US$154,884 (December 31, 2003 – US$57,364) is due from one entity in the
oil and gas industry which may pose some credit risk. If these
amounts were uncollectible, they would be capitalized as part of the
property and equipment exploration costs. It is management’s
opinion that the Company is not exposed to significant interest, currency
or credit risks arising from its financial
instruments.
|
f)
|
Measurement
uncertainty
|
|
The
preparation of the consolidated financial statements in accordance with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results may differ from
these estimated amounts.
|
g)
|
Cash
and cash equivalents
|
|
Cash
and cash equivalents include cash on hand, balances with banks and
short-term deposits with original maturities of three months or
less.
|
h)
|
Foreign
currency translation
|
|
The
Company translates integrated foreign operations into the functional
currency of the parent. Monetary assets and liabilities
denominated in foreign currencies are translated into U.S. dollars at
rates of exchange in effect at the date of the balance
sheet. Non-monetary items are translated at the rate of
exchange in effect when the assets are acquired or obligations
incurred. Revenues and expenses are translated at average rates
in effect during the period, with the exception of depreciation which is
translated at historic rates. Exchange gains and losses are
charged to operations.
|
|
The
Company follows the liability method of tax allocation. Under
this method, assets and liabilities are determined based on deferred
income tax, differences between the tax basis of an asset or liability and
its carrying value using enacted tax rates anticipated to apply in the
periods when the temporary differences are expected to
reverse.
|
The
effect on deferred income tax assets and liabilities of changes in tax rates is
recognized in income in the period in which the change is enacted.
|
Revenue
associated with the production and sales of crude oil, natural gas and
natural gas liquids owned by the Company will be recognized when title
passes from the Company to its
customer.
|
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2004
2. SIGNIFICANT
ACCOUNTING POLICIES (continued)
k)
|
Stock-based
compensation plan
|
|
The
Company has a stock-based compensation plan which includes stock
options. Consideration received from employees or directors on
the exercise of stock options under the stock option plan is recorded as
capital stock.
|
|
The
Company uses the intrinsic value method of accounting for employee and
director stock-based compensation. As all options have been
granted at exercise prices based on the market value of the Company's
common shares at the date of the grant, no compensation cost is
recognized.
|
|
Non-employee
stock-based compensation costs are measured using the fair value based
method and are charged to earnings on the measurement
date.
|
|
Comprehensive
income (loss) includes all changes in equity except those resulting from
investments made by owners and distributions to owners. Other
accumulated comprehensive income (loss) consists only of net loss for all
periods presented.
|
3. PROPERTY
AND EQUIPMENT
|
|
Balance
Sheet as at December 31,
US
$
|
|
|
Exploration
costs incurred in
US
$
|
|
|
|
2004
|
|
|
2003
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
|
Restated
note
5c
|
|
|
Restated
note
5c
|
|
|
Restated
note
5c
|
|
|
Restated
note
5c
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
and development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
costs – India
|
|
|
707,023 |
|
|
|
200,754 |
|
|
|
506,269 |
|
|
|
178,829 |
|
|
|
21,925 |
|
Accumulated
depletion
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
|
707,023 |
|
|
|
200,754 |
|
|
|
506,269 |
|
|
|
178,829 |
|
|
|
21,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computer
and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computer
and office equipment
|
|
|
255,509 |
|
|
|
168,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
depreciation
|
|
|
(112,456 |
) |
|
|
(51,148 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
143,053 |
|
|
|
117,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
850,076 |
|
|
|
317,774 |
|
|
|
|
|
|
|
|
|
|
|
|
|
a) Exploration
costs – India
The
exploration costs incurred to date are not subject to depletion and cover three
exploration blocks, known as the KG Block, Mehsana Block and the Sanand and
Mirola Block. It is anticipated these exploration costs will be
subject to depletion no earlier than the 2007 fiscal year.
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2004
3. PROPERTY
AND EQUIPMENT (continued)
b) Capitalized
overhead costs (Restated note 5c)
Included
in the US$506,269 of exploration cost additions during the year ended December
31, 2004 (year ended December 31, 2003 – US$178,829) are certain overhead costs
capitalized by the Company in the amount of US$382,788 (year ended December 31,
2003 – US$150,309) directly related to the exploration activities in
India. The capitalized overhead amount includes capitalized
stock-based compensation of US$46,253 (year ended December 31, 2003 – US$22,231)
(see note 5b). Further, the capitalized overhead amount includes
US$49,370 (year ended December 31, 2003 - US$nil) paid to third parties, and
US$287,165 paid to and on behalf of a related party (year ended December 31,
2003 – US$128,078) (see note 7c). These indirect costs are incurred
solely by and on behalf of the Company in providing its services under the
Carried Interest Agreement and are therefore not reimbursable under the Carried
Interest Agreement (see note 3d).
c) Production
Sharing Contracts
|
i)
|
Exploration
Block KG-OSN-2001/3
|
|
On
August 27, 2002, GeoGlobal together with its joint venture participants,
Jubilant Enpro Limited (“Enpro”) and Gujarat State Petroleum Corporation
Limited (“GSPC”) entered into a Joint Bidding Agreement for the purpose of
submitting a bid for Exploration Block KG-OSN-2001/3 offered by the
Government of India under the New Exploration Licensing Policy Third Round
(NELP-III). This Exploration bid was successful and was awarded
on November 29, 2002, by the Directorate General of Hydrocarbons under the
Ministry of Petroleum & Natural Gas of
India.
|
|
On
February 4, 2003, GeoGlobal, as to a 10% Participating Interest
("PI") (net 5% - see note 3e) along with Enpro and GSPC, as to
their 10% and 80% PI respectively, entered into a Production Sharing
Contract (“PSC-KG”) with the Government of India with respect to this
Exploration Block. See also Carried Interest Agreement note
3d.
|
|
The
PSC-KG allows the joint venture participants to explore for petroleum and
natural gas over a 6.5 year period on the Exploration Block subject to the
work commitment as outlined in note
10a.
|
|
ii)
|
Exploration
Block CB-ONN-2002/2 (also referred to as
Mehsana Block)
|
|
On
January 8, 2004, the Company announced that it was awarded by the
Government of India a 10% PI in a new onshore Exploration Block
CB-ONN-2002/2 covering an area of approximately 125 square kilometers
("sq. kms.") in the Cambay Basin, located in the province of Gujarat in
Northwest India, under the Fourth Round of the New Exploration Licensing
Policy (NELP-IV) bidding which closed on September 30,
2003.
|
|
On
February 6, 2004, GeoGlobal as to its 10% PI, along with its joint venture
participants, Enpro and GSPC as to their 30% and 60% PI respectively,
signed the Production Sharing Contract ("PSC-Mehsana") with the Government
of India with respect to this Exploration
Block.
|
|
The
PSC-Mehsana allows the joint venture participants to explore for petroleum
and natural gas over a 6 year period on the Exploration Block subject to
the work commitment as outlined in note
10b.
|
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2004
|
3.
|
PROPERTY
AND EQUIPMENT (continued)
|
|
iii)
|
Exploration Block
CB-ONN-2002/3 (also
referred to as Sanand and Mirola
Block)
|
|
On
January 8, 2004, the Company also announced that it was awarded a 10% PI
in a second new onshore Exploration Block CB-ONN-2002/3 covering an area
of approximately 285 sq. kms. also in the Cambay Basin under
NELP-IV.
