ITEM
1.
FINANCIAL STATEMENTS
2
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
FINANCIAL STATEMENTS
(Unaudited)
OCTOBER 31, 2007
(Stated in U.S. Dollars)
F-1
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Stated in U.S. Dollars)
|
|
OCTOBER 31
|
|
|
APRIL 30
|
|
|
|
2007
|
|
|
2007
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
106,208
|
|
$
|
1,325,750
|
|
Prepaid expenses
|
|
32,523
|
|
|
110,332
|
|
Other assets
|
|
7,594
|
|
|
8,603
|
|
|
|
146,325
|
|
|
1,444,685
|
|
|
|
|
|
|
|
|
Property And Equipment
(Note 5)
|
|
15,674
|
|
|
18,430
|
|
License Rights, net
(Note 6)
|
|
2,699
|
|
|
2,799
|
|
Unproven Oil and Gas Properties
(Note 7)
|
|
2,492,605
|
|
|
2,413,684
|
|
Deposits
|
|
57,951
|
|
|
59,579
|
|
|
|
|
|
|
|
|
|
$
|
2,715,254
|
|
$
|
3,939,177
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
Accounts payable
and accrued liabilities
|
$
|
1,023,198
|
|
$
|
1,230,009
|
|
Loans payable Related Parties
(Note 8)
|
|
36,680
|
|
|
21,680
|
|
Notes payable (Note
9)
|
|
20,000
|
|
|
20,000
|
|
Deferred income
|
|
16,690
|
|
|
18,885
|
|
|
|
1,096,568
|
|
|
1,290,574
|
|
STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Stock
(Note 10)
|
|
|
|
|
|
|
Authorized:
|
|
|
|
|
|
|
500,000,000 common shares, par value $0.001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000,000 preferred shares, par value $0.001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued:
|
|
|
|
|
|
|
37,107,270 common shares (April 30, 2007
|
|
|
|
|
|
|
36,907,270)
|
|
37,107
|
|
|
36,907
|
|
|
|
|
|
|
|
|
Additional Paid-In Capital
|
|
6,710,323
|
|
|
6,618,523
|
|
Warrants
|
|
351,100
|
|
|
351,100
|
|
Accumulated Deficit During Exploration Stage
|
|
(5,470,309
|
)
|
|
(4,356,142
|
)
|
Accumulated Other Comprehensive Loss
|
|
(9,535
|
)
|
|
(1,785
|
)
|
|
|
1,618,686
|
|
|
2,648,603
|
|
|
|
|
|
|
|
|
|
$
|
2,715,254
|
|
$
|
3,939,177
|
|
See Accompanying Notes to Financial Statements
F-2
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Stated in U.S. Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PERIOD FROM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCEPTION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DECEMBER 2,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
THREE MONTH PERIOD ENDED
|
|
|
SIX MONTH PERIOD ENDED
|
|
|
TO
|
|
|
|
OCTOBER 31
|
|
|
OCTOBER 31
|
|
|
OCTOBER 31
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
54,248
|
|
$
|
-
|
|
$
|
113,555
|
|
$
|
-
|
|
$
|
150,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas exploration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
expenses
|
|
(12,805
|
)
|
|
44,647
|
|
|
586,390
|
|
|
117,750
|
|
|
3,092,232
|
|
Selling , general and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
administrative
|
|
200,603
|
|
|
251,401
|
|
|
539,496
|
|
|
361,035
|
|
|
1,656,954
|
|
Depreciation and amortization
|
|
1,428
|
|
|
879
|
|
|
2,856
|
|
|
1,070
|
|
|
6,119
|
|
|
|
189,226
|
|
|
296,927
|
|
|
1,128,742
|
|
|
479,855
|
|
|
4,755,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
(134,978
|
)
|
|
(296,927
|
)
|
|
(1,015,187
|
)
|
|
(479,855
|
)
|
|
(4,604,556
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
(2,916
|
)
|
|
-
|
|
|
(6,980
|
)
|
|
-
|
|
|
(9,953
|
)
|
Fair value of discount
on private
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
placement
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(763,800
|
)
|
Oil and gas property
write offs
|
|
(92,000
|
)
|
|
|
|
|
(92,000
|
)
|
|
|
|
|
(92,000
|
)
|
|
|
(94,916
|
)
|
|
-
|
|
|
(98,980
|
)
|
|
-
|
