Item - 5 : Operating and Financial Review and Prospects
The following discussion of the Company's financial results includes those for the most recently completed last three Fiscal Years ended 6/30/16, 6/30/15, and 6/30/14. As used below, the phrases "last year" and "prior year" refers to financial results for the same fiscal period ended 30 June of the previous Fiscal Year.
FINANCIAL RESULTS FOR THE COMPANY’S FISCAL YEAR 2016, ENDED 6/30/16
All balances referred to in the following discussion are in US$ currency unless otherwise indicated.
Finance during Fiscal Year 2016 Ended 6/30/16
- During the Fiscal Year ended 6/30/16, the Company received $71,500 from the proceeds of loans from two related parties. In the prior year ended 6/30/15, $120,000 was received as proceeds of private placements. The Company also converted its loan payable of $750,000 into common shares.
Income during Fiscal Year 2016 Ended 6/30/16
- Overall, from operations during the Fiscal Year ended 6/30/16, the Company had a loss of $473,289 compared to a loss of $956,418 in the prior year ended 6/30/15. The Company had a loss per share of $0.00 in 2016 compared to a loss per share of $0.01 in 2015.
Expenses during Fiscal Year 2016 Ended 6/30/16
- General and administrative expenses decreased by $324,549 from $799,379 to $474,830 for the Fiscal Years ended 6/30/15 and 6/30/16 respectively. The decrease is attributable to the lower share-based payments expense of $26,200 compared to $100,000 in Fiscal 2015. The Company’s office and investor relations costs were also lower in Fiscal 2016 compared to Fiscal 2015. The office and investor relations costs were $122,321 in Fiscal 2015 and only $40,396 in Fiscal 2016. Professional fees were less by $48,599 in Fiscal 2016 compared to Fiscal 2015. In addition, interest charges were $84,551 in Fiscal 2015 but only $47,385 in Fiscal 2016.
Financial Results For the Company’s Fiscal Year 2015, Ended 6/30/15
All balances referred to in the following discussion are in US$ currency unless otherwise indicated.
Loss during Fiscal Year 2015 Ended 6/30/15
- Overall, the Company had a loss from operations during Fiscal 2015 of $956,418 compared to $939,489 in the prior year ended 6/30/2014. The Company had a loss per share of $0.01 in Fiscal 2015 and Fiscal 2014. The primary contributor to the overall increase in the loss incurred during the year were the Company’s general and administrative expenses as described below, which increased by $168,866. During Fiscal 2015, the Company recognized a loss of $159,837 on the disposal of the Company’s 51% owned subsidiary Visionaire Energy AS. During Fiscal 2014, the Company used the equity accounting method to account for its portion of the operations of Visionaire Energy AS and its affiliates, which resulted in a loss during 6/30/14 of $311,972, and therefore a resultant decrease in Visionaire Energy AS related cost to the Company of $152,135, and offsetting the overall increase in administrative costs.
Finance during Fiscal Year 2015 Ended 6/30/15
- Financing activities during Fiscal 2015 provided $120,000 from private placements on issuance of 2,400,000 common shares of the Company. The Company also converted its loan payable of $750,000 into common shares of the Company by issuing 15,000,000 shares of its common stock. During the prior year, the Company raised $40,000 from private placements and a further $750,000 from said loan, which, as noted above, was converted into the common shares of the Company during Fiscal 2015.
Investments during Fiscal Year 2015 Ended 6/30/15
– The Company sold its 51% interest in Visionaire Energy AS for total consideration of $1,200,000, consisting of the return of 20 million common shares of the Company, issued as part of the original investment in Visionaire Energy AS plus $200,000 in cash. The approval for the disposal of the Company’s shareholders was sought and received on 12/5/2014.
Expenses during Fiscal Year 2015 Ended 6/30/15
- General and administrative expenses during Fiscal 2015 amounted to $799,379 compared to $630,513 during Fiscal 2014, an increase of $168,866. The increase in cost was primarily the result of the stock-based compensation provided to a director by issuing 2,000,000 common shares of the Company. The stock-based compensation amounted to $100,000 compared to $20,877, which pertained to the fair value of the stock options granted during Fiscal 2014, resulting in an overall increase in the expense of $79,123. Other costs with significant increases during 6/30/15 were management fees and salaries, which increased by $54,392 as a result of medical insurance benefits provided to the Company’s officers, and, office costs and professional fees which increased by a combined $79,394 due to the changes involving the Company’s structure, i.e. the sale of Visionaire Energy AS, and the timing difference to Fiscal 2014 regulatory filings and annual meetings. These higher costs were off-set by a decrease in the overall interest charges related to the Company’s convertible promissory note. The interest charges decreased by $50,803 as, during Fiscal 2014, the Company had a series of amendments to the terms of the promissory note which resulted in a higher interest expense to accrete the promissory note to its face value with the amended terms. During Fiscal 2015, the Company only had one amendment to the terms of the promissory notes.
Financial Results For the Company’s Fiscal Year 2014, Ended 6/30/14
All balances referred to in the following discussion are in US$ currency unless otherwise indicated.
Loss during Fiscal Year 2014 Ended 6/30/14
- Overall, the Company had a loss from operations during the Fiscal Year ended 6/30/14 of $939,489 compared to $700,115 in the prior year ended 6/30/13. The Company had a loss per share of $0.01 in Fiscal 2014 compared to a loss per share of $0.01 in Fiscal 2013. The increase in loss was primarily due to the operations of the Company's 51% owned subsidiary Visionaire Energy AS, and its Norwegian investments, VTT Maritime AS and RADA Engineering and Consulting AS. The Company uses the equity method to account for its portion of the operations of these Affiliates and recorded a loss of $311,972 during 2014 Year while in the Prior Year, the Company recorded an income of $37,143.
Finance during Fiscal Year 2014 Ended 6/30/14
- Financing activities during Fiscal 2014 provided net cash proceeds of $761,517 primarily from a $750,000 loan and a $40,000 private placement compared to net cash proceeds of $42,948, resulting primarily from a $44,500 private placement during Fiscal 2013.
Investments during Fiscal Year 2014 Ended 6/30/14
- Subsequent to the end of Fiscal 2014, on 9/15/14, the Company sold its entire 51% interest in Visionaire Energy AS with effect from the end of Fiscal 2014 on 6/30/14, for total consideration of $1,200,000 consisting of 20 million Company shares valued at $1,000,000 plus $200,000 in cash. The sale transaction is subject to approval of the shareholders to be sought at the Company's 2014 AGM scheduled for 12/05/14. Consequently, the operations of Visionaire's investment in its Norwegian affiliates VTT Maritime AS and RADA Engineering and Consulting AS are presented as discontinued operations in the Company’s audited annual financial statements for Fiscal 2014 ended 6/30/14.
With effect from 4/30/14, the Company acquired a 42.5% equity interest in Ruaha River Power Company Ltd. ("
Ruaha Power
"), a renewable energy power developer based in Dar es Salaam, Tanzania. The Company is Ruaha Power's single largest shareholder. A private American development company owns 30% and two Tanzanian companies own 12.5% and 15% respectively. The Company earned its fully paid-up stake in Ruaha Power for its technical contributions to the initial geotechnical evaluation and feasibility study work on Ruaha Power's Lukosi River hydropower project performed by the Company from its Jakarta office.
Expenses during Fiscal Year 2014 Ended 6/30/14
- General and administrative expenses decreased by $8,707 from $639,220 to $630,513 for the fiscal years ended 30/06/13 and 30/06/14, respectively. The significant changes to general and administrative expenses are as follows: Most significantly, interest charges increased from $66,055 to $135,354 as a result of multiple amendments to the terms of the Company’s convertible promissory note and recognition of the interest expense to accrete the promissory note up to its face value upon the maturity of the note with such amended terms. This increase in interest charges was offset by decreases in professional fees and share-based payments expense. Professional fees incurred by the Company decreased from $104,690 to $67,266 as a result of the reduced charges from the Company’s accounting service provider. Share-based payments expense decreased from $52,250 to $20,877, reflecting the calculated fair value of share purchase options and warrants granted by the Company during the respective years. During Fiscal 2013, the Company granted 7.8 million incentive stock options to its directors, officers and consultants whereas in Fiscal 2014, the Company granted 2 million share purchase warrants to service providers as non-cash compensation for services rendered.
B.
|
LIQUIDITY AND CAPITAL RESOURCES.
|
The following discussion of the Company's liquidity and working capital situation includes those for the most recently completed last three Fiscal Years ended 6/30/16, 6/30/15, and 6/30/14. Cash on hand is sufficient to fund the Company’s overhead costs and new business development costs for the immediate future. The Company intends to focus its efforts on acquisitions of new properties to generate revenue. The Company also intends to conduct additional fund raising activities during the next fiscal year.
-
Working Capital Situation at End Fiscal 2016 on 6/30/16 -
At the end of Fiscal 2016 on 6/30/16, the Company’s consolidated financial statements reflect a working capital deficit of $1,282,380 compared to the 6/30/15 working capital deficit of $836,752. Cash used in operating activities during the year ended 6/30/16 totaled $74,225, compared with $558,421 in the prior year. Cash from financing activities during the year ended 6/30/16 was $71,500 whereas there was $120,000 received from such activities during the year ended 6/30/15.
-
Working Capital Situation at End Fiscal 2015 on 6/30/15 -
At the end of Fiscal 2015 on 6/30/15, the Company’s consolidated financial statements reflect a working capital deficit of $836,752 compared to the 6/30/14 working capital deficit of $693,794. Cash used in operating activities during the year ended 6/30/15 totaled $558,421 compared with $533,013 in the prior fiscal year. Cash received from investing activities during Fiscal 2015 was $ 200,000 compared to a $1,219 use of cash during the prior fiscal year.
-
Working Capital Situation at End Fiscal 2014 on 6/30/14 -
At the end of Fiscal 2014 on 6/30/14, the Company’s consolidated financial statements reflect a working capital deficit of $693,794 compared to the 6/30/13 working capital deficit of $744,691. Cash used in operating activities during the year ended 6/30/14 totaled $533,013, compared with $189,464 in the prior fiscal year. Cash used in investing activities during Fiscal 2014 was $ 1,219 compared to $15,544 during the prior fiscal year.
C.
|
RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
|
We do not currently, and did not previously, have research and development policies in place. Over the past three Fiscal Years, no funds were expended by our Company on research and development activities.
The Company is aware of two global market trends which we believe could have a material effect upon our business operations. These are:
-
Crude Price Gap
– Since 2011 there has been a marked change to the historical gap between the global market price of benchmark crude oils WTI and Brent. Prior to 2011, the Brent versus WTI spread traded in a range between a $4 discount for Brent to a $4 premium for Brent oil. The normal state of the relationship was a discount for the Brent crude. Brent has higher sulfur content than WTI, so Brent is more expensive to refine into gasoline. In addition, in years past there were greater supplies of Brent crude as the U.S. was a big importer of the commodity.
Therefore, the Brent discount relative to WTI generally hovered between $2 and $4 per barrel. In recent years, volatility in the spread between the two oils has increased and Brent crude has moved to a premium to WTI. Near the Report Date Brent is trading at a $3 premium to WTI.
The Company expects this trend to continue and the gap to continue or widen in the foreseeable future due largely to the success and revitalization of the US shale oil producers whose oil production is a substitute in terms of volume to non-US sourced oil such as Brent. The Company's core business focus is Indonesia and the SE Asia region where the higher Brent price received for any oil we produce would have a positive effect on the Company. Similarly, the WTI-Brent gap and Brent premium is largely reflected in the prices of refined petroleum products and rapidly rising consumer demand in our core region of operations would also have a positive effect on product revenues for any small-scale refinery we may develop.
-
Natural Gas Prices in SE Asia
– Increasing consumer demand in SE Asia for electrical power is driving a rapidly growing market that is also becoming increasingly environmentally aware of the benefits of natural gas power generation over the traditional alternative of coal. Already, gas producers with access to any of the limited pipeline capacity of Indonesia enjoy long-term gas supply contract prices with commercial and sovereign cross-border buyers who pay at multiples of 3 to 5 times over peak season Henry Hub gas prices. New pipeline capacity is being laid to make more gas available to feed the demand. The Company sees the trend from coal to gas as the fuel of choice, and the continued increase in market demand for power, constrained by available transport capacity, as having a possible positive impact on the Company for any gas production or gas-fired power plants it develops.
E.
|
Off-balance sheet arrangements.
|
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
F.
|
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS.
|
The table below reflects our “Short Term” (at least one year), “Mid Term” (two to three years) and “Long Term” (over three years) debt and fixed contractual obligations for the upcoming five Fiscal Years:
|
|
|
|
|
Contractual Obligations as at 6/30/16
|
Obligation
|
Total
|
Short Term
|
Mid Term
|
Long Term
|
Debt Principal
|
nil
|
nil
|
nil
|
nil
|
Debt Service Interest
|
nil
|
nil
|
nil
|
nil
|
Non-Cancelable Leases
|
nil
|
nil
|
nil
|
nil
|
Environmental liabilities
|
nil
|
nil
|
nil
|
nil
|
Asset Retirement Obligations
|
nil
|
nil
|
nil
|
nil
|
Property Work Commitments
|
nil
|
nil
|
nil
|
nil
|
Totals
|
nil
|
nil
|
nil
|
nil
|
The safe harbor provided in Section 27A of the Securities Act and Section 21E of the Exchange Act (“statutory safe harbors”) shall apply to forward-looking information provided pursuant to Item 5.E and 5.F.
Item - 6 : Directors, Officers, Employees and Their Compensation
A.
|
DIRECTORS AND OFFICERS.
|
Directors
- The term "Directors" as used herein includes and is limited to those persons duly elected or appointed to the Board of Directors of the Company in the manner provided for in the Company’s articles of association and in accordance with applicable law.
-
Terms
- The Directors each generally serve in their respective capacities from their election on the day of the Annual General Meeting of the Company held each year normally in December. Directors serve until the next Annual General Meeting or until a successor is duly elected. In the event a Director’s office is vacated for any reason then, in accordance with the Articles of the Company, casual vacancies may be filled by appointment by the remaining Directors. In such cases the persons filling the vacancy holds office until the next Annual General Meeting at which time they may be re-elected or replaced.
-
Family Relationships
-There are no family relationships between any of the Directors. There are no family relationships between any Director and any of the Officers of our Company.
-
Non-Arm’s Length Arrangements
- There are no arrangements or understandings between the Company and its major shareholders, customers, suppliers, or others, pursuant to which any Director or executive officer was selected.
-
Non-Executive Directors
- The Company distinguishes its Directors into two groups, "Executive Directors" and "Non-Executive Directors”. Executive Directors are those Directors who also serve as executive Officers employed under contract for such service by the Company. Non- Executive Directors are independent Directors who do not also serve as executive Officers of the Company and have no contractual relationship with the Company for personal services outside those of being solely a Director.
-
Directors at the Report Date
- The names and other information concerning the sitting Directors of the Company at the Report Date are set forth in the following table. Directors of the Company may from time to time serve as the Directors or Officers of other public companies unrelated to the Company, and the following table also shows related parties and other public companies of which a Director may also serve as a Director.
|
|
|
|
|
|
|
Board of Directors
|
Director’s
Name
|
Type of
Director
|
Age
|
First
Appointed
|
Standing
Committee
Memberships
|
Functional
Expertise Brought
to the Company
|
Other Public
Company
Directorships
|
Richard L. McAdoo
|
Executive Director &
Chief Executive Officer
|
63
|
Jan 1999
|
Reserves, Compensation
|
Businessman &
Petroleum Geologist
|
None
|
Phillip B. Garrison
|
Non-Executive &
Independent Director
|
64
|
Sep 2007
|
Audit, Reserves,
Compensation, Governance
|
Businessman &
Accountant
|
None
|
Robert V. Rudman
|
Executive Director &
Chief Financial Officer
|
69
|
Dec 2009
|
Audit
|
Businessman &
Accountant
|
None
|
Karsani Aulia
|
Non-Executive &
Independent Director
|
64
|
Mar 2017
|
Audit, Reserves,
Compensation, Governance
|
Businessman &
Petroleum Geologist
|
None
|
-
Experience and Principal Business Activities of the Directors
- A brief description of the qualifications, experience, and principal business activities of each Director referenced in the preceding table follows:
-
Executive Director - Richard L. McAdoo
holds a Bachelors and a Master's degree in Geology from Texas Tech University; and a Master's degree in Business Administration from Boston University. He is registered as a Certified Petroleum Geologist by the American Association of Petroleum Geologists. Actively involved in the international oil exploration and production business for the last 35 years, Mr.
McAdoo has held a variety of technical and management positions in exploration and production for Mobil Oil Company, Phillips Petroleum Company, Jackson Exploration, Inc., Triton Energy Corporation, Tracer Petroleum Company, and others in many regions including the North Sea, Middle East, Africa, South America, former Soviet Union, and Southeast Asia. A long-time resident of Jakarta, Indonesia, he is a tireless promoter of small or stranded oil and gas fields as ideal candidates for innovative conventional and alternative energy solutions to the SE Asia region's chronic undersupply of electrical power and transportation fuels.
-
Non-Executive Director - Phillip B. Garrison
is a resident of Dubai, United Arab Emirates. He is a graduate of the University of Oklahoma and holds an MBA from Southern Methodist University. He is a CPA registered in Texas. He is a past President of the American Business Council in Dubai and is a trustee of the American School of Dubai. After graduation from OU, Mr. Garrison began his career in 1975 in the Oklahoma City office of the public accounting firm of Arthur Young and Company before eventually becoming the Director of Tax in its Hong Kong office. In 1987 he joined Caltex (a Chevron-Texaco joint venture company) in its Irving, Texas office before being posted to Caltex’s Dubai office in 1994 as its Managing Director, responsible for downstream and marketing activities in the Middle East. In 2001 he founded Downstream Developments Inc. in Dubai and consults on and develops ventures for transportation and logistics, oil and gas infrastructure projects, and petroleum product marketing. Recently he has worked with the Falcon Group of Dubai, a FEDEX subcontractor in the Middle East and North Africa, as its Managing Director. He also worked with Specialist Group Dubai as its executive officer in charge of operations for its British Military contracts providing logistics, bulk fuels transportation, and waste management services in Iraq during the conflict there.
-
Executive Director - Robert V. Rudman
is a Canadian Chartered Accountant, a former auditor with the firm of Price Waterhouse and a proven professional with more than thirty years of hands-on experience in the management and analysis of companies. As a senior member of Canadian and U.S. financial advisory firms, Mr. Rudman has been instrumental in arranging a wide range of debt and equity financings, in structuring a number of mergers and acquisitions, in developing strategic and operational business plans, and in the
preparation and filing of all required regulatory reports. Mr. Rudman’s scope of experience includes both domestic and international transactions. His focus has been on the challenges facing early stage public companies. As an officer and director of an emerging high technology Canadian public company for a period of twelve years, Mr. Rudman served as the Chief Financial Officer, the Chief Executive Officer and as the Chairman of the Board.
-
Non-Executive Director – Karsani Aulia
is a resident of Jakarta, Indonesia. He is a graduate of the Bandung Institute of Technology and received his Master’s degree in petroleum geology, cum laude, from the Colorado School of Mines in 1982. He worked for PT Caltex Pacific Indonesia (Chevron-Texaco) from 1976 until 2004. There he held various technical and operating positions including Vice President Exploration and General Manager of Resources and Production for Caltex’s onshore Minas Field, the largest oilfield in Asia with a daily production of over 200,000 BPD. From 2002 until 2004 he served on Chevron's Worldwide Asset Management Committee and its Technology Council. From 2004 to 2007 he served as the General Manager for the Coastal Plains Pekanbaru PSC a local government owned oil and gas operating company with 27,000 BOPD oil production from the Riau Province, onshore Sumatra. Between 2007 and 2015, he served as Senior Vice President of Operations and Technology for Samudra Energy Ltd. an oil and gas exploration and production company based in Jakarta and Singapore. Under his leadership, Samudra Energy had a period of successful growth to become one of the top ten hydrocarbon producing companies in Indonesia.
-
Director Elected
- John Tate was elected as a director of the Company on 12/05/14 at the Company's Fiscal 2014 AGM. A brief description of the qualifications, experience, and principal business activities of Mr. Tate is as follows:
John Tate is a senior executive with global experience in emerging and frontier markets gained in positions with major US multinational corporations, an early stage software company and a start-up copper mining and mineral processing company in Africa. He has been residing in Dar es Salaam, Tanzania, East Africa since 2007 where he serves as the Chief Executive Officer and Chairman of Kastan Mining PLC. Prior to his relocation to Africa, Mr. Tate was the Chief Financial Officer of a software as a service company in Cincinnati, Ohio. From 2000 to 2005, he was the Assistant Treasurer, Global Operations for a logistics and supply chain management company. His earlier business career involved 10 years with Ford Motor Credit Company and served in various senior financial positions in international postings in Korea, Thailand, and India. Mr. Tate earned a Bachelor's and a Master's degree in finance at Colorado State University and he is a Certified Public Accountant. At the date of his election, Mr. Tate also served as a founder, director, Chief Financial Officer, resident manager, and shareholder of the Company's Tanzania affiliate, Ruaha River Power Company Limited ("Ruaha Power") and thereby exerted effective management control over Ruaha Power. At the date of his election Mr. Tate indirectly owned a 35% equity interest in Ruaha Power through Pan African Management and Development Company, Inc., a private company owned and controlled by Mr. Tate and his family.
-
Director Resignation
– John Tate resigned from the Company's board of directors effective on 30/12/16 to pursue his own business interests.
-
Director Appointment
– Mr. Karsani Aulia was appointed a director of the Company on 31/03/17 by action of the board of directors to fill the vacancy on the board.
Senior Management or Officers
- The term "Officers" as used herein includes and is limited to those senior managers or executive managers who are either Chairman, President, Vice President, Secretary, Treasurer, CEO, COO, or CFO of the Company or hold position of similar capacity in wholly-owned subsidiaries.
-
Terms
- Officers are appointed by the Board of Directors and hold office indefinitely at the pleasure of the Board of Directors.
-
Family Relationships
- There are no family relationships between any of the Company’s Officers, with each other, or with Directors of our Company.
-
Non-Arm’s Length Arrangements
- There are no arrangements or understandings between the Company and its major shareholders, customers, suppliers, or others, pursuant to which any Officer was selected.
-
Management Contracts
- Senior executive management functions of the Company and its subsidiaries are not performed by anyone other than Directors or Officers of the Company.
|
|
|
|
|
|
Officers
|
Officer’s Name
|
Positions Held
|
Age
|
Date First
Appointed
|
Functional
Expertise Brought to the
Company
|
Other Public
Company
Directorships
|
Richard L. McAdoo
|
Chairman & CEO
Chief Executive Officer
|
63
|
Jan 1999
|
Businessman &
Petroleum Geologist
|
None
|
Robert V. Rudman
|
Director & CFO
Chief Financial Officer
|
69
|
Sep 2009
|
Businessman &
Chartered Accountant
|
None
|
-
Richard L. McAdoo is the Company’s Chairman and Chief Executive Officer or CEO.
See other details in the preceding section concerning Directors experience.
-
Robert V. Rudman is the Company’s Chief Financial Officer or CFO.
See other details in the preceding section concerning Directors experience.