|
|
On
February 6, 2004, GeoGlobal as to its 10% PI, along with its joint venture
participants, Enpro, GSPC, and Prize Petroleum Company Limited as to their
20%, 55% and 15% PI respectively, signed the Production Sharing Contract
("PSC-Sanand and Mirola") with the Government of India with respect to
this Exploration Block.
|
|
The
PSC-Sanand and Mirola allows the joint venture participants to explore for
petroleum and natural gas over a 6 year period on the Exploration Block
subject to the work commitment as outlined in note
10c.
|
d)
|
Carried
Interest Agreement
|
|
On
August 27, 2002, GeoGlobal entered into a Carried Interest Agreement
(“CIA”) with GSPC, which grants the Company a 10% carried interest (net 5%
- see note 3e) in the Exploration Block KG-OSN-2001/3. The CIA provides
that GSPC is responsible for GeoGlobal's entire share of any and all costs
incurred during the Exploration Phase prior to the date of initial
commercial production.
|
|
As
at December 31, 2004, GSPC has incurred costs of Rs 22.77 crore
(approximately US$5.01 million) attributable to GeoGlobal under the CIA of
which 50% is for the account of Roy Group (Mauritius) Inc. ("RGM"), a
related party (note 7b) under the terms of the Participating Interest
Agreement as further described in note
3e.
|
e)
|
Participating
Interest Agreement
|
|
On
March 27, 2003, GeoGlobal entered into a Participating Interest Agreement
(“PIA”) with RGM, whereby GeoGlobal assigned and holds in trust for RGM
subject to Government of India consent, 50% of the benefits and
obligations of the PSC-KG and the CIA leaving GeoGlobal with a net 5%
Participating Interest in the PSC-KG and a net 5% carried interest in the
CIA. Under the terms of the PIA, until the Government of India
consent is obtained, GeoGlobal retains the exclusive right to deal with
the other parties to the PSC-KG and the CIA and is entitled to make all
decisions regarding the interest assigned to RGM and RGM agreed to be
bound by and responsible for the actions taken by, obligations undertaken
and costs incurred by GeoGlobal in regard to RGM's interest and to be
liable to GeoGlobal for its share of all costs, interests, liabilities and
obligations arising out of or relating to the RGM interest. RGM
agreed to indemnify GeoGlobal against any and all costs, expenses, losses,
damages or liabilities incurred by reason of RGM's failure to pay the
same. Subject to obtaining the government consent to the
assignment, RGM is entitled to all income, receipts, credits,
reimbursements, monies receivable, rebates and other benefits in respect
of its 5% interest which relate to the PSC-KG. GeoGlobal has a
right of set-off against sums owing to GeoGlobal by RGM. In the
event that the Indian government consent is delayed or denied, resulting
in either RGM or GeoGlobal being denied an economic benefit it would have
realized under the PIA, the parties agreed to amend the PIA or take other
reasonable steps to assure that an equitable result is achieved consistent
with the parties' intentions contained in the PIA. As a
consequence of this transaction the Company reports its holdings under the
PSC-KG and CIA as a net 5% Participating
Interest.
|
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2004
4. CAPITAL
STOCK
a) Common
shares
|
|
Number
of
shares
|
|
|
Capital
stock
US
$
|
|
|
Additional
paid-in
capital
US
$
|
|
|
|
|
|
|
|
|
|
Restated
note
5c
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at August 21, 2002 and December 31, 2002
|
|
|
1,000 |
|
|
|
64 |
|
|
|
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003
Transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
stock of GeoGlobal (formerly Suite101.com, Inc.) acquired August 29,
2003
|
|
|
14,656,687 |
|
|
|
14,657 |
|
|
|
10,914,545 |
|
Common
shares issued by GeoGlobal to acquire
GeoGlobal
India (note 6)
|
|
|
34,000,000 |
|
|
|
34,000 |
|
|
|
1,072,960 |
|
Share
issuance costs on acquisition
|
|
|
-- |
|
|
|
-- |
|
|
|
(66,850 |
) |
Elimination
of GeoGlobal capital stock in recognition of
reverse
takeover (note 1)
|
|
|
(1,000 |
) |
|
|
(14,657 |
) |
|
|
(10,914,545 |
) |
Options
exercised for cash
|
|
|
396,668 |
|
|
|
397 |
|
|
|
101,253 |
|
Private
placement financing
|
|
|
6,000,000 |
|
|
|
6,000 |
|
|
|
5,994,000 |
|
Share
issuance costs on private placement
|
|
|
-- |
|
|
|
-- |
|
|
|
(483,325 |
) |
Stock-based
compensation
|
|
|
-- |
|
|
|
-- |
|
|
|
62,913 |
|
|
|
|
55,052,355 |
|
|
|
40,397 |
|
|
|
6,680,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as at December 31, 2003
|
|
|
55,053,355 |
|
|
|
40,461 |
|
|
|
6,680,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
Transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
exercised for cash
|
|
|
115,000 |
|
|
|
115 |
|
|
|
154,785 |
|
Broker
warrants exercised for cash
|
|
|
39,100 |
|
|
|
39 |
|
|
|
58,611 |
|
Stock-based
compensation (note 5c)
|
|
|
-- |
|
|
|
-- |
|
|
|
350,255 |
|
|
|
|
154,100 |
|
|
|
154 |
|
|
|
563,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as at December 31, 2004
|
|
|
55,207,455 |
|
|
|
40,615 |
|
|
|
7,244,602 |
|
b) Warrants
i) Private
Placement Financing
On
December 23, 2003, GeoGlobal completed a brokered private placement of 5,800,000
units at US$1.00 each, together with a concurrent private placement of an
additional 200,000 units on the same terms, for aggregate gross cash total
proceeds of US$6,000,000. Each unit was comprised of one common share and
one half of one warrant ("Private Placement Warrant"), where one full Private
Placement Warrant entitles the holder to purchase one additional common share
for US$2.50, for a term of two years from date of closing. The
Private Placement Warrants are subject to accelerated expiration 30 days after
issuance of a news release to that effect in the event that the common shares
trade at US$4.00 or more for 20 consecutive trading days and if the resale of
the shares has been registered under the 1933 Act and the hold period for
Canadian subscribers has expired.
Costs of
US$483,325 were incurred in issuing shares under this Private Placement
Financing which included a fee equal to 6% of the gross proceeds raised in the
brokered offering. Also issued as additional consideration for this
transaction were 580,000 Broker Warrants.
None of
the Private Placement Warrants were exercised as at December 31,
2004.
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2004
4. CAPITAL
STOCK (continued)
ii) Broker
Warrants
The
580,000 Broker Warrants described above entitle the holder to purchase 580,000
common shares at an exercise price of US$1.50 per share, expiring on December
23, 2005. The Broker Warrants are also subject to accelerated expiration 30 days
after issuance of a news release to that effect in the event that the common
shares trade at US$3.00 or more for 20 consecutive trading days and if the
resale of the shares has been registered under the 1933 Act and the hold period
for Canadian subscribers has expired.
