UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|
x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2010
|
333-138806
(Commission File Number)
MOGUL ENERGY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
98-0461623
(I.R.S. Employer Identification Number)
520 Pike Street, Suite 2210
Seattle, WA 98101
(Address of principal executive offices)
(206) 357-4220
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes
x
No
¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes
x
No
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer
¨
|
Accelerated filer
¨
|
|
|
|
|
Non-accelerated filer
¨
(Do not check if a smaller reporting company)
|
Smaller reporting company
x
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
¨
No
x
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
57,445,987 common shares issued and outstanding as November 5, 2010.
T
ABLE OF CONTENTS
|
PART I
|
|
|
|
|
FINANCIAL INFORMATION
|
|
|
|
|
Item 1.
|
|
|
Item 2.
|
|
|
Item 3.
|
|
|
Item 4T.
|
|
|
|
|
|
|
|
|
PART II
|
|
|
|
|
OTHER INFORMATION
|
|
|
|
|
Item 1.
|
|
|
Item 2.
|
|
|
Item 3.
|
|
|
Item 4.
|
|
|
Item 5.
|
Other Information
|
|
Item 6.
|
|
|
|
|
|
|
M
ogul Energy International, Inc.
(an exploration stage company)
Financial Statement Index
|
|
Index
|
|
|
|
|
|
|
|
Balance Sheets
|
F-2
|
|
|
|
|
Statements of Operations
|
F-3
|
|
|
|
|
Statements of Cash Flows
|
F-4
|
|
|
|
|
Notes to the Financial Statements
|
F-5
|
Mogul Energy International, Inc.
(an exploration stage company)
Balance Sheets
(expressed in U.S. dollars)
|
|
|
September 30,
2010
|
|
|
December 31,
2009
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
Cash
|
|
$
|
299,648
|
|
|
$
|
7,481
|
|
|
Receivable
|
|
|
22,361
|
|
|
|
18,210
|
|
|
Investment - held for sale
|
|
|
84,607
|
|
|
|
625,961
|
|
|
Prepaid and Deposits
|
|
|
84,570
|
|
|
|
47,517
|
|
|
Total current assets
|
|
|
491,186
|
|
|
|
669,167
|
|
|
Non-current
|
|
|
|
|
|
|
|
|
|
Exploration and evaluation
|
|
|
492,844
|
|
|
|
923,232
|
|
|
Total Assets
|
|
$
|
984,030
|
|
|
$
|
1,622,400
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued
|
|
$
|
37,669
|
|
|
$
|
217,435
|
|
|
Bank indebtedness
|
|
|
-
|
|
|
|
43,143
|
|
|
Loans from shareholders
|
|
|
-
|
|
|
|
145,320
|
|
|
Total current liabilities
|
|
|
37,669
|
|
|
|
405,898
|
|
|
Contingencies and commitments
|
|
|
303,457
|
|
|
|
-
|
|
|
Total Liabilities
|
|
|
342,261
|
|
|
|
405,898
|
|
|
Shareholders’ Equity:
|
|
|
|
|
|
|
|
|
|
Deficit accumulation during exploration stage
|
|
$
|
(6,875,273
|
)
|
|
$
|
(6,721,905
|
)
|
|
Common stock (
Authorized: 100,000,000 shares, $0.0001 par value. Outstanding: 57,445,987 shares at 09/30/10 and 12/31/09)
|
|
|
5,744
|
|
|
|
5,744
|
|
|
Additional paid-in capital
|
|
|
7,345,741
|
|
|
|
7,213,003
|
|
|
Warrants & Options:
|
|
|
292,500
|
|
|
|
425,238
|
|
|
Preferred: 10,000,000 shares authorized, none issued
|
|
|
-
|
|
|
|
-
|
|
|
Foreign exchange adjustment
|
|
|
(165,207
|
)
|
|
|
(148,458
|
)
|
|
Other comprehensive income (loss)
|
|
|
39,400
|
|
|
|
442,880
|
|
|
Total Shareholders’ Equity
|
|
|
641,768
|
|
|
|
1,216,000
|
|
|
Total Shareholders’ Equity and Liabilities
|
|
$
|
984,030
|
|
|
$
|
1,622,400
|
|
The accompanying notes are an integral part of these financial statements
Mogul Energy International, Inc.
(an exploration stage company)
Statements of Operations
For the Three and Nine Months Ended September 30, 2010 and 2009, and
(expressed in U.S. dollars)
|
|
|
Three Months Ended
Sept. 30, 2010
|
|
|
Three Months Ended
Sept. 30, 2009
|
|
|
Nine Months Ended
Sept. 30, 2010
|
|
|
Nine Months Ended
Sept. 30, 2009
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
$
|
(332,466
|
)
|
|
$
|
(231,378
|
)
|
|
$
|
(772,549
|
)
|
|
$
|
(644,747
|
)
|
|
Deferred indemnity
|
|
|
(266,750
|
)
|
|
|
|
|
|
|
(266,750
|
)
|
|
|
-
|
|
|
Impairment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Other income and expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue for services
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,865
|
|
|
Gain on disposition exploration property
|
|
|
-
|
|
|
|
-
|
|
|
|
575,000
|
|
|
|
-
|
|
|
Gain on sale of investment held for sale
|
|
|
-
|
|
|
|
25,035
|
|
|
|
310,931
|
|
|
|
22,407
|
|
|
Net income (loss) for the periods
|
|
$
|
(599,216
|
)
|
|
$
|
(206,342
|
)
|
|
$
|
(153,368
|
)
|
|
$
|
(609,476
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gain (loss) on investments held for sale for periods
|
|
$
|
1,540
|
|
|
$
|
349,238
|
|
|
$
|
85,026
|
|
|
$
|
242,476
|
|
|
Foreign exchange adjustment
|
|
|
(11,104
|
)
|
|
|
15,771-
|
|
|
|
(16,749
|
))
|
|
|
28,662
|
|
|
Total other comprehensive gain (loss) for the periods
|
|
$
|
(9,565
|
)
|
|
$
|
365,009
|
|
|
$
|
68,277
|
|
|
$
|
271,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive net gain (loss) for the periods
|
|
$
|
(608,780
|
)
|
|
$
|
158,667
|
|
|
$
|
(85,091
|
)
|
|
$
|
(338,378
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
57,445,987
|
|
|
|
57,445,987
|
|
|
|
57,445,987
|
|
|
|
57,445,987
|
|
The accompanying notes are an integral part of these financial statements
Mogul Energy International, Inc.