|
|
(865,753
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
$
|
(229,894
|
)
|
$
|
(296,927
|
)
|
$
|
(1,114,167
|
)
|
$
|
(479,855
|
)
|
$
|
(5,470,309
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Loss per
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Share
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
$
|
(0.03
|
)
|
$
|
(0.02
|
)
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares Outstanding
|
|
36,948,574
|
|
|
24,960,667
|
|
|
36,927,922
|
|
|
24,960,667
|
|
|
|
|
See Accompanying Notes to Financial Statements
F-3
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
(Stated in U.S. Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PERIOD FROM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCEPTION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DECEMBER 2,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
THREE MONTH PERIOD ENDED
|
|
|
SIX MONTH PERIOD ENDED
|
|
|
TO
|
|
|
|
OCTOBER 31
|
|
|
OCTOBER 31
|
|
|
OCTOBER 31
|
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
2006
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
$
|
(229,894
|
)
|
$
|
(296,927
|
)
|
$
|
(1,114,167
|
)
|
$
|
(479,855
|
)
|
$
|
(5,470,309
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustment
|
|
(4,966
|
)
|
|
-
|
|
|
(7,750
|
)
|
|
-
|
|
|
(9,535
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Loss
|
$
|
(234,860
|
)
|
$
|
(296,927
|
)
|
$
|
(1,121,917
|
)
|
$
|
(479,855
|
)
|
$
|
(5,479,844
|
)
|
See Accompanying Notes to Financial Statements
F-4
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Stated in U.S. Dollars)
|
|
|
|
|
|
|
|
PERIOD FROM
|
|
|
|
|
|
|
|
|
|
INCEPTION
|
|
|
|
|
|
|
|
|
|
DECEMBER 2,
|
|
|
|
SIX MONTH PERIOD ENDED
|
|
|
2005
|
|
|
|
OCTOBER 31
|
|
|
TO
|
|
|
|
2007
|
|
|
2006
|
|
|
OCTOBER 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(1,114,167
|
)
|
$
|
(479,855
|
)
|
$
|
(5,470,309
|
)
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to Net
|
|
|
|
|
|
|
|
|
|
Cash Used in Operating Activities
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
2,856
|
|
|
1,070
|
|
|
6,119
|
|
Fair value of discount
on private
|
|
|
|
|
|
|
|
|
|
placement
|
|
-
|
|
|
-
|
|
|
763,800
|
|
Write-off of oil
and gas property
|
|
|
|
|
|
|
|
|
|
exploration
expenditures
|
|
599,195
|
|
|
-
|
|
|
2,849,313
|
|
Write off of oil
and gas property
|
|
|
|
|
|
|
|
|
|
acquisition
costs
|
|
92,000
|
|
|
|
|
|
92,000
|
|
Changes in Operating Assets and
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
77,809
|
|
|
(30,000
|
)
|
|
(27,856
|
)
|
Other assets
|
|
1,009
|
|
|
-
|
|
|
(5,659
|
)
|
Deposits
|
|
1,628
|
|
|
-
|
|
|
(27,305
|
)
|
Accounts payable and accrued
|
|
|
|
|
|
|
|
|
|
liabilities
|
|
(214,561
|
)
|
|
21,065
|
|
|
896,234
|
|
Deferred income
|
|
(2,195
|
)
|
|
-
|
|
|
765
|
|
Net Cash Used in Operating Activities
|
|
(556,426
|
)
|
|
(487,720
|
)
|
|
(922,898
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
|
|
|
|
|
|
|
|
|
|
Cash paid on unproven oil properties
|
|
(678,116
|
)
|
|
(1,281,268
|
)
|
|
(5,341,918
|
)
|
Cash acquired on reverse merger
|
|
-
|
|
|
|
|
|
4,038,375
|
|
Acquisition of property and equipment
|
|
-
|
|
|
(13,051
|
)
|
|
(16,551
|
)
|
|
|
(678,116
|
)
|
|
(1,294,319
|
)
|
|
(1,320,094
|
)
|
Cash Flows From Financing Activities
|
|
|
|
|
|
|
|
|
|
Payments on notes payable
|
|
-
|
|
|
-
|
|
|
(98,294
|
)
|
Proceeds from Stock issuances
|
|
-
|
|
|
-
|
|
|
2,334,200
|
|
Proceeds from borrowings- related
party
|
|
15,000
|
|
|
1,669,131
|
|
|
113,294
|
|
|
|
15,000
|
|