The Company’s executive compensation program is designed to attract, motivate and retain high performing senior executives, encourage and reward superior performance and align the executives’ interests with those of the Company’s shareholders. Individual compensation may be based on individual experience and performance or other criteria deemed important by the Compensation Committee. In order to meet the Company’s objectives, executive compensation is guided by three principles: 1) providing executives with an equity-based incentive plan, namely a stock option plan; 2) aligning employee compensation with Company corporate objectives; and 3) attracting and retaining qualified individuals in key positions.
a)
|
Compensation Policy Elements -
An executive compensation policy has been established to acknowledge and reward the contributions of the executive Officers to the Company’s success and to ensure competitive compensation, in order that the Company may benefit from the expertise required to pursue its objectives. The Company’s executive compensation policy is comprised of both fixed and variable components. The variable components include equity and non-equity incentive plans. Each compensation component has a different function, but all elements are intended to work in concert to maximize Company and individual performance by establishing specific, competitive operational and financial goals and by providing financial incentives to employees based on their level of attainment of these goals. The Company’s current executive compensation program is comprised of the following components:
|
-
Base Salary -
Salaries of the Company’s executive Officers are reviewed periodically by the Compensation Committee. In determining individual base salaries, the Compensation Committee takes into consideration individual circumstances that may include the scope of an executive’s position, location of employment, the executive’s relevant competencies, experience, performance, and retention risk.
-
Non-Equity Incentives -
The Company has no formal short or long term non-equity incentive compensation plan having objective targets or measures in determining non-equity incentives, but instead periodically makes cash bonuses allocated and paid to one or more executives based on merit and individual accomplishment and contribution to advancing the Company’s project development and strategic objectives. The granting of cash incentives requires the approval of both the Compensation Committee and the Board of Directors and are based upon an assessment of each individual’s performance in achieving significant value for the Company, specifically; an executive being instrumental in successfully negotiating a new property acquisition, arranging a financing, drilling a successful well, closing a corporate merger or acquisition, or playing a substantive role in a similar milestone event.
-
Long-Term Equity Compensation Plan (Stock Option Plan) -
The Company has no formal long term equity compensation plan having objective targets or measures in determining equity incentives. Instead incentive compensation paid to the Company’s executive Officers consists exclusively of Option-Based awards pursuant to the Company’s formal “
Stock Option Plan
”.
Shareholder approval for the Company’s current stock option plan (the “
2012 Plan
”) was obtained at the annual general meeting of the Shareholders held on 11/30/12. The purpose of the Plan is to advance the interests of the Company by encouraging the directors, officers, employees and consultants of the Company (the “Participants”) to acquire common shares in the Company, thereby increasing their proprietary interest in the Company, encouraging them to remain associated with the Company and furnishing them with additional incentive in their efforts on behalf of the Company in the conduct of their affairs.
The 2012 Plan permits the award of up to a maximum of 25,000,000 options to the Participants and limits the amounts of options which can be granted to a single person to 7.5% of the Company’s issued and outstanding shares and 15% of same to all related persons (Directors, Officers, and insiders) as a group. The Board of Directors has full and complete authority to interpret the Company’s Stock Option Plan, to establish applicable rules and regulations applying to it and to make all other determinations it deems necessary or useful for the administration of the Stock Option Plan, provided that such interpretations, rules, regulations and determinations are consistent with the express provisions of the Stock Option Plan; rules of all stock exchanges and quotation systems on which the Company’s securities are then traded; and with all applicable securities legislation.
Individuals eligible to participate under the Stock Option Plan will be determined by either the Board of Directors or the Compensation Committee. Options granted under the Stock Option Plan may be exercised at any time within a maximum period fixed at the date of their grant but not more than 5 years (the ‘‘Outside Expiry Date’’). The Board of Directors or the Compensation Committee, as the case may be, designates, at its discretion, the individuals to whom stock options are granted under the Stock Option Plan and determines the number of Common Shares covered by each of such options, the grant date, the exercise price of each option, the expiry date, the vesting schedule and any other matter relating thereto, in each case in accordance with the applicable rules and regulations of the regulatory authorities. To encourage retention and focus management on developing and successfully implementing the continuing growth strategy of the Company, stock options generally vest immediately but may vest over a specified period of months. The Board of Directors or the Compensation Committee, as the case may be, takes into account previous grants of options when considering new grants.
-
Pension Plan Benefits -
The Company does not currently have any formal pension plans that oblige the Company to make payments or provide benefits at, following, or in connection with retirement of its Directors, Officers, or employees.
-
Share-Based Awards -
The Company does not currently have any formal short or long term share-based award plans that oblige the Company to make any direct grants and issues of Company securities to its Directors, Officers, or employees as compensation.
b)
|
Compensation on Termination
- There are no Company policies providing for, and no provisions in the Company’s employment agreements with its Officers or employees for, incremental payments to be made to them by the Company in the event of termination of their employment “Without Cause”.
|
|
|
c)
|
Compensation on Change of Control of Company -
There are no Company policies providing for, and no provisions in the Company’s employment agreements with its Officers or employees for incremental payments to be made to them by the Company in the event of termination of their employment on the event of any “Change of Control” of the Company.
|
|
|
d)
|
Compensation of Directors
-The Company has no standard arrangement pursuant to which Directors are compensated by the Company for their services solely in their capacity as Directors except for the granting from time to time of incentive stock options in accordance with the Company’s Stock Option Plan and except for compensation paid to Directors who are also executive Officers. No cash compensation was paid to any Director of the Company for the Director’s services as a Director during the most recently completed financial year, other than the reimbursement of out-of-pocket expenses.
|
|
|
e)
|
Compensation of Officers and Directors
- During the most recently completed financial year of the Company, the Company compensated its Directors and Officers as set forth in the following table. The Company reports its financial statements in US dollars and therefore all amounts therein are reported in US dollars.
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary Table - Compensation of Directors and Officers During Fiscal 2016
|
Name and Principal
Position
|
Fiscal Year
Ended
|
Salary
|
Share-Based
Awards
(1)
|
Options
Granted
(1)
|
Non-Equity Incentive Plan
Compensation
|
Pension
Contributions
|
All Other
Compensation
|
Total
Compensation
(US$)
|
Annual
|
Long-Term
|
Officers
|
|
|
|
|
|
|
|
|
|
Richard L. McAdoo
Chairman & CEO
|
30-JUN-16
|
$150,000
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
$150,000
|
Robert V. Rudman
CFO
|
30-JUN-16
|
$120,000
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
$12,915
(
2)
|
$132,915
|
Non-Executive Directors
|
|
Fees
|
|
|
|
|
|
|
Fees
|
Phillip B. Garrison
Non-Executive Director
|
30-JUN-16
|
Nil
|
$26,200
(
3)
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
$26,200
|
John Tate
(4)
Non-Executive Director
|
30-JUN-16
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Karsani Aulia
(5)
Non-Executive Director
|
30-JUN-16
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Nil
|
Notes to the table:
|
1
|
When applicable the value of the share-based and options awards reflects the fair value of options granted on the dates of grant. The fair value is computed using the Black Scholes option pricing model with the following weighted average assumptions: a) average risk-free interest rate; b) expected years of life of the option; c) the price of the stock on the grant date; d) expected volatility as a percentage; and e) no expected dividend payments. The Black Scholes model is used to compute option fair values because it is the most commonly used option pricing model and is considered to produce a reasonable estimate of fair value.
|
|
2
|
Reflects cost of personal medical insurance provided.
|
|
3
|
Reflects the Black Scholes pricing model for warrants issued as compensation for a non-interest bearing loan.
|
|
4
|
Mr. Tate resigned effective 12/30/16 subsequent to the end of Fiscal 2016.
|
|
5
|
Mr. Aulia was appointed a director on 3/31/17, subsequent to the end of Fiscal 2016.
|
|
|
|
a)
|
Number of Directors
- The number of Directors on the Company's Board of Directors was fixed at four (4) directors at the last annual general meeting. Under the Company's articles of incorporation, the Board is entitled to add one (1) director at any time, should it deem necessary or desirable.
|
|
|
b)
|
Election of Directors
- The Directors of the Company are elected at each annual general meeting and hold office until the next annual general meeting. In the event or resignation of a sitting Director, the Board of Directors may act to appoint a replacement Director who shall serve until the next general meeting.
|
|
|
c)
|
Independence and Executive Directors –
At the Report Date, the Company has four sitting directors, two of whom are Executive Directors and two of whom are both Non-Executive Directors and also Independent Directors as described below:
|
|
|
|
i)
|
Executive Directors
– The Company considers directors two of its four directors, McAdoo and Rudman, to be "
Executive Directors
" by virtue of the fact both are salaried employees paid directly by the Company for personal services rendered in their capacities as senior executive officers of the Company.
|
|
|
|
|
ii)
|
Non-Executive Directors
– The Company considers two of its four directors, Aulia and Garrison, to be "
Non-Executive Directors
" by virtue of the fact that neither is a salaried employee paid by the Company for personal services and neither has been paid directly or indirectly for services rendered as a consultant, advisor, or contractor to the Company.
|
|
|
|
|
iii)
|
Independent Directors
– The Company considers directors Aulia and Garrison to be "
Independent Directors
" by virtue of the fact that both are Non-Executive Directors, neither is holder of, or director or officer of a holder, of 10% or more of the Company's voting stock, and neither is a director, officer, or major shareholder of an affiliate controlled by the Company or in control of the Company. Each also meets the requirements of an "Independent Director" as defined in
Part-1.2(1) of NI 58-101 Disclosure of Corporate Governance Practices
.
|
|
|
|
d)
|
Orientation of New Directors
– The Company makes an effort to provide newly appointed or elected Directors with a copy of all policies, codes of conduct, and board committee charters then currently in effect at the time of election for their information. Additionally, the Company assists all new Directors with registering on the "
NI 55-102 System for Electronic Disclosure by Insiders
" or "
SEDI
"; and advising of the requirements for each new Director to file and view insider reports electronically that are required of Directors by Canadian Securities Administrators.
|
|
|
e)
|
Nomination of Directors
- The Company maintains a standing board committee, that in accordance with its charter, is charged with the task to identify, evaluate, interview, and recommend qualified individual candidates for nomination as potential directors to be elected or appointed to the Board, or as qualified candidates to be hired by Continental in the capacity of senior executive and senior financial officers. See
Item-6.C.j "Governance and Nominating Committee"
herein below.
|
|
|
f)
|
Other Directorships
– As at the Report Date, no directors of the Company are also serving as a director of any other reporting issuer in any jurisdiction, whether domestic USA or foreign.
|
|
|
g)
|
Code of Business Conduct and Ethics
- The Company publishes a written Code of Business Conduct and Ethics (the "Code"). The most recent revision of this Code was adopted by the board of directors on 5/14/17. The Code is deemed to include all the Policies published and described in the following section.
|
|
|
|
i)
|
The purpose of the Code is to promote ethical and responsible decision making by all of the directors, officers, managers, and all other employees of the Company. The core principles of the Code embrace the values of honesty, integrity, excellence, accountability, transparence, independence, and common-sense ethical responsibility.
|
|
|
|
|
ii)
|
A complete copy of the Code has also been filed and made available for public viewing on 5/17/17 as Exhibit-99.1 under cover of a Form-6K Report of Foreign Issuer made on the SEC's EDGAR system. The Code is hereby incorporated into this Form-20F by this reference.
|
|
|
|
|
iii)
|
A complete copy of the Code has also been filed and made publicly available on the Canadian Securities Administrators SEDAR system in accordance with requirements of
Part-2.3 of NI 58-101 Disclosure of Corporate Governance Practices
. The Code is in the form of a convenient PDF file which can be downloaded from the SEDAR website, and a search for the Company's 'Code of Conduct' filing dated 5/16/17, at http://sedar.com/search/.
|
|
|
|
h)
|
Published Corporate Policies
– In addition to the Code of Business Conduct and Ethics described in the preceding section, the Company adopts from time to time and as deemed necessary or desirable certain policies, procedures, guidelines, and recommended practices or procedures for specific administrative, social, compliance, environmental, or ethical issues (each one of which are herein referred to as a "Policy"). Each Policy forms an integral part of the Code described in the preceding section. Policies are applicable to all directors, officers, full and part-time employees, casual hires, consultants, advisers, contractors, and suppliers who are working under direct contract to the Company
|
|
|
or any one of the Company's wholly owned subsidiaries, its majority owned or otherwise controlled subsidiaries, and any joint ventures under its designated operational control. As at the Report Date the Company has adopted, published, and made publicly available the following Policies:
|
i)
|
"
Policy on Trading and Company Securities
" – The purpose of this Policy is to the purpose of this Policy is intended to prevent "Insider Trading" by persons in possession of "Material Non-Public Information" concerning the Company or its business operations and activities; prevent "Tipping" by persons in possession of the same information" from informing or conveying such knowledge to any other persons; and provide guidance to persons subject to this Policy to permit them to lawfully conduct legitimate transactions for their own personal benefit in the securities of the Company. A complete copy of this Policy been filed and made available for public viewing on 5/23/17 as Exhibit-99.3 under cover of a Form-6K Report of Foreign Issuer made on the SEC's EDGAR system. The said Policy is hereby incorporated into this Form-20F by this reference. This Policy is also available in the form of a convenient PDF file which, after a search for the Company's 'Other Security Holders Documents' filing dated 5/23/17, can be downloaded from the SEDAR website http://sedar.com/search/.
|
|
|
|
i)
|
Audit Committee
- The Company's Board of Directors has chartered a standing "
Audit Committee
" and charged it with the responsibility of coordinating, reviewing, and working with the Company’s accountants and auditors regarding the preparation, review, and approval of the Company's annual audited financial statements and related regulatory filings in both Canada and the USA. The most recent revision of the Charter of the Audit Committee was adopted by the board of directors on 5/14/17.
|
|
|
|
i)
|
In addition to its USA reporting obligations, our Audit Committee operates under the Company's obligations pursuant to the regulatory practices prescribed by the Canadian Securities Administrators under
National Instrument 52-110 Audit Committees
and its
Companion Policy 52-110CP
as last amended and in force and effect (both herein referred to as "
NI-52-110
").
|
|
|
|
|
ii)
|
The Audit Committee does not consist of the entire Board of Directors. At the Report Date the Audit Committee has three duly appointed members, a majority of whom are "Independent Directors" as defined in
Part-1.4 or in Part-6.1.1 of NI 52-110 Audit Committees
. The two Independent Directors on the Audit Committee are directors Garrison and Aulia. All three Audit Committee members are "Financially Literate" as such term is defined in
Part-1.6 of NI 52-110 Audit Committees
.
|
|
|
|
|
iii)
|
The Company considers two members of the Audit Committee, directors Garrison and Rudman, to be "Audit Committee Financial Experts" as such term is defined in
Regulation S-K 17 CFR Part 229.407(d)(5)(ii).
Mr. Rudman is a Chartered Professional Accountant in Canada and a former employee of public accounting firm Price Waterhouse. Mr. Garrison is a Certified Public Accountant and a former employee of public accounting firm Arthur Young and Co.
|
|
|
|
|
iv)
|
The Audit Committee operates under a formal written "Charter" that is adopted by the Board and amended from time to time as and when the Board deems necessary or appropriate. The most recent revision of the Charter of the Audit Committee is dated 5/14/17.
|
|
|
|
|
v)
|
A complete copy of the Charter of the Audit Committee has also been filed and made available for public viewing on 5/17/17 as Exhibit-99.2 under cover of a Form-6K Report of Foreign Issuer made on the SEC's EDGAR system. The Charter of the Audit Committee is hereby incorporated into this Form-20F by this reference.
|
|
|
|
|
vi)
|
A complete copy of the Charter of the Audit Committee has also been filed and made publicly available on the Canadian Securities Administrators SEDAR system. The Charter is in the form of a convenient PDF file which can be found and downloaded from the SEDAR website, after a search for the Company's 'Other Security Holders Documents' filing dated 5/16/17, at http://sedar.com/search/.
|
|
|
|
j)
|
The Governance and Nominating Committee
- The Company’s Board of Directors has chartered a standing "Governance and Nominating Committee" and charged it with responsibility for oversight of the periodic review, amendment, and approval of the Company's "Code of Business Conduct and Ethics"; and with the task to identify, evaluate, interview, and recommend qualified individual candidates for nomination as potential directors to be elected or appointed to the Board or as qualified candidates to be hired by Continental in the capacity of senior executive and senior financial officers. The most recent revision of the Charter of the Governance and Nominating was adopted by the board of directors on 5/14/17.
|
|
|
|
i)
|
The Governance and Nominating Committee does not consist of the entire Board of Directors. At the Report Date the Governance and Nominating Committee has two duly appointed members, all of whom are "Independent Directors" as defined in
Part-1.2(1) of NI 58-101 Disclosure of Corporate Governance Practices
. The Independent Directors on the Governance and Nominating Committee are directors Garrison and Aulia.
|
|
|
|
|
ii)
|
A complete copy of the Charter of the Governance and Nominating Committee has also been filed and made available for public viewing on 5/17/17 as Exhibit-99.3 under cover of a Form-6K Report of Foreign Issuer made on the SEC's EDGAR system. The Charter of the Governance and Nominating Committee is hereby incorporated into this Form-20F by this reference.
|
|
|
|
|
iii)
|
A complete copy of the Charter of the Governance and Nominating Committee has also been filed and made publicly available on the Canadian Securities Administrators SEDAR system in accordance with requirements of
Part-2.3 of NI 58-101 Disclosure of Corporate Governance Practices
. The Charter is in the form of a convenient PDF file which can be found and downloaded from the SEDAR website, after a search for the Company's 'Other Security Holders Documents' filing dated 5/16/17, at http://sedar.com/search/.
|
k)
|
The Compensation Committee
- The Company’s Board of Directors has chartered a standing "Compensation Committee" and charged it with responsibility for oversight and periodic review of the Company's "equity incentive plans", "incentive plan", "equity incentive plans", and "plans" for "share-based awards" and "option-based awards" as such terms are all defined in
Part-1.2 of NI 58-102F6 Statement of Executive Compensation
and herein referred to collectively as "Compensation Plans". After such review, the Committee shall advise the Board of any recommendations for additions or revisions to the Compensation Plans.
|
|
|
|
i)
|
The Compensation Committee does not consist of the entire Board of Directors. At the Report Date the Compensation Committee has three duly appointed members, a majority of whom are "Independent Directors" as defined in
Part-1.2(1) of NI 58-101 Disclosure of Corporate Governance Practices
. The Independent Directors on the Governance and Nominating Committee are directors Garrison and Aulia.
|
|
|
|
|
ii)
|
A complete copy of the Charter of the Compensation Committee has also been filed and made available for public viewing on 5/23/17 as Exhibit-99.1 under cover of a Form-6K Report of Foreign Issuer made on the SEC's EDGAR system. The Charter is hereby incorporated into this Form-20F by this reference.
|
|
|
|
|
iii)
|
A complete copy of the Charter of the Compensation Committee has also been filed and made publicly available on the Canadian Securities Administrators SEDAR system in accordance with requirements of
Part-2.3 of NI 58-101 Disclosure of Corporate Governance Practices
. The Charter is in the form of a convenient PDF file which can be found and downloaded from the SEDAR website, after a search for the Company's 'Other Security Holders Documents' filing dated 5/23/17, at http://sedar.com/search/.
|
|
|
|
l)
|
Reserves Committee
- The Board of Directors has chartered a standing "Reserves Committee" and charged it with responsibility for oversight of the preparation, review, and approval of the Company's oil and gas activity and reserves reporting. The Reserves Committee operates pursuant to the regulatory requirements prescribed by the
Canadian Securities Administrators under National Instrument 51-101 Statement Of Reserves Data And Other Oil And Gas Information
("NI-51-101").
|
|
|
|
i)
|
The Reserves Committee does not consist of the entire Board of Directors. At the Report Date the Reserves Committee has three duly appointed members, a majority of whom are "Independent Directors" as defined in
Part-1.2(1) of NI 58-101 Disclosure of Corporate Governance Practices
. The Independent Directors on the Committee are directors Garrison and Aulia.
|
|
|
|
|
ii)
|
A complete copy of the Charter of the Reserves Committee has also been filed and made available for public viewing on 5/23/17 as Exhibit-99.2 under cover of a Form-6K Report of Foreign Issuer made on the SEC's EDGAR system. The Charter is hereby incorporated into this Form-20F by this reference.
|
|
|
|
|
iii)
|
A complete copy of the Charter of the Reserves Committee has also been filed and made publicly available on the Canadian Securities Administrators SEDAR system in accordance with requirements of
Part-2.3 of NI 58-101 Disclosure of Corporate Governance Practices
. The Charter is in the form of a convenient PDF file which can be found and downloaded from the SEDAR website, after a search for the Company's 'Other Security Holders Documents' filing dated 5/23/17, at http://sedar.com/search/.
|
|
|
|
During Fiscal 2015, in addition to its Officers, the Company had two full time employees, who were all located at the Company’s Indonesia representative office in Jakarta. Of these two employees is accounting staff and the other is administrative and support staff. None of the Company’s employees are represented by a union.
E.
|
SHARE OWNERSHIP BY DIRECTORS AND OFFICERS.
|
The table below lists, as at the Report Date, the number of voting securities owned directly or indirectly by all Directors and Officers. The common share voting rights of our Directors and Officers do not differ from those of any other shareholders. The amounts of common shares shown do not include those common shares that a Director or Officer may yet acquire upon exercise of any outstanding options or warrants.
|
|
|
|
Voting Shares Owned by Directors And Officers
|
Type of
|
Name of
|
Number of Voting
|
% of Total Voting
|
Security
|
Beneficial Owner
|
Securities Owned
|
Securities Issued
|
Common Shares
|
Richard L. McAdoo, Director & CEO
|
9,579,158
|
7.8 %
|
Common Shares
|
Robert V. Rudman, Director & CFO
|
3,752,000
|
3.0 %
|
Common Shares
|
Karsani Aulia, Non-Executive Director
|
0
|
-.-
|
Common Shares
|
Phillip B. Garrison, Non-Executive Director
|
0
|
-.-
|
|
Directors & Officers as a Group
|
13,331,158
|
10.8 %
|
Common Shares
|
Total Issued & Outstanding
|
123,015,381
|
100.0 %
|
Incentive Stock Options Held by Directors and Officers
- The table below lists, as at the Report Date, the number of incentive stock options held by each Director and Officer. Incentive stock options are granted to the Company’s management, employees, and consultants in accordance with our formal written Stock Option Plan that is described in more detail in Section-6.B. The number of options held, as at the Report Date, by Directors and Officers as a group plus those options held by other employees and consultants as a group is also shown.
|
|
|
|
|
Incentive Stock Options Held by Directors and Officers
|
Name of Optionee
Directors & Officers
|
US$ Option
Exercise Price
|
Date Option
Expires
|
Number of
Options
|
Percent
Of Total
|
Richard McAdoo, Director & CEO
|
n/a
|
n/a
|
0
|
0
|
Robert Rudman, Director & CFO
|
n/a
|
n/a
|
0
|
0
|
Karsani Aulia, Director
|
n/a
|
n/a
|
0
|
0
|
Phillip B. Garrison, Director
|
n/a
|
n/a
|
0
|
0
|
Total Directors & Officers as a Group
|
0
|
0
|
Other Optionees as a Group
|
n/a
|
n/a
|
0
|
0
|
Total Stock Options Outstanding at the Report Date
|
0
|
0
|
Item - 7 : Major Shareholders and Related Party Transactions
Authorized Share Capital
- At the Report Date, the authorized capital of the Company consists of One Billion (1,000,000,000) shares divided into Five Hundred Million (500,000,000) common shares without par value and Five Hundred Million (500,000,000) preferred shares without par value.
Authorized Common Shares
- At the Report Date, all of the 500,000,000 authorized common shares of the Company are of the same class and, once issued, rank equally as to dividends, voting powers, and participation in assets. Holders of common shares are entitled to one vote for each share held of record in all matters to be acted upon by the shareholders. Holders of common shares are entitled to receive such dividends as may be declared from time to time by the Board of Directors, in its discretion, out of funds legally available therefore.