(an exploration stage company)
Statements of Cash Flows
For the Nine Months Ended September 30, 2010 and 2009 and
(Expressed in U.S. dollars)
|
|
|
Nine Months Ended
Sept. 30, 2010
|
|
|
Nine Months Ended
Sept. 30, 2009
|
|
|
Operating Activities
|
|
|
|
|
|
|
|
Net income (loss) for periods
|
|
$
|
(153,368
|
)
|
|
$
|
(403,134
|
)
|
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Gain on disposition of exploration Property
|
|
|
(575,000
|
)
|
|
|
-
|
|
|
Gain on investment held for sale
|
|
|
(310,931
|
)
|
|
|
2,629
|
|
|
Changes in non-cash working capital
|
|
|
|
|
|
|
|
|
|
Accounts payables ( decrease) increase
|
|
|
(179,767
|
)
|
|
|
(349,016
|
)
|
|
GST receivable (decrease) increase
|
|
|
(4,150
|
)
|
|
|
38,049
|
|
|
Prepaid
|
|
|
(37,054
|
)
|
|
|
(8,398
|
)
|
|
Commitments and Contingencies
|
|
|
303,457
|
|
|
|
-
|
|
|
Cash used in operating activities
|
|
$
|
(955,677
|
)
|
|
$
|
(719,870
|
)
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
|
Proceeds - sale of investments held for sale
|
|
|
448,804
|
|
|
|
57,578
|
|
|
Proceeds from the disposition of exploration property
|
|
|
1,000,000
|
|
|
|
|
|
|
Exploration and evaluation
|
|
|
5,389
|
|
|
|
(193,731
|
)
|
|
Cash used for investing activities
|
|
$
|
1,454,193
|
|
|
$
|
(136,153
|
)
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
|
Loans from shareholders
|
|
|
(145,320
|
)
|
|
|
-
|
|
|
Bank indebtedness
|
|
|
(43,143
|
)
|
|
|
-
|
|
|
Cash from financing activities
|
|
$
|
(188,463
|
)
|
|
$
|
-
|
|
|
Foreign exchange adjustment
|
|
|
(16,749
|
)
|
|
|
12,850
|
|
|
Increase (decrease) in cash during periods
|
|
|
310,052
|
|
|
|
(843,173
|
)
|
|
Cash beginning of periods
|
|
|
7,481
|
|
|
|
845,173
|
|
|
Cash at end of periods
|
|
$
|
299,648
|
|
|
$
|
2,078
|
|
|
Interest paid during period
|
|
|
32,972
|
|
|
|
-
|
|
|
Taxes paid during period
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
-
|
|
|
Schedule of Non-cash Transactions
|
|
|
|
|
|
|
-
|
|
|
Expiration of shareholder warrants
|
|
|
132,738
|
|
|
|
-
|
|
|
Net unrealized gain on investments held
for sale
|
|
$
|
(85,026
|
)
|
|
$
|
-
|
|
The accompanying notes are an integral part of these financial statements
Mogul Energy International, Inc.
Notes to the September 30, 2010 and 2009 Financial Statements
NOTE 1 - Organization and Nature of Business
Mogul Energy International, Inc. (Company) was formed as a Delaware corporation on July 25, 2005 to engage in the business of oil and gas exploration. The Company’s business activities included financing to acquiring drilling prospects and exploration for oil and gas.
The Company acquires low entry cost exploration prospects, as measured on a dollar per barrel for proven and potential reserves in proximity to producing oil fields.
In managements opinion all of the adjustments necessary for a fair statement of the results of the interim period ended September 30, 2010 have been made. Included is an adjustment for contingency resulting from a liability to indemnify certain shareholders for $266,750, as outlined in Note 10 under the caption Flow-through Financing. All other adjustments are of a normal recurring nature. These financial statements for the nine months ended September 30, 2010 should be read in conjunction with our audited financial statements for the year ended December 31, 2009.
NOTE 2 -
Going Concern
The Company is considered an exploration stage corporation because it has had no revenues from its intended principal business and has not yet achieved commercial production.
The Company has a history of operating losses, and a $6,875,273 accumulated deficit through September 30, 2010 ($6,735,083 - September 30, 2009). This and other factors raise substantial doubt about the ability of the Company to continue as a going concern. Management plans to address these matters through the sale of additional shares of its common stock and/or additional borrowings to finance the Company’s operations and/or the sale of assets to achieve profitable operations through successful exploration and development of oil and gas properties.
Although there is no assurance that the Company will be successful in these actions, management believes that it will be able to secure the necessary financing to continue operations for the foreseeable future. Accordingly, these financial statements do not reflect adjustments to the carrying value of assets and liabilities, the reported expenses and balance sheet classifications used that would be necessary if the going concern assumption were not appropriate. Such adjustments would be material and would have an adverse effect on the ability of the Company to continue as a going concern.
NOTE 3 - Investment Held for Sale
At September 30, 2010 the Company held 300,000 common shares of Sea Dragon Energy Inc., a Canadian company trading on the TSX Venture
exchange under the symbol SDX. This investment is accounted for as held for sale.
NOTE 4 - Goods and Services Tax Receivables (GST)
The Company’s GST receivable was $22,361 at September 30, 2010 compared to $16,712 at September 30, 2009. This receivable relates to the Goods and Services Tax (Canada). The Company anticipates the full amount to be refunded within 12 months of the balance sheet date. Due to the nature of this receivable management does not consider an allowance for doubtful accounts to be necessary.
NOTE 5 - Foreign Exchange Rate
The Company’s functional and reporting currency is the United States Dollar. Transactions denominated in foreign currencies are translated into US dollars at the rate of exchange in effect at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies have been translated to US dollars at the rate of exchange in effect at the balance sheet date. Non-monetary assets and liabilities are translated at the historical rate of exchange.
The impact of unrealized monetary adjustments is reflected as the cumulative translation adjustment in the equity section of the balance sheet. The foreign exchange translation adjustment loss was $165,207 for the period ended September 30, 2010 ($84,272 – September 30, 2009). A realized foreign exchange loss of $23,404 was recognized for the period (gain of $3,348 – September 30, 2009) and was included as a charge to general and administrative expenses.
Mogul Energy International, Inc.
Notes to the September 30, 2010 and 2009 Financial Statements
NOTE 6 - Capital Stock
Common Stock
During the quarter ended March 31, 2008 the Company issued 2,383,000 shares of its common stock at $0.15 per share, related costs totaled $16,795. In connection with the offering 135,051 finder’s fee warrants were granted allowing the holder to purchase one common share of the company for one Class B warrant and $0.15. The warrants had a fair market value of $12,212 calculated using the Black-Scholes model: risk free rate 3.05%, share price $0.18, strike price $0.15, volatility 83% and dividend yield 0.00.
