Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
May. 31, 2015 | Jul. 21, 2015 | |
Option 1 | ||
Entity Registrant Name | EFLO ENERGY, INC. | |
Entity Central Index Key | 1,448,806 | |
Document Type | 10-Q | |
Document Period End Date | May 31, 2015 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --08-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 34,835,699 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,015 |
CONSOLIDATED BALANCE SHEETS (Un
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | May. 31, 2015 | Aug. 31, 2014 |
ASSETS | ||
Cash | $ 12,262 | $ 650,599 |
Accounts receivable; joint interest owners and other | 426,173 | 1,589,898 |
Prepaids | 152,881 | 47,864 |
Other | 17,069 | 30,182 |
Total current assets | 608,385 | 2,318,543 |
OIL AND GAS PROPERTIES, full cost method, unproven | 50,588,799 | 50,305,989 |
OTHER ASSETS-Goodwill | 1,194,365 | 1,194,365 |
Total assets | 52,391,549 | 53,818,897 |
CURRENT LIABILITIES | ||
Accounts payable and accrued liabilities | 2,467,288 | 4,250,625 |
Short-term loans | 104,533 | 0 |
Convertible notes, net of $nil and $233,964 of unamortized discount at May 31, 2015 and August 31, 2014, respectively | 50,000 | 3,396,036 |
Asset retirement obligation-current | 80,000 | 80,000 |
Total current liabilities | 2,701,821 | 7,726,661 |
NONCURRECT LIABILITIES | ||
Asset retirement obligations | 18,284,927 | 17,759,023 |
Deferred income taxes | 3,297,434 | 3,297,434 |
Total liabilities | 24,284,182 | 28,783,118 |
STOCKHOLDERS' EQUITY | ||
Capital Stock Authorized: 10,000,000 preferred shares, par value $0.001 per share 150,000,000 common shares, par value $0.001 per share Issued and outstanding: 34,835,699 common shares at May 31, 2015 (August 31, 2014 - 19,897,714 common shares) | 34,836 | 19,898 |
Additional paid-in capital | 34,749,302 | 30,493,045 |
Accumulated other comprehensive loss | (154,528) | (90,423) |
Accumulated deficit | (6,522,243) | (5,386,741) |
Total stockholders' equity | 28,107,367 | 25,035,779 |
Total liabilities and stockholders' equity | $ 52,391,549 | $ 53,818,897 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | May. 31, 2015 | Aug. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Unamortized Discount | $ 0 | $ 233,964 |
Stockholders Equity | ||
Preferred Stock Shares Par value | $ .001 | $ .001 |
Preferred Stock Shares Authorized | 10,000,000 | 10,000,000 |
Common Stock Shares Par value | $ 0.001 | $ 0.001 |
Common Stock Shares Authorized | 150,000,000 | 150,000,000 |
Common Stock Shares Issued | 34,835,699 | 19,897,714 |
Common Stock Shares Outstanding | 34,835,699 | 19,897,714 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
May. 31, 2015 | May. 31, 2014 | May. 31, 2015 | May. 31, 2014 | |
EXPENSES | ||||
Management and director's fees | $ 64,446 | $ 197,048 | $ 309,171 | $ 629,617 |
Stock-based compensation expense | (74,654) | 96,900 | (41,030) | 319,319 |
Consulting fees | 26,341 | 97,465 | 154,686 | 342,000 |
Professional fees | 27,351 | 234,859 | 257,950 | 480,764 |
Financing fees | 0 | 0 | 0 | 176,400 |
Office, travel and general | 28,409 | 54,470 | 162,620 | 291,823 |
Accretion of asset retirement obligations | 175,370 | 174,098 | 525,904 | 517,139 |
Provision for doubtful accounts | 907,460 | 0 | 907,460 | 0 |
Total Expenses | 1,154,723 | 854,840 | 2,276,761 | 2,757,062 |
OPERATING LOSS | (1,154,723) | (854,840) | (2,276,761) | (2,757,062) |
OTHER INCOME (EXPENSE) | ||||
Interest expense and other financing costs | (111,714) | (204,665) | (508,137) | (341,585) |
Gain on settlement of accounts payable and accrued liabilities | 0 | 0 | 1,649,396 | 0 |
NET INCOME (LOSS) before taxes | (1,266,437) | (1,059,505) | (1,135,502) | (3,098,647) |
Provision for income tax | 0 | 0 | 0 | 0 |
NET INCOME (LOSS) | (1,266,437) | (1,059,505) | (1,135,502) | (3,098,647) |
Foreign currency translation | (13,495) | (12,626) | (64,105) | (45,710) |
COMPREHENSIVE INCOME (LOSS) | $ (1,279,932) | $ (1,072,131) | $ (1,199,607) | $ (3,144,357) |
BASIC AND DILUTED INCOME (LOSS) PER SHARE | $ (0.04) | $ (0.05) | $ (0.04) | $ (0.16) |
WEIGHTED AVERAGE SHARES OUTSTANDING | 33,148,171 | 19,588,206 | 26,684,058 | 19,538,745 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | |
May. 31, 2015 | May. 31, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income (loss) | $ (1,135,502) | $ (3,098,647) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
Stock-based compensation and fee payments | (41,030) | 340,432 |
Amortization of convertible note discount | 233,964 | 207,590 |
Unrealized foreign exchange gains | (2,047) | (45,710) |
Gain on settlement of accounts payable and accrued liabilities | (1,649,396) | 0 |
Accretion of asset retirement obligations | 525,904 | 517,139 |
Provision for doubtful accounts | 907,460 | 0 |
Changes in working capital items- | ||
Accounts receivable | 224,212 | (531,393) |