Authorized Preferred Shares
- At the Report Date, the authorized capital of the Company includes 500,000,000 preferred shares. The Board of Directors, using its own discretion, may from time to time by resolution, alter the Articles of the Company to divide the preferred shares into special series or classes of preferred shares in differing amounts of preferred shares having separate special terms and conditions attached to each such series. The Directors may create and designated a particular series of preferred shares, fix the number of preferred shares to be included in such designated series, and determine the consideration for which any series is to be sold or issued. Further, the Directors may create, define and attach special rights and restrictions to the preferred shares of any particular series including, rates and other conditions of any dividends; the rights and terms of provisions for cancellation, redemption, conversion, exchange, and/or retraction of the series; and the terms and conditions of any voting rights or restrictions. Holders of preferred shares shall be entitled, on the distribution of assets of the Company or on the liquidation, dissolution or winding-up of the Company, to receive before any distribution to be made to holders of common shares or any other series or class of shares capital ranking junior to the preferred shares as specifically provided in the special rights and restrictions attached to any particular series of the preferred shares issued.
Issued and Outstanding Share Capital
- At the Company’s most recently completed Fiscal 2016 year ended on 6/30/16, the total number of common shares issued and outstanding was 123,015,381. As of the Report Date the total number of common shares issued and outstanding is 123,015,381. Zero preferred shares were issued at the end of Fiscal 2016, and none are issued as of the Report Date. The authorized and issued share capital of the Company is summarized in the table below.
|
|
|
|
|
Authorized And Issued Share Capital
|
Authorized
Share Capital
|
Issued and Outstanding
Share Capital
|
Type of Security
|
Number of
Shares
|
Audited Fiscal
Year End 6/30/16
|
Last Unaudited
Month End 5/31/17
|
At The
Report Date
|
Common Shares
|
500,000,000
|
123,015,381
|
123,015,381
|
123,015,381
|
Preferred Shares
|
500,000,000
|
0
|
0
|
0
|
Fully Diluted Basis Shareholding
- As at the Report Date, on a fully diluted basis, there are
123,015,381
common shares of the Company either issued or allocated under unexercised outstanding options, warrants, and debt conversion rights. This fully-diluted total includes
123,015,381
common shares actually issued and outstanding plus
2,000,000
outstanding unexercised warrants, plus
-0-
outstanding unexercised options to purchase additional common shares, plus
5,000,000
outstanding unexercised rights to convert against a promissory note; all as summarized in the table below.
|
|
|
|
Fully Diluted Shareholding
|
Type of Security
|
Audited Fiscal
Year End 6/30/16
|
Last Unaudited
Month End 5/31/17
|
At The
Report Date
|
Common Shares
|
123,015,381
|
123,015,381
|
123,015,381
|
Warrants
|
2,550,000
|
2,000,000
|
2,000,000
|
Options
|
0
|
0
|
0
|
Debt Conversion Rights
|
5,000,000
|
5,000,000
|
5,000,000
|
Fully Diluted Total
|
130,565,381
|
130,015,381
|
130,015,381
|
Definition of Major Shareholder
- As used herein the term “
Major Shareholder
” refers to beneficial owners of 5% or more of each class of the Company’s voting securities, including our common shares. As at the Report Date the Company has one class of common shares outstanding, of which
123,015,381
are issued and entitled to vote.
Voting Rights
- The voting rights of our Major Shareholders do not differ from the voting rights of shareholders who are not Major Shareholders.
List of Major Shareholders
- To the knowledge of the Directors and Officers of the Company, no person beneficially owns, directly or indirectly, or exercises control or direction over common shares carrying more than 5% of the voting rights attached to all issued and outstanding shares of the Company at the Report Date except for those Major Shareholders who, together with their respective share holdings, are listed in the following table:
|
|
|
|
Major Shareholders
|
Type of Security
|
Name of Major Shareholder
|
Voting Shares Owned
|
% of Total
|
Common Shares
|
Mr. J. Khan
(1)
|
15,000,000
|
12.2 %
|
Common Shares
|
Dr. K. Tan
(2)
|
15,000,000
|
12.2 %
|
Common Shares
|
Mr. R. L. McAdoo
(3)
|
9,579,158
|
7.8 %
|
|
Major Shareholders as a Group
|
39,579,158
|
32.2 %
|
Common Shares
|
Total Issued & Outstanding
(4)
|
123,015,381
|
100.0 %
|
Notes to Table:
|
1
|
Major Shareholder, Malaysian businessman
|
|
2
|
Major Shareholder, Malaysian businessman
|
|
3
|
Major Shareholder, Executive Director, Chairman, and CEO of the Company.
|
|
4
|
Does not included shares held by nominee depositories CDS and CEDE as described in the following section. The Company is not aware of the identities of unregistered shareholders and beneficial owners of the shares held by nominee depositories CDS or CEDE.
|
Registered and Unregistered Shareholders -
We estimate that the total number of Registered and Unregistered Shareholders of the Company is approximately 990, based on the following assumptions:
-
Registered Shareholders
- The Company knows the names, residences, and respective numbers of shares held by only those holders who possess a paper certificate on file with our registrar and transfer agent (collectively our “
Registered Shareholders
”). Each year our transfer and clearing agents Computershare and Broadridge furnish us with a list of Registered Shareholders entitled to vote at our annual general meeting and we use this list to mail proxy and meeting information, and some information about non-objecting beneficial owners who are unknown to us but hold our shares through an intermediary broker dealer or similar financial institution. As at the most recent record date for an annual general meeting we had 190 registered shareholders holding about 57% of our outstanding common shares.
-
Unregistered Shareholders
- The Company has researched to the best of its ability, the “
Unregistered Shareholders
”. The shares of our Unregistered Shareholders are commonly held by brokerage firms that use a share depository institution as its nominee and clearing house on behalf of banks, brokerage firms, institutions and their respective clients. Two of these share depository institutions, CDS and CEDE, hold a majority of the Company’s issued and outstanding common shares as shown in the preceding table. Canadian Depository for Securities, Inc., or “
CDS
” is a Canadian depository and “
CEDE
” an American nominee of the Depository Trust Company is a USA depository. The actual number of shareholders, the amount of shares owned by each, the residence of each, and the identities of each actual individual shareholder represented by the CDS and CEDE holdings is not known to the Company except for a limited amount of shareholders who have elected to receive annual meeting proxy and other information directly from the Company. We estimate the number of our Unregistered Shareholders from the number of proxy materials requested of the Company by various brokerage houses for distribution to our shareholders at the record date of our most recently held annual general or special shareholders meeting. Unregistered Shareholders hold about 43% of our outstanding common shares.
Geographic Distribution of Shareholders
- We estimate the location of Registered Shareholders from the registered certificate addresses provided by our transfer agent. In the case of Unregistered Shareholders, we presume that the shares held by Canadian depository CDS represent Canadian or other Non-US holders and we presume that shares held at CEDE are attributable to USA resident holders although we have no way of knowing these facts as certain. As at the Report Date, based on mailings at our annual general meetings, we estimate that 21% of shares are held by residents located in the USA, another 28% in Canada, and the remaining 51% in other countries.
Control
- To the extent known to the Company, the Company is not owned or controlled directly or indirectly by another corporation, or by any foreign government, or by any other natural or legal person severally or jointly, other than disclosed herein.
Change of Control
- To the extent known to the Company, there are no arrangements, the operation of which may at a subsequent date result in a change of control of the Company.
B.
|
RELATED PARTY TRANSACTIONS.
|
Management Fees
- During the Fiscal Year ended 6/30/16, management fees in the amount of $282,915 were paid or accrued to officers of the Company. At the end of Fiscal 2016, a total amount of $616,697 was payable to officers and director of the Company relating to accrued and outstanding management compensation and personal loans made to the Company.
Loans from Directors
- During the year ended 6/30/16, two directors of the Company loaned $10,000 and $61,500, respectively, to the Company for assistance with working capital. These loans are interest free with no fixed repayment terms.
Share Based Award
- During the year ended 6/30/16, the Company issued a director an amount of 2,000,000 common share purchase warrants having an exercise price of $0.01 per share and an expiry date of 12/31/17 as compensation for a $10,000 loan. The Company calculated the Black Scholes fair value of these warrants to be $26,200 which was charged to the statement of loss as share-based payments.
Visionaire Transaction
- The Company acquired a 51% stake in Visionaire Energy AS ("
VE
") from Visionaire Invest AS ("
VIN
") in a shares-swap transaction completed during Fiscal 2013 on 6/04/13. VIN retained a 49% stake in VE. The Company issued 20,000,000 common shares to VIN in consideration for 51% of the shares of VE. At closing of the transaction, Mr. Johnny Christiansen became a director of the Company. Mr. Christiansen is also the chief executive officer of both VE and of VIN. He also beneficially owns 29% of the shares of VIN. The 20,000,000 shares of the Company owned by VIN represent about 14% of the Company's issued and outstanding share capital, an amount which is in excess of 10%, and makes VIN an insider, affiliate, and related party of the Company. On 9/15/14, the Company entered into a sale and purchase agreement with VIN to sell its 51% equity interest in VE back to VIN for total consideration of $1,200,000 consisting of a return of its 20,000,000 Company shares valued at $0.05 per share plus $200,000 in cash. Mr. Christiansen abstained from voting on the director's resolution to sell the VE stake; and resigned, also on 9/15/14, from the Company's board upon signature of the agreement. The sale transaction was voted on and approved by the shareholders at the Company's AGM on 12/05/14 and immediately closed thereupon, ending the related party relationship.
Panafra, Kastan, and Mr. John Tate
- On 12/05/14, Mr. John Tate was elected at the 2014 AGM to serve as a director on the Company's board. He so served until his resignation effective 31/12/16. During the period of his services Mr. Tate was a related party to both Pan African Management and Development Company, Inc. ("
Panafra
") a company incorporated in Delaware, and to Kastan Mining PLC ("
Kastan
") a company incorporated in Tanzania. Mr. Tate and his family owned shareholding and management control of both Panafra and Kastan. Prior to Mr. Tate becoming a director and a related party, the Company had, after fully arms-length negotiations, entered into agreements on 9/24/14 and on 10/11/14, with Kastan and Panafra concerning joint holdings of shares of the Company's Ruaha River Power Company PLC affiliate. See further discussion in Item-4.C.b "
Partially Owned Joint Venture Companies
.
Joint Development Agreement –
On 4/01/17, the Company entered into a Joint Development Agreement (the "
CHI JDA
") with Continental Hilir Indonesia Pte. Ltd. ("
CHI
"), a private Singapore company, for the joint development of Small-Scale Refinery Projects in Indonesia. CHI and the Company are related parties and at the Report Date share three common directors. See further discussion in Item-10.C "
Material Contracts
".
Consulting and Joint Development Agreement –
On 28/02/17, the Company entered into a Consulting and Joint Development Agreement (the "
CHMEA JDA
") with Continental Hilir MEA (FZE) ("
CHMEA
"), a private company registered in the Sharjah Airport International Free Zone of the United Arab Emirates, for the joint development of Small-Scale Refinery Projects in the Middle East and Africa. CHMEA and the Company are related parties and at the Report Date share one common director. See further discussion in Item-10.C "
Material Contracts
".
Except for the related party transactions described in the preceding paragraphs, and to the extent of the Company’s knowledge, during the Company’s Fiscal Year ended 6/30/16 and up to the Report Date there were no loans, guarantees, transactions, or currently proposed transactions between the Company and
(a)
|
enterprises that directly or indirectly through one or more intermediaries, control or are controlled by, or are under common control with, the Company;
|
|
|
(b)
|
associates (An associate is an unconsolidated enterprise in which the Company has a significant influence or which has significant influence over the Company);
|
|
|
(c)
|
individuals owning, directly or indirectly, an interest in the voting power of the Company that gives them significant influence over the Company, and close members (Close members of an individual’s family are those that may be expected to influence, or be influenced by, that person in their dealings with the Company.) of any such individual’s family;
|
|
|
(d)
|
Directors, Officers, and key management personnel, that is, those persons having authority and responsibility for planning, directing and controlling the activities of the Company, including close members of such individuals’ families; and
|
|
|
(e)
|
enterprises in which a substantial interest in the voting power is owned, directly or indirectly, by any person described in (c) or (d) or over which such a person is able to exercise significant influence. This includes enterprises owned by Directors or Major Shareholders of the Company and enterprises that have a member of key management in common with the Company. Significant influence over an enterprise is the power to participate in the financial and operating policy decisions of the enterprise but is less than control over those policies.
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|
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C.
|
INTERESTS OF EXPERTS AND COUNSEL.
|
Since the end of the Company's Fiscal 2016, to the best of our knowledge, there are no transactions, or proposed transactions, which have materially affected or will materially affect the Company in which any auditors, experts, counsel, or independent advisors has had or will have any direct or material indirect interest.
Item - 8 : Financial Information
A.
|
CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION.
|
The Company’s audited financial statements prepared using IFRS as issued by IASB, together with the independent auditor's report thereon for the Company's Fiscal 2016 year, are attached as an integral part field with this Annual Report. They are further described in "Item 18 - Financial Statements".
a)
|
Canadian Financial Disclosure Standards NI 51-102 -
The Company is obliged, in its home country of Canada, to prepare certain financial reports pursuant to the standards required by the Canadian Securities Administrators ("
CSA
") pursuant to
National Instrument 51-102 Continuous Disclosure Obligations
and its
Companion Policy NI 51-102CP
(herein both referred to as "
NI 51-102
").
|
|
|
b)
|
Electronic SEDAR Filings
- NI 51-102 mandates that the Company file electronically, the Company's annual audited financial statements and its interim quarterly financial statements, together with a management discussion and analysis for each period, via the CSA's
System for Electronic Document Archiving and Retrieval
better known as “
SEDAR
”. The Company began filing electronically on SEDAR in 1997. Copies of the Company’s SEDAR filings may be downloaded from the SEDAR website at www.sedar.com.
|
|
|
c)
|
Audited Annual Financial Statements
- The Company prepares NI 51-102 annual audited consolidated financial statements as at its year end date of 30 June. These consolidated financial statements include the accounts of the Company and its majority owned subsidiaries.
|
|
|
d)
|
Interim Quarterly Financial Statements
- During the course of the Company’s Fiscal Year, management prepares NI 51-102 compliant, unaudited, interim, quarterly consolidated financial statements together with a management discussion and analysis and files it on SEDAR within 60 days of each of the fiscal quarters ended 30 September, 31 December, and 31 March.
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|
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e)
|
EDGAR Form-6K Filings
– The Company has adopted the regular practice of filing its NI 51-102 compliant interim quarterly financial statements and management discussion and analysis on EDGAR under cover of Form-6K filings at the same time it files them on SEDAR.
|
|
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f)
|
Reporting Currency
- Commencing for its 7/31/02 year end the Company adopted the U.S. currency as its reporting currency and has prepared its financial statements since then on that basis. The accounts of the Company are prepared in U.S. dollars.
|
|
|
g)
|
Canadian GAAP
- Prior to and including the Company's Fiscal Year ended 6/30/11, the Company's financial statements were prepared in accordance with Canadian Generally Accepted Accounting Principles ("
GAAP
"), the application of which, in the case of the Company, conformed in all material respects for the periods presented with US GAAP, except as disclosed in footnotes to those financial statements.
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|
|
h)
|
IFRS - International Financial Reporting Standards -
The Canadian Accounting Standards Board has mandated the replacement of Canadian GAAP with International Financial Reporting Standards ("
IFRS
") for all Canadian publicly accountable enterprises. The effective changeover date for the Company was 7/01/11, at which time the Company ceased using Canadian GAAP and replaced it with IFRS. The Company issued its first set of interim quarterly financial statements prepared under IFRS for the quarter ended 9/30/11 including comparative IFRS financial results and an opening balance sheet as at 7/01/10. The first annual IFRS consolidated financial statements were prepared for the Company's fiscal year ended 6/30/12 which incorporated restated comparatives for the previous Fiscal Year ended 6/30/11. Commencing from 7/01/11, the Company's financial statements were and are prepared in accordance with IFRS as issued by the International Accounting Standards Board or IASB.
|
|
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a)
|
Legal Proceedings
- As of the Report Date, the Company knows of no material, active or pending legal proceedings against them; nor is the Company involved as a plaintiff in any material proceeding or pending litigation.
|
|
|
b)
|
Default on Convertible Note
- As at the Report Date the Company is in default of repayment of an unsecured $250,000 promissory note convertible into common shares of the Company. The Company has offered the holder terms for converting a portion of the note in accordance with its provisions together with extending its term. There are no guarantees that these discussions will result in a resolution mutually acceptable to the Company and the note holder.
|
|
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|
i)
|
On 9/21/11, the Company issued a convertible promissory note for proceeds of $250,000. The note principal was convertible, at the election of the holder, at any time during its term into 3,125,000 common shares of the Company. Any unpaid interest thereupon is also convertible, at the option of the holder, at the same conversion rate. As additional consideration, the Company issued 1,562,500 warrants (“the additional consideration warrants”) to the note holder, exercisable at $0.12 per share up to 9/22/13, the original maturity date.
|
|
|
|
|
ii)
|
The note originally accumulated interest at a rate of 10% per annum or at 15% per annum in the event of default of payment. On 11/21/12, the Company reached an agreement with the note holder that increased the interest rate retroactively to 18%, extended the maturity date to 3/21/13, and reduced the conversion price from $0.08 to $0.05 per share. This amendment to the terms of the note resulted in an incremental value of $1,000.
|
|
|
|
|
iii)
|
On 5/21/13, the Company reached an agreement with the note holder that extended the maturity date to 9/21/13, extended the term of the additional consideration warrants to 3/21/15, and reduced the exercise price of the additional consideration warrants to $0.08.This amendment to the terms of the note resulted in an incremental value of $1,000 and the amendment to the terms of the additional consideration warrants resulted in an incremental value of $16,719.
|
|
|
|
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iv)
|
On 10/4/13, the Company reached an agreement with the note holder that extended the maturity date to 11/15/13. This amendment to the terms of the note resulted in an incremental value of $8,500.
|
|
|
|
|
v)
|
On 12/12/13, the Company reached an agreement with the note holder that extended the maturity date to 1/31/14 and reduced the exercise price of the additional consideration warrants to $0.05. This amendment to the terms of the note resulted in an incremental value of $31,500 and the amendment to the terms of the additional consideration warrants resulted in an incremental value of $10,782.
|
|
|
|
|
vi)
|
On 3/31/14, the Company reached an agreement with the note holder that extended the maturity date to 4/30/14 and extended the term of the additional consideration warrants to 12/31/15. This amendment to the terms of the note resulted in an incremental value of $6,000 and the amendment to the terms of the additional consideration warrants resulted in an incremental value of $7,031.
|
|
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|
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vii)
|
On 7/28/14, the Company reached an agreement with the note holder to extend the maturity date of the promissory note to 9/30/14 without any additional consideration.
|
|
|
|
|
viii)
|
The incremental value of the conversion rights of the note and the additional consideration warrants were calculated using the Black- Scholes model as further discussed in Note 10 to the Company's attached annual audited financial statements.
|
|
|
|
c)
|
Cease Trade Order
– On 6/23/17, the Company completed the audits, financial reports, and made all of the regulatory filings to remedy and cure a cease trade order issued on 11/4/15 by the British Columbia Securities Commission ("BCSC"). The order was issued because the Company was at that time deficient in its regulatory requirements involving the filing of its audited consolidated financial statements for the fiscal year ended 6/30/15. The order prohibits trading of the Company’s securities in Canada until the deficiency is cured by the Company filing the required delinquent financial reports and a revocation order is issued by the BCSC.
|
|
|
|
In addition to the audited statements for the year ended 6/30/15, the Company must also prepare and file the same for the year ended 6/30/16, plus the six interim quarterly financial reports for the three fiscal quarters ended 3/31/16 and the three quarters ended 3/31/17. The Company completed its annual audits and filed both its delinquent Fiscal 2015 report on 5/24/17 and this Fiscal 2016 report on 6/21/17. Three of the six delinquent interim reports for the three quarters ended 3/31/16 were completed and filed on 6/20/17. The remaining interim reports for the three quarters ended 3/31/17 were completed and filed on 6/23/17. These last reports complete the requirements to remedy and cure the deficiency which led to the cease trade order. The Company intends to immediately apply to the BCSC for a revocation order.
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|
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d)
|
Dividend Distributions
- Holders of our common shares are entitled to receive such dividends as may be declared from time to time by our board, in its discretion, out of funds legally available for that purpose. The Company has not declared any dividends for the last five Fiscal Years and does not anticipate that it will do so in the foreseeable future. We intend to retain future earnings, if any, for use in the operation and expansion of our business and do not intend to pay any cash dividends in the foreseeable future.
|
Item - 9 : The Offer and Listing .
A.
|
OFFER AND LISTING DETAILS.
|
Since 3/24/98, the Company's common shares trade on the OTC Markets in the United States under the symbol "CPPXF". The following table lists trading price history of the Company's common shares and the high and low trading prices for each of the past six months, each of the past eleven quarters, and each of the past five fiscal years.
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|
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|
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|
|
|
|
|
Price History
|
US$
|
US$
|
|
Price History
|
US$
|
US$
|
|
Price History
|
US$
|
US$
|
For the Month
|
High
|
Low
|
For the Quarter
|
High
|
Low
|
For the Fiscal
|
High
|
Low
|
Ended
|
Price
|
Price
|
Ended
|
Price
|
Price
|
Year's Ended
|
Price
|
Price
|
05/31/2017
|
$0.03
|
$0.03
|
03/31/2017
|
$0.02
|
$0.00
|
06/30/2016
|
$0.02
|
$0.01
|
04/30/2017
|
$0.08
|
$0.01
|
12/31/2016
|
$0.02
|
$0.00
|
06/30/2015
|
$0.04
|
$0.00
|
03/31/2017
|
$0.01
|
$0.01
|
09/30/2016
|
$0.04
|
$0.00
|
06/30/2014
|
$0.10
|
$0.01
|
02/31/2017
|
$0.02
|
$0.00
|
06/30/2016
|
$0.02
|
$0.01
|
06/30/2013
|
$0.14
|
$0.01
|
01/31/2017
|
$0.01
|
$0.00
|
03/31/2016
|
$0.02
|
$0.00
|
06/30/2012
|
$0.18
|
$0.04
|
12/31/2016
|
$0.02
|
$0.00
|
12/31/2015
|
$0.03
|
$0.00
|
|
|
09/30/2015
|
$0.03
|
$0.00
|
06/30/2015
|
$0.04
|
$0.00
|
03/31/2015
|
$0.03
|
$0.00
|
12/31/2014
|
$0.05
|
$0.01
|
09/30/2014
|
$0.05
|
$0.03
|
This Form-20F is filed as an Exchange Act "Annual Report" and therefore the provision of information called for by this Item-9.B is not applicable.
Since 3/24/98, the Company's common shares have been quoted and traded under the symbol "CPPXF" on the OTC Markets QB or Pink tiers or one of their respective predecessors.
This Form-20F is filed as an Exchange Act "Annual Report" and therefore the provision of information called for by this Item-9.D is not applicable.
This Form-20F is filed as an Exchange Act "Annual Report" and therefore the provision of information called for by this Item-9.E is not applicable.
F.
|
EXPENSES OF THE ISSUE.
|
This Form-20F is filed as an Exchange Act "Annual Report" and therefore the provision of information called for by this Item-9.F is not applicable.
Item - 10 : Additional Information .
This Form-20F is filed as an Exchange Act "Annual Report" and therefore the provision of information called for by this Item-10.A is not applicable.