During
the year ended December 31, 2004, 39,100 Broker Warrants were exercised at
US$1.50 for gross proceeds of US$58,650.
|
During
the year ended December 31, 2004, 115,000 options were exercised at
various prices between US$1.18 and US$1.50 for gross proceeds of
US$154,900.
|
d)
|
Weighted
average number of shares
|
|
For
purposes of the determination of net loss per share, the basic and diluted
weighted average number of shares outstanding for the year ended December
31, 2004 was 41,671,136 (December 31, 2003 – 19,737,035, December 31, 2002
– 14,500,000). The amount for the year ended December 31, 2004
excludes 5,000,000 shares currently held in escrow. The amount
for the year ended December 31, 2003 also excludes the 5,000,000 shares
currently held in escrow plus 14,500,000 shares which were not released
from escrow until August 27, 2004. The amount for the period
ended December 31, 2002 is deemed to be the number of shares issued to the
legal subsidiary pursuant to the reverse take-over transaction described
in note 6, reduced by the 19,500,000 shares which were held in
escrow.
|
5. STOCK
OPTIONS
a) The
Company’s 1998 Stock Incentive Plan
Under the
terms of the 1998 Stock Incentive Plan (the "Plan"), 3,900,000 common shares
have been reserved for issuance on exercise of options granted under the
Plan. As at December 31, 2004, the Company had 385,697 (December 31,
2003 – 385,697) common shares remaining for issuance under the
Plan. The Board of Directors of the Company may amend or modify the
Plan at any time, subject to any required stockholder approval. The
Plan will terminate on the earliest of: (i) 10 years after the Plan Effective
Date, being December 2008; (ii) the date on which all shares available for
issuance under the Plan have been issued as fully-vested shares; or, (iii) the
termination of all outstanding options in connection with certain changes in
control or ownership of the Company.
Subsequent
to the year-end, on January 17, 2005, the Board of Directors resolved to amend
the Plan to increase the shares reserved for grant of options from 3,900,000 to
8,000,000 subject to shareholder approval (note 12a).
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2004
5. STOCK
OPTIONS (continued)
b) Stock-based
compensation
Under the
Statement of Financial Accounting Standards 123, the Company is required to
measure and disclose on a pro-forma basis the impact on net loss and net loss
per share of applying the fair value based method to stock-based compensation
arrangements with employees and directors.
Under
this method, compensation cost is measured at fair value at grant date using the
Black-Scholes option pricing method and recognized over the vesting
period. If the fair value based method had been used, the stock based
compensation costs, pro-forma exploration costs – India, net loss and pro-forma
net loss per share would be as follows:
|
|
Year
ended
Dec
31, 2004
US
$
|
|
|
Year
ended
Dec
31, 2003
US
$
|
|
|
Period
from Inception,
Aug
21, 2002 to Dec 31, 2002
US
$
|
|
|
Period
from
Inception,
Aug
21, 2002 to
Dec
31, 2004
US
$
|
|
|
|
Restated
note
5c
|
|
|
Restated
note
5c
|
|
|
Restated
note
5c
|
|
|
Restated
note
5c
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro-forma
basis
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
costs – India
|
|
|
56,654 |
|
|
|
44,542 |
|
|
|
-- |
|
|
|
101,196 |
|
General
and administrative
|
|
|
132,767 |
|
|
|
88,349 |
|
|
|
-- |
|
|
|
221,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
costs – India
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
reported
|
|
|
707,023 |
|
|
|
200,754 |
|
|
|
21,925 |
|
|
|
707,023 |
|
Pro-forma
|
|
|
808,219 |
|
|
|
245,296 |
|
|
|
21,925 |
|
|
|
808,219 |
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
reported
|
|
|
(1,171,498 |
) |
|
|
(518,377 |
) |
|
|
(13,813 |
) |
|
|
(1,703,688 |
) |
Pro-forma
|
|
|
(1,304,265 |
) |
|
|
(606,726 |
) |
|
|
(13,813 |
) |
|
|
(1,924,804 |
) |
Net
loss per share - basic and diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
reported
|
|
|
(0.03 |
) |
|
|
(0.03 |
) |
|
|
(0.00 |
) |
|
|
|
|
Pro-forma
|
|
|
(0.03 |
) |
|
|
(0.03 |
) |
|
|
(0.00 |
) |
|
|
|
|
Black-Scholes
Assumptions
|
|
|
|
|
|
|
|
|
|
Fair
value of stock options granted
|
|
|
-- |
|
|
$ |
0.20 |
|
|
|
-- |
|
Risk-free
interest rate
|
|
|
-- |
|
|
|
2.61 |
% |
|
|
-- |
|
Volatility
|
|
|
-- |
|
|
|
55 |
% |
|
|
-- |
|
Expected
life
|
|
|
-- |
|
|
0.8
years
|
|
|
|
-- |
|
Dividend
yield
|
|
|
-- |
|
|
|
0 |
% |
|
|
-- |
|
i)
|
The
risk-free rate is based on the U.S. Treasury yield curve in effect at the
time of grant.
|
ii)
|
Expected
volatilities are based on historical volatility of the Company's stock and
other factors.
|
iii)
|
The
expected life of options granted represents the period of time that the
options are expected to be outstanding and is derived from historical
exercise behavior and current
trends.
|
5. STOCK
OPTIONS (continued)
c) Restatement
|
|
Year
ended
Dec
31, 2004
US
$
|
|
|
Year
ended
Dec
31, 2003
US
$
|
|
|
Period
from Inception,
Aug
21, 2002 to Dec 31, 2002
US
$
|
|
|
Period
from
Inception,
Aug
21, 2002 to
Dec
31, 2004
US
$
|
|
|
|
Restated
note
5c
|
|
|
Restated
note
5c
|
|
|
|
|
|
Restated
note
5c
|
|
Stock-based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
fees
|
|
|
304,002 |
|
|
|
40,682 |
|
|
|
-- |
|
|
|
344,684 |
|
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
costs - India
|
|
|
46,253 |
|
|
|
22,231 |
|
|
|
-- |
|
|
|
68,484 |
|
|
|
|
350,255 |
|
|
|
62,913 |
|
|
|
-- |
|
|
|
413,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The years
ended December 31, 2004, 2003 and the period from inception August 21, 2002 to
December 31, 2004 have been restated due to an error in the classification and
calculation for stock-based compensation for non-employee
consultants.
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2004
5. STOCK
OPTIONS (continued)
The
following is a summary of the effects of this restatement on the Company's
Consolidated Balance Sheets and Statements of Stockholders' Equity at December
31, 2004 and 2003 and the Consolidated Statements of Operations for the years
ended December 31, 2004 and 2003 and the period from inception of August 21,
2002 to December 31, 2004.