Prepaids and other | (91,904) | (35,323) |
Accounts payable and accrued liabilities | 578,895 | 556,227 |
Net cash used in operating activities | (449,444) | (2,089,685) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Expenditures on oil and gas properties, net | (295,473) | (426,750) |
Net cash used in investing activities | (295,473) | (426,750) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from short-term loans | 106,580 | 0 |
Proceeds from notes payable | 0 | 2,255,000 |
Net cash provided by financing activities | 106,580 | 2,255,000 |
DECREASE IN CASH | (638,337) | (261,435) |
CASH, BEGINNING OF PERIOD | 650,599 | 476,522 |
CASH, END OF PERIOD | 12,262 | 215,087 |
SUPPLEMENTAL DISCLOSURE | ||
Cash paid for interest | 0 | 0 |
Cash paid for income taxes | 0 | 0 |
NON-CASH INVESTING ACTIVITIES: | ||
Accrued expenditures on oil and gas properties | 1,002,013 | 508,314 |
NON-CASH FINANCING ACTIVITIES | ||
Common stock issued for settlement of accounts payable and accrued liabilities | 230,475 | 157,500 |
Common stock issued as settlement of convertible notes and interest | $ 4,081,750 | $ 0 |
1. BASIS OF PRESENTATION
1. BASIS OF PRESENTATION | 9 Months Ended |
May. 31, 2015 | |
Accounting Policies [Abstract] | |
1. BASIS OF PRESENTATION | Unaudited Interim Condensed Consolidated Financial Statements The unaudited interim condensed consolidated financial statements of EFLO Energy, Inc. (the Company), have been prepared in accordance with United States generally accepted accounting principles (GAAP) for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (SEC). They do not include all information and footnotes required by GAAP for complete financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the consolidated financial statements for the year ended August 31, 2014 included in the Companys Annual Report on Form 10-K filed with the SEC. The unaudited interim condensed consolidated financial statements should be read in conjunction with those consolidated financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for fair presentation have been made. Operating results for the nine months ended May 31, 2015 are not necessarily indicative of the results that may be expected for the year ending August 31, 2015. Allowance for Doubtful Accounts We routinely assess the recoverability of all material receivables to determine their collectability. All of our receivables are from joint venture partners. We are exposed to a concentration of credit risk with respect to our accounts receivable. We believe our financial partners are financially strong and the risk of loss is minimal. We accrue a reserve on a receivable when, based on our judgment, it is probable that a receivable will not be collected and the amount of any reserve may be reasonably estimated. As of May 31, 2015 and August 31, 2014, we had CAD$1,128,541 ($907,460) and $nil, respectively, recorded as an allowance for doubtful accounts. Recent Accounting Pronouncements In June 2014, the FASB issued Accounting Standards Update 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation (ASU 2014-10), which eliminates the concept of a development stage entity (DSE) from U.S. GAAP. This change rescinds certain financial reporting requirements that have historically applied to DSEs and is intended to result in cost-savings for affected entities. ASU 2014-10 is effective for public entities for annual reporting periods beginning after December 15, 2014 and interim periods therein. The Company adopted ASU 2014-10 on September 1, 2014 and has applied its guidance in the preparation of these unaudited interim condensed consolidated financial statements. The application of ASU 2014-10 resulted in the removal of 1) inception-to-date information in the statements of operations and cash flows, 2) labels on the financial statements indicating the Companys exploration stage status, 3) certain historic disclosures describing exploration stage activities in which the Company has been engaged. The Company does not believe, however, that the removal of this information has a material effect on its unaudited interim condensed consolidated financial statements or the related footnote disclosures thereto. In August 2014, the FASB issued Accounting Standard Update No. 2014-15, Disclosure of Uncertainties About an Entity's Ability to Continue as a Going Concern. The amendments require management to perform interim and annual assessments of an entity's ability to continue as a going concern and provides guidance on determining when and how to disclose going concern uncertainties in the financial statements. The standard applies to all entities and is effective for annual and interim reporting periods ending after December 15, 2016, with early adoption permitted. The Company is currently evaluating the impact that this new guidance will have on its financial statements. |