During the period ended June 30, 2008 the Company issued a total of 3,800,000 flow-through common shares, pursuant to the income tax laws of Canada (Income Tax Act, Canada) through a series of closings: 2,800,000, 400,000, and 600,000 closed on June 2, June 5 and June 11, 2008 respectively. They were issued at $0.25 per flow-through common share for proceeds of $950,000. The related tax impact will be recorded when the qualifying transaction expenditures are renounced to shareholders. In addition, the company also issued 2,300,000 common shares on June 2, 2008 and 4,000,000 common shares and on June 11, 2008 for a total of 6,300,000 shares of its common stock at $0.20 per share for total proceeds of $1,260,000. In all, 10,100,000 shares were issued. Share issuance costs associated with the two classes of financings that closed in June amounted to $102,444 in cash and finder’s fee warrants granted as follows:
|
|
·
|
52,500 warrants each of which allows the holder to purchase one common share of the Company for $0.20 per share expiring on December 20, 2009. The fair market value of the warrants was $11,807 calculated using the Black-Scholes method: risk free rate 2.71%, share price $0.225, strike price $0.20, volatility 520% and dividend yield $0.00.
|
|
|
·
|
224,000 warrants each of which allows the holder to purchase one common share of the Company for $0.20 per share expiring on June 11, 2010. The fair market value of the warrants was $57,378 calculated using the Black-Scholes method: risk free rate 2.71%, share price $0.225, strike price $0.20, volatility 520% and dividend yield $0.00.
|
|
|
·
|
432,500 warrants each of which allows the holder to purchase one common share of the Company for $0.20 per share expiring on December 20, 2009. The fair market value of the warrants was $97,183 calculated using the Black-Scholes method: risk free rate 2.71%, share price $0.225, strike price $0.20, volatility 520% and dividend yield $0.00.
|
Warrant and Options
At September 30, 2010 all outstanding shareholder and finder’s fee warrants had expired.
The following are details related to warrants issued by the company to shareholders:
|
September 30, 2010
|
|
|
|
|
Shares
|
|
|
Weighted Average Exercise Price
|
|
|
Outstanding warrants at beginning of the period
|
|
|
1,366,667
|
|
|
$
|
0.40
|
|
|
Warrants Granted
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
Expired
|
|
|
(1,366,667
|
)
|
|
$
|
0.40
|
|
|
Outstanding at the end of period
|
|
Nil
|
|
|
|
-
|
|
Mogul Energy International, Inc.
Notes to the September 30, 2010 and 2009 Financial Statements
Fair Value Assumptions – The fair value of warrants and options granted is estimated on the date granted using the Black-Scholes option pricing model with following weighted average assumptions used for the grants:
|
|
1.
|
For the period ended September 30, 2007, risk free interest rates ranging from 3.73% to 4%, expected dividend yields of zero, expected life ranging from two years, and expected volatility ranging from 2% to 51%.
|
|
|
2.
|
For the year ended December 31, 2006 the valuation of the warrants was estimated on a reasonability test as the stock was not publicly traded at that time.
|
The following are details related to warrants issued by the company as finders’ fees:
|
|
|
September 30, 2010
|
|
|
|
|
Shares
|
|
|
Weighted Average Exercise Price
|
|
|
Outstanding warrants at beginning of period
|
|
|
276,500
|
|
|
$
|
0.20
|
|
|
Warrants granted
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
Expired
|
|
|
950,106
|
|
|
$
|
0.20
|
|
|
Outstanding at the end of period
|
|
Nil
|
|
|
$
|
0.20
|
|
|
|
1.
|
For the period ended June 30, 2008, risk free rate was 2.71%, expected dividend yield was zero, expected life ranged from 18 months to 2 years, and expected volatility of 520%.
|
|
|
2.
|
For the period ended December 31, 2007, risk free rate was 3.05%, expected dividend yield of zero, expected life of 2 years, and expected volatility of 82%.
|
A summary of the status of the warrants under various agreements follows for the period ended September 30, 2010:
|
Warrants Outstanding
|
|
|
Warrants Exercisable
|
|
|
Range of Exercise Prices
|
|
Number Outstanding
|
|
Weighted Average Remaining Contractual Life (years)
|
|
|
Weighted Average Exercise Price
|
|
Number Exercisable
|
|
Weighted Average Remaining Contractual Life (years)
|
|
|
$0.15 to $0.25
|
|
nil
|
|
|
-
|
|
|
$
|
0.20
|
|
Nil
|
|
|
-
|
|
Mogul Energy International, Inc.
Notes to the September 30, 2010 and 2009 Financial Statements
Employee Stock Option Plan
On August 7
th
, 2007 the Company granted 2,250,000options to Directors and employees of the Company. These options vest at a rate of 20% per quarter. These options were fully vested as of August 7
th
, 2008.
The following table summarizes the continuity of the Company’s stock options:
|
September 30, 2010
|
|
|
|
|
Options
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Remaining Life (years)
|
|
|
Options outstanding
|
|
|
2,250,000
|
|
|
$
|
0.30
|
|
|
|
0.83
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
Outstanding at the end of period
|
|
|
2,250,000,
|
|
|
$
|
0.30
|
|
|
|
0.83
|
|
The fair value of the options was calculated using the Black Scholes method: risk free rate 3.73%, share price $0.28, strike price $0.30, volatility 51% and dividend yield 0.00.
Preferred Stock
The Company’s Articles of Incorporation authorize its Board of Directors, without approval from the common shareholders, to issue 10,000,000 shares of preferred stock in any series, rights and preferences as determined by the Board. Preferred shares may be issued that: have greater voting rights than the common stock, diluting the value of any outstanding shares of common stock.
NOTE 7 – Related Party Transactions
On January the 19
th
, 2010 the company received $292,500 in the form of a promissory note payable without any notice, bonus or penalty from Mogul Energy Ltd., a company owned by the brother of the President of the Company. Interest payments were CAD$10,000 per month for the period of time in which the note was outstanding. The promissory note was repaid on April 28, 2010 and interest paid was equivalent to US$32,972.
During the period the Company entered into a consulting contract with a related party to assist in the negotiations and related activities required to conclude the sale of the Excelaron asset (see Note 5) for CAD$4,000 per month for four months. Total disbursements under this contract were equivalent to US$15,133.
NOTE 8 - Oil and Gas Properties
Disposition of EWA Concession Agreement 20% Working Interest
On March 21, 2008, the Company entered into an Agreement of Purchase and Sale with Egypt Oil Holdings Ltd. (Egypt Oil), Sea Dragon Energy Inc. (Sea Dragon) and Dover Investments Ltd. The Agreement, with an effective date of March 21, 2008, was part of a larger transaction (the “Transaction”) that closed on April 24, 2008. The Transaction resulted in the sale of the Company’s 20% working interest in the East Wadi Araba Concession Agreement (Concession) to Sea Dragon in exchange for satisfaction of the Company’s outstanding “Cash calls payable” ($759,306) related to the Company’s drilling program on the Concession, a cash payment of $100,000 CDN plus 4,000,000 shares of Sea Dragon’s common stock, valued at an estimated $0.15 per share based on a recent share offering of Sea Dragon, a publicly traded Company. Ninety percent of Sea Dragon’s shares received by the Company for this transaction were placed in escrow. The terms of the escrow called for the release of these shares on the earlier of: (i) the Company announcing the drilling results of the second exploratory well drilled on the Concession (note 5); or (ii) July 31, 2009.
Mogul Energy International, Inc.