|
|
As
Reported
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Dec
31, 2004
US$
|
|
|
|
Dec
31, 2004
US$
|
|
|
Period
of Inception,
Aug
21, 2002
to
Dec 31, 2003
US$
|
|
|
Dec
31, 2004
US$
|
|
|
Balance
Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
and gas interests
|
|
|
638,539 |
|
|
|
|
46,253 |
|
|
|
22,231 |
|
|
|
707,023 |
|
|
Additional
paid-in
capital
|
|
|
6,831,434 |
|
|
|
|
350,255 |
|
|
|
62,913 |
|
|
|
7,244,602 |
|
|
Deficit
accumulated
|
|
|
(1,359,004 |
) |
|
|
|
(304,002 |
) |
|
|
(40,682 |
) |
|
|
(1,703,688 |
) |
|
Stockholders'
equity
|
|
|
5,513,045 |
|
|
|
|
46,253 |
|
|
|
22,231 |
|
|
|
5,581,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement
of
Stockholders'
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
paid-in
capital
|
|
|
6,831,434 |
|
|
|
|
350,255 |
|
|
|
62,913 |
|
|
|
7,244,602 |
|
|
Accumulated
deficit
|
|
|
(1,359,004 |
) |
|
|
|
(304,002 |
) |
|
|
(40,682 |
) |
|
|
(1,703,688 |
) |
|
Stockholders'
equity
|
|
|
5,513,045 |
|
|
|
|
46,253 |
|
|
|
22,231 |
|
|
|
5,581,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
Reported
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Year
ended
Dec
31, 2004
US$
|
|
Period
of Inception,
Aug
21, 2002
to
Dec 31, 2004
US$
|
|
Year
ended
Dec
31, 2004
US$
|
|
|
Period
of Inception,
Aug
21, 2002
to
Dec 31, 2004
US$
|
|
|
Year
ended
Dec
31, 2004
US$
|
|
Period
of Inception,
Aug
21, 2002
to
Dec 31, 2004
US$
|
Statements
of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
fees
|
|
|
237,615 |
|
407,886
|
|
|
304,002 |
|
|
|
344,684 |
|
|
|
541,617 |
|
752,570
|
Net
loss and
comprehensive
loss
|
|
|
(867,496 |
) |
(1,359,004)
|
|
|
(304,002 |
) |
|
|
(344,684 |
) |
|
|
(1,171,498 |
) |
(1,703,688)
|
Net
loss per share
-
basic and diluted
|
|
|
(0.02 |
) |
|
|
|
(0.01 |
) |
|
|
|
|
|
|
(0.03 |
) |
|
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2004
5. Stock
Options (continued)
|
|
As
Reported
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Dec
31, 2003
US$
|
|
|
|
Dec
31, 2003
US$
|
|
|
Period
of Inception,
Aug
21, 2002
to
Dec 31, 2002
US$
|
|
|
Dec
31, 2003
US$
|
|
|
Balance
Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
and gas interests
|
|
|
295,543 |
|
|
|
|
22,231 |
|
|
|
-- |
|
|
|
317,774 |
|
|
Additional
paid-in
capital
|
|
|
6,618,038 |
|
|
|
|
62,913 |
|
|
|
-- |
|
|
|
6,680,951 |
|
|
Deficit
accumulated
|
|
|
(491,508 |
) |
|
|
|
(40,682 |
) |
|
|
-- |
|
|
|
(532,190 |
) |
|
Stockholders'
equity
|
|
|
6,166,991 |
|
|
|
|
22,231 |
|
|
|
-- |
|
|
|
6,189,222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statement
of
Stockholders'
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
paid-in
capital
|
|
|
6,618,038 |
|
|
|
|
62,913 |
|
|
|
-- |
|
|
|
6,680,951 |
|
|
Accumulated
deficit
|
|
|
(491,508 |
) |
|
|
|
(40,682 |
) |
|
|
-- |
|
|
|
(532,190 |
) |
|
Stockholders'
equity
|
|
|
6,166,991 |
|
|
|
|
22,231 |
|
|
|
-- |
|
|
|
6,189,222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
Reported
|
|
Adjustment
|
|
|
As
Restated
|
|
|
Year
ended
Dec
31, 2003
US$
|
|
Period
of Inception,
Aug
21, 2002
to
Dec 31, 2003
US$
|
|
Year
ended
Dec
31, 2003
US$
|
|
|
Period
of Inception,
Aug
21, 2002
to
Dec 31, 2003
US$
|
|
|
Year
ended
Dec
31, 2003
US$
|
|
Period
of Inception,
Aug
21, 2002
to
Dec 31, 2003
US$
|
Statements
of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
fees
|
|
|
170,271 |
|
170,271
|
|
|
40,682 |
|
|
|
40,682 |
|
|
|
210,953 |
|
210,953
|
Net
loss and
comprehensive
loss
|
|
|
(477,695 |
) |
(491,508)
|
|
|
(40,682 |
) |
|
|
(40,682 |
) |
|
|
(518,377 |
) |
(532,190)
|
Net
loss per share
-
basic and diluted
|
|
|
(0.02 |
) |
|
|
|
(0.01 |
) |
|
|
|
|
|
|
(0.03 |
) |
|
The
restatement had no impact on the Consolidated Statements of Cash Flows for the
year ended December 31, 2004 and from inception of August 21, 2002 to December
31, 2004 and therefore, no changes have been reflected
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2004
5. STOCK
OPTIONS (continued)
d) Black-Scholes
Assumptions
The
Company believes that the estimated fair value of the stock options is more
readily measurable than the fair value of services rendered. The fair
value of the stock options granted to non-employee consultantss is calculated at
each reporting date using the Black-Scholes option-pricing
model. Weighted average assumptions used in the valuation are
disclosed in the following table:
|
|
Year
ended
Dec
31, 2004
US
$
|
|
|
Year
ended
Dec
31, 2003
US
$
|
|
|
Period
from Inception,
Aug
21, 2002 to Dec 31, 2002
US
$
|
|
|
|
Restated
note
5c
|
|
|
Restated
note
5c
|
|
|
|
|
Black-Scholes
Assumptions
|
|
|
|
|
|
|
|
|
|
Fair
value of stock options at reporting date
|
|
$ |
0.73 |
|
|
$ |
0.67 |
|
|
|
-- |
|
Risk-free
interest rate
|
|
|
1.67 |
% |
|
|
1.32 |
% |
|
|
-- |
|
Volatility
|
|
|
98 |
% |
|
|
89 |
% |
|
|
-- |
|
Expected
life
|
|
0.5
years
|
|
|
1.1
years
|
|
|
|
-- |
|
Dividend
yield
|
|
|
0 |
% |
|
|
0 |
% |
|
|
-- |
|
e) Stock
option table
These
options were granted for services provided to the Company:
|
|
|
|
|
|
|
|
Balance
|
|
Option
|
|
|
Balance
|
Granted
|
Exercised
|
Balance
|
exercisable
|
|
exercise
|
|
|
December
31,
|
during
|
during
|
December
31,
|
December
31,
|
Grant
date
|
price
|
Expiry
date
|
Vesting
date
|
2003
|
the
year
|
the
year
|
2004
|
2004
|
(mm/dd/yy)
|
US
$
|
(mm/dd/yy)
|
(mm/dd/yy)
|
#
|
#
|
#
|
#
|
#
|
|
|
|
|
|
|
|
|
|
2/25/99
|
1.50
|
08/29/04
|
Vested
|
50,000
|
--
|
50,000
|
--
|
--
|
6/11/99
|
1.50
|
08/29/04
|
Vested
|
5,000
|
--
|
5,000
|
--
|
--
|
6/12/00
|
1.50
|
08/29/04
|
Vested
|
5,000
|
--
|
5,000
|
--
|
--
|
12/09/03
|
1.18
|
08/31/05
|
Vested
|
1,625,000
|
--
|
55,000
|
1,570,000
|
570,000
|
12/09/03
|
1.18
|
08/31/05
|
01/08/05
|
375,000
|
--
|
--
|
375,000
|
--
|
12/30/03
|
1.50
|
08/31/05
|
Vested
|
475,000
|
--
|
--
|
475,000
|
475,000
|
12/30/03
|
1.50
|
08/31/05
|
01/08/05
|
470,000
|
--
|
--
|
470,000
|
--
|
|
|
|
|
3,005,000
|
--
|
115,000
|
2,890,000
|
1,045,000
|
At
December 31, 2004, there were 1,570,000 options outstanding exercisable at
US$1.18 per common share until August 31, 2005 of which 1,000,000 options were
granted subject to shareholder approval.
Subsequent
to the year-end as outlined in note 12, the Board of Directors of the Company
passed a number of resolutions with respect to stock options: (i) to extend the
expiry date of all outstanding options from August 31, 2005 to August 31, 2006;
(ii) to amend the Plan to increase the shares reserved for the grant of options;
and (iii) the issuance of additional options.