2. OIL AND GAS PROPERTIES
2. OIL AND GAS PROPERTIES | 9 Months Ended |
May. 31, 2015 | |
Extractive Industries [Abstract] | |
2. OIL AND GAS PROPERTIES | Oil and Gas Acquisition Kotaneelee Gas Project (the KGP) As a result of two working interest acquisitions, the Company generally owns a 53.65% working interest in the KGP, including a 100% working interest in one shut in gas well. The KGP covers 30,188 gross acres in the Yukon Territory in Canada, and includes: a gas dehydration plant (capacity: 70 MMcf/d), one shut in gas well, one water disposal well (capacity: 6,000 bbl/d), and two suspended gas wells. The KGP has a fully developed gas gathering, sales and delivery infrastructure, airstrip, roads, flarestack, storage tanks, barge dock and a 24 person permanent camp facility. The KGP gas dehydration plant has a processing capacity of 70 MMcf/d, outlet gas compression of 1,200 psig and is tied-in through a 24-inch gas sales line to a gas processing plant in Fort Nelson, British Columbia. On July 18, 2012, the Company completed an acquisition of Devon Canadas (Devon) entire right and interest (generally a working interest of 22.989%, with a working interest of 69.337% in one shut in gas well) in the KGP. As consideration for Devons working interest in the KGP, (the Devon Assets), the Company paid approximately $23,298,000. The consideration was comprised of $290,000 in cash, 7,250,000 shares of the Companys restricted common stock valued at $15,950,000, and the absorption of approximately $7,058,000 in asset retirement obligations. On October 17, 2012, the Company completed a Share Purchase Agreement with Nahanni Energy Inc., 1700665 Alberta Ltd., Apex Energy (2000), Inc. and Canada Southern Petroleum #1 L.P. (jointly Nahanni) for the acquisition of its entire right and interest (generally a working interest of 30.664%) in the KGP (the Nahanni Assets) which, in addition to the 69.337% working interest acquired from Devon on July 18, 2012, provided the Company with a 100% interest in one shut in gas well in the KGP. As consideration for the Nahanni Assets, the Company paid Nahanni approximately $13,761,000. The consideration was comprised of approximately $133,000 in cash ($398,550 offset by $265,950 paid in connection with the acquisition of the Devon Assets in settlement of certain Nahanni indebtedness), 1,614,767 shares of one of the Companys subsidiaries, which are exchangeable for 1,614,767 shares of the Companys restricted common stock valued at approximately $4,191,000, and the absorption of approximately $9,437,000 in asset retirement obligations. The number of shares issued by the Companys subsidiary was calculated by dividing the fair value of the exchangeable shares by the volume weighted average trading price of the Companys stock for the ten (10) trading days prior to closing the purchase agreement. The fair value of the exchangeable shares has been recorded as additional paid in capital in the Companys equity. The exchangeable shares enjoy no voting or revenue participation rights in the subsidiary. The Company records assets acquired and liabilities assumed at their estimated acquisition date fair values, while transaction and integration costs associated with the acquisitions are expensed as incurred. The Company uses relevant market assumptions to determine fair value and allocate purchase price, such as future commodity pricing for purchased hydrocarbons, market multiples for similar transactions and replacement value for certain equipment. Many of the assumptions are unobservable. The Companys preliminary assessment of the fair value of the Nahanni Assets resulted in a valuation of $25,526,554. As a result of incorporating this information into the purchase price allocation, a gain on bargain purchase of $11,766,787 was recognized in the accompanying consolidated statement of operations. The gain on bargain purchase was primarily attributable to the strategic nature of the divestiture by the motivated seller, coupled with a confluence of certain favorable economic trends in the industry and the geographic region in which the Nahanni Assets are located. The Company allocated the consideration paid for the Nahanni Assets and Devon assets based upon its assessment of their fair value at the dates of purchase, as follows: Fair Value of Assets Acquired Asset Description Nahanni Assets $ Devon Assets $ Total $ Unproved leasehold costs 14,548,787 13,827,001 28,375,788 Plant and equipment 8,594,362 6,484,001 15,078,363 Gathering systems 2,383,405 1,788,001 4,171,406 Vehicles - 4,527 4,527 Unproven Properties 25,526,554 22,103,530 47,630,084 Goodwill - 1,194,365 1,194,365 Total Assets Acquired - KGP 25,526,554 23,297,895 48,824,449 Development costs incurred to obtain access and provide facilities for extracting, gathering, treating and storing oil and gas related to unproved oil and gas properties that are being evaluated for economic viability are capitalized to the full cost pool until proved reserves are established, or determination is made that the unproved properties are impaired. During the nine months ended May 31, 2015, the full cost pool was increased by $282,810 (2014 - $935,064) as a result of these costs. |