Notes to the September 30, 2010 and 2009 Financial Statements
A further $76,667 was capitalized prior to April 25, 2008 and was subsequently assessed as impaired. The corresponding accounts payable were assumed by EOH as a part of the Purchase and Sale agreement with Egypt Oil and Sea Dragon.
Saskatchewan Exploration Program
The Company commenced an exploration program in 2008 on its leased properties located in eastern Saskatchewan.
Ryerson 16-17-009-31W1M
The first well encountered a heavily oil stained, marginal reservoir within the Bakken interval. This well has been suspended. Subsequent to September 30, 2010 the Company’s managemnt decided to plug and abandon this well.
Walpole 8-3-11-32W1M
A second well was abandoned after encountering a wet zone at the Bakken reservoir level.
Reclamation costs and abandonment cost associated with the 2008 drilling program amount to $31,131 and were classified to accounts payable and capitalized under the full cost method to exploration and evaluation. Due to their nature abandonment costs were reclassified during the current quarter to land reclamation expense.
Further exploration in Saskatchewan as been terminated due to expiration of the leased property, a lack of resources and falling oil prices. The Company realized an impairment charge of $1,203,247 related to the expiration of substantially all leased property assets and their related acquisition costs previously capitalized on the balance sheet as Exploration and Evaluation. A further impairment charge of $412,134 has been recognized for the dry hole and other related costs of the 2008 exploration program. The suspended well costs have been recorded as a capitalized asset pending the determination of reserves.
The Company committed $43,488 during the period in order to commence reclamation work on the Warpole and subsequently the Ryerson drill sites. We had expenses $23,030 on this project as of September 30, 2010 as a result of completing the clean-up and restoration of the Warpole site. Subsequent to September 30, 2010 we committed to the plugging and abandoning the well at Ryerson. This work is expected to be completed by the end of November 2010.
United States (Excelaron)
On February 12, 2009 the Company entered into an agreement with Excelaron LLC (“Excelaron”), a California company, whereby Excelaron agreed to permit the Company to subscribe for a 40% Members Percentage Interest in Excelaron. In substance the subscription of this interest is contingent upon the Company making a $2,300,000 capital contribution to be used to acquire and develop oil and gas lease agreements that Excelaron has entered into. These leases are located in California. Should the Company not meet the contingent payment amounts its interest in Excelaron would be significantly reduced. For every $250,000 invested below $1,000,000 the Company would receive a 2% interest in Excelaron and 5% for each $250,000 above the $1,000,000 threshold. As of March 31, 2010 the Company’s investment in Excelaron totaled $425,000,
On October 5, 2009 the Company entered a binding letter of intent with Vesta Capital Corp (“Vesta”), Excelaron and other parties pursuant to which we agreed to sell and assign our 40% interest in Excelaron in exchange for 38,500,000 common shares of Vesta (the “Vesta Shares”), as part of a qualifying transaction (collectively, the “Excelaron Transaction”) in accordance with the policies of the TSX Venture Exchange pursuant to which Vesta would become a publicly traded company on the TSX-V. While the original agreement was not executed the parties continued to negotiate in good faith.
On January 12, 2010 the Company was party to a Definitive Agreement, whereby the Company was to relinquish its interest in Excelaron to Vesta Capital Corporation, a Canadian pool company on the TSX Venture Exchange (“TSX-V”) and United Hydrocarbon Corporation (“UHC”), a related company incorporated in Ontario, Canada as part of a Qualifying Transaction on the TSX-V.
Mogul Energy International, Inc.
Notes to the September 30, 2010 and 2009 Financial Statements
The Company made an advance to Excelaron in the form of a loan of $425,000 on January 14
th
, 2010. The loan called for interest of $10,000 per month for the period in which the loan was outstanding. This principle and interest were completely repaid on April 30, 2010.
On March 26, 2010 following several amendments to the Definitive Agreement, an amended Qualifying Transaction Agreement was executed (the “Amended Qualifying Transaction Agreement”) pursuant to which we agreed to accept, in lieu of the Vesta Shares, an aggregate of $1,000,000 Canadian Dollars and the reimbursement of approximately, $425,000 of advances made by us to Excelaron, in exchange for the Excelaron Interest.
Pursuant to the terms of the Amended Qualifying Transaction Agreement the Company sold its 40% interest in Excelaron for the equivalent of approximately US$1,000,000 based on the foreign exchange rate of $1US equivalent to $1CAD on the date of the transaction with UHC and for the reimbursement of US$425,000 for advances made to Vesta.
Upper Texas Gulf Coast
On June 29, 2010 the Company announced that it had signed a non binding Letter of Intent (“LOI”) with Powderhorn Energy, LLC and its financial partners (collectively “Powderhorn”). Subject to additional agreements between both entities Powderhorn was to participate in the proposed drilling program offered by the Company along the Upper Gulf Coast. The terms and conditions which would have constituted a binding agreement between the entities with respect to the transaction contemplated were being negotiated. The termination date of the LOI was extended by mutual agreement beyond the original termination date of July 19, 2010. Costs of $9,153 have been capitalized under the companies full cost policy for exploration and evaluation, the costs pertain to negotiations for mineral leases in the region.
On September 23, 2010 the Company announced it had cancelled the LOI with Powderhorn. The Company also stated it had a commitment of funds from two additional sources to partially fund the drilling of the first two prospects in its current inventory of prospects.
Mogul is continuing with the acquisition of the necessary oil, gas and mineral leases on each of these initial prospects. The requisite state permits to drill will be secured from the Texas Railroad Commission upon completion of the leasing and title clearance.
NOTE 9 - Commitments
Office Leases
The Company rents office space in Seattle, Washington on a month-to-month basis for $375 per month, and office space in Vancouver, British Columbia, Canada for CAD$1,314 per month.
As of January 1, 2010 the Company entered into a five year lease for office space in Toronto, Canada at a monthly cost of CAD$8,838 (approximately US$8,424).
The Company also leased office space in California for $3,285 per month. This lease expired on October 31, 2010 and was not renewed.
Mogul Energy International, Inc.
Notes to the September 30, 2010 and 2009 Financial Statements
NOTE 10 - Contingencies
Environmental Uncertainties
The Company may be exposed to financial risks in the oil and gas exploration business for pollution or hazards against which it cannot adequately insure or which it may elect not to insure. Incurring any such liability may have a material adverse effect on our financial position and operations.
Governmental Regulations and Licensing
In order to drill for, recover, transport or sell any gas or oil from the properties subject to the Company’s drilling rights, the Company will generally be required to obtain additional licenses and permits and enter into agreements with various landowners and/or government authorities. The issuance of these permits and
licenses generally will be contingent upon the consent of the governmental authority having jurisdiction over the property, which entities have broad discretion in determining whether or not to grant such authority. These licenses, permits, and agreements will generally contain numerous restrictions and require payment of development and exploration fees and royalties typically based on the recoverable reserves or expenditures. The amount of any such fee and royalties and other terms will determine in part, the commercial viability of any extraction prospect.