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2004
6. ACQUISITION
On August
29, 2003, pursuant to an agreement dated April 4, 2003 and amended August 29,
2003, the Company completed a transaction with Mr. Roy and GeoGlobal Resources
(India) Inc. ("GeoGlobal India"), a corporation then wholly-owned by Mr. Roy,
whereby the Company acquired from Mr. Roy all of the outstanding capital stock
of GeoGlobal India. In exchange for the outstanding capital stock of
GeoGlobal India, the Company issued 34.0 million shares of our Common
Stock. Of the 34.0 million shares, 14.5 million shares were delivered
to Mr. Roy at the closing of the transaction being August 29, 2003 and an
aggregate of 19.5 million shares were held in escrow by an escrow
agent. The terms of the escrow provide for the release of the shares
upon the occurrence of certain developments relating to the outcome of oil and
natural gas exploration and development activities conducted on the KG
Block. On August 27, 2004, 14.5 million shares were released to Mr.
Roy from escrow upon the actual commencement of a drilling program on the KG
Block. The final 5.0 million shares remaining in escrow will be
released only if a commercial discovery is declared on the KG
Block. In addition to the shares of Common Stock, the Company
delivered to Mr. Roy a $2.0 million promissory note, of which $500,000 was paid
on the closing of the transaction on August 29, 2003, $500,000 was paid on
October 15, 2003, $500,000 was paid on January 15, 2004 and $500,000 was paid on
June 30, 2004. The note did not accrue interest. The note
was secured by the outstanding stock of GeoGlobal India which has subsequently
been released. As a consequence of the transaction, Mr. Roy held as
of the closing of the transaction an aggregate of 34.0 million shares of our
outstanding Common Stock, or approximately 69.3% of the shares outstanding,
assuming all shares held in escrow are released to him. The terms of
the transaction provide that Mr. Roy is to have the right to vote all 34.0
million shares following the closing, including the shares during the period
they are held in escrow. Shares not released from the escrow
will be surrendered back to GeoGlobal.
As
discussed in note 1, the acquisition of GeoGlobal India by GeoGlobal was
accounted for as a reverse takeover transaction. As a result, the
cost of the transaction was determined based upon the net assets of GeoGlobal
deemed to have been acquired. These consolidated financial statements
include the results of operations of GeoGlobal from the date of
acquisition. The net identifiable assets acquired of GeoGlobal are as
follows:
|
|
US
$
|
|
|
|
|
|
Net
assets acquired
|
|
|
|
Cash
|
|
|
3,034,666 |
|
Other
current assets
|
|
|
75,000 |
|
Current
liabilities
|
|
|
(2,706 |
) |
|
|
|
|
|
Net
book value of identifiable assets acquired
|
|
|
3,106,960 |
|
|
|
|
|
|
Consideration
paid
|
|
|
|
|
Promissory
note issued
|
|
|
2,000,000 |
|
34,000,000
common shares issued par value $0.001
|
|
|
34,000 |
|
Additional
paid-in capital
|
|
|
1,072,960 |
|
|
|
|
3,106,960 |
|
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2004
7. RELATED
PARTY TRANSACTIONS
Related
party transactions are measured at the exchange amount which is the amount of
consideration established and agreed by the related parties.
a) Note
payable
On August
29, 2003, as part of the Acquisition (note 6), a US$2,000,000 promissory note
was issued to the sole shareholder of GeoGlobal India. On each of
August 29, 2003, October 15, 2003, January 15, 2004 and June 30, 2004,
US$500,000 of the note was paid. The promissory note was non-interest
bearing and the capital stock of GeoGlobal India collateralized the repayment of
the note. The collateral has been released.
b) Roy
Group (Mauritius) Inc.
Roy Group
(Mauritius) Inc. is related to the Company by common management and is
controlled by a director of the Company. On March 27, 2003, the
Company entered into a Participating Interest Agreement (note 3e) with the
related party.
c) Roy
Group (Barbados) Inc.
Roy Group
(Barbados) Inc. is related to the Company by common management and is controlled
by a director of the Company. On August 29, 2003, the Company entered
into a Technical Services Agreement ("TSA") with the related party to provide
services to the Company as assigned by the Company and to bring new oil and gas
opportunities to the Company. The related party receives
consideration of US$250,000 per year for an initial term of three years as
outlined and recorded below:
|
|
Year
ended
Dec
31-2004
|
|
|
Year
ended
Dec
31-2003
|
|
|
Period
from
Inception,
Aug
21-2002 to
Dec
31-2002
|
|
|
Period
from
Inception,
Aug
21-2002 to
Dec
31-2004
|
|
|
|
US
$
|
|
|
US
$
|
|
|
US
$
|
|
|
US
$
|
|
Consolidated
Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
fees
|
|
|
50,000 |
|
|
|
16,667 |
|
|
|
-- |
|
|
|
66,667 |
|
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
costs - India (note 3)
|
|
|
200,000 |
|
|
|
66,666 |
|
|
|
-- |
|
|
|
266,666 |
|
|
|
|
250,000 |
|
|
|
83,333 |
|
|
|
-- |
|
|
|
333,333 |
|
The
related party was also reimbursed for medical insurance and expenses; travel,
hotel, meals and entertainment expenses; computer costs; and amounts billed to
third parties incurred during the periods as outlined and recorded
below:
Consolidated
Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
19,640 |
|
|
|
40,649 |
|
|
|
-- |
|
|
|
60,289 |
|
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
20,350 |
|
|
|
-- |
|
|
|
-- |
|
|
|
20,350 |
|
Property
and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
costs – India (note 3)
|
|
|
87,165 |
|
|
|
61,412 |
|
|
|
21,925 |
|
|
|
170,502 |
|
Computer
equipment
|
|
|
8,064 |
|
|
|
-- |
|
|
|
27,921 |
|
|
|
35,985 |
|
|
|
|
135,219 |
|
|
|
102,061 |
|
|
|
49,846 |
|
|
|
287,126 |
|
At
December 31, 2004, the Company owed Roy Group (Barbados) Inc. US$16,103
(December 31, 2003 - US$41,115) for services provided and expenses incurred on
behalf of the Company and pursuant to the TSA. These amounts bear no
interest and have no set terms of repayment.
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2004
7. RELATED
PARTY TRANSACTIONS
(continued)
d) D.I.
Investments Ltd.
D.I.
Investments Ltd. is related to the Company by common management and is
controlled by a director of the Company. The related party charged as
consulting fees for services rendered as outlined and recorded
below:
|
|
Year
ended
Dec
31-2004
|
|
|
Year
ended
Dec
31-2003
|
|
|
Period
from Inception,
Aug
21-2002 to Dec 31-2002
|
|
|
Period
from Inception,
Aug
21-2002 to
Dec
31-2004
|
|
|
|
US
$
|
|
|
US
$
|
|
|
US
$
|
|
|
US
$
|
|
Consolidated
Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
fees
|
|
|
120,000 |
|
|
|
61,715 |
|
|
|
-- |
|
|
|
181,715 |
|
The
related party was also reimbursed for office costs, including rent, parking,
office supplies and telephone as well as travel, hotel, meals and entertainment
expenses incurred during the periods as outlined and recorded
below:
Consolidated
Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
Office
costs
|
|
|
65,073 |
|
|
|
33,802 |
|
|
|
6,198 |
|
|
|
105,073 |
|
Travel,
hotel, meals and
entertainment
|
|
|
3,344 |
|
|
|
39,045 |
|
|
|
-- |
|
|
|
42,389 |
|
|
|
|
68,417 |
|
|
|
72,847 |
|
|
|
6,198 |
|
|
|
147,462 |
|
At
December 31, 2004, the Company owed D.I. Investments Ltd. US$nil (December 31,
2003 – D.I. Investments owed the Company US$1,640) as a result of services
provided and expenses incurred on behalf of the Company. These
amounts bear no interest and have no set terms of repayment.
e) Amicus
Services Inc.