B.
|
MEMORANDUM AND ARTICLES OF ASSOCIATION.
|
The Company was incorporated in British Columbia, Canada, on 5/29/84 under the name "Intl. Focus Res. Inc.". On 1/03/96 the name was changed to "Continental Copper Corporation". On 10/23/97 the name was changed to "Continental Energy Corporation". On 6/23/04, the Company was transitioned under the Business Corporation Act (British Columbia).At an annual general meeting of the shareholders on 1/25/06 the shareholders adopted an amended Articles to conform them to the Business Corporations Act (British Columbia), enacted in 2004, as it required. At a special general meeting of the shareholders on 9/10/08 the shareholders amended and adopted the Company’s current Articles.
Set out below is a summary of various provisions of our Notice of Articles and Articles prescribed by the Business Corporations Act (British Columbia) in respect of:(i) objects and purposes: (ii) directors; (iii) authorized capital; (iv) rights, preference and restrictions attached to our classes of shares; (v) shareholder meetings; and (vi) limitation on rights of non-Canadians; (vii) delay of change of control; and (viii) reporting of share ownership.
Objects and Purposes
-
Neither our Notice of Articles or Articles contain a limitation on our objects and purposes.
Directors
- Our Articles have provisions related to conflicts of interests of directors in certain corporate transactions. A director or senior officer who holds a disclosable interest in a contract or transaction into which the Company proposes to enter into, must disclose such interest and is liable to account to the Company for any profit that accrues to the director or senior offer as a result of the transaction if the provisions for disclosure and director approval set out in the Business Corporations Act (British Columbia) are not complied with. A director with a disclosable interest in a contract or transaction is not entitled to vote on any directors’ resolution approving the contract or transaction, unless all directors have an interest in the contract or transaction. A director with a disclosable interest in a contract or transaction is entitled to be counted as part of the quorum for the directors’ meeting to consider the contract or transaction. Under the Business Corporations Act (British Columbia), a director does not hold a disclosable interest in a contract or transaction merely because it relates to his/her compensation in his/her capacity as a director, officer, employee or agent of the Company. Our Articles provide that our directors may, without shareholder approval, borrow money upon the credit of our Company, issue and sell bonds or debentures and provide guarantees. Neither our Notice of Articles nor Articles set out a mandatory retirement age for our directors and our directors are not required to own securities of our Company in order to serve as directors.
Authorized Capital
-
Our Notice of Articles provide that our authorized capital consists of 500,000,000 shares of common stock, without par value, and 500,000,000 shares of preferred stock, without par value. Our preferred stock may be issued in one or more series and our directors may fix the number of shares which is to comprise each series and the designation, rights, privileges, restrictions and conditions attaching to each series.
Rights, Preferences and Restrictions
-
Pursuant to our Articles and the Business Corporations Act (British Columbia), holders of our common stock are entitled to vote at all meetings of shareholders, except meetings at which only holders of a specified class of shares are entitled to vote, receive any dividend declared by our Company's board of directors and, subject to the rights, privileges, restrictions and conditions attaching to any other class of shares, receive the remaining property of our Company upon dissolution. Shares of our preferred stock of each series rank on a parity with our share of preferred stock of any other series and are entitled to a preference over shares of our common stock with respect to the payment of dividends and the distribution of assets or return of capital in the event of liquidation, dissolution or winding-up of our Company. The provisions in our Articles attaching to our common stock and our preference stock may be altered, amended, repealed, suspended or changed by the affirmative vote of the holders of not less than two-thirds of the outstanding shares of common stock and two-thirds of the shares of preferred stock, as applicable. With the exception of special resolutions (i.e. resolutions in respect of fundamental changes to our Company, including: the sale of all or substantially all of its assets, an merger or other arrangement or an alteration to our Company's authorized capital) that require the approval of two-thirds of the votes cast by shareholders (holding common stock) entitled to vote at a meeting, either in person or by proxy, resolutions to approve matters brought before a meeting of our shareholders require approval by a simple majority of the votes cast by shareholders entitled to vote at a meeting, either in person or by proxy.
Shareholder Meetings
-
The Business Corporations Act (British Columbia) provides that:(i) meetings of shareholders must be held in British Columbia, unless otherwise provided in a company's Articles; (ii) directors must call an annual general of shareholders not later than 15 months after the last preceding annual general and once in every calendar year;(iii) for the purpose of determining shareholders entitled to receive notice of or vote at meetings of shareholders, the directors may fix in advance a date as the record date for that determination, provided that such date shall not precede by more than 50 days or by less than 21 days the date on which the meeting is to be held; (iv) a quorum of shareholders for a shareholder meeting may be set by the Articles and the Company’s Articles provide that the quorum for the transaction of business at a meeting of our shareholders is two shareholders, or one or more proxy holder representing two members, or one member and proxy holder representing another member; (v) the holders of not less than five percent of the issued shares entitled to vote at a meeting may requisition the directors to call a meeting of shareholders for the purposes stated in the requisition; and (vii) upon the application of a director or shareholder entitled to vote at the meeting, the Supreme Court of British Columbia may order a meeting to be called, held and conducted in a manner that the Court directs.
Limitations on Rights of Non-Canadians
-
Except as provided in the Investment Canada Act, there are no limitations specific to the rights of non-Canadians to hold or vote our common stock under the laws of Canada or British Columbia or in our charter documents. See "Exchange Controls" below in this Annual Report for a discussion of the principal features of the Investment Canada Act for non-Canadian residents proposing to acquire our common stock.
Delay of Change of Control
-
Pursuant to the provisions of the Business Corporations Act (British Columbia), at each annual general meeting of our shareholders all of our directors retire and the shareholders appoint a new board of directors. Each director holds office until our next annual general meeting unless:(i) he dies or resigns; (ii) he is removed by ordinary resolution of our shareholders (or class or series of shareholders if such class or series has the exclusive right to elect one or more directors); or (iii) the director becomes disqualified to hold officer, as provided under the Business Corporations Act (British Columbia).A director appointed or elected to fill a vacancy on our board holds office for the unexpired term of his predecessor (generally, until our next annual general meeting).With the exception of provisions in our Articles that limit the number of directors that can be appointed between annual meetings of shareholders and that give our directors the authority to issue blank check preferred stock, there are no provisions in our Notice of Articles or Articles that would have the effect of delaying, deferring or preventing a change in control of our Company, and that would operate only with respect to a merger, acquisition or corporate restructuring involving our Company.
Reporting of Share Ownership
-
Neither our Notice of Articles or Articles contain any provisions governing the ownership threshold above which shareholder ownership must be disclosed. Securities legislation in Canada, however, requires that we disclose in our annual general meeting proxy statement, holders who beneficially own more than ten percent of our issued and outstanding shares, and United States Federal securities laws require the disclosure in this Annual Report on Form-20F of holders who own more than five percent of our issued and outstanding shares.
Malaysia Joint Study and Bid Group Agreement
- On 11/12/13, subsequent to the end of Fiscal 2012, the Company entered into a 50/50 joint bid arrangement with an established Malaysian partner to evaluate opportunities and present carefully selected bids for new oil and gas production sharing and risk service contracts offered in Malaysia by PETRONAS, the national oil company. At the Report Date, the Malaysia Joint Study and Bid Group remains in effect.
Joint Development Agreement –
On 4/01/17, the Company entered into a Joint Development Agreement (the "
CHI JDA
") with Continental Hilir Indonesia Pte. Ltd. ("
CHI
"), a private Singapore company, for the joint development of Small-Scale Refinery Projects in Indonesia. CHI and the Company are related parties and at the Report Date share three common directors. The CHI JDA provides that CHI may earn an 80% participating interest with the Company on realization of any new Small Scale Refinery ("
SSR
") developments in Indonesia by providing reimbursable cash advances to the Company from time to time and also carrying or paying for the Company's 20% participating interest share of feasibility studies, pre-operations costs, proposal preparation, and presentation costs to local commercial partners and to foreign direct investment and SSR licensing authorities. At the Report Date, the CHI JDA remains in full force and effect.
Consulting and Joint Development Agreement –
On 28/02/17, the Company entered into a Consulting and Joint Development Agreement (the "
CHMEA JDA
") with Continental Hilir MEA (FZE) ("
CHMEA
"), a private company registered in the Sharjah Airport International Free Zone of the United Arab Emirates, for the joint development of Small-Scale Refinery Projects in the Middle East and Africa. CHMEA and the Company are related parties and at the Report Date share one common director. The CHMEA JDA provides that CHMEA may earn a 50% participating interest with the Company on realization of any new SSR developments in the Middle East and Africa by providing reimbursable cash advances to the Company from time to time and also carrying or paying for the Company's 50% participating interest share of feasibility studies, pre-operations costs, proposal preparation, and presentation costs to local commercial partners and to foreign direct investment and SSR licensing authorities. At the Report Date, the CHMEA JDA remains in full force and effect.
Except as discussed in ITEM-10.E, "Taxation", the Company is not aware of any Canadian federal or provincial laws, decrees, or regulations that restrict the export or import of capital, including foreign exchange controls, or that affect the remittance of dividends, interest or other payments to non-Canadian holders of the common shares. There are no limitations on the right of non-Canadian owners to hold or vote the common shares imposed by Canadian federal or provincial law or by the charter or other constituent documents of the Company.
The Investment Canada Act (the “Investment Act”), which generally prohibits a reviewable investment by an entity that is not a “Canadian”, as defined, unless after review, the minister responsible for the Investment Act is satisfied that the investment is likely to be of net benefit to Canada. An investment in the Shares by a non-Canadian who is not a “WTO investor” (which includes governments of, or individuals who are nationals of, member states of the World Trade Organization and corporations and other entities which are controlled by them), at a time when the Company was not already controlled by a WTO investor, would be reviewable under the Investment Act under three circumstances. First, if it was an investment to acquire control (within the meaning of the Investment Act) and the value of the Company’s assets, as determined under Investment Act regulations, was C$5 million or more. Second, the investment would also be reviewable if an order for review was made by the federal cabinet of the Canadian government on the grounds that the investment related to Canada’s cultural heritage or national identity (as prescribed under the Investment Act), regardless of asset value. Third, the investment would also be reviewable if an order for review is made by the federal cabinet of the Canadian government on the grounds that an investment by a non-Canadian could be injurious to national security.
An investment in the Shares by a WTO investor, or by a non-Canadian at a time when the Company was already controlled by a WTO investor, would be reviewable under the Investment Act if it was an investment to acquire control and the value of the Company’s assets, as determined under Investment Act regulations, was not less than a specified amount, which for 2009 is C$312 million.
The usual thresholds for review for direct acquisitions of Canadian businesses (other than acquisitions of cultural businesses) by foreign investors will change as of a date to be determined by the federal cabinet of the Canadian Government. At that time transactions will be reviewable only if the “enterprise value” of the assets of the Canadian business is equal to or greater than (a) C$600 million, in the case of investments made during the first two years after the amendments come into force; (b) C$800 million, in the case of investments made during the third and fourth years after the amendments come into force; and (c) C$1 billion, in the case of investments made between the fifth year after the amendments come into force and December 31 of the sixth year after the amendments come into force. This threshold will thereafter be adjusted on an annual basis.
The Investment Act provides detailed rules to determine if there has been an acquisition of control. For example, a non-Canadian would acquire control of the Company for the purposes of the Investment Act if the non-Canadian acquired a majority of the Shares. The acquisition of less than a majority, but one-third or more, of the Shares would be presumed to be an acquisition of control of the Company unless it could be established that, on the acquisition, the Company not controlled in fact by the acquirer. An acquisition of control for the purposes of the Investment Act could also occur as a result of the acquisition by a non-Canadian of all or substantially all of the Company’s assets.
Canadian Federal Income Tax Considerations
- The following summary discusses only the Canadian federal income tax considerations generally applicable to a holder (a "Holder") of one or more common shares of the Company who, for the purposes of the Income Tax Act (Canada) (the "Tax Act") is a non-resident of Canada who holds common shares as capital property. The summary deals with the provisions of the Tax Act in force on 12/31/99. It does not discuss all the tax consequences that may be relevant to particular holders in light of their circumstances or to holders subject to special rules. It is therefore not intended to be, nor should it be construed to be, legal or tax advice to any holder of common shares of the Company and no opinion or representation with respect to the Canadian income tax consequences to any such holder or prospective holder is made. Holders and prospective holders should therefore consult their own tax advisers with respect to their particular circumstances.
Dividends
- A Holder will be subject to Canadian withholding tax ("Part XIII Tax") equal to 25%, or such lower rate as may be available under an applicable tax treaty, of the gross amount of any dividend paid or deemed to be paid on common shares. Under the Canada-US Income Tax Convention (1980) as amended by the Protocols signed on 6/14/83, 3/28/84, 3/17/95, and 7/29/97 (the "Treaty"), the rate of Part XIII Tax applicable to a dividend on common shares paid to a Holder who is a resident of the United States and who is the beneficial owner of the dividend, is 5%.If the Holder is a company that owns at least 10% of the voting stock of the Company paying the dividend, and, in all other cases, the tax rate is 15% of the gross amount of the dividend. The Company will be required to withhold the applicable amount of Part XIII Tax from each dividend so paid and remit the withheld amount directly to the Receiver General for Canada for the account of the Holder.
Disposition of Common Shares
- A Holder who disposes of a common share, including by deemed disposition on death, will not normally be subject to Canadian tax on any capital gain (or capital loss) thereby realized unless the common share constituted "taxable Canadian property" as defined by the Tax Act. Generally, a common share of a public corporation will not constitute taxable Canadian property of a Holder if the share is listed on a prescribed stock exchange unless the Holder or persons with whom the Holder did not deal at arm's length alone or together held or held options to acquire, at any time within the five years preceding the disposition, 25% or more of the shares of any class of the capital stock of the Company. A Holder who is a resident of the United States and realizes a capital gain on a disposition of a common share that was taxable Canadian property will nevertheless, by virtue of the Treaty, generally be exempt from Canadian tax thereon unless (a) more than 50% of the value of the common shares is derived from, or from an interest in, Canadian real estate, including Canadian mineral resource properties, (b) the common share formed part of the business property of a permanent establishment that the Holder has or had in Canada within the 12 month period preceding the disposition, or (c) the Holder is an individual who (i) was a resident of Canada at any time during the 10 years immediately preceding the disposition, and for a total of 120 months during any period of 20 consecutive years, preceding the disposition, and (ii) owned the common share when he ceased to be resident in Canada. A Holder who is subject to Canadian tax in respect of a capital gain realized on a disposition of a common share must include three quarters of the capital gain (taxable capital gain) in computing the Holder's taxable income earned in Canada. The Holder may, subject to certain limitations, deduct three-quarters of any capital loss (allowable capital loss) arising on a disposition of taxable Canadian property from taxable capital gains realized in the year of disposition in respect to taxable Canadian property and, to the extent not so deductible, from such taxable capital gains realized in any of the three preceding years or any subsequent year.
United States Taxation
- For federal income tax purposes, an individual who is a citizen or resident of the United States or a domestic corporation ("US Taxpayer") will recognize a gain or loss on the sale of the Company's common shares equal to the difference between the proceeds from such sale and the adjusted tax basis of the common shares. The gain or loss will be a capital gain or capital loss if the Company's common shares are capital assets in the hands of the US Taxpayer. For federal income tax purposes, a US Taxpayer will be required to include in gross income dividends received on the Company's common shares. A US Taxpayer who pays Canadian tax on a dividend on common shares will be entitled, subject to certain limitations, to a credit (or alternatively, a deduction) against federal income tax liability.
A domestic corporation that owns at least 10% of the voting shares of the Company should consult its tax advisor as to applicability of the deemed paid foreign tax credit with respect to dividends paid on the Company's common shares. Under a number of circumstances, United States Investor acquiring shares of the Company may be required to file an information return with the Internal Revenue Service Center where they are required to file their tax returns with a duplicate copy to the Internal Revenue Service Center, Philadelphia, PA 19255. In particular, any United States Investor who becomes the owner, directly or indirectly, of 10% or more of the shares of the Company will be required to file such a return. Other filing requirements may apply, and United States Investors should consult their own tax advisors concerning these requirements.
This is not intended to be, nor should it be construed to be, legal or tax advice to any holder of common shares of the Company and no opinion or representation with respect to the US income tax consequences to any such holder or prospective holder is made. Holders and prospective holders should therefore consult their own tax advisers with respect to their particular circumstances.
F.
|
DIVIDENDS AND PAYING AGENTS.
|
This Form-20F is filed as an Exchange Act "Annual Report" and therefore the provision of information called for by this Item-10.F is not applicable.
This Form-20F is filed as an Exchange Act "Annual Report" and therefore the provision of information called for by this Item-10.G is not applicable.
Documents and agreements concerning our Company referred to in this Annual Report may be viewed by appointment during normal business hours at our registered and records office at 900-885 West Georgia Street, Vancouver, British Columbia, V6C 3H1, Canada.
I.
|
SUBSIDIARY INFORMATION.
|
As of the Report Date, we have no direct and indirectly owned subsidiaries incorporated in the United States.
Item - 11 : Quantitative and Qualitative Disclosure About Market Risk .
This Form-20F is filed as an Exchange Act "Annual Report" and therefore the provision of information called for by this Item-11 is not applicable.
Item - 12 : Description of Securities Other than Equity Securities .
This Form-20F is filed as an Exchange Act "Annual Report" and therefore the provision of information called for by this Item-12 is not applicable.
PART-II
Item - 13 : Defaults, Dividend Arrearages and Delinquencies .
A.
|
MATERIAL DEFAULT IN PAYMENT.
|
See disclosure in
Item-8.B.b "Default on Convertible Note"
above.
No payments of dividends of any kind have been made by the Company during the past Fiscal Year covered by this Annual Report or during the period up to the Report Date. No declarations of dividends of any kind have been made during the same period and consequently no dividend payments are accrued or in arrears.
Item - 14 : Material Modifications to Rights of Security Holders and Use of Proceeds .
A.
|
From the beginning of the Fiscal Year covered by this Annual Report up to the Report Date neither the Company nor anyone else has modified materially the instruments defining the rights of holders of any class of the Company's securities.
|
|
|
B.
|
From the beginning of the Fiscal Year covered by this Annual Report up to the Report Date neither the Company nor anyone else has modified materially or qualified the rights evidenced by any class of the Company's securities by issuing or modifying any other class of securities.
|
|
|
C.
|
From the beginning of the Fiscal Year covered by this Annual Report up to the Report Date neither the Company nor anyone else has withdrawn or substituted a material amount of the assets securing any class of the Company's securities.
|
|
|
D.
|
From the beginning of the Fiscal Year covered by this Annual Report up to the Report Date there have been no changes to the trustees or paying agents for any class of the Company's securities.
|
|
|
D.
|
From the beginning of the Fiscal Year covered by this Annual Report up to the Report Date the Company has not filed a first Securities Act registration statement.
|
Item - 15 : Controls and Procedures .
A.
|
DISCLOSURE CONTROLS AND PROCEDURES.
|
As required under applicable United States securities regulatory requirements, we have carried out an evaluation of the effectiveness of the design and operation of our Company's disclosure controls and procedures as at Fiscal Year ended 6/30/16 to prevent a material weakness. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in SEC rules and forms. Disclosure controls and procedures include, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer and Finance Manager, to allow timely decisions regarding required disclosure.
The Company carried out an evaluation under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures as of the end of the period covered by this Annual Report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of 6/30/16.
B.
|
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.
|
Our management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15 under the Securities Exchange Act of 1934. Our internal control over financial reporting is a process designed under the supervision of our principal executive officer and principal financial officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Our management assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in
Internal Control — Integrated Framework
, issued in 1992 by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the assessment, management determined that we maintained effective internal control over financial reporting as of 6/30/16, based on those criteria.
C.
|
ATTESTATION REPORT OF THE REGISTERED PUBLIC ACCOUNTING FIRM.
|
This report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company's registered public accounting firm pursuant to the Dodd-Frank Wall Street Reform Act of 2010 that provides small public companies with market capitalizations below $75 million a permanent exemption from the Sarbanes-Oxley Section 404(b) requirement to obtain an audit of internal controls over financial reporting.
D.
|
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING.
|
There were no changes in the Company’s internal control over financial reporting procedures or in other factors that have materially affected, or are reasonably likely to materially affect these internal controls over financial reporting subsequent to the date of management's last evaluation.
E.
|
OUTSOURCED ACCOUNTING AND CONTROLLER FUNCTIONS.
|
The Company outsources its internal controller and accounting functions under contract dated with AVISAR Chartered Professional Accountants of Langley, British Columbia, Canada. Beginning on that contract date and continuing as of the Report Date, AVISAR prepares financial reports for the Company, including annual and quarterly financial statements. AVISAR is also involved, together with the Company's CEO and CFO, in the preparation of the management discussion and analysis that forms, with the financial statements, a part of each annual or quarterly financial report. These reports are filed on SEDAR in Canada in accordance with the requirements of
Canadian Securities Administrators NI 51-102 Continuous Disclosure Obligations
. AVISAR also works with the Company's auditors, Davidson & Company LLP and assists them in the completion of their annual audits of the Company's financial statements.
Item - 16 : [Reserved]
A.
|
AUDIT COMMITTEE FINANCIAL EXPERT.
|
Our Board of Directors has determined that we have at least two members of our Audit Committee, Mr. Rudman and Mr. Garrison, that each qualify as an "
Audit Committee Financial Expert
" as defined in
Regulation S-K (17 CFR Part 229.407(d)(5)(ii))
. Mr. Rudman is a Certified Professional Accountant and Mr. Garrison is a Certified Public Accountant. Both have prior experience working at junior and senior management levels with public accounting firms. Mr. Rudman worked for Price Waterhouse Coopers, and Mr. Garrison worked for Arthur Young and Company. Our Board of Directors considers all three duly appointed members of the Company's Audit Committee to be "Financially Literate" as they are required to be in accordance with the meaning of that term as set forth in
Part-1.6 of NI 52-110 Audit Committees
B.
|
CODE OF ETHICS OF SENIOR FINANCIAL OFFICERS.
|
In addition to the Code of Business Conduct and Ethics published by the Company and described and incorporated herein as provided for in
Item-6.B.h "Code of Business Conduct and Ethics"
above our senior financial officers subscribe an additional code of ethics for the purposes of inclusion in this Annual Report. This additional code complies with Section-406 of the Sarbanes-Oxley Act of 2002 and the rules of the SEC promulgated thereunder. A copy of this additional code of ethics, entitled "
Code of Ethics for Senior Financial Officers
" and signed by the Company's two senior financial officers the CEO and the CFO and is filed with this Annual Report and annual audited financial statements for Fiscal 2015 as an attachment marked Exhibit-11.1.
C.
|
INDEPENDENT CERTIFYING AUDITOR'S FEES AND SERVICES.
|
For Fiscal 2014
- The Company engaged Dale Matheson Carr-Hilton Labonte LLP ("
DMCL
") Chartered Accountants, of Vancouver, British Columbia, Canada as the Company's independent certifying auditors on 10/13/06. DMCL is a member of the Chartered Professional Accountants of Canada British Columbia and a member of the Chartered Professional Accountants of Canada. In addition, DMCL is registered with the Public Company Accountability Oversight Board. Our Board of Directors appointed DMCL as our principal certifying accountant to audit our financial statements for the Fiscal 2014 and earlier period covered by this Annual Report.
For Fiscal 2015 and 2016
- Effective 12/31/14, the Company completed a Change of Auditor more fully described in Item-16.F below. The Vancouver, British Columbia, Canada based firm of
Davidson & Company LLP
(“
Davidson
”) was engaged as the Company’s auditors. Davidson is a member of the Chartered Professional Accountants of Canada British Columbia, a member of the Chartered Professional Accountants of Canada and is registered with the Public Company Accountability Oversight Board. Our Board of Directors appointed Davidson as our independent certifying accountant to audit our financial statements for the Fiscal 2015 period covered by this Annual Report.