In a notice dated March 2, 2010 a deposit for $36,706 had been requested by the Province of Saskatchewan’s Ministry of Energy and Resources related to the Oil and Gas Orphan Fund that is levied on non producing wells that require reclamation activities to be performed. The Company has recorded a liability for this deposit under the Commitments and Contingencies account on the balance sheet.
Flow-through Financing
On June 30, 2008 the Company closed a private placement equity financing for aggregate gross proceeds of $950,000 comprised of 3,800,000 common shares issued by the Company on a “flow-through” basis issued at $0.25 per share. Under the terms of the subscription agreement the Company renounced expenses to the investors under the “look-back provisions” allowable under the Canadian Income Tax Act (the “Act”) for CAD$872,150 of Canadian Exploration Expenses (“CEE”) to subscribers for the tax year ended December 31, 2008. As of June 30, 2010 the Company had incurred $247,579 of allowable CEE expenditures while $624,571 of monies disbursed were not qualified CEE expenses.
Under the terms of the subscription agreement the Company has an obligation to indemnify the subscribers an amount equal to tax payable under the Act as a consequence of the failure of the Company to incur the full amount of the CEE too have been spent.
During the quarter ended September 30, 2010 the Company’s management estimated the likely liability of the indemnification clause of the subscription agreement to be approximately CAD$275,000 (US$266,750 equivalent at September 30, 2010). This liability has been recorded on the Company’s balance sheet under the caption Commitments and Contingencies and has been expensed as deferred indemnity on the income statement.
NOTE 11 - Loss Per Share
Loss per share is calculated using the weighted average number of shares issued during the relevant period. The weighted average number of common shares was 57,445,987 for the period ended September 30, 2010.
Mogul Energy International, Inc.
Notes to the September 30, 2010 and 2009 Financial Statements
NOTE 12 - Capitalized costs relating to the oil and gas acquisitions and exploration activity
|
Schedule “A”
Canada
|
|
|
|
|
Additions during 2008:
|
|
|
-
|
|
|
Exploration
|
|
$
|
832,035
|
|
|
Lease property acquisition costs
|
|
|
15,612
|
|
|
Less accumulated depreciation, depletion, amortization and impairment
|
|
|
(1,615,381
|
)
|
|
Net book value December 31, 2008
|
|
$
|
435,512
|
|
|
Additions: during 2009
|
|
|
62,720
|
|
|
Net book value December 31, 2009
|
|
|
498,232
|
|
|
Exploration
|
|
|
-
|
|
|
Reduced: during 2010
|
|
|
(18,993
|
)
|
|
Net book value of Canadian Assets at September 30, 2010
|
|
|
479,239
|
|
|
Schedule “B”
United States
*
|
|
|
|
|
Cost at January 1, 2008
|
|
$
|
-
|
|
|
Additions: payment for 40% of Excelaron (Contingent)
|
|
|
425,000
|
|
|
Reduction: repayment by Vesta to acquire interest in Excelaron
|
|
|
(425,000
|
)
|
|
Additions: acquisition costs related to leases for oil and gas rights in Texas
|
|
|
13,605
|
|
|
Net book value of U.S. Assets at September 30, 2010
|
|
$
|
13,605
|
|
NOTE 13 – Subsequent Events
On October 22, 2010 the Company’s Board of Directors granted, pursuant to the Company’s 2007 Stock Option Plan, nonqualified stock options (NQSO”) for the purchase of up to an aggregate of 2,850,000 shares of its common stock at a purchase price of $0.05 per share.
The closing price of the Company’s common stock on the date of grant was $0.04. The options vested on the date of grant and have a term of 5 years. The Board of Directors also terminated options held by three individuals to purchase up to an aggregate of 1,400,000 shares of the Company’s common stock at a price of $0.30 per share.
|
Item 2
.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relates to future events and/or our future financial performance. Generally, you can identify forward-looking statements by terminology such as “intends,” "may", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", or "potential" or the negative of these terms or other comparable terminology. To the extent that such statements are not recitations of historical fact, such statements constitute forward-looking statements that, by definition, involve risks and uncertainties. These statements reflect only our current expectations and involve known and unknown risks, uncertainties and other factors, many of which are unforeseen, including the risks in Item 1A entitled "Risk Factors," that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements. These forward-looking statements are within the meaning of Section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbors created thereby. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our unaudited interim financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles. The following discussion should be read in conjunction with our unaudited interim financial statements and the related notes that appear elsewhere in this Quarterly Report.
In this Quarterly Report, unless otherwise specified, all references to "common shares" refer to common shares in the capital of Mogul Energy International, Inc., and the terms "we" "us" and "our" mean Mogul Energy International, Inc. (the “Company” and “Registrant”).
General Development of Business
We are a Delaware corporation formed on July 25, 2005, with our principal place of business in Seattle, Washington. We also maintain an office in Vancouver, British Columbia and Toronto, Ontario, Canada. We are an independent oil and gas exploration company established to take advantage of low cost acquisition opportunities near other producing and proven oil fields. To date, we have not generated any operating revenues. The address of our website is
www.mogulenergy.com
. Information on our website is not part of this report.
The company’s strategy going forward will be to acquire oil and gas properties that have existing reserves behind pipe. Existing well bores with proven oil and gas reserves behind pipe can usually be purchased for a fraction of the original cost to drill and complete a new well. Property purchased with proven reserves reduce the risk of not finding hydrocarbons and are economically viable to develop due to the elimination of the associated cost of finding the hydrocarbons. After the property has been purchased, the primary cost for establishing new production is the re-completion cost.
These initial prospects are the start to an existing inventory of dozens of leads and areas of interest that continue to be finalized. These include:
|
|
·
|
Exploitation opportunities,
|
|
|
·
|
Prospects in existing fields,
|
|
|
·
|
Exploration opportunities,
|
We intend to focus our immediate efforts primarily on on-shore, by-passed and offset discovered hydrocarbons in the United States.
Current opportunities will provide the company with several prospects that are in shallow zones near wells that produced from a variety of formations in the past. We have partnered with several geologists and geophysicists that specialize in the upper Texas Gulf Coast area to identify offset well locations to wells that have produced large quantities in the past, and, near wells that continue to produce today. Many of these zones were considered non commercial many years ago. However, at today’s prices, these wells are expected to be profitable.
Milestones
On February 11, 2009 the Company entered into an agreement with Excelaron LLC (“Excelaron”), a California company, whereby Excelaron agreed to permit the Company to subscribe for a 40% Members Percentage Interest. In substance the subscription of this interest was contingent upon the Company making a $2,300,000 capital contribution to be used to acquire and develop oil and gas lease agreements that Excelaron had entered into. These leases are located in California. Should the Company not meet the contingent payment amounts its interest in Excelaron would be significantly reduced. For every $250,000 invested below $1,000,000 the company would receive a 2% interest in Excelaron and a 5% for each $250,000 above $1,000,000.