Amicus
Services Inc. is related to the Company as Amicus Services Inc. is controlled by
the brother of a director of the Company. The related party charged
as consulting fees for services rendered as outlined below:
|
|
Year
ended
Dec
31-2004
|
|
|
Year
ended
Dec
31-2003
|
|
|
Period
from Inception,
Aug
21-2002 to Dec 31-2002
|
|
|
Period
from Inception,
Aug
21-2002 to Dec 31-2004
|
|
|
|
US
$
|
|
|
US
$
|
|
|
US
$
|
|
|
US
$
|
|
Consolidated
Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
fees
|
|
|
33,921 |
|
|
|
14,469 |
|
|
|
-- |
|
|
|
48,390 |
|
The
related party was also reimbursed for office costs, including parking, office
supplies and telephone as well as travel and hotel expenses incurred during the
periods as outlined and recorded below:
Consolidated
Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
1,961 |
|
|
|
168 |
|
|
|
-- |
|
|
|
2,129 |
|
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
967 |
|
|
|
3,052 |
|
|
|
-- |
|
|
|
4,019 |
|
Property
and equipment
|
|
|
1,599 |
|
|
|
-- |
|
|
|
-- |
|
|
|
1,599 |
|
|
|
|
4,527 |
|
|
|
3,220 |
|
|
|
-- |
|
|
|
7,747 |
|
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2004
7. RELATED
PARTY TRANSACTIONS
(continued)
At
December 31, 2004, the Company owed Amicus Services Inc. US$3,521 (December 31,
2003 – US$7,388) as a result of services provided and expenses incurred on
behalf of the Company. These amounts bear no interest and have no set
terms of repayment.
8. INCOME
TAXES
a) Income
tax expense
The
provision for income taxes in the consolidated financial statements differs from
the result which would have been obtained by applying the combined Federal,
State and Provincial tax rates to the loss before income taxes. This
difference results from the following items:
|
|
Year
ended
Dec
31-2004
|
|
|
Year
ended
Dec
31-2003
|
|
|
Period
from
Inception,
Aug
21-2002 to Dec 31-2002
|
|
|
Period
from
Inception,
Aug
21-2002 to Dec 31-2004
|
|
|
|
US
$
|
|
|
US
$
|
|
|
US
$
|
|
|
US
$
|
|
|
|
Restated
note
5c
|
|
|
Restated
note
5c
|
|
|
|
|
|
Restated
note
5c
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(1,171,498 |
) |
|
|
(518,377 |
) |
|
|
(13,813 |
) |
|
|
(1,703,688 |
) |
Expected
tax rate
|
|
|
35.0 |
% |
|
|
35.0 |
% |
|
|
42.12 |
% |
|
|
|
|
Expected
income tax recovery
|
|
|
(410,024 |
) |
|
|
(181,432 |
) |
|
|
(5,818 |
) |
|
|
(597,274 |
) |
Excess
of expected tax rate over
tax
rate of foreign affiliates
|
|
|
54,623 |
|
|
|
24,804 |
|
|
|
-- |
|
|
|
81,387 |
|
Non-deductible
expenditures
|
|
|
122,589 |
|
|
|
22,020 |
|
|
|
-- |
|
|
|
144,609 |
|
Acquisition
of losses
|
|
|
-- |
|
|
|
4,355,268 |
|
|
|
-- |
|
|
|
4,355,268 |
|
Other
|
|
|
298,110 |
|
|
|
316,029 |
|
|
|
(107 |
) |
|
|
623,921 |
|
|
|
|
65,298 |
|
|
|
4,536,689 |
|
|
|
(5,925 |
) |
|
|
4,607,911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation
allowance
|
|
|
(65,298 |
) |
|
|
(4,536,689 |
) |
|
|
5,925 |
|
|
|
(4,607,911 |
) |
Provision
for income taxes
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
b) Deferred
income taxes
The
Company has not recognized the deferred income tax asset because the benefit is
not more likely than not to be realized. The components of the net
deferred income tax asset consist of the following temporary
differences:
|
|
December
31, 2004
US
$
|
|
|
December
31, 2003
US
$
|
|
|
|
Restated
note
5c
|
|
|
Restated
note
5c
|
|
Difference
between tax base and reported amounts of
depreciable
assets
|
|
|
2,679 |
|
|
|
5,078 |
|
Non-capital
loss carry forwards
|
|
|
524,904 |
|
|
|
117,130 |
|
|
|
|
527,583 |
|
|
|
122,208 |
|
Valuation
allowance
|
|
|
(527,583 |
) |
|
|
(122,208 |
) |
Deferred
income tax asset
|
|
|
-- |
|
|
|
-- |
|
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2004
8. INCOME
TAXES (continued)
c) Loss
carry forwards
|
i)
|
At
December 31, 2004, the Company has US$7,442,153 of available non-cash
capital loss carry forwards to reduce taxable income for income tax
purposes in the various jurisdictions as outlined below which have not
been reflected in these consolidated financial
statements.
|
Tax
Jurisdiction
|
Amount
US
$
|
Expiry
Dates
Commence
|
United
States
|
7,220,074
|
2023
|
Canada
|
28,926
|
2010
|
Barbados
|
193,153
|
2012
|
|
7,442,153
|
|
|
ii)
|
At
December 31, 2003, the Company has US$5,890,659 of available capital loss
carry forwards to reduce capital gains for US income tax purposes expiring
in 2008, which have not been reflected in these consolidated financial
statements
|
9. SEGMENTED
INFORMATION
The
Company’s petroleum and natural gas exploration and development activities are
conducted in India. Management of the Company considers the
operations of the Company as one operating segment. The following
information relates to the Company’s geographic areas of operation.
|
|
December
31-2004
|
|
|
December
31-2003
|
|
|
|
Property
and equipment
US
$
|
|
|
Property
and equipment
US
$
|
|
|
|
Restated
note
5c
|
|
|
Restated
note
5c
|
|
|
|
|
|
|
|
|
Canada
|
|
|
97,482 |
|
|
|
58,451 |
|
India
|
|
|
752,594 |
|
|
|
259,323 |
|
|
|
|
850,076 |
|
|
|
317,774 |
|
10. COMMITMENTS
a) Exploration
Block KG-OSN-2001/3 Block
Under the
terms of this Production Sharing Contract, GeoGlobal, along with its joint
venture participants have committed to the Government of India an exploration
work program as outlined below. All of GeoGlobal's share of any and
all costs incurred during the exploration phase prior to the date of initial
commercial production are the responsibility of GSPC pursuant to the CIA
executed on August 27, 2002, as described in note 3d.