3. ASSET RETIRMENT OBLIGATIONS
3. ASSET RETIRMENT OBLIGATIONS | 9 Months Ended |
May. 31, 2015 | |
Notes to Financial Statements | |
3. ASSET RETIRMENT OBLIGATIONS | In connection with its acquisition of the Nahanni Assets and the Devon Assets, the Company acquired $9,436,526 and $7,057,716 in asset retirement obligations, respectively, relating to its portion of the abandonment, reclamation and environmental liabilities associated with the KGP. On March 31, 2011, the Company initiated oil and gas operations by entry into a Farmout and Participation Agreement which provided for its acquisition of a net working interest ranging from 21.25% to 42.5%, in a 2,629 acre oil and gas lease, insofar as that lease covers from the surface to the base of the San Miguel formation (the San Miguel Lease). The San Miguel Lease, which is located in Zavala County, Texas, is unproven and has no current production. The Company recorded $80,000 in asset retirement obligations related to the future plugging and abandonment of a test well on the San Miguel Lease. At May 31, 2014, the Companys interest in the San Miguel lease was impaired and expensed to the extent of its carrying value, which included the full amount of the associated asset retirement obligation. The entire asset retirement obligation relating to the San Miguel Lease has been classified as a current liability. The Company has no assets that are legally restricted for purposes of settling asset retirement obligations. As part of the Companys acquisition of the Devon Assets, it provided Devon a corporate guarantee (the Guarantee) in the amount of CAD$10,000,000 ($9,225,000) and delivered a letter of credit in the amount of CAD$4,380,000 ($4,041,000) to Devon (the Devon LOC). The Company also delivered a letter of credit in the amount of CAD$625,000 ($577,000) to the government of the Yukon Territory (the Yukon LOC). The amounts of the Devon LOC and Yukon LOC reduce the amount of the Guarantee on a dollar-for-dollar basis. The Company is primarily responsible for payment of all asset retirement obligations. The Guarantee, Devon LOC and Yukon LOC are only available to Devon in the event the Company defaults upon its asset retirement obligations relating to the Devon Assets. The following table summarizes changes to the Companys asset retirement obligations during the nine months ended May 31, 2015 and the year ended August 31, 2014: $ Balance, August 31, 2013 17,146,750 Liabilities incurred (acquired) - Accretion expense 692,273 Balance, August 31, 2014 17,839,023 Liabilities incurred (acquired) - Accretion expense 525,904 Total Balance, May 31, 2015 18,364,927 Total Balance, May 31, 2015 Current 80,000 Total Balance, May 31, 2015 Long Term 18,284,927 |
4. SHORT-TERM LOANS
4. SHORT-TERM LOANS | 9 Months Ended |
May. 31, 2015 | |
Debt Disclosure [Abstract] | |
4. SHORT-TERM LOANS | On March 4, 2015, the Company entered into a loan agreement with Fundacion Inversiones Barroco (FIB), a Panamanian corporation, whereby the Company borrowed CAD$600,000 from FIB (the Loan). The Loan bears interest at a rate of 10% per annum, is unsecured and due on or before February 1, 2016. On April 7, 2015, the Company repaid the CAD$600,000 loan. The Loan is a related party transaction as a director of the Company is related to FIB. FIB is also a shareholder of the Company. In April 2015, the Company entered into a loan agreement with FIB and Holloman Corporation (Holloman and collectively, the Lenders). The Lenders agreed to provide funds as requested by the Company (the Short-term Loans). The Short-term Loans bear interest at a rate of 10% per annum and are due on or before February 1, 2016. The Short-term Loans are secured by the assets of the Company and its wholly-owned subsidiaries. The Short-term Loans are related party transactions as a director of the Company is related to FIB and a director of the Company is related to Holloman. At May 31, 2015, the Shareholders Loans principal balance was CAD$130,000 ($104,533). During the nine months ended May 31, 2015, the Company recorded interest expense of $726. |
5. CONVERTIBLE NOTES PAYABLE
5. CONVERTIBLE NOTES PAYABLE | 9 Months Ended |
May. 31, 2015 | |
Notes to Financial Statements | |