Audit Fees
-
The aggregate fees billed by Davidson for professional services rendered for the audit of our annual financial statements for the year ended 6/30/15 are estimated at $15,000. The aggregate fees billed by Davidson for professional services rendered for the audit of our annual financial statements for the year ended 6/30/16 are estimated at $15,000.
Tax Fees
-
The aggregate fees billed by Davidson for professional services rendered and related to tax advice, return preparation, and tax planning for the year ended 6/30/15 were $ nil and the aggregate fees to be rendered by Davidson for similar services for the year ended 6/30/16 are also estimated to be $ nil.
Audit Committee Pre-Approved Procedures
- Our Audit Committee pre-approves all services provided by our principal accountants and their fees were reviewed and approved by the Audit Committee before the respective services were rendered and none of such services were approved by the Audit Committee pursuant to paragraph (c)(7)(i) of Rule 2-01 of Regulation S-X.
D.
|
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.
|
The provision of information called for by this Item-16.D is not applicable.
E.
|
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.
|
During the most recently completed Fiscal Year ended 6/30/15 and covered by this Annual Report the Company made no repurchases of its own securities pursuant to any plan or program. The Company made no public announcements of any securities repurchase plans or programs during the year. There are no outstanding securities that may yet be purchased under any plan or program attributable to the past or prior years as at the Report Date.
F.
|
CHANGE IN REGISTRANT’S INDEPENDENT CERTIFYING AUDITOR.
|
Davidson & Company LLP (“
Davidson
”) was engaged as the Company’s successor auditors, replacing Fiscal Year 2014 and former auditor Dale Matheson Carr-Hilton Labonte LLP ("
DMCL
"), who resigned at the request of the Company effective 12/31/14.
The Company completed a Change of Auditor in accordance with the
Part-4.11 Change of Auditor
provisions of the
Canadian Securities Regulators NI 51-102 Continuous Disclosure Obligations
. By order of the Company's board, a "
Notice of Change of Auditor
" dated 12/31/14 and filed on SEDAR on 1/09/15 (the "
Notice
"). The Notice was given, at the order of the board, by the Company to the British Columbia Securities Commission and the Alberta Securities Commission as per
Section-4.11(7) of NI 51-102
, and it stated that:
|
1.
|
DMCL has resigned as auditors of the Issuer at the request of the Issuer effective 12/31/14;
|
|
|
|
|
2.
|
the resignation of DMCL and the appointment of Davidson as the Issuer's auditor have been considered and approved by the Issuer's Board of Directors;
|
|
|
|
|
3.
|
there was no modified opinion in DMCL's report for the Issuer's most recently completed fiscal year, nor for any subsequent period;
|
|
|
|
|
4.
|
there have been no "reportable events" within the meaning assigned under
subsection 4.11(1) of Nl 51-102
.
|
In a letter, the "
DMCL Letter
" dated 12/31/14 and filed on SEDAR on 1/09/15, DMCL, acknowledged its review and agreement with the content of the Notice as required in connection with its resignation as the Company's auditor.
In a letter, the "
Davidson Letter
" dated 1/08/15 and filed on SEDAR on 1/09/15, DMCL, acknowledged its review and agreement with the content of the Notice as required in connection with its proposed engagement by the Company as auditor.
The Notice, DMCL Letter, and Davidson Letter were included as Exhibits 99-4, 99-5, and 99-6 respectively in a Form-6K filing reporting the auditor change that was made by the Company on EDGAR dated 1/12/15. These said exhibits are hereby incorporated into this Annual Report on Form-20F by this reference.
The Company’s securities are quoted on the OTCQB and are not listed on a national securities exchange in its home country of Canada. This Annual Report is for our Fiscal Year ended 6/30/16. Therefore, the provision of information called for by this Item-16.G is not applicable.
H.
|
MINE SAFETY DISCLOSURE.
|
Neither the Company, nor any one of its subsidiaries, act as operators of a coal or other mine. Therefore, the provision of mine safety information called for by this Item-16.H is not applicable in this Annual Report.
PART - III
Item - 17 : Financial Statements .
Refer to "Item 18 – Financial Statements" below.
Item - 18 : Financial Statements .
The Company is providing its audited annual financial statements with this Annual Report on Form-20F in the substance and form described in the following list and attached and labeled Exhibit-18 following Item-19 and the Signatures below:
List of Consolidated Financial Statements Filed Herewith as an Integrated Part of this Annual Report
|
(1)
|
Financial Statement Title Page.
|
|
|
|
|
(2)
|
Independent Auditor's Reports for Fiscal 2016 and Fiscal 2015 by Davidson & Company LLP.
|
|
|
|
|
(3)
|
Audited Consolidated Financial Statements for the past two Fiscal Years ended 6/30/16 and 6/30/15, including:
|
|
|
|
|
a.
|
Consolidated Statements of Financial Position.
|
|
|
|
|
b.
|
Consolidated Statements of Comprehensive Loss.
|
|
|
|
|
c.
|
Consolidated Statements of Cash Flow.
|
|
|
|
|
d.
|
Consolidated Statement of Changes in Equity (Deficiency).
|
|
|
|
|
e.
|
Notes to the Consolidated Financial Statements.
|
|
|
|
|
(4)
|
Management's Discussion & Analysis for the 2016 fiscal year ended 6/30/16 made on Form 51-102F in accordance with the Company's obligations in its home country pursuant to the Canadian Securities Administrator's
National Instrument NI 51-102 Continuous Disclosure Obligations
and its
Companion Policy NI 51-102CP
.
|
|
|
|
Item - 19 : Exhibits.
|
|
Exhibit
|
Description
|
01.1
|
(1)
Articles of Incorporation as last amended at a special general meeting on 9/10/08.
|
01.2
|
(2)
Notice of amended Articles of the Company as last recorded with the Registrar of British Columbia on 11/13/09.
|
11.1
|
Code of Ethics of Senior Financial Officers, CEO and CFO, dated at the Report Date.
|
12.1
|
Section 302 Certification under Sarbanes-Oxley Act of 2002 for CEO, dated at the Report Date.
|
12.2
|
Section 302 Certification under Sarbanes-Oxley Act of 2002 for CFO, dated at the Report Date.
|
13.1
|
Section 906 Certification under Sarbanes-Oxley Act of 2002 for CEO, dated at the Report Date.
|
13.2
|
Section 906 Certification under Sarbanes-Oxley Act of 2002 for CFO, dated at the Report Date.
|
18.0
|
Audited Annual Financial Statements More Fully Described in Item-18 above.
|
99.1
|
Audit Committee Charter, incorporated herein by reference to a copy filed on EDGAR under Form-6K on 5/17/17.
|
99.2
|
Governance and Nominating Committee Charter, incorporated herein by reference to a Form-6K filed on EDGAR on 5/17/17.
|
99.3
|
Compensation Committee Charter, incorporated herein by reference to a copy filed on EDGAR under Form-6K on 5/23/17.
|
99.4
|
Reserves Committee Charter, incorporated herein by reference to a copy filed on EDGAR under Form-6K on 5/23/17.
|
99.5
|
Policy on Trading and Company Securities, incorporated herein by reference to a copy filed on an EDGAR Form-6K on 5/23/17.
|
Notes:
(1)
Incorporated by reference to a copy furnished to the SEC under Form-6K on 10/10/08.
(2)
Incorporated by reference to a copy furnished to the SEC under Form-6K on 12/14/09.
SIGNATURES
CONTINENTAL ENERGY CORPORATION
<Signed>
_______________________________________
By: Richard L. McAdoo
Director & Chief Executive Officer
Report Date:
June 29, 2017
2016 FORM-20F EXHIBIT - 11.1
C
ODE
O
F
E
THICS
F
OR
S
ENIOR
F
INANCIAL
O
FFICERS
This constitutes the Company's Code of Ethics for senior financial officers as required by Section 406 of the Sarbanes-Oxley Act of 2002, for all companies reporting under Section 13(a) and 15(d) of the Securities Exchange Act of 1934
Last Revised on June 29, 2017
The Chief Executive Officer, Chief Financial Officer and Controller (collectively, the "Senior Financial Officers") of Continental Energy Corporation (the "Company") must adhere to this Code of Ethics for Senior Officers, in addition to all other applicable Company Policies and the Company's separately published Code of Business Conducts and Ethics for all its employees. The Company currently has no officer serving in the capacity of Controller.
1. P
RINCIPLES
G
OVERNING
P
ROFESSIONAL
A
ND
E
THICAL
C
ONDUCT
It is the policy of the Company that its Senior Financial Officers will adhere to, advocate for, and promote professional and ethical conduct; honesty and integrity, and accountability for adherence to this code.
2. C
ONFLICTS OF
I
NTEREST
The Senior Financial Officers must promote a culture of honesty and integrity throughout the Company and avoid conflicts of interest with the Company. The Senior Financial Officers should avoid actual or apparent conflicts of interest between personal and professional relationships. Any situation, transaction or relationship that involves, or may reasonably be expected to involve, a conflict of interest with the Company must be disclosed immediately to the Audit Committee.
3. F
INANCIAL
R
EPORTING AND
D
ISCLOSURE
Senior Financial Officers shall provide fair, accurate, timely, and understandable disclosure in this Form-20F Annual Report of a "foreign private issuer" under Section 13(a) and 15(d) of the Securities Exchange Act of 1934. The said officers seek to provide disclosure to the investment community that is not only in conformity with Section 406 of the Sarbanes-Oxley Act of 2002, but that also fairly presents the financial condition and results of operations of the Company to its shareholders and possible investors. Senior Financial Officers shall also seek to promote ethical behavior by other Company employees involved in financial reporting.
4. C
OMPLIANCE WITH
A
PPLICABLE
L
AWS
, R
ULES AND
R
EGULATIONS
It is the policy of the Company to comply with all applicable laws, rules and regulations of federal, state and local governments and other regulatory agencies that affect the conduct of the Company's business and financial reporting. The Senior Financial Officers are expected to be familiar with the legal and regulatory requirements applicable to their business responsibilities and to fulfill their duties in accordance with these laws, rules and regulations.
5. W
AIVER
Waivers of this Code of Ethics may only be granted by the Company’s Audit Committee and will be disclosed in accordance with applicable securities laws.
6. C
ODE
C
OMPLIANCE AND
V
IOLATIONS
Compliance with this Code of Ethics is mandatory. Each Senior Financial Officer shall promptly report any information he or she may have concerning evidence of any material violation of the securities or other laws, rules or regulations applicable to the Company and the operation of its business, by the Company, or any of its agents, and any violation of this Code of Ethics to the Company’s Audit Committee. The Audit Committee may determine, or designate appropriate persons to determine, appropriate disciplinary action, up to and including termination of employment, in the event of any such violation.
The undersigned incumbent Senior Financial Officers have read the foregoing and certify their compliance with this Code of Ethics.
|
|
<Signed>
|
<Signed>
|
_____________
|
_____________
|
Richard L. McAdoo
|
Robert V. Rudman
|
Chief Executive Officer
|
Chief Financial Officer
|
2016 FORM - 20F EXHIBIT - 12.1
SARBANES OXLEY ACT OF 2002 SECTION 302 CERTIFICATIONS
The disclosure required to be filed pursuant to Section 302 of the Sarbanes Oxley Act of 2002 is included below in this Exhibit-12.1 in the form required as Certificates by the Company's CFO.
CFO CERTIFICATE
I,
Robert V. Rudman
, certify that:
1.
|
I have reviewed and read this annual report on Form-20F of Continental Energy Corporation (the “Company”) for the Company's fiscal year ended
30 June 2016
;
|
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
|
|
|
4.
|
The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
|
|
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
|
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
|
|
|
(c)
|
Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
|
|
|
(d)
|
Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonable likely to materially affect, the Company’s internal control over financial reporting; and
|
|
|
|
5.
|
The Company’s other certifying officer and I have disclosed, based on our most recent evaluations of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
|
|
|
|
(a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
|
|
|
|
|
(b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
|
Dated:
June 29, 2017
<Signed>
__________________
Robert V. Rudman
Chief Financial Officer
2016 FORM-20F EXHIBIT - 12.2
SARBANES OXLEY ACT OF 2002 SECTION 302 CERTIFICATIONS
The disclosure required to be filed pursuant to Section 302 of the Sarbanes Oxley Act of 2002 is included below in this Exhibit-12.2 in the form required as Certificates by the Company's CEO.
CEO CERTIFICATE
I,
Richard L. McAdoo
, certify that:
1.
|
I have reviewed and read this annual report on Form-20F of Continental Energy Corporation (the “Company”) for the Company's fiscal year ended
30 June 2016
;
|
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
|
|
|
4.
|
The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
|
|
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
|
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
|
|
|
(c)
|
Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
|
|
|
(d)
|
Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonable likely to materially affect, the Company’s internal control over financial reporting; and
|
|
|
|
5.
|
The Company’s other certifying officer and I have disclosed, based on our most recent evaluations of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
|
|
|
|
(a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
|
|
|
|
|
(b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.
|
Dated:
June 29, 2017
<Signed>
__________________
Richard L. McAdoo
Chief Executive Officer
2016 FORM-20F EXHIBIT - 13.1
Certification Furnished Pursuant To Rule 13a-14(B) (17 CFR 240.13a-14(B)) or
Rule 15d-14(B) (17 CFR 240.15d-14(B)) and Section 1350 of Chapter 63 Of Title 18 of
The United States Code (18 U.S.C. 1350), Promulgated Under Section 906 of The Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form-20F for the fiscal year ended
30 June 2016
of Continental Energy Corporation, a British Columbia, Canada corporation (the “Company”), as filed with the Securities and Exchange Commission on the date hereof (the “Annual Report”), I,
Richard L. McAdoo
, Chief Executive Officer of the Company certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
|
The Annual Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
|
|
2.
|
The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Dated:
June 29, 2017
<Signed>
__________________
Richard L. McAdoo
Chief Executive Officer
2016 FORM-20F EXHIBIT - 13.2
Certification Furnished Pursuant To Rule 13a-14(B) (17 CFR 240.13a-14(B)) or
Rule 15d-14(B) (17 CFR 240.15d-14(B)) and Section 1350 of Chapter 63 Of Title 18 of
The United States Code (18 U.S.C. 1350), Promulgated Under Section 906 of The Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form-20F for the fiscal year ended
30 June 2016
of Continental Energy Corporation, a British Columbia, Canada corporation (the “Company”), as filed with the Securities and Exchange Commission on the date hereof (the “Annual Report”), I,
Robert V. Rudman
, Chief Financial Officer of the Company certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1.
|
The Annual Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
|
|
2.
|
The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Dated:
June 29, 2017
<Signed>
__________________
Robert V. Rudman
Chief Financial Officer
The foregoing certifications are being furnished solely pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended, and 18 U.S.C. § 1350 and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.
2016 FORM-20F EXHIBIT - 18.0
A
UDITED
C
ONSOLIDATED
F
INANCIAL
S
TATEMENTS
CONTINENTAL ENERGY CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
30 June 2016
Expressed in U.S. Dollars
Contents
-
Financial Statement Title Page.
-
Independent Auditor's Reports for Fiscal 2016 and Fiscal 2015 by Davidson & Company LLP.
-
Audited Consolidated Financial Statements for the past two Fiscal Years ended 6/30/16 and 6/30/15, including:
-
Consolidated Statements of Financial Position.
-
Consolidated Statements of Comprehensive Loss.
-
Consolidated Statements of Cash Flow.
-
Consolidated Statement of Changes in Equity (Deficiency).
-
Notes to the Consolidated Financial Statements.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Directors of
Continental Energy Corporation
We have audited the accompanying financial statements of Continental Energy Corporation, which comprise the statements of financial position as of June 30, 2016 and 2015, and the related statements of loss and comprehensive loss, changes in deficiency, and cash flow for the years ended June 30, 2016 and 2015, and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, these financial statements present fairly, in all material respects, the financial position of Continental Energy Corporation as at June 30, 2016 and 2015, and its financial performance and its cash flows for the years ended June 30, 2016 and 2015, in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Emphasis of Matter
Without qualifying our opinion, we draw attention to Note 1 in the financial statements which indicate that Continental Energy Corporation has suffered recurring losses from operations and has a net capital deficiency. These matters, along with the other matters set forth in Note 1, indicate the existence of material uncertainties that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
“DAVIDSON & COMPANY LLP”
|
|
Vancouver, Canada
|
Chartered Professional Accountants
|
June 29, 2017
CONTINENTAL ENERGY CORPORATION
FINANCIAL STATEMENTS
30 JUNE 2016
Expressed in U.S. Dollars
1
Continental Energy Corporation
Financial Statements
(Expressed in US Dollars)
S
TATEMENTS OF
F
INANCIAL
P
OSITION
|
|
|
|
|
|
ASSETS
|
Note
|
30 June 2016
|
|
30 June 2015
|
|
Current
|
|
$
|
|
$
|
|
Cash
|
|
1,290
|
|
4,015
|
|
Receivables
|
|
1,278
|
|
731
|
|
Prepaid expenses and deposits
|
|
3,349
|
|
12,636
|
|
|
|
5,917
|
|
17,382
|
|
Non-current assets
|
|
|
|
|
|
Property, plant and equipment
|
|
1,461
|
|
2,922
|
|
|
|
7,378
|
|
20,304
|
|
LIABILITIES
|
|
|
|
|
|
Current
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
11
|
751,783
|
|
434,244
|
|
Loans from related parties
|
11
|
71,500
|
|
-
|
|
Convertible debt
|
9
|
465,014
|
|
419,890
|
|
|
|
1,288,297
|
|
854,134
|
|
DEFICIENCY
|
|
|
|
|
|
Share capital
|
10
|
16,201,630
|
|
16,201,630
|
|
Conversion rights reserve
|
|
92,966
|
|
92,966
|
|
Share-based payment and other reserve
|
10
|
9,927,687
|
|
9,901,487
|
|
Deficit
|
|
(27,503,202
|
)
|
(27,029,913
|
)
|
|
|
(1,280,919
|
)
|
(833,830
|
)
|
|
|
7,378
|
|
20,304
|
|
Nature of Operations and Going Concern
(Note
1
)
Subsequent Events
(Note 15)
ON BEHALF OF THE BOARD:
“Richard L. McAdoo”
, Director & CEO
“Robert V. Rudman”
, Director & CFO
- See Accompanying Notes -
2
Continental Energy Corporation
Financial Statements
(Expressed in US Dollars)
S
TATEMENTS OF
L
OSS AND
C
OMPREHENSIVE
L
OSS
|
|
|
|
|
|
|
|
Year Ended
|
|
Year Ended
|
|
|
Note
|
30 June 2016
|
|
30 June 2015
|
|
EXPENSES
|
|
$
|
|
$
|
|
Depreciation
|
|
1,461
|
|
2,923
|
|
Interest and bank charges
|
9
|
47,385
|
|
84,551
|
|
Management and consulting fees
|
11
|
290,627
|
|
336,889
|
|
Office and investor relations
|
|
40,396
|
|
122,321
|
|
Professional fees
|
|
56,319
|
|
104,918
|
|
Rent, maintenance and utilities
|
|
3,928
|
|
21,216
|
|
Share-based payments
|
10
|
26,200
|
|
100,000
|
|
Travel and accommodation
|
|
8,514
|
|
26,561
|
|
|
|
(474,830
|
)
|
(799,379
|
)
|
Other income (expenses)
|
|
|
|
|
|
Interest and foreign exchange
|
|
1,541
|
|
2,798
|
|
Loss on disposal of subsidiary
|
8
|
-
|
|
(159,837
|
)
|
Net loss for the year
|
|
(473,289
|
)
|
(956,418
|
)
|
|
|
|
|
|
COMPREHENSIVE
L
OSS
F
OR THE
Y
EAR
|
|
|
|
|
Net loss for the year
|
|
(473,289
|
)
|
(956,418
|
)
|
Other Comprehensive income (loss) to be reclassified to profit or loss in subsequent periods:
|
|
|
|
|
Exchange differences on translation of foreign operations
|
|
-
|
|
37,900
|
|
Recycle of translation differences on disposal of subsidiary
|
8
|
-
|
|
(19,209
|
)
|
Comprehensive loss for the year
|
|
(473,289
|
)
|
(937,727
|
)
|
Comprehensive loss attributable to:
|
|
|
|
|
Shareholders of the Company
|
|
(473,289
|
)
|
(956,298
|
)
|
Non-controlling interests
|
|
-
|
|
18,571
|
|
Loss Per Share – Basic and Diluted
|
|
(0.00
|
)
|
(0.01
|
)
|
Weighted Average Number of Shares
|
128,601,682
|
|
128,601,682
|
|
- See Accompanying Notes -
3
Continental Energy Corporation
Financial Statements
(Expressed in US Dollars)
S
TATEMENTS OF
C
ASH
F
LOW
|
|
|
|
|
|
|
|
Year Ended
|
|
Year Ended
|
|
Cash Resources Provided By (Used In)
|
Note
|
30 June 2016
|
|
30 June 2015
|
|
Operating Activities
|
|
$
|
|
$
|
|
Loss for the year
|
|
(473,289
|
)
|
(956,418
|
)
|
Items not affecting cash
|
|
|
|
|
|
Depreciation
|
|
1,461
|
|
2,923
|
|
Interest on convertible debt
|
9
|
45,124
|
|
81,000
|
|
Loss on disposal of subsidiary
|
8
|
-
|
|
159,837
|
|
Share-based payments
|
10
|
26,200
|
|
100,000
|
|
Changes in non-cash working capital
|
|
|
|
|
|
Receivables
|
|
(547
|
)
|
6,334
|
|
Prepaid expenses and deposits
|
|
9,287
|
|
11,921
|
|
Accounts payable and accrued liabilities
|
|
317,539
|
|
35,982
|
|
|
|
(74,225
|
)
|
(558,421
|
)
|
Investing Activities
|
|
|
|
|
|
Consideration received upon disposal of subsidiary
|
8
|
-
|
|
200,000
|
|
|
|
-
|
|
200,000
|
|
Financing Activities
|
|
|
|
|
|
Shares issued – cash
|
10
|
-
|
|
120,000
|
|
Proceeds from loans from related parties
|
11
|
71,500
|
|
-
|
|
|
|
71,500
|
|
120,000
|
|
|
|
|
|
|
|
Change in cash
|
|
(2,725
|
)
|
(238,421
|
)
|
Cash Position – Beginning of Year
|
|
4,015
|
|
242,436
|
|
Cash Position – End of Year
|
|
1,290
|
|
4,015
|
|
Supplemental cash flow information
(Note 13)
- See Accompanying Notes -
4
Continental Energy Corporation
Financial Statements
(Expressed in US Dollars)
S
TATEMENTS OF
C
HANGES IN
E
QUITY
(D
EFICIENCY
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-Based
|
|
|
|
Foreign
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment and
|
|
Conversion
|
|
Currency
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Other
|
|
Rights
|
|
Translation
|
|
|
|
controlling
|
|
|
|
|
|
Share Capital
|
Reserve
|
|
Reserve
|
|
Reserve
|
|
Deficit
|
|
Interest
|
|
Total
|
|
|
Note
|
Number
|
|
Amount $
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
$
|
|
Balance on 30 June 2014
|
|
123,615,381
|
|
16,131,630
|
|
9,401,487
|
|
56,966
|
|
(120
|
)
|
(26,073,495
|
)
|
(204,417
|
)
|
(687,949
|
)
|
Private placements – cash
|
10
|
2,400,000
|
|
120,000
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
120,000
|
|
Conversion of loan
|
10
|
15,000,000
|
|
750,000
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
750,000
|
|
Convertible debt amendments
|
9
|
-
|
|
-
|
|
-
|
|
36,000
|
|
-
|
|
-
|
|
-
|
|
36,000
|
|
Shares issued for services
|
10
|
2,000,000
|
|
100,000
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
100,000
|
|
Foreign currency translation
|
|
-
|
|
-
|
|
-
|
|
-
|
|
19,329
|
|
-
|
|
18,571
|
|
37,900
|
|
Disposal of subsidiary
|
8
|
(20,000,000
|
)
|
(900,000
|
)
|
500,000
|
|
-
|
|
(19,209
|
)
|
-
|
|
185,846
|
|
(233,363
|
)
|
Loss for the year
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(956,418
|
)
|
-
|
|
(956,418
|
)
|
Balance on 30 June 2015
|
|
123,015,381
|
|
16,201,630
|
|
9,901,487
|
|
92,966
|
|
-
|
|
(27,029,913
|
)
|
-
|
|
(833,830
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive warrants
|
10
|
-
|
|
-
|
|
26,200
|
|
-
|
|
-
|
|
-
|
|
-
|
|
26,200
|
|
Loss for the year
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(473,289
|
)
|
-
|
|
(473,289
|
)
|
Balance on 30 June 2016
|
|
123,015,381
|
|
16,201,630
|
|
9,927,687
|
|
92,966
|
|
-
|
|
(27,503,202
|
)
|
-
|
|
(1,280,919
|
)
|
- See Accompanying Notes -
5
Continental Energy Corporation
N
OTES TO THE
F
INANCIAL
S
TATEMENTS
(Expressed in US Dollars)
30 JUNE 2016
|
|
1.
|
Nature of Operations and Going Concern
|
Continental Energy Corporation (“
Continental
” or the “
Company
”) is incorporated under the laws of the Province of British Columbia, Canada. The Company’s registered address and records office is 900-885 West Georgia Street, Vancouver, British Columbia, Canada V6C 3H1.