Phase
I (2.5 years)
(i) 1250
km2
3D seismic program consisting of acquisition, processing and
interpretation
(ii) reprocessing
of 2298.4 km of 2D seismic data
(iii) bathymetric
survey and seabed sampling
(iv) drill 14
exploratory wells between 900 to 4118 meters (2 wells have been
drilled)
(italics
denotes work completed)
Phase
II (2.5 years)
(i) bathymetric
survey and seabed sampling
(ii) drill 4
exploratory wells between 1100 to 2850 meters
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2004
10. COMMITMENTS
(continued)
Phase
III (1.5 years)
(i) bathymetric
survey and seabed sampling
(ii) drill 2
exploratory wells to 1550 and 1950 meters
Land
Relinquishment
(i) Phase I –
25%
(ii) Phase II
– 25%
(iii) Phase III
– 100% except for development and discovery areas
Under the
terms of the CIA, all of GeoGlobal's and RGM's proportionate share of capital
costs for exploration and development activities will be recovered by GSPC
without interest over the projected production life or ten years, whichever is
less, from oil and natural gas produced on the Exploration
Block. GeoGlobal is not entitled to any share of production until
GSPC has recovered the Company's share of the costs and expenses that were paid
by GSPC on behalf of the Company and RGM. The total of these costs
and expenses is estimated to be approximately US$11 million over the 6.5 year
term of this PSC.
b) Exploration
Block CB-ONN-2002/2 (“Mehsana”)
Pursuant
to the PSC in respect of this Mehsana Block, on August 18, 2004, the Company
executed a Financial and Performance Guarantee to the Government of India to
fulfill the Company’s obligations under the terms of the PSC, which includes the
completion of its 10% share of a minimum work commitment for Phase I, estimated
to be approximately US$606,000.
Under the
terms of this PSC, GeoGlobal, along with its joint venture participants have
committed to the Government of India an exploration work program as outlined
below. The Company will be required to fund its proportionate share
of costs incurred in these activities which are estimated to be approximately
US$1.0 million over the 6 year term of this PSC.
Phase I (2.5 years)
(i) Acquire
75 sq kms 3D seismic
(ii) Reprocess
650 kms of 2D seismic
(iii) Drill 7
exploratory wells between 1000 and 2200 meters
Phase
II (2.0 years)
(i) Drill 2
exploratory wells 2000 meters
Phase III (1.5 years)
(i) Drill
2 exploratory wells 2000 meters
Land
Relinquishment
(i) Phase
I – 25%
(ii) Phase II
– 25%
(iii) Phase III
– 100% except for development and discovery areas
c) Exploration
Block CB-ONN-2002/3 Block (“Sanand and Mirola”)
Pursuant
to the PSC in respect of this Sanand and Mirola Block, on August 24, 2004, the
Company executed a Financial and Performance Guarantee to the Government of
India to fulfill the Company’s obligations under the terms of the PSC, which
includes the completion of its 10% share of a minimum work commitment for Phase
I, estimated to be approximately US$1,097,000.
Under the
terms of this PSC, GeoGlobal, along with its joint venture participants have
committed to the Government of India an exploration work program as further
outlined below. The Company will be required to fund its
proportionate share of costs incurred in these activities which are estimated to
be approximately US$1.5 million over the 6 year term of this PSC.
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2004
10. COMMITMENTS
(continued)
Phase I (2.5 years)
(i) Acquire
200 sq kms 3D seismic
(ii) Reprocess
1000 kms of 2D seismic
(iii) Drill
12 exploratory wells between 1500 and 3000 meters
Phase
II (2.0 years)
(i) Drill 3
exploratory wells 2000 meters
Phase III (1.5 years)
(i) Drill 2
exploratory wells 2000 meters
Land Relinquishment
(i) Phase I –
25%
(ii) Phase
II – 25%
(iii) Phase
III – 100% except for development and discovery areas
d) Restricted
cash
Under the
terms of the Production Sharing Contracts (notes 3b(ii) and (iii)), the Company
is to provide the Government of India a guarantee for the performance of the
minimum work commitments for the first budget period ending March 31, 2005 of
Phase I of both Cambay Blocks. As a result, the Company has provided
to the Government of India two irrevocable letters of credit totalling
US$206,796 (Mehsana US$74,530 and Sanand and Mirola US$132,266) secured by term
deposits of the Company in the same amount.
11. COMPARATIVE
FIGURES
|
a)
|
As
a result of the reverse takeover outlined in note 1, the comparatives are
those of the continuing entity for accounting purposes and are for the
year ended December 31, 2003 and for the period from inception, August 21,
2002 to December 31, 2002.
|
b)
|
As
the Company is in its development stage, these are the accumulated amounts
of the continuing entity for the period from inception, being August 21,
2002 to December 31, 2004.
|
12. SUBSEQUENT
EVENT
Subsequent
to the year-end, the Board of Directors of the Company passed the following
resolutions with respect to stock options, subject to shareholder
approval:
a) On
January 17, 2005, the Board of Directors resolved:
|
(i)
|
to
amend the Company’s 1998 Stock Incentive Plan to increase the shares
reserved for the grant of options from 3,900,000 to
8,000,000;
|
|
(ii)
|
to
grant 580,000 options exercisable at US$1.01 per share to employees and
consultants vesting at various dates throughout 2005 and expiring on
August 31, 2006;
|
|
(iii)
|
to
extend the expiration date of the options granted to employees and
consultants on December 9, 2003 for 2,000,000 shares from August 31, 2005
to August 31, 2006;
|
|
(iv)
|
to
grant 210,000 options exercisable at US$1.01 per share to non-employees
and consultants vesting at various dates throughout 2005 and expiring on
August 31, 2006; and
|
|
(v)
|
to
extend the expiration date of the options granted to non-employees and
consultants on December 30, 2003 for 945,000 shares less 150,000 shares
cancelled from August 31, 2005 to August 31,
2006.
|
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2004
12. SUBSEQUENT
EVENT (continued)
|
b)
|
On
January 18, 2005, the granting of 600,000 options to employees and
consultants exercisable at US$1.10 per share, vesting at various dates
throughout 2005 and expiring on August 31,
2006.
|
c)
|
On
January 25, 2005, the granting of 60,000 options to non-employees and
consultants exercisable at US$1.17 per share, vesting at various dates
throughout 2005 and expiring on August 31,
2006.
|
13. RECENT
ACCOUNTING STANDARDS
On
December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 123 (revised 2004), Share-Based Payment, which is
a revision of FASB Statement No. 123, Accounting for Stock-Based
Compensation. Statement 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to
Employees, and amends FASB Statement No. 95, Statement of Cash Flows.
Generally, the approach in Statement 123(R) is similar to the approach described
in Statement 123. However, Statement 123(R) requires all share-based
payments to employees, including grants of employee stock options, to be
recognized in the income statement based on their fair values. Pro forma
disclosure is no longer an alternative.
Statement
123(R) must be adopted no later than January 1, 2006. Early adoption will be
permitted in periods in which financial statements have not yet been issued.
The Company is adopting Statement 123(R) on January 1, 2005.
Statement
123(R) permits public companies to adopt its requirements using one of two
methods:
1.
|
A
“modified prospective” method in which compensation cost is recognized
beginning with the effective date (a) based on the requirements of
Statement 123(R) for all share-based payments granted after the effective
date and (b) based on the requirements of Statement 123 for all awards
granted to employees prior to the effective date of Statement 123(R) that
remain unvested on the effective
date.
|
2.
|
A
“modified retrospective” method which includes the requirements of the
modified prospective method described above, but also permits entities to
restate based on the amounts previously recognized under Statement 123 for
purposes of pro forma disclosures either (a) all prior periods presented
or (b) prior interim periods of the year of
adoption.
|
The
Company is adopting Statement 123(R) using the modified prospective
method.