5. CONVERTIBLE NOTES PAYABLE | The following table summarizes changes to the Companys convertible notes payable during the nine months ended May 31, 2015 and the year ended August 31, 2014: 2013 Convertible Notes $ 2014 Convertible Notes $ Balance, August 31, 2013 - - Principal received 2,255,000 1,400,000 Transaction costs (533,803 ) - Amortization of transaction costs 299,839 - Conversion into common stock (25,000 ) - Balance, August 31, 2014 1,996,036 1,400,000 Amortization of transaction costs 233,964 - Settlement of principal and interest in common stock (2,230,000 ) (1,350,000 ) Balance, May 31, 2015 - 50,000 2013 Convertible Note Offering On October 30, 2013 the Company sold convertible notes having an aggregate principal amount of $2,255,000 (the 2013 Convertible Notes), to 22 accredited investors, under the following general terms: ● the maturity date is April 30, 2015; ● the principal amount is convertible into shares of the Companys common stock at a price of $1.00 per share; ● interest is at 15% per annum payable, at the Companys election, in cash or shares of its common stock at a rate of $1.25 per share; and, ● the Company also issued stock purchase warrants in connection with the 2013 Convertible Note providing for the purchase of up to 1,127,500 shares of its common stock (1 full share for each $2.00 invested in the 2013 Convertible Notes) at an exercise price of $1.25 per share for a period of three years (the "Stock Purchase Warrants). During the year ended August 31, 2014, the Company paid $176,400 in finders fees which were recognized as financing fees in the statements of loss. The fair value of the Stock Purchase Warrants ($533,803) is being amortized to the statement of loss over the life of the 2013 Convertible Notes. During the nine months ended May 31, 2015, the Company recognized $220,185 (2014 - $132,148) in interest expense relating to the 2013 Convertible Notes and $233,964 (2014 - $207,590) as amortization of transaction costs. On June 2, 2014, $25,000 in principal payable on the 2013 Convertible Notes was converted into 25,000 shares of the Companys common stock at a conversion price of $1.00 per share. On April 29, 2015, the remaining $2,230,000 in principal payable on the 2013 Convertible Notes was converted into 2,230,000 shares of the Companys common stock at a conversion price of $1.00 per share. The Company also issued 401,400 shares of the Company to settle $501,750 of interest at a rate of $1.25 per share. 2014 Convertible Note Offering During June 2014, the Company sold convertible notes having an aggregate principal amount of $1,400,000 (the 2014 Convertible Notes), to two accredited investors, and one non-accredited investor, under the following general terms: ● the maturity date is December 31, 2014. On December 30, 2014, the maturity date was extended to January 31, 2015; ● at the option of the note holder, the principal amount is convertible into shares of the Companys common stock at a price per share to be determined in connection with the Companys planned offering of shares upon migration to a senior stock exchange, less a 10% discount (the 2014 Conversion Right); ● a 6% financing fee on the principal sum of the 2014 Convertible Notes, is payable at the option of the note holder, in shares of the Companys common stock (the number of which is to be calculated using the closing market price of the Companys shares at the notes maturity date), or in cash of $84,000. ● the 2014 Convertible Notes are non-interest bearing so long as they are paid or converted prior to their maturity date. In the event of default, or if a 2014 Convertible Note is not paid, or converted on or within ten (10) days following its maturity date: a) the note will bear interest at 10% per annum, payable monthly; and, b) an additional 4% financing fee (the Default Financing Fee) on the then outstanding principal balance of the 2014 Convertible Note(s) shall become due and payable. The Company is obligated to pay the Default Financing Fee in common shares at a conversion price equal to the closing market price of the common shares on the date of an event of default, or at the maturity date, whichever is earliest. Entities controlled, in part or in whole, by the Companys Chairman and former President acquired $1,000,000 and $350,000 of 2014 Convertible Notes under these terms. During the nine months ended May 31, 2015, the Company recognized $46,817 (2014 - $nil) of financing expense relating to the 6% financing fee. On January 12, 2015, the Company entered into a settlement agreement with two of the three 2014 Convertible Notes holders whereby $1,350,000 of principal and $81,000 of the 6% financing fee were settled by the issuance of 11,007,692 shares of the Companys common stock calculated using a price of $0.13 per share. During the nine months ended May 31, 2015, the Company recognized $2,000 of Default Financing Fee and $1,667 of interest expense (2014 - $nil). |
6. CAPITAL STOCK AND STOCK BASE
6. CAPITAL STOCK AND STOCK BASED COMPENSATION | 9 Months Ended |
May. 31, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