On September the 9, 2009 the Company entered into an Extension Agreement with Excelaron LLC to extend the time for the Company to make the capital contribution that was subject to the Agreement dated February 11, 2009 between the Company and Excelaron. On September 25, 2009 the Company made a payment of $100,000 under the agreement and an additional payment subsequent to the period end of $150,000. The Extension Agreement requires that within 60 days of the execution of the agreement, subject to being extended for a period of up to an additional 45 days if necessary, a further $1,000,000 payment be made. Subsequently, upon issuance of the Environmental Impact Report approving the Huasna Project a final payment of $875,000 was to be paid. For more information, see the Company’s Current Report on Form 8-K filed on October 2, 2009.
On or about September 21, 2009 the Company executed a letter of intent (“LOI”) with Vesta Capital Corp (“Vesta”), a Canadian Capital Pool company that is a reporting issuer in Canada; United Hydrocarbon Corporation (“UHC”), a Canadian company; and Barisan Energy Limited (“Barisan”), an Australian company (collectively the “Parties”). Pursuant to the LOI, the Parties agreed to negotiate and use reasonable efforts to conclude a definitive agreement (the “Definitive Agreement”) regarding a proposed business combination (the “Proposed Transaction”). Under the Proposed Transaction, if completed, Vesta would acquire an aggregate 65% interest in Excelaron through the acquisition of the Company’s 40% interest in Excelaron, the acquisition of UHC’s 25% interest in Excelaron and the acquisition of Barisan’s 4% interest in Excelaron. Vesta would issue 65 million shares: 38.5 million to the Company; 22.5 million to the shareholders of UHC and 4 million to Barisan. Upon completion of the Proposed Transaction, Vesta would own 44% of Excelaron directly and 21% through a wholly owned subsidiary UHC. The Proposed Transaction is subject to a number of conditions and regulatory approvals, including the TSX approval, satisfaction of corporate governance requirements, and completion of a private financing of UHC.
On January 12, 2010 the Company was party to a Definitive Agreement, whereby the Company was to relinquish its interest in Excelaron to Vesta Capital Corporation, a Canadian pool company on the TSX Venture Exchange (“TSX-V”) and United Hydrocarbon Corporation; a related company incorporated Ontario, Canada. This was to be a part of Vesta’s Qualifying Transaction on the TSX-V. While the original agreement was not executed the parties continued to negotiate in good faith.
The Company made an advance to Excelaron in the form of a loan of $425,000 on January 14
th
, 2010. The loan called for interest of $10,000 per month for the period in which the loan was outstanding. This principle and interest were completely repaid on April 30, 2010.
On March 26, 2010 following several amendments to the Definitive Agreement, an amended Qualifying Transaction Agreement was executed (the “Amended Qualifying Transaction Agreement”) pursuant to which we agreed to accept, in lieu of the Vesta Shares, an aggregate of $1,000,000 Canadian Dollars and the reimbursement of approximately, $425,000 of advances made by us to Excelaron, in exchange for the Excelaron Interest.
On April 28, 2010 pursuant to the terms of the Amended Qualifying Transaction Agreement the Company sold its 40% interest in Excelaron for the equivalent of approximately US$1,000,000, to UHC and for the reimbursement of US$425,000 for advances made to Excelaron.
On June 29, 2010 the Company announced that it had signed a non binding Letter of Intent (“LOI”) with Powderhorn Energy, LLC and its financial partners (collectively “Powderhorn”). Subject to additional agreements between both entities Powderhorn will participate in the proposed drilling program offered by the Company along the Upper Gulf Coast. The terms and conditions which will constitute a binding agreement between the entities with respect to the transaction contemplated are currently being negotiated. The termination date of the LOI has been extended by mutual agreement beyond the original termination date of July 19, 2010.
On September 23, 2010 the Company announced it had cancelled the LOI with Powderhorn. The Company also stated it had a commitment of funds from two additional sources to partially fund the drilling of the first two prospects in its current inventory of prospects.
Material Changes in Financial Condition and Results of Operations
Selected Quarterly Financial Information
|
|
|
September 30, 2010
|
|
|
September 30, 2009
|
|
|
Cash
|
|
|
299,648
|
|
|
|
878
|
|
|
Investments
|
|
|
84,607
|
|
|
|
498,637
|
|
|
Working capital
|
|
|
453,516
|
|
|
|
260,736
|
|
|
Total assets
|
|
|
984,030
|
|
|
|
1,315,340
|
|
|
Total Liabilities
|
|
|
342,262
|
|
|
|
293,860
|
|
|
Shareholders' equity
|
|
|
641,768
|
|
|
|
1,021,480
|
|
|
Share capital
|
|
|
7,351,485
|
|
|
|
7,113,281
|
|
|
Weighted average common shares outstanding
|
|
|
57,445,987
|
|
|
|
57,445,987
|
|
|
Retained loss
|
|
|
(6,875,273
|
)
|
|
|
(6,735,083
|
)
|
|
Cash flow from operations
|
|
|
(956,814
|
)
|
|
|
(1,328,446
|
)
|
|
Net income gain (loss)
|
|
|
(153,368
|
)
|
|
|
(609,476
|
)
|
|
Loss per share
|
|
|
(0.00
|
)
|
|
|
(0.00
|
)
|
Cash at September 30, 2010 was to $299,648 ($878 – September 30, 2009). This is cash remaining since the sale of the 40% Membership Interest in Excelaron (“Excelaron Interest”) for the equivalent of $1,000,000 at the time of sale. Over the nine month period $442,500 of loans from shareholders was repaid and accounts payable was reduced to $37,669 ($266,362 – September 30, 2009). The company also received $425,000 as the repayment of a loan receivable from Vesta.
The company also recorded a liability of $266,750 pertaining to the June 30, 2008 private placement equity financing (“2008 private placement)” for aggregate gross proceeds of $950,000 comprised of 3,800,000 common shares issued by the Company on a “flow-through” basis. Under the terms of the subscription agreement the Company renounced expenses to the investors under the “look-back provisions” of the Canadian Income Tax Act (the “Act”) for CAD$872,150 of Canadian Exploration Expenses (“CEE”) to subscribers for the tax year ended December 31, 2008. As of June 30, 2010 the company had incurred $247,579 of allowable CEE expenditures while $624,571 of monies disbursed were not for qualified expenses.
Under the terms of the subscription agreement the Company has an obligation to indemnify the subscribers an amount equal to taxes payable under the Act as a consequence of the failure of the Company to incur the full amount of the CEE too have been incurred.
During the quarter ended September 30, 2010 the Company’s management estimated the likely liability of the indemnification clause of the subscription agreement to be approximately CAD$275,000 (US$266,750 equivalent at September 30, 2010). This liability has been recorded on the Company’s balance sheet under the caption Commitments and Contingencies and has been expensed as a deferred indemnity charge on the income statement.