The Company has historically been engaged in the assembly of a portfolio of oil and gas exploration properties but has begun diversifying its business into a broader range upstream and downstream oil and gas activities. These include new small-scale, distributed oil refineries and gas-turbine power plant developments fully integrated with smaller and stranded oil and gas production in underserved local markets.
At the 21 June 2017 date of this filing the Company has completed the audits, financial reports, and made most of the regulatory filings to remedy and cure a cease trade order issued on 4 November 2015 by the British Columbia Securities Commission ("
BCSC
"). The order was issued because the Company was at that time deficient in its regulatory requirements involving the filing of its audited consolidated financial statements for the fiscal years ended 30 June 2015. The order prohibits trading of the Company’s securities in Canada until the deficiency is cured by the Company filing the required delinquent financial reports and a revocation order is issued by the BCSC.
In addition to the audited statements for the year ended 30 June 2015, the Company must also prepare and file the same for the year ended 30 June 2016, plus the six interim quarterly financial reports for the three fiscal quarters ended 31 March 2016 and the three quarters ended 31 March 2017. The Company completed its annual audits and filed both its delinquent Fiscal 2015 report on 24 May 2017 and this Fiscal 2016 report on 21 June 2017. Three of the six delinquent interim reports for the three quarters ended 31 March 2016 were completed and filed on 20 June 2017. The Company is working to complete and file the last late reports for the three quarters ended 31 March 2017. When filed, these last reports complete the requirements to remedy and cure the deficiency which led to the cease trade order. The Company intends to immediately thereafter apply to the BCSC for a revocation order.
These financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Company will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. The Company has incurred operating losses over the past several fiscal years and has no current source of operating cash flows. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the financing necessary to acquire and develop its projects as well as fund ongoing administration expenses. There are no assurances that sufficient funding will be available.
Management intends to obtain additional funding by issuing common shares in private placements. There can be no assurance that management’s future financing actions will be successful. Management is not able to assess the likelihood or timing of raising capital for future expenditures or acquisitions.
These uncertainties indicate the existence of material uncertainty that cast significant doubt on the Company’s ability to continue as a going concern in the future. If the going concern assumption were not appropriate for these financial statements, liquidation accounting would apply and adjustments would be necessary to the carrying values and classification of assets, liabilities, the reported income and expenses, and such adjustments could be material.
These financial statements have been prepared in accordance with International Financial Reporting Standards (“
IFRS
”) as issued by the International Accounting Standards Board (“
IASB
”) and the interpretations of the International Financial Reporting Interpretations Committee (“
IFRIC
”). The policies presented in Note 3 were consistently applied to all periods presented.
The Company’s Board of Directors, upon the recommendation of its Audit Committee, has approved these financial statements on 20 June 2017.
These financial statements have been prepared on a historical cost basis and presented in United States (“
US
”) dollars, the functional currency of the Company, except when otherwise indicated.
6
Continental Energy Corporation
N
OTES TO THE
F
INANCIAL
S
TATEMENTS
(Expressed in US Dollars)
30 JUNE 2016
|
|
3.
|
Summary of Significant Accounting Policies
|
Foreign Currencies
The functional currency is the currency of the primary economic environment in which the entity operates. The functional currency determinations were conducted through an analysis of the consideration factors identified in IAS 21, the Effects of Changes in Foreign Exchange Rates (“IAS 21”).
The Company’s functional and presentation currency is the U.S. dollar.
Any transactions in currencies other than the functional currency have been translated to the U.S. dollar in accordance with IAS 21. Transactions in currencies other than the functional currency are recorded at that rates of exchange prevailing on dates of transactions. At the end of each reporting period, monetary assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at that date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at rates prevailing at the date when the fair value was determined. All gains and losses on translation of these foreign currency transactions are included in the statements of loss and comprehensive loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Loss per Share
Basic loss per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding during the period. The computation of diluted earnings per share assumes the conversion, exercise or contingent issuance of securities only when such conversion, exercise or issuance would have a dilutive effect on earnings per share. The dilutive effect of convertible securities is reflected in diluted earnings per share by application of the “if converted” method. The dilutive effect of outstanding options and warrants and their equivalents is reflected in diluted earnings per share by application of the treasury stock method. In the years when the Company reports a loss, the effect would be anti-dilutive, and therefore, basic and diluted loss per share are the same.
Share Based Payments
The Company grants stock options to buy common shares of the Company to directors, officers, employees and service providers. The board of directors grants such options for periods of up to five years, with vesting periods determined at its sole discretion and at prices equal to or greater than the closing market price on the day preceding the date the options were granted. An individual is classified as an employee when the individual is an employee for legal or tax purposes (direct employee) or provides services similar to those performed by a direct employee.
The fair value of the share purchase options granted is measured using the Black-Scholes option pricing model taking into account the terms and conditions upon which the share purchase options were granted. At each statement of financial position reporting date, the amount recognized as an expense is adjusted to reflect the actual number of share purchase options that are expected to vest.
Unit Private Placements
The Company values warrants issued as part of a private placement unit by allocating the proceeds from the issuance of units between common shares and common share purchase warrants on a pro-rata basis based on relative fair values as follows:
-
The fair value of common shares is based on the closing market price on the date the units are issued; and
-
The fair value of the common share purchase warrants is determined using the Black-Scholes pricing model.
The fair value attributed to the warrants is recorded in the share based payment reserve.
Property, Plant and Equipment
Equipment is carried at cost less accumulated depreciation. Depreciation is charged so as to write-off the cost of these assets, less residual value, over their estimated useful economic lives on 50% declining balance basis, for automobiles, office furniture, computers and other equipment including software.
7
Continental Energy Corporation
N
OTES TO THE
F
INANCIAL
S
TATEMENTS
(Expressed in US Dollars)
30 JUNE 2016
Financial Instruments
Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument. Financial assets and liabilities are offset and the net amount is reported in the statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.
Financial assets:
Financial assets are classified into one of the following categories:
-
Fair value through profit or loss (“FVTPL”);
-
Available for sale (“AFS”);
-
Held-to-maturity (“HTM”); and
-
Loans and receivables.
The classification is determined at initial recognition and depends on the nature and purpose of the financial asset.
|
|
|
|
(i)
|
FVTPL financial assets
|
Financial instruments are classified as FVTPL when the financial instrument is held for trading or is designated as FVTPL.
A financial instrument is classified as held for trading if:
-
It has been acquired principally for the purpose of selling in the near future;
-
It is part of an identified portfolio of financial instruments that the Company manages and has an actual pattern of short-term profit-making; or
-
It is a derivative that is not designated and effective as a hedging instrument.
Financial instruments classified as FVTPL are stated at fair value with any resultant gain or loss recognized in profit or loss.
The Company has no financial assets classified as FVTPL.
|
|
|
|
(ii)
|
AFS financial assets
|
Instruments held by the Company that are classified as AFS are stated at fair value. Gains and losses arising from changes in fair value are recognized directly in equity in the investments revaluation reserve. When an investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognized in the investments revaluation reserve is included in profit or loss for the period.
The fair value of AFS monetary assets denominated in a foreign currency is translated at the spot rate on the statement of financial position date. The change in fair value attributable to translation differences due to a change in amortized cost of the asset is recognized in profit or loss, while all other changes are recognized in equity/deficiency.
The Company has no financial assets classified as AFS.
|
|
|
|
(iii)
|
HTM financial assets
|
Investments are recognized on a trade-date basis and are initially measured at fair value, including transaction costs. After initial recognition, the Company carries the assets at amortized costs less impairment. The Company assesses its intention and ability to hold its held-to-maturity investments to maturity not only when those financial assets are initially recognized, but also at the end of each subsequent reporting period. The Company has no HTM financial assets.
|
|
|
|
(iv)
|
Loans and receivable
|
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables.
8
Continental Energy Corporation
N
OTES TO THE
F
INANCIAL
S
TATEMENTS
(Expressed in US Dollars)
30 JUNE 2016
Loans and receivables are initially recognized at the transaction value and subsequently carried at amortized cost less impairment losses. The impairment loss of receivables is based on a review of all outstanding amounts at year end. Bad debts are written off during the year in which they are identified. Interest income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.
The Company has classified receivables and cash as loans and receivables.
|
|
|
|
(v)
|
Effective interest method
|
The effective interest method calculates the amortized cost of a financial asset and allocates interest income over the corresponding period. The effective interest rate is the rate that discounts estimated future cash receipts over the expected life of the financial instrument, or, where appropriate, a shorter period.
|
|
|
|
(vi)
|
Derecognition of financial assets
|
A financial instrument is derecognized when:
Financial liabilities:
Financial liabilities are classified into one of the following categories:
The classification is determined at initial recognition and depends on the nature and purpose of the financial liability.
|
|
|
|
(i)
|
FVTPL financial liabilities
|
This category comprises derivatives, or liabilities acquired or incurred principally for the purpose of selling or repurchasing it in the near term. They are carried on the statement of financial position at fair value with changes in fair value recognized in the profit or loss.
|
|
|
|
(ii)
|
Other financial liabilities
|
These are initially measured at fair value, net of transaction costs, and are subsequently measured at amortized cost using the effective interest method, with interest expense recognized on an effective yield basis. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expenses over the corresponding period. The effective interest rate is the rate that exactly discounts estimated future cash payments over the expected life of the financial liability, or, where appropriate, a shorter period.
The Company has classified accounts payable, accrued liabilities, loans from related parties, and convertible debt other financial liabilities.
|
|
|
|
(iii)
|
Derecognition of financial liabilities
|
Financial liabilities are derecognized when the Company’s obligations are discharged, cancelled or they expire.
Impairment
Financial assets
At each reporting date, the Company assesses whether there is objective evidence that a financial asset is impaired. If such evidence exists, the Company recognizes an impairment loss as follows:
-
Financial assets carried at amortized cost: The loss is the difference between the amortized cost of the loan or receivable and the present value of the estimated future cash flows, discounted using the instrument’s original effective interest rate. The carrying amount of the asset is reduced by this amount either directly or indirectly through the use of an allowance account.
9
Continental Energy Corporation
N
OTES TO THE
F
INANCIAL
S
TATEMENTS
(Expressed in US Dollars)
30 JUNE 2016
-
Available-for-sale financial assets: The impairment loss is the difference between the original cost of the asset and its fair value at the measurement date, less any impairment losses previously recognized in the statement of comprehensive loss. This amount represents the cumulative loss in accumulated OCI that is reclassified to profit or loss.
Impairment losses on financial assets carried at amortized cost are reversed in subsequent periods if the amount of the loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized. Impairment losses on available-for-sale equity instruments are not reversed.
Non-financial assets
At the end of each reporting period, the Company reviews the carrying amounts of its long lived assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the CGU to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual CGUs, or otherwise they are allocated to the smallest group of CGUs for which a reasonable and consistent allocation basis can be identified.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of the asset or CGU is reduced to its recoverable amount. An impairment loss is recognized in profit or loss.
Where an impairment loss subsequently reverses for assets with a finite useful life, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or CGU in prior periods. A reversal of an impairment loss is recognized in profit or loss.
Compound Financial Instruments
Compound financial instruments issued by the Company comprise convertible promissory notes that can be converted into fixed number of common shares of the Company. The liability component of the compound financial instrument is recognized initially at the fair value of a similar liability that does not have any equity conversion option. The equity component is recognized as the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts. Should a compound financial instrument have more than one equity component, transaction costs are allocated to the equity components in proportion to their respective fair values.
Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortized cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition.
Income Taxes
Income tax expense consists of current and deferred tax expense. Income tax expense is recognized in the statements of comprehensive loss.
Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous years.
Deferred taxes are recorded using the liability method. Under the liability method, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that substantive enactment occurs.
10
Continental Energy Corporation
N
OTES TO THE
F
INANCIAL
S
TATEMENTS
(Expressed in US Dollars)
30 JUNE 2016
A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. To the extent that the Company does not consider it probable that a deferred tax asset will be recovered, it provides a valuation allowance against the excess.
The following temporary differences do not result in deferred tax assets or liabilities:
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset when they relate to income taxes levied by the same taxation authority.
|
|
4.
|
Significant Accounting Estimates and Judgments
|
The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, profit and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and further periods if it affects both current and future periods.
Critical Accounting Estimates:
Significant estimates relate to, but are not limited to
Share-based compensation
The Company provides compensation benefits to its employees, directors and officers through a stock option plan. The fair value of each option award is estimated on the date of the grant using the Black-Scholes option pricing model. Expected volatility is based on historical stock price volatility of comparable companies in a similar stage of life cycle as the Company. The Company uses historical data to estimate option exercises and forfeiture rates within the valuation model. The risk-free interest rate for the expected term of the option is based on the yields of government bonds.
When the Company determines it necessary to modify the terms of the options, the Black-Scholes option pricing model is utilized at the date of the modification and uses the modified terms in order to calculate the incremental change in value of the original option.
Changes in these assumptions, especially the volatility and the expected life determination could have a material impact on the Company’s comprehensive loss for the year.
Warrant valuation
The Company grants warrants in conjunction with private placements and as compensation for financing arrangements. The fair value of each warrant granted is estimated on the date of the grant using the Black-Scholes option pricing model. Expected volatility is based on historical stock price volatility of comparable companies in a similar stage of life cycle as the Company. The Company uses historical data to estimate the timing of warrant exercises within the valuation model. The risk-free interest rate for the expected term of the warrant is based on the yields of government bonds. When the Company determines it necessary to modify the terms of a warrants, the Black-Scholes option pricing model is utilized at the date of the modification and uses the modified terms in order to calculate the incremental change in value of the original warrant if the warrants were originally issued as compensation.
Changes in these assumptions, especially the volatility and the expected life determination could have a material impact on the Company’s comprehensive loss for the year.
11
Continental Energy Corporation
N
OTES TO THE
F
INANCIAL
S
TATEMENTS
(Expressed in US Dollars)
30 JUNE 2016
Critical Judgments:
Recovery of deferred taxes
Judgment is required in determining whether deferred tax assets are recognized on the statement of financial position. Deferred tax assets require management to assess the likelihood that the Company will generate taxable income in future periods in order to utilize recognized deferred tax assets. Estimates of future taxable income are based on forecasted cash flows and the application of existing tax laws in each jurisdiction. The Company has not recognized any deferred tax assets on the statement of financial position as at 30 June 2016.
|
|
5.
|
Standards Issued but Not Yet Effective
|
Certain new standards, interpretations, amendments and improvements to existing standards were issued by the IASB or IFRIC, that are mandatory for accounting periods on after July 1, 2016. Many are not applicable or do not have a significant impact on the Company and have been excluded from the summary below.
The Company is currently assessing the impact of the following standards, which have not yet been adopted.
IFRS 9 Financial Instruments
This standard and its consequential amendments will replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9, except that an entity choosing to measure a financial liability at fair value will present the portion of any change in its fair value due to changes in the entity’s own credit risk in other comprehensive income, rather than within profit or loss. The new standard also requires a single impairment method to be used, replacing the multiple impairment methods in IAS 39. IFRS 9 is effective for annual periods beginning on or after January 1, 2018. Earlier adoption is permitted.
IFRS 2, Share Based Payments
The IASB issued amendments to IFRS 2 Share-Based Payments that address three main areas: the effects of vesting conditions on the measurement of a cash-settled share-based payment transaction; the classification of a share-based payment transaction with net settlement features for withholding tax obligations; and accounting where a modification to the terms and conditions of a share-based payment transaction changes its classification from cash settled to equity settled. On adoption, entities are required to apply the amendments without restating prior periods, but retrospective application is permitted if elected for all three amendments and other criteria are met. The amendments are effective for annual periods beginning on or after January 1, 2018, with early application permitted.
IFRS 16, Leases
This standard and its consequential amendments will replace IAS 17 – Leases and its associated interpretative guidance. IFRS 16 applies a control model to the identification of leases, distinguishing between a lease and a service contract on the basis of whether the customer controls the asset being leased. For those assets determined to meet the definition of a lease, IFRS 16 introduces significant changes to the accounting by lessees, introducing a single, on-balance sheet accounting model that is similar to current finance lease accounting, with limited exceptions for short-term leases or leases of low value assets. Lessor accounting remains similar to current accounting practice. IFRS 16 is effective for annual periods beginning on or after January 1, 2019.
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue new business development and to maintain a flexible capital structure for its projects for the benefits of its stakeholders. The Company’s principal source of funds is from the issuance of common shares.
In the management of capital, the Company includes the components of deficiency as well as cash and receivables.
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to
12
Continental Energy Corporation
N
OTES TO THE
F
INANCIAL
S
TATEMENTS
(Expressed in US Dollars)
30 JUNE 2016
issue new shares, enter into joint venture property arrangements, acquire or dispose of assets, or adjust the amount of cash and short-term investments.
The Company’s investment policy is to invest any excess cash in highly liquid short-term interest-bearing investments selected with regard to the expected timing of expenditures from continuing operations.
The Company is not subject to any externally imposed capital requirements and there was no change in the Company’s capital management during the year ended 30 June 2016.
|
|
7.
|
Financial Risk Management
|
The Company’s financial instruments are exposed to certain financial risks. The risk exposures and the impact on the Company’s financial instruments are summarized below.
Currency risk
The Company is primarily exposed to currency fluctuations relative to the U.S. dollar through expenditures that are denominated in foreign currencies. Also, the Company is exposed to the impact of currency fluctuations on its foreign currency monetary assets and liabilities.
The Company is exposed to foreign currency risk through the following financial assets and liabilities denominated in currencies other than U.S. dollars:
|
|
|
|
|
|
|
|
Accounts
|
|
|
|
|
payable and
|
|
|
|
|
accrued
|
|
30 June 2016
|
Cash
|
Receivables
|
liabilities
|
|
Canadian dollars
|
-
|
1,662
|
(113,539
|
)
|
Indonesian Rupiah
|
11,640,117
|
-
|
(28,443,867
|
)
|
|
|
|
|
|
|
|
|
Accounts
|
|
|
|
|
payable and
|
|
|
|
|
accrued
|
|
30 June 2015
|
Cash
|
Receivables
|
liabilities
|
|
Canadian dollars
|
23
|
912
|
(73,999
|
)
|
Indonesian Rupiah
|
13,563,611
|
-
|
(32,305,867
|
)
|
At 30 June 2016, with other variables unchanged, a 10% change in exchange rates would affect the loss by $10,631 (2015 - $5,998).
Credit risk
Credit risk is the risk of loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company’s cash is held by reputable financial institutions. Receivables consist of goods and services taxes due from the Federal Government of Canada. Management believes that the credit risk concentration with respect to cash and receivables is remote.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. Liquidity requirements are managed based on expected cash flows to maintain sufficient capital to meet short term obligations. As at 30 June 2016, the Company had a cash balance of $1,290 which is not sufficient to settle current liabilities of $1,288,297. The Company’s management continues to work on obtaining financing to meet these obligations and also on reaching alternative arrangements with relevant parties.
13
Continental Energy Corporation
N
OTES TO THE
F
INANCIAL
S
TATEMENTS
(Expressed in US Dollars)
30 JUNE 2016
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company has a positive cash balance and its debt is either interest free or bears interest at fixed rates. The Company has no significant concentrations of interest rate risk arising from operations.
|
|
8.
|
Disposal of Subsidiary
|
On 4 June 2013, the Company acquired 51% of the shares of Visionaire Energy AS (“
Visionaire Energy
”), a privately held Norwegian holding company by issuing 20,000,000 of its common shares at a value of $900,000 to Visionaire Invest AS (the “
Vendor
”).
Pursuant to a sales and purchase agreement dated 15 September 2014, the Company reached an agreement with the Vendor to sell its 51% interest in Visionaire Energy for $200,000 cash and the return of 20,000,000 common shares of the Company. The agreement was subject to the approval of the shareholders which was obtained at the Company’s annual meeting held on 5 December 2014, the effective date of disposal of Visionaire Energy.
Based on the book value of the net assets disposed of on 5 December 2014, the related sales proceeds and the effect of recycling of foreign exchange, the loss on disposal of Visionaire Energy was calculated to be $159,837, as summarized below:
|
|
|
|
$
|
|
Cash
|
5,611
|
|
Equity Investments
|
596,439
|
|
Accounts Payable
|
(8,850
|
)
|
Non-controlling interest
|
185,846
|
|
Total net assets
|
779,046
|
|
|
|
|
Consideration – Cash
|
200,000
|
|
Consideration – Common shares of Continental
|
400,000
|
|
Total consideration
|
600,000
|
|
|
|
|
Loss on disposal before recycling of foreign exchange
|
179,046
|
|
Recycling of foreign exchange
|
(19,209
|
)
|
Loss on disposal of Visionaire Energy
|
159,837
|
|
|
|
|
|
Total
|
|
|
$
|
|
Balance on 30 June 2014
|
374,890
|
|
Interest
|
81,000
|
|
Conversion rights - amendments
|
(36,000
|
)
|
Balance on 30 June 2015
|
419,890
|
|
Interest
|
45,124
|
|
Balance on 30 June 2016
|
465,014
|
|
On 21 September 2011, the Company issued a convertible promissory note for proceeds of $250,000. As additional consideration, the Company also issued 1,562,500 warrants (“
the additional consideration warrants
”) to the note holder.
14
Continental Energy Corporation
N
OTES TO THE
F
INANCIAL
S
TATEMENTS
(Expressed in US Dollars)
30 JUNE 2016
The Company has since entered into multiple arrangements with the note holder for amendment of the terms of the convertible promissory note and the additional consideration warrants. As at 30 June 2016, the promissory note paid interest at 18% per annum and could be converted to the common shares of the Company at $0.05 per share. The additional consideration warrants were exercisable at $0.05 per common share and expired on 31 December 2015 without being exercised.