Prior to January 1, 2005, as permitted
by Statement 123, the Company accounted for share-based payments to employees
using APB Opinion No. 25’s intrinsic value method and, as such, generally
recognized no compensation cost for employee stock options. Accordingly,
the adoption of Statement 123(R)’s fair value method will have a significant
impact on the Company’s result of operations, although it will have no impact on
the Company’s overall financial position. The impact of adoption of Statement
123(R) cannot be predicted at this time because it will depend on levels of
share-based payments granted in the future. However, had the Company
adopted Statement 123(R) in prior periods, the impact of that standard would
have approximated the impact of Statement 123 as described in the disclosure of
pro forma net loss and loss per share in Note 5b to the Company’s consolidated
financial statements.
Notes
to the Consolidated Financial Statements
GeoGlobal
Resources Inc.
(a
development stage enterprise)
December
31, 2004
14. Selected
Quarterly Information (Unaudited)
The
following represents selected quarterly financial information:
|
|
3
months ended
|
|
|
3
months ended
|
|
|
6
months ended
|
|
|
3
months ended
|
|
|
9
months ended
|
|
|
Year
ended
|
|
|
Year
ended
|
|
|
|
Mar
31
|
|
|
June
30
|
|
|
June
30
|
|
|
Sept
30
|
|
|
Sept
30
|
|
|
Dec
31/04
|
|
|
Dec
31/03
|
|
2004
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
5,883 |
|
|
|
7,092 |
|
|
|
12,975 |
|
|
|
6,386 |
|
|
|
19,361 |
|
|
|
31,591 |
|
|
|
1,863 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings (loss) and
comprehensive
earnings (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
previously reported
|
|
|
(201,539 |
) |
|
|
(306,205 |
) |
|
|
(507,744 |
) |
|
|
(163,165 |
) |
|
|
(670,909 |
) |
|
|
(867,496 |
) |
|
|
(477,695 |
) |
Adjustment
- current period
|
|
|
(396,065 |
) |
|
|
(240,838 |
) |
|
|
(636,903 |
) |
|
|
111,139 |
|
|
|
(525,764 |
) |
|
|
(304,002 |
) |
|
|
(40,682 |
) |
As
restated
|
|
|
(597,604 |
) |
|
|
(547,043 |
) |
|
|
(1,144,647 |
) |
|
|
(52,026 |
) |
|
|
(1,196,673 |
) |
|
|
(1,171,498 |
) |
|
|
(518,377 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings (loss) per share
-
basic and diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
previously reported
|
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
|
(0.02 |
) |
|
|
(0.02 |
) |
|
|
(0.02 |
) |
Adjustment
- current period
|
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
|
(0.02 |
) |
|
|
0.01 |
|
|
|
(0.01 |
) |
|
|
(0.01 |
) |
|
|
(0.01 |
) |
As
restated
|
|
|
(0.02 |
) |
|
|
(0.02 |
) |
|
|
(0.03 |
) |
|
|
0.00 |
|
|
|
(0.03 |
) |
|
|
(0.03 |
) |
|
|
(0.03 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
previously reported
|
|
|
(693,047 |
) |
|
|
|
|
|
|
(999,252 |
) |
|
|
|
|
|
|
(1,162,417 |
) |
|
|
(1,359,004 |
) |
|
|
(491,508 |
) |
Adjustment
- prior years
|
|
|
(40,682 |
) |
|
|
|
|
|
|
(40,682 |
) |
|
|
|
|
|
|
(40,682 |
) |
|
|
(40,682 |
) |
|
|
-- |
|
Adjustment
- current period
|
|
|
(396,065 |
) |
|
|
|
|
|
|
(636,903 |
) |
|
|
|
|
|
|
(525,764 |
) |
|
|
(304,002 |
) |
|
|
(40,682 |
) |
As
restated
|
|
|
(1,129,794 |
) |
|
|
|
|
|
|
(1,676,837 |
) |
|
|
|
|
|
|
(1,728,863 |
) |
|
|
(1,703,688 |
) |
|
|
(532,190 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
and gas interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
previously reported
|
|
|
83,568 |
|
|
|
186,650 |
|
|
|
270,218 |
|
|
|
67,741 |
|
|
|
337,959 |
|
|
|
460,016 |
|
|
|
156,598 |
|
Adjustment
- current period
|
|
|
59,424 |
|
|
|
35,918 |
|
|
|
95,342 |
|
|
|
(14,789 |
) |
|
|
80,553 |
|
|
|
46,253 |
|
|
|
22,231 |
|
As
restated - current period
|
|
|
142,992 |
|
|
|
222,568 |
|
|
|
365,560 |
|
|
|
52,952 |
|
|
|
418,512 |
|
|
|
506,269 |
|
|
|
178,829 |
|
Opening
balance - beginning of year
|
|
|
200,754 |
|
|
|
|
|
|
|
200,754 |
|
|
|
|
|
|
|
200,754 |
|
|
|
200,754 |
|
|
|
21,925 |
|
As
restated
|
|
|
343,746 |
|
|
|
|
|
|
|
566,314 |
|
|
|
|
|
|
|
619,266 |
|
|
|
707,023 |
|
|
|
200,754 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
previously reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
Oil
and gas interests
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
|
|
|
396,065 |
|
|
|
240,838 |
|
|
|
636,903 |
|
|
|
(111,139 |
) |
|
|
525,764 |
|
|
|
304,002 |
|
|
|
40,682 |
|
Oil
and gas interests
|
|
|
59,424 |
|
|
|
35,918 |
|
|
|
95,342 |
|
|
|
(14,789 |
) |
|
|
80,553 |
|
|
|
46,253 |
|
|
|
22,231 |
|
|
|
|
455,489 |
|
|
|
276,756 |
|
|
|
732,245 |
|
|
|
(125,928 |
) |
|
|
606,317 |
|
|
|
350,255 |
|
|
|
62,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As
restated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting
|
|
|
396,065 |
|
|
|
240,838 |
|
|
|
636,903 |
|
|
|
(111,139 |
) |
|
|
525,764 |
|
|
|
304,002 |
|
|
|
40,682 |
|
Oil
and gas interests
|
|
|
59,424 |
|
|
|
35,918 |
|
|
|
95,342 |
|
|
|
(14,789 |
) |
|
|
80,553 |
|
|
|
46,253 |
|
|
|
22,231 |
|
|
|
|
455,489 |
|
|
|
276,756 |
|
|
|
732,245 |
|
|
|
(125,928 |
) |
|
|
606,317 |
|
|
|
350,255 |
|
|
|
62,913 |
|
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
GeoGlobal
Resources Inc.
By: /s/ Allan J.
Kent
Allan
J. Kent
Executive
Vice President and CFO
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Company and in the
capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
/s/ Jean Paul Roy
Jean
Paul Roy
|
|
President,
Chief Executive Officer and Director
|
|
June
3, 2008
|
|
|
|
|
|
/s/ Allan J. Kent
Allan
J. Kent
|
|
Executive
Vice President, Chief Financial Officer and Director
|
|
June
3, 2008
|
|
|
|
|
|
/s/ Brent J. Peters
Brent
J. Peters
|
|
Director
|
|
June
3, 2008
|
|
|
|
|
|
/s/ Peter R. Smith
Peter
R. Smith
|
|
Chairman
of the Board and Director
|
|
June
3, 2008
|
|
|
|
|
|
/s/ Michael J. Hudson
Michael
J. Hudson
|
|
Director
|
|
June
3, 2008
|