A deposit for $36,706 has been requested by the Province of Saskatchewan’s Ministry of Energy and Resources related to the Oil and Gas Orphan Fund that is levied on non producing wells that require reclamation activities to be performed. The Company has recorded a liability for this deposit under the Commitments and Contingencies account on the balance sheet. This liability will increase by CAD$5,550 per year to a total liability of CAD$49,500 or until we file an “Acknowledgement of Reclamation” which is expected to be filed next spring at which time any deposit having been made will be repaid to the company.
At September 30, 2010, we had total assets of $984,030 as compared to $1,315,340 for the comparable quarter in 2009. The decrease in total assets was largely a result of the decrease of Exploration and evaluation assets due to the sale of our Excelaron Interest, a capitalized asset that had a book value of $425,000. We also reduced our holdings of shares of Sea Dragon Energy Inc., classified as investments held for sale to 300,000 shares with a fair market value of $84,607 compared to 1,386,000 shares last year with a fair market value of $498,637. These decreases in assets were partially offset by cash received as a result of the sale of Excelaron.
Cash outflow from operating activities was $956,814; the largest component of this is attributable primarily to deductions associated with the gain on the investment held for sale and the Excelaron Interest, $310,931 and $575,000 respectively. The recognition of $304,593 for Commitments and Contingencies had a large impact on cash outflows for operations ($1,328,446 loss –September 30, 2009).
The Company reported a net loss of $153,368 for the nine month period ended September 30, 2010, compared to a net loss of $609,476 for the comparable quarter in 2009. This difference is attributable to gains on the sale of investments held for sale and the sale of the Excelaron Interest.
|
|
|
Nine Months Ended
September 30, 2010
|
|
|
Nine Months Ended
September 30, 2009
|
|
|
Expenses
|
|
|
|
|
|
|
|
General & Administration:
|
|
|
|
|
|
|
|
Interest expense
|
|
|
32,972
|
|
|
|
-
|
|
|
Internet and telephone
|
|
|
9,659
|
|
|
|
10,258
|
|
|
Lease reclamation expenses
|
|
|
59,737
|
|
|
|
-
|
|
|
Professional fees
|
|
|
190,998
|
|
|
|
191,562
|
|
|
Realized foreign exchange loss
|
|
|
23,404
|
|
|
|
(1031
|
)-
|
|
Rent
|
|
|
61,079
|
|
|
|
47,210
|
|
|
Tax on flow-through funds
|
|
|
18,722
|
|
|
|
25,168
|
|
|
Travel & promotion
|
|
|
85,558
|
|
|
|
88,729
|
|
|
Wages
|
|
|
234,794
|
|
|
|
183,038
|
|
|
Other
|
|
|
55,626
|
|
|
|
99,813
|
|
|
Total General and administration expenses
|
|
|
(772,549
|
)
|
|
|
(644,747
|
)
|
|
Deferred indemnity charge
|
|
|
(266,750
|
)
|
|
|
-
|
|
|
Gain on disposition EWA
|
|
|
-
|
|
|
|
-
|
|
|
Gain on sale of held for sale
|
|
|
310,931
|
|
|
|
22,406
|
|
|
Gain on sale of Excelaron 40% Membership Interest
|
|
|
575,000
|
|
|
|
-
|
|
|
Service revenue
|
|
|
-
|
|
|
|
12,865
|
|
|
Net Income
|
|
|
(153,368
|
)
|
|
|
(609,476
|
)
|
General expenses for the six months ended September 30, 2010 increased to 772,549 over the corresponding period in 2009 ($644,747 - September 30, 2009).
The company paid US$32,972 in interest during the nine month period on a promissory note received from a related party for $292,500. The promissory note was repaid on April 28, 2010 (no comparable amount was recorded for September 30, 2010).
The Company has incurred reclamation costs in Saskatchewan of which $23,030 have been incurred on work performed and $36,706 has been incurred as contingency to the Ministry of Energy and Resources as noted above, $31,312 of the amount of the contingency was reclassified due to its nature from the full cost asset account to an expense in the period.
Realized foreign exchange losses were considerably higher for this period compared to last and is due to the appreciation of the Canadian dollar payables paid over the nine month period as compared to a $1,031 gain for the comparable period in 2009.
A tax assessed on flow through funds is based on the amount of funds not spent on eligible CEE per month. The company had recorded an accrual of $25,168 at September 30, 2009 and an additional amount to September 30, 2010 for a further $18,722 in accordance with the regulations governing flow through financing in Canada and is in relation to the 2008 private placement.
Wages have increased by $51,756 as the Company has brought on additional directors, staff and consultants to gain more expertise for the Company’s new focus on the Upper Texas Gulf Coast.
Other consists of expenses for general office operations, courier and postage, transfer agent fees filing fees and miscellaneous costs.
The Company has incurred a deferred indemnity charge related to the 2008 private placement described above.
Subsequent Events
On October 22, 2010 the Company’s Board of Directors granted, pursuant to the Company’s 2007 Stock Option Plan, nonqualified stock options (NQSO”) for the purchase of up to an aggregate of 2,850,000 shares of its common stock at a purchase price of $0.05 per share.
The closing price of the Company’s common stock on the date of grant was $0.04. The options vested on the date of grant and have a term of 5 years. The Board of Directors also terminated options held by three individuals to purchase up to an aggregate of 1,400,000 shares of the Company’s common stock at a price of $0.30 per share.
We have suffered recurring losses from operations. The cumulative deficit since inception amounts to $6,875,273. The continuation of our business is dependent upon obtaining further financing, a successful program of acquisition and exploration, and, finally, achieving a profitable level of operations. The issuance of additional equity securities could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
|
Item
3
.
|
Quantitative and Qualitative Disclosures About Market Risk
|
No information is provided under this Item because the Company is a smaller reporting company.
|
Item
4T.
|
Controls and Procedures
|
Management’s Evaluation of Disclosure Controls and Procedures
As required under the
Exchange Act
, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as of the end of the period covered by this report, being September 30, 2010. We are responsible for establishing and maintaining adequate internal controls and procedures for the financial reporting of our company. Disclosure control and procedures are the controls and other procedures that are designed to ensure that we record, process, summarize and report in a timely manner the information that we must disclose in reports that we file with or submit to the SEC. Our management has concluded, based on their evaluation, that as of September 30, 2010, as the result of the material weaknesses, our disclosure controls and procedures were ineffective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes. For more information, see Item 9A – Controls and Procedures – in Part II of our Annual Report on Form 10-K for the year ended December 31, 2009.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting during the period covered by this report that have materially affected, or are likely to materially affect, the Company’s internal control over financial reporting.