On 28 July 2014, the Company reached an agreement with the note holder to extend the maturity date of the promissory note from 30 April 2014 to 30 September 2014 without any additional consideration. This amendment resulted in an incremental value of $36,000.
The convertible promissory note is in default as of the date of these financial statements.
The incremental value of the conversion rights of the note and the additional consideration warrants were calculated using the Black-Scholes model with the following assumptions:
|
|
|
|
|
|
|
|
Additional
|
|
|
Conversion
|
|
Consideration
|
|
Fiscal 2015
|
Rights
|
|
Warrants
|
|
Expected dividend yield
|
Nil
|
|
-
|
|
Expected stock price volatility
|
87%
|
|
-
|
|
Risk-free interest rate
|
0.04%
|
|
-
|
|
Expected life (years)
|
0.18
|
|
-
|
|
Authorized Share Capital
500,000,000 common shares without par value and without special rights or restrictions attached.
500,000,000 preferred shares without par value and with special rights or restrictions attached.
Shares issued
Year ended 30 June 2016
There were no common or preferred share issued.
Year ended 30 June 2015
On 4 August 2014, the Company completed a private placement consisting of 2,400,000 common shares at a price of $0.05 per share for total proceeds of $120,000.
On 22 August 2014, a $750,000 loan, previously obtained on 3 March 2014, was converted into 15,000,000 common shares of the Company at a price of $0.05 per share.
On 29 October 2014, the Company issued 2,000,000 common shares at fair value of $100,000 for consulting services. The amount was recognized as share-based payments expense on the Company’s statement of loss.
On 5 December 2014, Visionaire Invest AS returned 20,000,000 common shares of the Company, with a fair value of $400,000, for cancellation pursuant to the sale of the Company’s 51% interest in Visionaire Energy (Note 8).
Stock options
The Company has an approved incentive stock option plan under which the Board of Directors may, from time to time, grant options to directors, officers, employees or consultants. Options granted must be exercised within a period as determined by the board. Options vest on the grant date unless otherwise determined by the board. The aggregate number of common shares which may be reserved as outstanding options shall not exceed 25,000,000, and the maximum number of options held by any one individual at any one time shall not exceed 7.5% of the total number of the Company's issued and outstanding common shares and 15% of same for all related parties (officers, directors, and insiders) as a group.
15
Continental Energy Corporation
N
OTES TO THE
F
INANCIAL
S
TATEMENTS
(Expressed in US Dollars)
30 JUNE 2016
A reconciliation of the Company’s stock options outstanding on 30 June 2016 and 30 June 2015 is as follows:
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
Number of
|
|
Exercise Price
|
|
|
Warrants
|
|
$ per Share
|
|
Outstanding on 30 June 2014
|
15,800,000
|
|
0.05
|
|
Expired
|
(9,000,000
|
)
|
0.05
|
|
Outstanding on 30 June 2015
|
6,800,000
|
|
0.05
|
|
Expired
|
(6,800,000
|
)
|
0.05
|
|
Outstanding on 30 June 2016
|
-
|
|
-
|
|
Warrants
A reconciliation of the Company’s warrants outstanding on 30 June 2016 and on 30 June 2015 is as follows:
|
|
|
|
|
|
|
|
Weighted Average
|
|
|
Number of
|
|
Exercise Price
|
|
|
Warrants
|
|
$ per Share
|
|
Outstanding on 30 June 2014
|
11,462,500
|
|
0.05
|
|
Expired
|
(2,000,000
|
)
|
0.05
|
|
Outstanding on 30 June 2015
|
9,462,500
|
|
0.05
|
|
Issued
|
2,000,000
|
|
0.01
|
|
Expired
|
(8,912,500
|
)
|
0.05
|
|
Outstanding on 30 June 2016
|
2,550,000
|
|
0.03
|
|
Year ended 30 June 2016
As an incentive for the $10,000 loan from a director (Note 11), the Company issued on 13 October 2015 to the director, 2,000,000 share purchase warrants with an exercise price of $0.01 per share and expiry date of 31 December 2017. The Company calculated the fair value of these warrants to be $26,200 which was charged to the statement of loss as share-based payments.
Year ended 30 June 2015
On 5 January 2015, the terms of 2,600,000 and 375,000 outstanding share purchase warrants expiring on 7 January 2015 and 15 January 2015, respectively, were extended to expire on 7 January 2016 and 15 January 2016. The exercise price of these warrants remained at $0.05 per share. As these warrants were originally issued to investors in a private placement, no amount was recognized for the incremental increase in their fair value.
The fair value of the warrants issued was estimated using the Black-Scholes option pricing model, with the following assumptions:
|
|
|
|
|
|
Year Ended
|
|
Year Ended
|
|
|
30 June 2016
|
|
30 June 2015
|
|
Expected dividend yield
|
Nil
|
|
-
|
|
Expected stock price volatility
|
86%
|
|
-
|
|
Risk-free interest rate
|
0.64%
|
|
-
|
|
Expected life of warrants (years)
|
2.22
|
|
-
|
|
16
Continental Energy Corporation
N
OTES TO THE
F
INANCIAL
S
TATEMENTS
(Expressed in US Dollars)
30 JUNE 2016
A summary of the Company’s warrants outstanding on 30 June 2016 is as follows:
|
|
|
Number of
|
Price Per Share
|
Expiry Date
|
Shares
|
|
|
250,000
|
$0.10
|
25 July 2016
|
300,000
|
$0.10
|
23 October 2016
|
2,000,000
|
$0.01
|
31 December 2017
|
2,550,000
|
|
|
(Note 15)
|
|
|
|
|
11.
|
Related Party Transactions
|
As at 30 June 2016, $616,967 (2015 - $371,146) was payable to officers of the Company as salary, fees, or other compensation. These amounts are included in accounts payable and accrued liabilities and are unsecured, non-interest bearing with no specific terms for repayment.
During the year ended 30 June 2016, the Company paid or accrued salary, fees, or other compensation to officers of the Company in the amount of $282,915 (2015 - $305,794).
During the year ended 30 June 2016, two directors of the Company loaned $10,000 and $61,500, respectively, to the Company for assistance with working capital. These loans are interest free with no fixed repayment terms.
The Company issued a promissory note in recognition of the receipt of the $10,000 loan and as an incentive for the loan, granted 2,000,000 share purchase warrants to the lending director, with an exercise price of $0.01 per share and expiry date of 31 December 2017 (Note 10).
The Company is domiciled in Canada and is therefore subject to tax on estimated assessable profit at the rate of 26.00% (2015 – 26.00%). The Company has no assessable profit in Canada.
The tax expense at statutory rates for the Company can be reconciled to the reported income taxes per the statement of loss as follows:
|
|
|
|
|
|
Year Ended
|
|
Year Ended
|
|
|
30 June 2016
|
|
30 June 2015
|
|
|
$
|
|
$
|
|
Loss before income taxes
|
(473,289
|
)
|
(956,418
|
)
|
Federal and provincial statutory tax rate
|
26.00
|
%
|
26.00
|
%
|
Income tax recovery based on the above rates
|
(123,055
|
)
|
(248,669
|
)
|
Non-deductible expenses and other
|
88,524
|
|
459,456
|
|
Expiry of tax losses
|
-
|
|
73,454
|
|
Losses and temporary differences for which no tax benefit has been recorded
|
34,531
|
|
(284,241
|
)
|
Total income taxes
|
-
|
|
-
|
|
17
Continental Energy Corporation
N
OTES TO THE
F
INANCIAL
S
TATEMENTS
(Expressed in US Dollars)
30 JUNE 2016
The Company’s unrecognized deferred tax assets are as follows:
|
|
|
|
|
|
30 June 2016
|
|
30 June 2015
|
|
|
$
|
|
$
|
|
Non-capital losses
|
1,799,260
|
|
1,732,374
|
|
Capital losses
|
381,861
|
|
395,425
|
|
Resource properties
|
390,005
|
|
403,858
|
|
Capital assets
|
139,343
|
|
143,927
|
|
Share issue costs and other
|
9,964
|
|
10,318
|
|
Total unrecognized deferred tax assets
|
2,720,433
|
|
2,685,902
|
|
In assessing the recoverability of deferred tax assets other than deferred tax assets resulting from the initial recognition of assets and liabilities that do not affect accounting or taxable profit, the Company’s management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.
The Company has non-capital loss carry-forwards of approximately $6,920,000 that may be available for tax purposes in Canada as follows:
|
|
|
Expiring on
|
Canada
|
|
30 June
|
$
|
|
2027
|
1,135,000
|
|
2028
|
1,023,000
|
|
2029
|
1,092,000
|
|
2030
|
633,000
|
|
2031
|
439,000
|
|
2032
|
455,000
|
|
2033
|
462,000
|
|
2034
|
397,000
|
|
2035
|
828,000
|
|
2036
|
456,000
|
|
Non-capital loss carry-forwards
|
6,920,000
|
|
The Company’s tax assets related to the other categories disclosed above are not subject to expiry provisions under the Canadian tax regime.
|
|
13.
|
Supplemental cash flow information
|
|
|
|
|
|
|
Non-Cash Investing and Financing Activities for the
|
|
30 June 2016
|
|
30 June 2015
|
|
Year Ended
|
Note
|
$
|
|
$
|
|
Conversion option and additional consideration warrants amendment
|
9
|
-
|
|
36,000
|
|
Incentive share purchase warrants for loan
|
10
|
26,200
|
|
-
|
|
Cancellation of shares upon disposal of subsidiary
|
8
|
-
|
|
400,000
|
|
Loan converted to common shares of the Company
|
10
|
-
|
|
750,000
|
|
18
Continental Energy Corporation
NOTES TO THE FINANCIAL STATEMENTS
(Expressed in US Dollars)
30 JUNE 2016
|
|
14.
|
Segmented Information
|
The Company operates in one segment, being the business sector of acquiring participating interests in oil, gas, and alternative energy projects, producers, and related service providers doing business outside of North America. The Company’s non-current assets consist of computer and other equipment and are all located in Indonesia.
1.
|
A total of 550,000 outstanding warrants, exercisable at $0.10 per share, expired unexercised.
|
|
|
2.
|
On 4 January 2017, the Company entered into a Joint Development Agreement (the “
CHI JDA
”) with Continental Hilir Indonesia Pte. Ltd. (“
CHI
”), a private Singapore company, for the joint development of Small-Scale Refinery Projects in Indonesia. CHI and the Company are related parties and at the date of these financial statements share three common directors. The CHI JDA provides that CHI may earn an 80% participating interest with the Company on realization of any new Small Scale Refinery (“
SSR
”) developments in Indonesia by providing reimbursable cash advances to the Company from time to time and also carrying or paying for the Company's 20% participating interest share of feasibility studies, pre-operations costs, proposal preparation, and presentation costs to local commercial partners and to foreign direct investment and SSR licensing authorities.
|
|
|
3.
|
On 28 February 2017, the Company entered into a Consulting and Joint Development Agreement (the “
CHMEA JDA
”) with Continental Hilir MEA (FZE) (“
CHMEA
”), a private company registered in the Sharjah Airport International Free Zone of the United Arab Emirates, for the joint development of Small-Scale Refinery Projects in the Middle East and Africa. CHMEA and the Company are related parties and at the date of these financial statements share one common director. The CHMEA JDA provides that CHMEA may earn a 50% participating interest with the Company on realization of any new SSR developments in the Middle East and Africa by providing consulting services and reimbursable cash advances to the Company from time to time and also carrying or paying for the Company’s 50% participating interest share of feasibility studies, pre-operations costs, proposal preparation, and presentation costs to local commercial partners and to foreign direct investment and SSR licensing authorities.
|
|
|
4.
|
Upon 14 May 2017, the board of directors adopted a new and revised “Code” of Business Conduct and Ethics for the Company. A complete copy of the Code was filed by the Company on SEDAR on 16 May 2017 and is publicly available in PDF form for download from the SEDAR website.
|
|
|
5.
|
Upon 14 May 2017, the board of directors adopted a new and revised “Charter” for the Company's Audit Committee. A complete copy of the Charter was filed by the Company on SEDAR on 16 May 2017 and is publicly available in PDF form for download from the SEDAR website.
|
|
|
6.
|
On 24 May 2017 we made a late filing of the required audited annual financial reports and other disclosure for our Fiscal 2015 year ended 30 June 2015. These reports included the Company's required annual oil and gas activities and reserves report for Fiscal 2015.
|
|
|
7.
|
On 26 May 2017 we made a late filing on EDGAR of the required audited annual financial reports and other disclosure on US SEC Form 20F Annual Report for our Fiscal 2015 year ended 30 June 2015. The Form 20F Annual Report was filed concurrently as a voluntary “Annual Information Form” or “AIF” filing on SEDAR.
|
|
|
8.
|
On 5 June 2017, the Company caused its registrar and transfer agent, Computershare, to file on SEDAR a Notice of Meeting and Record Date for the Company's annual general meeting of shareholders for Fiscal 2015 and Fiscal 2016 years to be held on 4 August 2017 in the Company's registered and records office in Vancouver. The official “Record Date” for the purposes of determining those shareholders of record entitled to vote at the meeting is 30 June 2017.
|
|
|
9.
|
On 20 June 2017 the Company made a late filing of interim financial reports for the three Fiscal 2016 quarters ended 30 September 2015, 31 December 2015, and 31 March 2016. These three quarterly reports were each filed electronically on SEDAR in compliance with NI 51-102 and NI 51-109. The reports included unaudited and management prepared consolidated financial statements for each quarter plus management's discussion and analysis thereof.
|
---oOo---
19
CONTINENTAL ENERGY CORPORATION
FORM 51-102F1
Management’s Discussion and Analysis
For the Fourth Quarter and Fiscal Year Ended on 30 June 2016
This Management Discussion and Analysis (“
MD&A
”) has been prepared by the management of Continental Energy Corporation (the "
Company
") as of 21 June 2017 (the "
Report Date
").
This MD&A pertains to the three (3) months quarter ended 30 June 2016 that is hereinafter referred to as "
This Quarter
". This Quarter corresponds to the "
Fourth Quarter
" ending the Company's fiscal year. Therefore, this MD&A also pertains to the twelve (12) months period of the Company's fiscal year ended 30 June 2016 ("
Fiscal 2016
").
This MD&A is intended to be read in conjunction with the audited annual consolidated financial statements, the notes thereto, and the auditor's report to the Company for its Fiscal 2016 year ended on 30 June 2016 (the "
Audited Annual Financial Statements
") that are published and filed herewith.
This MD&A is intended to supplement and complement the unaudited, condensed, interim, consolidated quarterly financial statements (the "
Interim Financial Statements
") that were separately prepared and filed by management, on similar forms with similar management discussion, for each one of the preceding three Fiscal 2016 quarters, ended on 30 September 2015, on 31 December 2015, and on 31 March 2016.
All financial information presented herein, and in the Interim Financial Statements, and in the Audited Annual Financial Statements has been prepared in accordance with accounting policies consistent with International Financial Reporting Standards (“
IFRS
”) promulgated by the International Accounting Standards Board. All amounts disclosed are in United States dollars unless otherwise stated.
PART - 1 : NATURE OF BUSINESS
The Company is an emerging developer of conventional and alternative energy capacity integrated with upstream and downstream petroleum supply within the Republic of Indonesia. Why Indonesia? Already a G20 member, Indonesia is predicted by the World Bank to grow to the 4
th
largest economy in the world by 2045.
PART - 2 : HIGHLIGHT EVENTS DURING THIS QUARTER
Significant events which may have a material effect on the business affairs of the Company that have occurred during This Quarter are summarized below:
Corporate Activity
The Company explored new opportunities in its core business areas and searched for new sources of capital during This Quarter.
2. 1 Share Purchase Warrants Activity During This Quarter
During This Quarter, the following activity involving the Company’s share purchase warrants occurred:
-
Exercises
- No outstanding share purchase warrants were exercised.
-
New Issues
- No new issues of share purchase warrants were made.
-
Expiry
- On 28 June 2016, an amount of 150,000 unexercised share purchase warrants expired.
-
Amendments
- No amendments were made to the terms of any outstanding share purchase warrants.
2. 2 Incentive Stock Options Activity During This Quarter
During This Quarter, the following activity involving the Company’s incentive stock options occurred:
-
Exercises
- No outstanding incentive stock options were exercised.
-
New Grants
- No new incentive stock options were granted.
-
Expiry
- No outstanding and unexercised incentive stock options expired.
-
Amendments
- No amendments were made to the terms of any outstanding incentive stock options.
2. 3 Common Share Conversion Rights Activity During This Quarter
During This Quarter, the following activity involving the common share conversion rights issued by the Company occurred:
-
Exercises
- There were no exercises of outstanding common share conversion rights.
-
New Issues
- There were no new common shares conversion rights issued.
-
Expiry
- No outstanding common shares conversion rights expired.
-
Amendments
- No amendments were made to the terms of any outstanding common share conversion rights.
2. 4 New Shares Issues During This Quarter
During This Quarter, there were no new common shares issued.
PART - 3 : SHAREHOLDING AT THE END OF THIS QUARTER AND FISCAL 2016
As at the end of This Quarter and end Fiscal 2016, the Company’s share capital was issued or held in reserve as follows:
|
|
|
123,015,381
|
|
common shares were issued and outstanding.
|
2,550,000
|
|
unexercised warrants were issued and outstanding.
|
0
|
|
unexercised stock options were issued and outstanding.
|
5,000,000
|
|
common shares were held in reserve against possible conversion of a $250,000 note.
|
Nil
|
|
preferred shares were issued and outstanding.
|
PART - 4 : SUBSEQUENT EVENTS TO THE REPORT DATE
Significant events which may have a material effect on the business affairs of the Company that have occurred subsequent to the end of This Quarter and up to the Report Date are summarized below:
Small Scale Refinery Opportunity
In August and November 2016, Indonesia’s Energy Ministry issued new regulations opening up, for the first time, the crude oil refining and distribution business to private sector companies. The new regulations provide for substantial fiscal incentives and perpetual licenses to private companies to build, own, and operate "Small Scale Refineries or SSRs". SSRs are defined as having a maximum capacity of 20,000 barrels per day and are intended to be co-located with existing domestic crude oil production to both stimulate more oil production by reducing crude oil transport costs and provide refined fuel products to local domestic markets at reduced or eliminated import costs.
As an incentive to SSR operators, these crude and products transport costs savings may be passed through to the SSR operator in the form of a reduced feedstock price agreed by the Energy Ministry in the license, for locally produced crude oil delivered at the SSR plant gate.
Indonesia is taking a page from the global power generation industry, who has come to the realization that multiple small-scale, geographically distributed refining capacity is simply more cost efficient and provides more direct local and regional economic benefits than a few huge-scale refineries requiring multi-billion dollar investment.
This is a completely new business opening, with no large players or competitive actors already in the market or expected to appear. The opportunity lies with smaller companies who can put together the technical expertise, Indonesian operating knowledge, and financial packages needed.
The Company's 20+ years of Indonesian oil and gas operating experience and relationship building put it in a unique position to take advantage of these SSR opportunities. To this end the Company entered into, during late 2016, four Memorandums of Understanding with private Indonesian company partners to jointly pursue SSR licenses vertically integrated with, and co-located with, upstream crude oil feedstock from four production sharing contract areas operated by the partners.
Director Resignation
Effective upon 30 December 2016, Mr. John Tate resigned from the Company’s board of directors to pursue his own business interests.
Joint Development Agreement Signed
On 4 January 2017, the Company entered into a Joint Development Agreement (the “
CHI JDA
”) with Continental Hilir Indonesia Pte. Ltd. (“
CHI
”), a private Singapore company, for the joint development of Small-Scale Refinery Projects in Indonesia. CHI and the Company are related parties and at the Report Date share three common directors. The CHI JDA provides that CHI may earn an 80% participating interest with the Company on realization of any new Small Scale Refinery ("
SSR
") developments in Indonesia by providing reimbursable cash advances to the Company from time to time and also carrying or paying for the Company's 20% participating interest share of feasibility studies, pre-operations costs, proposal preparation, and presentation costs to local commercial partners and to foreign direct investment and SSR licensing authorities.
Consulting and Joint Development Agreement Signed
On 28 February 2017, the Company entered into a Consulting and Joint Development Agreement (the “
CHMEA JDA
") with Continental Hilir MEA (FZE) (“
CHMEA
”), a private company registered in the Sharjah Airport International Free Zone of the United Arab Emirates, for the joint development of Small-Scale Refinery Projects in the Middle East and Africa. CHMEA and the Company are related parties and at the Report Date share one common director. The CHMEA JDA provides that CHMEA may earn a 50% participating interest with the Company on realization of any new Small Scale Refinery ("
SSR
") developments in the Middle East and Africa by providing consulting services and reimbursable cash advances to the Company from time to time and also carrying or paying for the Company's 50% participating interest share of feasibility studies, pre-operations costs, proposal preparation, and presentation costs to local commercial partners and to foreign direct investment and SSR licensing authorities.
Director Appointment
Upon 31 March 2017, Mr. Karsani Aulia was appointed a director of the Company by action of the board of directors to fill the vacancy on the board. Mr. Aulia is a graduate of the Bandung Institute of Technology and received his Master’s degree in petroleum geology, cum laude, from the Colorado School of Mines in 1982.
He worked for PT Caltex Pacific Indonesia (Chevron-Texaco) from 1976 until 2004. There he held various technical and operating positions including Vice President Exploration and General Manager of Resources and Production for Caltex’s onshore Minas Field, the largest oilfield in Asia with a daily production of over 200,000 BPD. From 2002 until 2004 he served on Chevron's Worldwide Asset Management Committee and its Technology Council.
From 2004 to 2007 he served as the General Manager for the Coastal Plains Pekanbaru PSC a local government owned oil and gas operating company with 27,000 BOPD oil production from the Riau Province, onshore Sumatra. Between 2007 and 2015, he served as Senior Vice President of Operations and Technology for Samudra Energy Ltd. an oil and gas exploration and production company based in Jakarta and Singapore. Under his leadership, Samudra Energy had a period of successful growth to become one of the top ten hydrocarbon producing companies in Indonesia.
Code of Business Conduct and Ethics
Upon 14 May 2017, the board of directors adopted a new and revised "Code" of Business Conduct and Ethics for the Company. A complete copy of the Code was filed by the Company on SEDAR on 16 May 2017 and is publicly available in PDF form for download from the SEDAR website. The PDF download link can be found after a search of the Company's filings at SEDAR's website http://sedar.com/search/. A complete copy of the Code was also filed by the Company on EDGAR on 17 May 2017 under cover of a Form-6K filing.
Charter of the Audit Committee
Upon 14 May 2017, the board of directors adopted a new and revised "Charter" for the Company's Audit Committee. A complete copy of the Charter was filed by the Company on SEDAR on 16 May 2017 and is publicly available in PDF form for download from the SEDAR website. The PDF download link can be found after a search of the Company's filings at SEDAR's website http://sedar.com/search/. A complete copy of the Charter was also filed by the Company on EDGAR on 17 May 2017 under cover of a Form-6K filing.
Charter of the Governance and Nominating Committee
Upon 14 May 2017, the board of directors adopted a new and revised "Charter" for the Company's Governance and Nominating Committee. A complete copy of the Charter was filed by the Company on SEDAR on 16 May 2017 and is publicly available in PDF form for download from the SEDAR website. The PDF download link can be found after a search of the Company's filings at SEDAR's website http://sedar.com/search/. A complete copy of the Charter was also filed by the Company on EDGAR on 17 May 2017 under cover of a Form-6K filing.