6. CAPITAL STOCK AND STOCK BASED COMPENSATION | a) Issuance of Common Stock: During the nine months ended May 31, 2015, the Company completed the follow stock transactions: i) During December 2014, in connection with cost cutting efforts, Holloman Corporation and Niconsult GmbH voluntarily terminated their service agreements with the Company (Note 7). The effective date of those terminations was June 1, 2014. As a result, the Company adjusted fees totaling $22,500 related to the three months ended August 31, 2014, which had been paid using 23,991 shares of its restricted common stock, at a weighted average price of $0.938 per share. This adjustment resulted in the recognition of a gain on forgiveness of accounts payable of $22,500 during the nine months ended May 31, 2015. ii) On January 12, 2015, the Company issued 11,007,692 shares of the Companys common stock as settlement of $1,350,000 of 2014 Convertible Notes principal and $81,000 of 6% financing fee (Notes 5 and 8). iii) On January 12, 2015, the Company issued 1,322,884 shares of the Companys common stock at the fair value of $171,975 as settlement of $1,798,871 of accounts payable and accrued liabilities and accordingly, the Company recorded a gain on settlement of accounts payable and accrued liabilities of $1,626,896 (Note 8). iv) On April 29, 2015, the Company issued 2,631,400 shares of the Companys common stock as settlement of $2,230,000 of 2013 Convertible Notes principal and $501,750 of accrued interest (Note 5). b) Convertible notes: The Company has outstanding 2014 Convertible Notes (Note 5) which are convertible into shares of the Companys common stock. c) Stock purchase warrants: The Company has 1,127,500 Stock Purchase Warrants outstanding which are exercisable at $1.25 per share up to October 30, 2016. d) Options: On August 27, 2012, the Company established a Non-Qualified Stock Option Plan and a Stock Bonus Plan (the Plans). The Non-Qualified Stock Option Plan (the Option Plan) authorizes the issuance of up to 2,000,000 shares of the Companys common stock. The Stock Bonus Plan provides for the issuance of up to 350,000 common shares (Bonus Shares). Under the Plans, shares may only be issued to employees, directors, officers, consultants and advisors, provided qualifying services are rendered. The Companys stock options outstanding as at May 31, 2015 and August 31, 2014 and the changes for the periods then ended are as follows: Number Outstanding # Weighted Average Exercise Price $ Balance, August 31, 2013 1,600,000 2.46 Expired (600,000 ) 2.23 Balance, August 31, 2014 1,000,000 2.60 Expired (750,000 ) 2.61 Balance, May 31, 2015 250,000 2.58 Summary of stock options outstanding at May 31, 2015: Security Number Outstanding # Exercise Price $ Expiry Date Stock options 125,000 2.50 August 27, 2017 Stock options 125,000 2.65 August 27, 2017 During the nine months ended May 31, 2015, the Company had stock-based compensation expense of ($41,030) (2014 - $340,432). |
7. RELATED PARTY TRANSACTIONS
7. RELATED PARTY TRANSACTIONS | 9 Months Ended |
May. 31, 2015 | |
Related Party Transactions [Abstract] | |
7. RELATED PARTY TRANSACTIONS | Effective January 20, 2011, a company controlled by the Companys former Chief Executive Officer, its former Chief Financial Officer, and an unrelated consultant (the Finders) entered into an agreement with the Company providing for the payment of finders compensation ranging from 5% (on transaction values greater than $1,000,000) to 10% (on transactions valued up to $300,000) on transactions introduced to the Company by or through the Finders for a period of two years (the Finders Fee Agreement). Under the Finders Fee Agreement, compensation is divided between the Finders and the Finders may elect whether the finders compensation is payable in cash, or shares of the Companys restricted common stock. The Finders Fee Agreement specifically recognizes that the KGP has been presented to the Company by the Finders. On January 12, 2015, two of the Finders settled the fees payable under the Finders Fee Agreement at no cost to the Company (see Note 8). Effective September 1, 2013, the Company executed an administrative services agreement with Holloman Corporation. Under this agreement, fees of $5,000 per month are payable to Holloman Corporation covering; office and meeting space, supplies, utilities, office equipment, network access and other administrative facilities costs. These fees are payable quarterly in shares of the Companys restricted common stock at the closing price of the stock on the last trading-day of the applicable monthly billing period. During December 2014, in connection with cost cutting efforts, Holloman Corporation voluntarily terminated its administrative services agreement with the Company. The effective date of that termination was June 1, 2014. The chairman of the Companys board of directors is also a director of Pacific World Energy Corporation (Pacific World). Pacific World held $1,000,000 of 2014 Convertible Notes principal until settlement for shares of the Companys common stock on January 12, 2015 (Note 5). The Short-term Loans (Note 4) are related party transactions as a director of the Company is related to FIB and a director of the Company is related to Holloman. |