PART II
OTHER INFORMATION
|
Item 1
.
|
Legal Proceedings
|
We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
There have been no material changes to the risk factors previously disclosed in Item 1A – Risk Factors – in Part I of our Annual Report on Form 10-K for the year ended December 31, 2009.
|
Item
2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Between January 1, 2010 and September 30, 2010, the Company did not sell any equity securities of the Company which were not registered under the Securities Act.
|
Item
3
.
|
Defaults Upon Senior Securities
|
None
|
Item 4
.
|
Submission of Matters to a Vote of Securities Holders
|
None
|
Item
5.
|
Other Information
|
There have been no material changes to the procedures by which security holders may recommend nominees to the registrant’s board of directors.
|
Exhibit
Number
|
|
Description
|
|
|
|
|
|
(3)
|
|
(i) Articles of Incorporation; and (ii) Bylaws
|
|
|
|
|
|
3.1
|
|
Certificate of Incorporation (1)*
|
|
3.2
|
|
By-laws (1)*
|
|
|
|
|
|
3.3
|
|
Form of Registration Rights Agreement with the Selling Shareholders (1)*
|
|
3.4
|
|
Form of Subscription Agreement ($0.001) (2)*
|
|
3.5
|
|
Form of Subscription Agreement ($0.15) (2)*
|
|
3.6
|
|
Form of Subscription Agreement ($0.40) dated for reference July 28, 2005 (2)*
|
|
3.7
|
|
Form of Subscription Agreement ($0.40) dated for reference October 31, 2005 (2)*
|
|
3.8
|
|
Form of Subscription Agreement ($0.40) dated for reference January 19, 2006 (2)*
|
|
3.9
|
|
Form of Flow Through Subscription Agreement ($0.40) dated for reference February 8, 2006 (2)*
|
|
3.10
|
|
Form of Subscription Agreement for Unit Offering dated for reference April 11, 2006 (2)*
|
|
3.11
|
|
Form of Subscription Agreement ($0.15) dated for reference December 12, 2007 (incorporated by reference from our Current Report on Form 8-K filed on February 15, 2008)*
|
|
3.12
|
|
Form of Flow Through Subscription Agreement ($0.18) dated for reference December 12, 2007 (incorporated by reference from our Current Report on Form 8-K filed on February 15, 2008)*
|
|
|
|
|
|
(4)
|
|
Instruments Defining the Rights of Security Holders
|
|
4.1
|
|
2007 Stock Incentive Plan (incorporated by reference from our Current Report on Form 8-K filed on August 10, 2007)*
|
|
|
|
|
|
(5)
|
|
Opinion re Legality
|
|
5.1
|
|
Opinion of Sierchio Greco & Greco, LLP (3)*
|
|
|
|
|
|
(10)
|
|
Material Contracts
|
|
10.1
|
|
A Binding Farm-Out Agreement East Wadi Araba Concession dated August 6, 2005 (1)*
|
|
10.2
|
|
A Binding Joint Venture Agreement - Egypt dated August 7, 2005 (1)*
|
|
10.3
|
|
Farm-Out Agreement dated September 29, 2005 (1)*
|
|
10.4
|
|
Farm-out Agreement dated November 8, 2005 (1)*
|
|
10.5
|
|
Assignment Agreement-East Wadi Araba Concession dated December 9, 2005 (1)*
|
|
10.6
|
|
Assignment Agreement dated December 9, 2005 (1)*
|
|
10.7
|
|
Amendment to Binding Farm-Out Agreement East Wadi Araba Concession-Egypt dated March 30, 2006 (1)*
|
|
10.8
|
|
Assignment Agreement dated April 4, 2006 (1)*
|
|
10.9
|
|
Concession Agreement for Petroleum Exploration and Exploitation (the
"Concession Agreement"
) between Dover, the Arab Republic of Egypt and the Egyptian General Petroleum Corporation (
“EGPC”
) dated July 18, 2002 (1)*
|
|
10.10
|
|
East Wadi Araba Concession - Gulf of Suez, Egypt Amending Agreement dated April 13, 2006 (1)*
|
|
10.11
|
|
Deed of Assignment submitted May 30, 2006 (1)*
|
|
10.12
|
|
A Binding Agreement dated April 14, 2005 (1)*
|
|
10.13
|
|
Agreement dated October 2, 2006 with Ernie Pratt (2,3)*
|
|
10.14
|
|
Office Lease Agreement as amended (2)*
|
|
10.15
|
|
Promissory note dated April 1, 2006 in the aggregate amount of $113,791.35 (2)*
|
|
10.16
|
|
Assignment Agreement dated January 24, 2007 (2)*
|
|
10.17
|
|
Letter of Intent dated July 30, 2007 (incorporated by reference from our Current Report on Form 8-K filed on August 7, 2007)*
|
|
10.18
|
|
Form of Stock Option Agreement (incorporated by reference from our Current Report on Form 8-K filed on August 10, 2007)*
|
|
(14)
|
|
Code of Ethics
|
|
14.1
|
|
Code of Ethics (5)*
|
|
|
|
|
|
(23)
|
|
Consents of Experts and Counsel
|
|
23.1
|
|
Consent of Sierchio Greco & Greco, LLP (included in Exhibit 5.1) (3)*
|
|
23.2
|
|
Consent of Jorgensen & Co. (incorporated by reference from our Registration Statement on Form SB-2/A filed on May 8, 2007) (1,2,3,4)*
|
|
23.3
|
|
Consent of Chapman Petroleum Engineering Ltd. (1,2,3,4)*
|
|
|
|
|
|
(31)
|
|
Certifications
|
|
|
|
Certification of Principal Executive Officer pursuant to Section 302
|
|
|
|
Certification of Principal Financial and Accounting Officer pursuant to Section 302
|
|
|
|
Certification of Principal Executive Officer and Principal Financial and Accounting Officer pursuant to Section 1350
|
|
|
|
|
|
(99)
|
|
Additional Exhibits
|
|
99.1
|
|
List of Freehold Properties Leases (1)*
|
|
99.2
|
|
Evaluation of Resource Potential East Wadi Araba Concession, Offshore Gulf of Suez, Egypt (1)*
|
|
99.3
|
|
Settlement Agreement dated January 24, 2007 (2)*
|
* Previously filed.
1 Filed with our Registration Statement on Form SB-2 on November 17, 2006, and incorporated herein by reference.
2 Filed with our Registration Statement on Form SB-2/A on February 6, 2007, and incorporated herein by reference.
3 Filed with our Registration Statement on Form SB-2/A on March 29, 2007, and incorporated herein by reference.
4 Filed with our Registration Statement on Form SB-2/A on April 25, 2007, and incorporated herein by reference.
5 Filed with our Annual Report on Form 10-K, for the year ending December 31, 2008, and incorporated herein by reference.
6 Filed with our Annual Report on Form 10-K, for the year ending December 31, 2009, and incorporated herein by reference.
SIG
NATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MOGUL ENERGY INTERNATIONAL, INC.
/s/ Naeem Tyab
By: Naeem Tyab, President
(Principal Executive Officer)
(Principal Financial Officer)
Dated: November 19, 2010
Mogul Energy (PK) (USOTC:MGUY)
Historical Stock Chart
Von Mai 2024 bis Jun 2024
Mogul Energy (PK) (USOTC:MGUY)
Historical Stock Chart
Von Jun 2023 bis Jun 2024