Charter of the Compensation Committee
Upon 17 May 2017, the board of directors adopted a new and revised “Charter” for the Company’s Compensation Committee. A complete copy of the Charter was filed by the Company on SEDAR on 23 May 2017 and is publicly available in PDF form for download from the SEDAR website. The PDF download link can be found after a search of the Company's filings at SEDAR’s website http://sedar.com/search/. A complete copy of the Charter was also filed by the Company on EDGAR on 23 May 2017 under cover of a Form-6K filing.
Charter of the Reserves Committee
Upon 17 May 2017, the board of directors adopted a new and revised “Charter” for the Company’s Governance and Nominating Committee. A complete copy of the Charter was filed by the Company on SEDAR on 23 May 2017 and is publicly available in PDF form for download from the SEDAR website. The PDF download link can be found after a search of the Company’s filings at SEDAR's website http://sedar.com/search/. A complete copy of the Charter was also filed by the Company on EDGAR on 23 May 2017 under cover of a Form-6K filing.
Annual Financial Report Filed Late for Fiscal 2015
On 24 May 2017 we made a late filing of the required audited annual financial reports and other disclosure for our Fiscal 2015 year ended 30 June 2015. These reports were filed electronically on SEDAR in compliance with NI 51-102 and NI 51-109. These reports included audited, annual, consolidated financial statements for the Fiscal 2015 year plus management's discussion and analysis thereof.
Annual Oil & Gas Activity and Reserves Report Filed Late for Fiscal 2015
On 24 May 2017 we made a late filing of the Company's required annual oil and gas activities and reserves report for Fiscal 2015. These reports were filed electronically on SEDAR in compliance with NI 51-101.
Annual Report on Form 20F Filed Late for Fiscal 2015
On 26 May 2017 we made a late filing on EDGAR of the required audited annual financial reports and other disclosure on US SEC Form 20F Annual Report for our Fiscal 2015 year ended 6/30/15. The Form 20F Annual Report was filed concurrently as a voluntary “Annual Information Form” or “AIF” filing on SEDAR in compliance with NI 51-102 and NI 51-109. These reports included audited, annual, consolidated financial statements for Fiscal 2015 plus the disclosure required by Form 20F as an Annual Report.
AGM Notice and Record Date Set
On 5 June 2017, the Company caused its registrar and transfer agent, Computershare, to file on SEDAR a Notice of Meeting and Record Date for the Company's annual general meeting of shareholders for Fiscal 2015 and Fiscal 2016 years to be held on 4 August 2017 in the Company's registered and records office at 900-885 West Georgia Street, Vancouver, British Columbia, Canada V6C 3H1. The official “Record Date” for the purposes of determining those shareholders of record entitled to vote at the meeting is 30 June 2017. The formal notice and agenda for the meeting will be published on the Record Date.
Interim Quarters Financial Reports Filed
On 19 June 2017 the Company made a late filing of interim financial reports for the Fiscal 2016 quarters ended 30 September 2015, 31 December 2015, and 31 March 2016. These three quarterly reports were each filed electronically on SEDAR in compliance with NI 51-102 and NI 51-109. The reports included unaudited and management prepared consolidated financial statements for each quarter plus management’s discussion and analysis thereof.
Cease Trade Order
At the 21 June 2017 date of this filing the Company has completed the audits, financial reports, and made most of the regulatory filings to remedy and cure a cease trade order issued on 4 November 2015 by the British Columbia Securities Commission (“
BCSC
”). The order was issued because the Company was at that time deficient in its regulatory requirements involving the filing of its audited consolidated financial statements for the fiscal years ended 30 June 2015. The order prohibits trading of the Company’s securities in Canada until the deficiency is cured by the Company filing the required delinquent financial reports and a revocation order is issued by the BCSC.
In addition to the audited statements for the year ended 30 June 2015, the Company must also prepare and file the same for the year ended 30 June 2016, plus the six interim quarterly financial reports for the three fiscal quarters ended 31 March 2016 and the three quarters ended 31 March 2017. The Company completed its annual audits and filed both its delinquent Fiscal 2015 report on 24 May 2017 and this Fiscal 2016 report on 21 June 2017. Three of the six delinquent interim reports for the three quarters ended 31 March 2016 were completed and filed on 20 June 2017. The Company is working to complete and file the last late reports for the three quarters ended 31 March 2017. When filed, these last reports complete the requirements to remedy and cure the deficiency which led to the cease trade order. The Company intends to immediately thereafter apply to the BCSC for a revocation order.
4. 1 Share Purchase Warrants Activity: Since This Quarter End and Up to the Report Date
-
Exercises
- No outstanding share purchase warrants were exercised.
-
New Issues
- No share purchase warrants were issued.
-
Expiry
- A total amount of 550,000 outstanding and unexercised share purchase warrants expired. These warrants were originally issued to investors as a part of a unit with a common share pursuant to private placements. The dates of each expiry are as follows:
-
On 25 July 2016, an amount of 250,000 unexercised share purchase warrants expired.
-
On 23 October 2016, an amount of 300,000 unexercised share purchase warrants expired.
4. 2 Incentive Stock Options Activity: Since This Quarter End and Up to the Report Date
-
Exercises
- No outstanding incentive stock options were exercised.
-
New Grants
- No new incentive stock options were granted.
-
Expiry
- No outstanding and unexercised incentive stock options expired.
-
Amendments
- No amendments were made to the terms of any outstanding incentive stock options.
4. 3 Conversion Rights Activity: Since This Quarter End and Up to the Report Date
-
Exercises
- There were no exercises of outstanding common share conversion rights.
-
New Issues
- There were no new common shares conversion rights issued.
-
Expiry
- No outstanding common shares conversion rights expired.
-
Amendments
- No amendments were made to the terms of any outstanding common share conversion rights.
4. 4 New Shares Issues: Since This Quarter End and Up to the Report Date
PART - 5 : SHAREHOLDING AT THE REPORT DATE
As at the Report Date of this MD&A, the Company’s share capital is issued or held in reserve as follows:
|
|
|
123,015,381
|
|
common shares were issued and outstanding.
|
2,000,000
|
|
unexercised warrants were issued and outstanding.
|
0
|
|
unexercised stock options were issued and outstanding.
|
5,000,000
|
|
common shares were held in reserve against possible conversion of a $250,000 note.
|
Nil
|
|
preferred shares were issued and outstanding.
|
PART - 6 : FINANCIAL RESULTS OF OPERATIONS
Selected Annual Information for Last Three Fiscal Years
The following table sets out selected annual financial information for the Company and is derived from its audited, consolidated financial statements for the last three fiscal years ended 30 June 2016, 2015 and 2014 respectively.
|
|
|
|
|
|
|
US$
|
2016
|
|
2015
|
|
2014
|
|
Revenue
|
Nil
|
|
Nil
|
|
Nil
|
|
|
|
|
|
|
|
|
Income (Loss) Attributable to the Shareholders of the Company
|
|
|
|
|
|
|
From Continuing Operations
|
(473,289
|
)
|
(956,418
|
)
|
(627,517
|
)
|
From Discontinued Operations
|
Nil
|
|
Nil
|
|
(159,106
|
)
|
Total for the Year
|
(473,289
|
)
|
(956,418
|
)
|
(786,623
|
)
|
|
|
|
|
|
|
|
Income (Loss) Attributable to the Non-Controlling Interests
|
|
|
|
|
|
|
From Continuing Operations
|
Nil
|
|
Nil
|
|
Nil
|
|
From Discontinued Operations
|
Nil
|
|
Nil
|
|
(152,866
|
)
|
Total for the Year
|
Nil
|
|
Nil
|
|
(152,866
|
)
|
|
|
|
|
|
|
|
Net Loss for the Year
|
(473,289
|
)
|
(956,418
|
)
|
(939,489
|
)
|
|
|
|
|
|
|
|
Basic and Diluted Loss per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to the Shareholders of the Company
|
|
|
|
|
|
|
From Continuing Operations
|
(0.0
|
)
|
(0.01
|
)
|
(0.01
|
)
|
Total
|
(0.0
|
)
|
(0.01
|
)
|
(0.01
|
)
|
|
|
|
|
|
|
|
Total Assets
|
7,378
|
|
20,304
|
|
845,499
|
|
Total Long-Term Liabilities
|
Nil
|
|
Nil
|
|
Nil
|
|
Dividends Declared
|
Nil
|
|
Nil
|
|
Nil
|
|
Summary of Quarterly Results for the Last Eight Quarters
The following table sets out selected and unaudited quarterly financial information for the Company for its last eight quarters and is derived from Interim Financial Statements prepared by management in accordance with accounting policies consistent with IFRS.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to Shareholders of the Company
|
|
|
|
|
|
|
Income (loss)
|
|
Basic &
|
|
|
|
|
|
|
|
From
|
|
Diluted
|
|
|
|
Total Net
|
|
Income
|
|
Continued
|
|
Per Share
|
|
Period
|
Revenue
|
Income (loss)
|
|
(loss)
|
|
Operations
|
|
Income (loss)
|
|
Quarter-4 of Fiscal 2016
|
Nil
|
(121,367
|
)
|
(121,367
|
)
|
(121,367
|
)
|
(0.00
|
)
|
Quarter-3 of Fiscal 2016
|
Nil
|
(110,496
|
)
|
(110,496
|
)
|
(110,496
|
)
|
(0.00
|
)
|
Quarter-2 of Fiscal 2016
|
Nil
|
(137,892
|
)
|
(137,892
|
)
|
(137,892
|
)
|
(0.00
|
)
|
Quarter-1 of Fiscal 2016
|
Nil
|
(103,534
|
)
|
(103,534
|
)
|
(103,534
|
)
|
(0.00
|
)
|
Quarter-4 of Fiscal 2015
|
Nil
|
(128,476
|
)
|
(128,476
|
)
|
(128,476
|
)
|
(0.00
|
)
|
Quarter-3 of Fiscal 2015
|
Nil
|
(173,476
|
)
|
(173,476
|
)
|
(173,476
|
)
|
(0.00
|
)
|
Quarter-2 of Fiscal 2015
|
Nil
|
(452,987
|
)
|
(452,987
|
)
|
(452,987
|
)
|
(0.00
|
)
|
Quarter-1 of Fiscal 2015
|
Nil
|
(201,479
|
)
|
(201,479
|
)
|
(201,479
|
)
|
(0.00
|
)
|
-
Quarterly results will vary in accordance with the Company’s business and financing activities. The Company’s primary source of funding is through the issuance of share capital. When the capital markets are depressed, the Company’s activity level normally declines accordingly. As capital markets strengthen and the Company is able to secure equity financing with favorable terms, the Company’s business activity levels increase.
-
A factor that affects the Company’s reported quarterly results are write-downs or write-offs of capitalized assets and its investments. The Company will write-down or write-off capitalized assets when no further work is warranted and also write-down or write-off its balances in investees if it determines that capitalized balances of these investments are impaired. The size and timing of these write-downs and write-offs cannot typically be predicted and affect the Company’s quarterly results. The Company regularly reviews its properties and investments for any indications of impairment.
-
Non-cash costs such as those attributable to calculated valuations of share based payments expenses also affect the size of the Company’s quarterly income (loss).
PART - 7 : COMPARATIVE RESULTS OF OPERATIONS
Current and Comparative Periods
This Quarter and the twelve (12) months period and Fiscal Year ended 30 June 2016 (the “
Current Period
”); and the Last Fiscal Year's twelve (12) months period ended 30 June 2015 (the “
Comparative Period
”).
a)
|
Overall, the Company incurred a loss from operations during the Current Period of $473,289 compared to a loss of $956,418 for the Comparative Period, a decrease of $483,129.
|
|
|
b)
|
The Company incurred a loss per share of $0.00 in the Current Period and $0.01 during the Comparative Period.
|
|
|
c)
|
Total
equity loss from the results of the Norwegian subsidiaries during the Current Period was $Nil compared to $159,837 for the Comparative Period as a result of Visionaire Energy AS’s discontinued operations. The Company disposed of its subsidiary, Visionaire Energy AS during the Comparative Period for cash proceeds of $200,000 and the return of 20,000,000 common shares of the Company, with a fair value of $400,000. The book value of the net assets of Visionaire Energy AS, compared with the sales proceeds and the recycling of the related foreign exchange resulted in a loss of $159,837.
|
|
|
d)
|
Interest expense during the Current Period was $47,385 compared to $84,551 during the Comparative Period primarily due to the accretion of the Company’s convertible debt.
|
e)
|
The Company’s administrative costs were higher in the Comparative Period compared to the Current Period, primarily a result of higher management and consulting fees due to an increase in employee benefits, and higher office costs and professional fees due to the changes involving its subsidiaries and timing differences relating to regulatory filings and annual meetings. These administrative costs were higher in the Comparative Period by $194,074 (Comparative Periods 2016 - $391,270; 2015 - $585,344).
|
|
|
f)
|
Share-based payments expense were $26,200 during the Current Period compared to $100,000 during the Comparative Period.
|
|
|
g)
|
Cash used in operating activities during the Current Period was $74,225 compared to $558,421 used in the Comparative Period. The change is attributable to lower activity and the disposal of the Norwegian subsidiaries by the Company during the Comparative Period.
|
|
|
h)
|
Net cash raised from financing activities during the Current Period was $71,500 compared to $120,000 raised during the Comparative Period.
|
Current and Comparative Quarters
This Quarter and the three (3) months period ended 30 June 2016 (the “
Current Quarter
”) and the Last year's fourth quarter and three month period ended 30 June 2015 (the “
Comparative Quarter
”).
i)
|
Overall, the Company incurred a loss from operations during the Current Quarter of $121,367 compared to a loss of $128,476 for the Comparative Quarter, a decrease of $7,109
|
|
|
j)
|
The Company incurred a loss per share of $0.00 in the Current Quarter and the Comparative Quarter.
|
|
|
k)
|
Interest expense during the Current Quarter was $11,853 compared to $11,627 during the Comparative Quarter primarily due to the accretion of the Company’s convertible debt.
|
|
|
l)
|
The Company’s administrative costs were lower in the Current Quarter compared to the Comparative Quarter, primarily a result of lower management and consulting fees due to a decrease in employee benefits and lower office and investor relation costs, and professional fees due to the changes involving its subsidiaries. These administrative costs were lower in the Current Quarter by $4,270 (Comparative Quarters 2016 - $106,162; 2015 - $110,432).
|
|
|
m)
|
Share-based payments expense was $nil during the Current Quarter and the Comparative Quarter.
|
PART - 8 : LIQUIDITY AND CAPITAL MANAGEMENT
As at the end of this Fiscal Year 2016 on 30 June 2016, the Company’s Audited Annual Financial Statements reflect a working capital deficit of $1,282,380 compared to a working capital deficit of $836,752 at the end of the prior Fiscal 2015 year.
The Company has no significant operations that generate cash flow and its long term financial success is dependent on management’s ability to develop new business opportunities which become profitable. These undertakings can take many years and are subject to factors that are beyond the Company’s control.
In order to finance the Company’s growth and develop new business opportunities and to cover administrative and overhead expenses, the Company raises money through equity sales and from the exercise of convertible securities. Many factors influence the Company’s ability to raise such funds, including the health of the capital markets, the climate for investment in the sectors the Company is considering, the Company’s track record, and the experience and caliber of its management.
The Company does not have sufficient funds to meet its administrative requirements and new business development objectives over the next twelve months. Actual funding requirements may vary from those planned due to a number of factors, including providing for new opportunities as they arise. The Company believes it will be able to raise the necessary capital it requires, but recognizes there will be risks involved that may be beyond its control. The Company is actively sourcing new capital.
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to pursue new business development and to maintain a flexible capital structure for its projects for the benefits of its stakeholders. The Company's principal source of funds is from the issuance of common shares. In the management of capital, the Company includes the components of shareholders’ equity as well as cash and receivables.
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, enter into joint venture arrangements, acquire or dispose of assets, or adjust the amount of cash and short-term investments. The Company’s investment policy is to invest its cash in liquid short-term interest-bearing investments selected with regard to the expected timing of expenditures from continuing operations. The Company is not subject to any externally imposed capital requirements and there was no change in the Company’s capital management during the period ended 30 June 2016.
PART - 9 : RISKS AND UNCERTAINTIES
The Company has no history of profitable operations and is currently in the early stages of its development. As such, the Company is subject to many risks common to such enterprises, including under-capitalization, cash shortages and limitations with respect to personnel, financial and other resources and the lack of revenues. There is no assurance that the Company will be successful in achieving a return on shareholders' investment and the likelihood of success must be considered in light of its early stage of operations.
The Company has no source of operating cash flow and no assurance that additional funding will be available to it to take advantage of further growth and development of new opportunities and projects when required. Although the Company has been successful in the past in obtaining financing through the sale of equity securities or joint ventures, there can be no assurance that the Company will be able to obtain adequate financing in the future or that the terms of such financing will be favorable. Failure to obtain such additional financing could result in the delay or indefinite postponement of further growth or new opportunity development.
The Company is very dependent upon the personal efforts and commitment of its existing management. To the extent that management's services would be unavailable for any reason, a disruption to the operations of the Company could result, and other persons would be required to manage and operate the Company.
PART - 10 : RELATED PARTY TRANSACTIONS
10 . 1 Transactions With Related Parties And Related Party Balances
At the end of This Quarter and Fiscal 2016, $616,967 (30 June 2015 - $371,146) was payable to the CEO and the CFO of the Company. This amount is included in accounts payable and is unsecured, non-interest bearing and has no specific terms for repayment.
During the year ended 30 June 2016, two directors of the Company loaned $10,000 and $61,500, respectively, to the Company for assistance with working capital. These loans are interest free with no fixed repayment terms.
The Company issued a promissory note in recognition of the receipt of the $10,000 loan and as an incentive for the loan, granted 2,000,000 share purchase warrants to the lending director, with an exercise price of $0.01 per share and expiry date of 31 December 2017.
10 . 2 Compensation Of Key Management Personnel
During This Quarter and the twelve (12) months ended 30 June 2016, the Company paid or accrued salary, fees, or other compensation to the CEO and the CFO of the Company in the amount of $150,000 and $132,915, respectively (30 June 2015 - $156,776 and $149,018, respectively).
PART - 11 : MATERIAL CONTRACTS AND EVENTS
11 . 1 Off-Balance Sheet Arrangements
At the end of This Quarter, the Company does not have any off-balance sheet arrangements not already disclosed elsewhere in this MD&A or in the Audited Annual Financial Statements that are published and filed herewith.
11 . 2 Material Contracts & Commitments
During This Quarter, no new material contracts or commitments were undertaken, not elsewhere disclosed in this MD&A or in the Audited Annual Financial Statements that are published and filed herewith.
11 . 3 Investor Relations, Publicity and Promotion
During This Quarter, no material new arrangements, or modifications to existing agreements, were made by the Company for investor relations services, publicity, promotion or advertising agreements which are not otherwise already disclosed in this MD&A or in the Audited Annual Financial Statements that are published and filed herewith.
11 . 4 Financial Advice, New Business Consulting, Finder's Agreements, & Fund Raising
During This Quarter, no material new arrangements, or modifications to existing agreements, were made by the Company for investor relations services, publicity, promotion or advertising agreements which are not otherwise already disclosed in this MD&A or in the Audited Annual Financial Statements that are published and filed herewith.
11 . 5 Claims, Contingencies & Litigation
As at the Report Date, the Company is in default of repayment of an unsecured $250,000 promissory note convertible into common shares of the Company. The Company has offered the holder terms for converting a portion of the note in accordance with its provisions together with extending its term. There are no guarantees that these discussions will result in a resolution mutually acceptable to the Company and the note holder. Except for the foregoing and any contingencies elsewhere disclosed herein, or in the Audited Annual Financial Statements that are published and filed herewith, the Company knows of no material, active or pending claims or legal proceedings against them; nor is the Company involved as a plaintiff in any material proceeding or pending litigation that might materially adversely affect the Company or a property interest of the Company.
PART - 12 : CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in accordance with IFRS requires that the Company’s management make judgments and estimates and form assumptions that affect the amounts in the financial statements and the related notes to those financial statements. Actual results could differ from those estimates. The Company reviews its judgments, estimates, and assumptions on an ongoing basis based on historical experience and other factors that are considered to be relevant under the circumstances. The Company’s critical accounting policies and estimates applied in the preparation of its Interim Financial Statements are the same as those applied to the Audited Annual Financial Statements.
PART - 13 : FINANCIAL INSTRUMENTS
The Company’s financial instruments as at the end of This Quarter, consist of cash, accounts payable and accrued liabilities and the convertible debt. The fair value of these instruments approximates their carrying value due to their short-term maturity. There were no off-balance sheet financial instruments.
Cash, other than minor amounts of Indonesian Rupiahs, consist solely of cash deposits with major Canadian banks. The Company therefore considers its credit risk to be low. The Company does not use derivative or hedging instruments to reduce its exposure to fluctuations in foreign currency exchange rates involving Canadian dollar and Indonesian Rupiah. However, as the Company holds its funds primarily in US dollars, the risk of foreign exchange loss is considered low by the Company’s management.
PART - 14 : CONTINUOUS DISCLOSURE AND FILINGS
14 . 1 Additional Disclosure for Venture Issuers without Significant Revenue
Additional disclosure concerning the Company’s general and administrative expenses and other business development costs is provided in the Company’s statement of loss and comprehensive loss contained in the Audited Annual Financial Statements that are published and filed herewith.
14 . 2 Continuous Disclosure & Filings - Canada
Additional disclosure is made on a continuous basis in accordance with applicable laws and in compliance with securities rules and regulations of the British Columbia Securities Commission (“
BCSC
”). This disclosure and filings includes annual audited consolidated financial statements and quarterly unaudited interim financial statements. It also includes press releases, material change reports, and disclosure of new or changed circumstances regarding the Company. Shareholders and interested parties may obtain downloadable copies of these mandatory filings made by the Company on "
SEDAR
" (the System for Electronic Document Archiving and Retrieval at website
www.sedar.com)
. The Company began filing on SEDAR in 1997. All Company filings made on SEDAR during the year and up to the date of this filing are incorporated herein by this reference.
14 . 3 Continuous Disclosure & Filings - USA
The Company is also a full reporting issuer and filer with the US Securities and Exchange Commission (“
SEC
”). The Company is required to file an annual report with the SEC in the format of a Form 20F annual report which includes audited annual consolidated financial statements. The Company files interim unaudited quarterly financial reports, press releases, material change reports, and disclosure of new or changed circumstances regarding the Company on a periodic basis under Form-6K. The Company has filed electronically on the SEC’s EDGAR database (website www.sec.gov/edgar) commencing with the Company’s Form 20F at its fiscal year end 2004. Prior to 2004 the Company filed Form 20F annual reports with the SEC in paper form. All Company filings made to US-SEC during the past fiscal year and during the This Quarter and up to the date of this filing are incorporated herein by this reference.
PART - 15 : FORWARD -LOOKING STATEMENTS
Forward-looking statements relate to future events or future performance and reflect management's expectations or beliefs regarding future events and include, but are not limited to, statements with respect to the estimation of reserves and resources, projections of anticipated revenue, the realization of reserve estimates, the timing and amount of estimated future production, cost, work schedules, capital requirements, success of resource exploration operations, environmental risks, permitting risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage.
15 . 1 Forward Looking Words and Phrases
In certain cases, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "projections", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" or the negative of these terms or comparable terminology.
15 . 2 Risks and Uncertainties
By their very nature forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, among others, risks related to actual results of exploration or new project development activities; changes in project parameters as plans continue to be refined; cash flow projections; future prices of resources; possible variations in resource reserves; accidents, labor disputes and other risks of the oil, gas, and alternative energy industries; delays in obtaining governmental approvals or financing or in the completion of development or construction activities; as well as other factors detailed from time to time in the Company's periodic filings on EDGAR and SEDAR.
15 . 3 No Assurance all Risks Anticipated
Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements.
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