8. GAIN ON SETTLEMENT OF ACCOUN
8. GAIN ON SETTLEMENT OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | 9 Months Ended |
May. 31, 2015 | |
Notes to Financial Statements | |
8. GAIN ON SETTLEMENT OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | On January 12, 2015, the Company (together with its officers and directors), two of the 2014 Convertible Notes holders, and other interest parties entered into a settlement agreement (the Settlement Agreement). Under the terms of the Settlement Agreement, two of the 2014 Convertible Notes holders agreed to accept payment of principal and 6% financing fees aggregating $1,431,000 into 11,007,692 shares of the Companys common stock calculated using a price of $0.13 per share (Note 5). The Settlement Agreement also provided for the following liability settlements which were settled with 1,322,884 shares of the Companys common stock calculated using a price of $0.13 per share: Description of liability Accounts payable and accrued liabilities $ Agreed settlement amount $ Gain on settlement of accounts payable and accrued liabilities $ Number of shares of the Companys common stock # Finders fees 1,079,802 - 1,079,802 - Directors fees 451,750 55,900 395,850 430,000 Management fees 233,891 116,075 117,816 892,884 Consulting fees 33,428 - 33,428 - 1,798,871 171,975 1,626,896 1,322,884 |
9. SUBSEQUENT EVENTS
9. SUBSEQUENT EVENTS | 9 Months Ended |
May. 31, 2015 | |
Subsequent Events [Abstract] | |
9. SUBSEQUENT EVENTS | Subsequent to May 31, 2015, the Company received additional short-term loans (Note 4) from FIB and Holloman of CAD$208,000. |
2. OIL AND GAS PROPERTIES (Tabl
2. OIL AND GAS PROPERTIES (Tables) | 9 Months Ended |
May. 31, 2015 | |
Oil And Gas Properties Tables | |
Schedule of Oil and Gas Acquisition | Fair Value of Assets Acquired Asset Description Nahanni Assets $ Devon Assets $ Total $ Unproved leasehold costs 14,548,787 13,827,001 28,375,788 Plant and equipment 8,594,362 6,484,001 15,078,363 Gathering systems 2,383,405 1,788,001 4,171,406 Vehicles - 4,527 4,527 Unproven Properties 25,526,554 22,103,530 47,630,084 Goodwill - 1,194,365 1,194,365 Total Assets Acquired - KGP 25,526,554 23,297,895 48,824,449 |
3. ASSET RETIREMENT OBLIGATIONS
3. ASSET RETIREMENT OBLIGATIONS (Tables) | 9 Months Ended |
May. 31, 2015 | |
BalanceEnding1 | |
Schedule of Asset Retirement Obligation | $ Balance, August 31, 2013 17,146,750 Liabilities incurred (acquired) - Accretion expense 692,273 Balance, August 31, 2014 17,839,023 Liabilities incurred (acquired) - Accretion expense 525,904 Total Balance, May 31, 2015 18,364,927 Total Balance, May 31, 2015 Current 80,000 Total Balance, May 31, 2015 Long Term 18,284,927 |
5. CONVERTIBLE NOTES PAYABLE (T
5. CONVERTIBLE NOTES PAYABLE (Tables) | 9 Months Ended |
May. 31, 2015 | |
Convertible Notes Payable Tables | |
Schedule convertible notes payable | 2013 Convertible Notes $ 2014 Convertible Notes $ Balance, August 31, 2013 - - Principal received 2,255,000 1,400,000 Transaction costs (533,803 ) - Amortization of transaction costs 299,839 - Conversion into common stock (25,000 ) - Balance, August 31, 2014 1,996,036 1,400,000 Amortization of transaction costs 233,964 - Settlement of principal and interest in common stock (2,230,000 ) (1,350,000 ) Balance, May 31, 2015 - 50,000 |
5. CAPITAL STOCK AND STOCK-BASE
5. CAPITAL STOCK AND STOCK-BASED COMPENSATION (Tables) | 9 Months Ended |
May. 31, 2015 | |
Capital Stock And Stock-based Compensation Tables | |
Option activity | The Companys stock options outstanding as at May 31, 2015 and August 31, 2014 and the changes for the periods then ended are as follows: Number Outstanding # Weighted Average Exercise Price $ Balance, August 31, 2013 1,600,000 2.46 Expired (600,000 ) 2.23 Balance, August 31, 2014 1,000,000 2.60 Expired (750,000 ) 2.61 Balance, May 31, 2015 250,000 2.58 Summary of stock options outstanding at May 31, 2015: Security Number Outstanding # Exercise Price $ Expiry Date Stock options 125,000 2.50 August 27, 2017 Stock options 125,000 2.65 August 27, 2017 |
8. GAIN ON SETTLEMENT OF ACCO19
8. GAIN ON SETTLEMENT OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Tables) | 9 Months Ended |
May. 31, 2015 | |
Notes to Financial Statements | |
GAIN ON SETTLEMENT OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | Description of liability Accounts payable and accrued liabilities $ Agreed settlement amount $ Gain on settlement of accounts payable and accrued liabilities $ Number of shares of the Companys common stock # Finders fees 1,079,802 - 1,079,802 - Directors fees 451,750 55,900 395,850 430,000 Management fees 233,891 116,075 117,816 892,884 Consulting fees 33,428 - 33,428 - 1,798,871 171,975 1,626,896 1,322,884 |
2. OIL AND GAS PROPERTIES (Deta
2. OIL AND GAS PROPERTIES (Details) | May. 31, 2015USD ($) |
Unproven Properties | |
Unproved Leasehold costs | $ 28,375,788 |
Plant and equipment | 15,078,363 |
Gathering systems | 4,171,406 |
Vehicles | 4,527 |
Subtotal | 47,630,084 |
Goodwill | 1,194,365 |
Total Assets Acquired - KGP | 48,824,449 |
Nahanni Assets | |
Unproven Properties | |
Unproved Leasehold costs | 14,548,787 |
Plant and equipment | 8,594,362 |
Gathering systems | 2,383,405 |
Vehicles | 0 |
Subtotal | 25,526,554 |
Goodwill | 0 |
Total Assets Acquired - KGP | 25,526,554 |
Devon Assets | |
Unproven Properties | |
Unproved Leasehold costs | 13,827,001 |
Plant and equipment | 6,484,001 |
Gathering systems | 1,788,001 |
Vehicles | 4,527 |
Subtotal | 22,103,530 |
Goodwill | 1,194,365 |
Total Assets Acquired - KGP | $ 23,297,895 |
3. ASSET RETIREMENT OBLIGATIO21
3. ASSET RETIREMENT OBLIGATIONS (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
May. 31, 2015 | Aug. 31, 2014 | |
Asset Retirement Obligations | ||
Asset Retirement Obligation, Beginning | $ 17,839,023 | $ 17,146,750 |
Liabilities incurred (acquired) | 0 | 0 |
Accretion expense | 525,904 | 692,273 |
Asset Retirement Obligation, Ending | 18,364,927 | 17,839,023 |
Total Balance, May 31, 2015 - Current | 80,000 | 80,000 |
Total Balance, May 31, 2015 - Long Term | $ 18,284,927 | $ 17,759,023 |
5. CONVERTIBLE NOTES PAYABLE (D
5. CONVERTIBLE NOTES PAYABLE (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
May. 31, 2015 | Aug. 31, 2014 | |
2013 Convertible Notes | ||
Beginning balance | $ 1,996,036 | $ 0 |
Principal received | 2,255,000 | |
Transaction costs | (533,803) | |
Amortization of transaction costs | 233,964 | 299,839 |
Conversion into common stock | (25,000) | |
Settlement of principal and interest in common stock | (2,230,000) | |
Ending balance | 0 | 1,996,036 |
2014 Convertible Notes | ||
Beginning balance | 1,400,000 | 0 |
Principal received | 1,400,000 | |
Transaction costs | 0 | |
Amortization of transaction costs | 0 | 0 |
Conversion into common stock | 0 | |
Settlement of principal and interest in common stock | (1,350,000) | |
Ending balance | $ 50,000 | $ 1,400,000 |
6. CAPITAL STOCK AND STOCK-BASE
6. CAPITAL STOCK AND STOCK-BASED COMPENSATION (Details) - $ / shares | 9 Months Ended | 12 Months Ended |
May. 31, 2015 | Aug. 31, 2014 | |
Capital Stock And Stock-based Compensation Details | ||
Options outstanding, beginning | 1,000,000 | 1,600,000 |
Expired | (750,000) | (600,000) |
Options outstanding, ending | 250,000 | 1,000,000 |
Weighted Average Exercise Price, beginning | $ 2.60 | $ 2.46 |
Weighted Average Exercise Price, expired | 2.61 | 2.23 |
Weighted Average Exercise Price, ending | $ 2.58 | $ 2.60 |
6. CAPITAL STOCK AND STOCK-BA24
6. CAPITAL STOCK AND STOCK-BASED COMPENSATION (Details 1) - 9 months ended May. 31, 2015 - $ / shares | Total |
Options outstanding, ending | 250,000 |
Weighted Average Exercise Price, ending | $ 2.58 |
Option group 1 | |
Options outstanding, ending | 125,000 |
Weighted Average Exercise Price, ending | $ 2.50 |
Expiry date | Aug. 27, 2017 |
Option group 2 | |
Options outstanding, ending | 125,000 |
Weighted Average Exercise Price, ending | $ 2.65 |
Expiry date | Aug. 27, 2017 |
8. GAIN ON SETTLEMENT OF ACCO25
8. GAIN ON SETTLEMENT OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details) - May. 31, 2015 - USD ($) | Total |
Accounts payable and accrued liabilities | $ 1,798,871 |
Agreed settlement amount | 171,975 |
Gain on settlement of accounts payable and accrued liabilities | $ 1,626,896 |
Number of shares of the Company's common stock | 1,322,884 |
Finders' fees | |
Accounts payable and accrued liabilities | $ 1,079,802 |
Agreed settlement amount | 0 |
Gain on settlement of accounts payable and accrued liabilities | $ 1,079,802 |
Number of shares of the Company's common stock | 0 |
Directors' fees | |
Accounts payable and accrued liabilities | $ 451,750 |
Agreed settlement amount | 55,900 |
Gain on settlement of accounts payable and accrued liabilities | $ 395,850 |
Number of shares of the Company's common stock | 430,000 |
Management fees | |
Accounts payable and accrued liabilities | $ 233,891 |
Agreed settlement amount | 116,075 |
Gain on settlement of accounts payable and accrued liabilities | $ 117,816 |
Number of shares of the Company's common stock | 892,884 |
Consulting fees | |
Accounts payable and accrued liabilities | $ 33,428 |
Agreed settlement amount | 0 |
Gain on settlement of accounts payable and accrued liabilities | $ 33,428 |
Number of shares of the Company's common stock | 0 |