|
1,669,131
|
|
|
2,349,200
|
|
|
|
|
|
|
|
|
|
|
|
Net Increase (Decrease) in Cash and
|
|
|
|
|
|
|
|
|
|
Cash Equivalents
|
|
(1,219,542
|
)
|
|
(112,908
|
)
|
|
106,208
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, beginning
|
|
|
|
|
|
|
|
|
|
of Period
|
|
1,325,750
|
|
|
418,337
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, end of
|
|
|
|
|
|
|
|
|
|
Period
|
$
|
106,208
|
|
$
|
305,429
|
|
$
|
106,208
|
|
(Continued)
See Accompanying Notes to Financial Statements
F-5
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Stated in U.S. Dollars)
|
|
|
|
|
|
|
|
PERIOD FROM
|
|
|
|
|
|
|
|
|
|
INCEPTION
|
|
|
|
|
|
|
|
|
|
DECEMBER 2
|
|
|
|
SIX MONTH PERIOD ENDED
|
|
|
2005
|
|
|
|
OCTOBER 31
|
|
|
TO
|
|
|
|
2007
|
|
|
2006
|
|
|
OCTOBER 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes paid
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
$
|
-
|
|
$
|
-
|
|
$
|
2,973
|
|
|
|
|
|
|
|
|
|
|
|
Supplementary disclosure for Non-Cash
|
|
|
|
|
|
|
|
|
|
Investing and Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued on acquisition of Worldbids
|
|
|
|
|
|
|
|
|
|
business
|
$
|
-
|
|
$
|
-
|
|
$
|
3,905,530
|
|
Stock issued for acquisition of Oil and
|
|
|
|
|
|
|
|
|
|
Gas property
|
$
|
92,000
|
|
$
|
-
|
|
$
|
92,000
|
|
See Accompanying Notes to Financial Statements
F-6
ROYALITE PETROLEUM COMPANY INC.
(An
Exploration
Stage
Company)
CONSOLIDATED
STATEMENT
OF
STOCKHOLDERS
EQUITY
(Unaudited)
(Stated
in U.S.
Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
ACCUMULATED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADDITIONAL
|
|
|
|
|
|
DEFICIT DURING
|
|
|
OTHER
|
|
|
TOTAL
|
|
|
COMMON STOCK
|
|
|
PAID IN
|
|
|
|
|
|
DEVELOPMENT
|
|
|
COMPREHENSIVE
|
|
|
STOCKHOLDERS
|
|
|
SHARES
|
|
|
AMOUNT
|
|
|
CAPITAL
|
|
|
WARRANTS
|
|
|
STAGE
|
|
|
LOSS
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 2, 2005
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cash at $0.001 per share
|
18,000,000
|
|
|
18,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
18,000
|
|
Common shares issued for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cash; Reg. S - Private
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Placement at $0.10 per share
|
2,000,000
|
|
|
2,000
|
|
|
198,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
200,000
|
|
Common shares issued for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cash; Reg. D - Private
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Placement at $0.10 per share
|
100,000
|
|
|
100
|
|
|
9,900
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
10,000
|
|
Common shares issued for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cash; Reg. S - Private
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Placement at $0.30 per share
|
1,860,667
|
|
|
1,861
|
|
|
556,339
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
558,200
|
|
Common shares issued for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
licensing rights
|
3,000,000
|
|
|
3,000
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
3,000
|
|
Net Loss
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(196,085
|
)
|
|
-
|
|
|
(196,085
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance April 30,
2006
|
24,960,667
|
|
$
|
24,961
|
|
$
|
764,239
|
|
$
|
-
|
|
$
|
(196,085
|
)
|
$
|
-
|
|
$
|
593,115
|
|
(Continued)
See Accompanying Notes to Financial Statements
F-7
ROYALITE PETROLEUM COMPANY INC.
(An
Exploration
Stage
Company)
CONSOLIDATED
STATEMENT
OF
STOCKHOLDERS
EQUITY
(Unaudited)
(Stated
in U.S.
Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
ACCUMULATED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADDITIONAL
|
|
|
|
|
|
DEFICIT DURING
|
|
|
OTHER
|
|
|
TOTAL
|
|
|
COMMON STOCK
|
|
|
PAID IN
|
|
|
|
|
|
DEVELOPMENT
|
|
|
COMPREHENSIVE
|
|
|
STOCKHOLDERS
|
|
|
SHARES
|
|
|
AMOUNT
|
|
|
CAPITAL
|
|
|
WARRANTS
|
|
|
STAGE
|
|
|
LOSS
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance April 30, 2006
|
24,960,667
|
|
$
|
24,961
|
|
$
|
764,239
|
|
$
|
-
|
|
$
|
(196,085
|
)
|
$
|
-
|
|
$
|
593,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
pursuant to merger
|
10,914,603
|
|
|
10,914
|
|
|
3,894,616
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
3,905,530
|
|
Common shares issued for
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
cash; Reg. S - Private
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Placement at $1.50 per share
|
1,032,000
|
|
|
1,032
|
|
|
1,195,868
|
|
|
351,100
|
|
|
-
|
|
|
-
|
|
|
1,548,000
|
|
Fair value of Discount on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of 1,032,000 shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
at $1.50 per share
|
-
|
|
|
-
|
|
|
763,800
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
763,800
|
|
Foreign currency adjustment
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,785
|
)
|
|
(1,785
|
)
|
Net Loss
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(4,160,057
|
)
|
|
-
|
|
|
(4,160,057
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance April 30, 2007
|
36,907,270
|
|
|
36,907
|
|
|
6,618,523
|
|
|
351,100
|
|
|
(4,356,142
|
)
|
|
(1,785
|
)
|
|
2,648,603
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares issued for Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Gas property
|
200,000
|
|
|
200
|
|
|
91,800
|
|
|
|
|
|
|
|
|
|
|
|
92,000
|
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustment
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(7,750
|
)
|
|
(7,750
|
)
|
Net Loss
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,114,167
|
)
|
|
-
|
|
|
(1,114,167
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance October 31,
2007
|
37,107,270
|
|
$
|
37,107
|
|
$
|
6,710,323
|
|
$
|
351,100
|
|
$
|
(5,470,309
|
)
|
$
|
(9,535
|
)
|
$
|
1,618,686
|
|
See Accompanying Notes to Financial Statements
F-8
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER
31
, 2007
(Unaudited)
(Stated in U.S. Dollars)
1.
|
BASIS OF PRESENTATION
|
|
|
|
|
The unaudited financial information furnished
herein reflects all adjustments, which in the opinion of management are
necessary to fairly state the Companys financial position and the
results of its operations for the periods presented. This report on Form
10-QSB should be read in conjunction with the Companys financial
statements and notes thereto included in the Companys audited financial
statements for the fiscal period ended April 30, 2007. The Company assumes
that the users of the interim financial information herein have read or
have access to the audited financial statements for the preceding fiscal
year and that the adequacy of additional disclosure needed for a fair
presentation may be determined in that context. Accordingly, footnote
disclosure, which would substantially duplicate the disclosure contained
in the Companys audited financial statements for the fiscal year
ended April 30, 2007, has been omitted. The results of operations for
the six month period ended October 31, 2007 are not necessarily indicative
of results for the entire year ending April 30, 2008.
|
|
|
|
|
The financial statements include the operations
of the Company and its wholly-owned subsidiaries, Royalite Petroleum Corp,
incorporated in the state of Nevada, and Worldbid International Inc.,
a Company now domiciled in the state of Nevada. All significant inter-
company balances and transactions have been eliminated in the consolidation.
|
|
|
|
|
The consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
in the United States.
|
|
|
|
|
The preparation of consolidated financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities at the date of the consolidated financial statements,
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ significantly from these estimates.
|
|
|
|
2
|
OPERATIONS
|
|
|
|
|
a)
|
Description of Business
|
|
|
|
|
|
Royalite Petroleum Company Inc., referred to as the
Company, is considered an exploration stage company. The Company's
primary objective is to identify, acquire and develop oil and gas projects,
and has not yet realized any revenues from this primary objective.
|
|
|
|
|
|
The Company has acquired interests in properties through
leases on which it will drill oil or gas wells in efforts to discover
and/or to produce oil and gas. The Company has a 100% working interest
and a net revenue factor of 87.5% in the properties leased to date. At
October 31, 2007, the Company owned interests in oil and gas properties
located within the State of Utah.
|
F-9
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER
31
, 2007
(Unaudited)
(Stated in U.S. Dollars)
2.
|
OPERATIONS
(Continued)
|
|
|
|
|
a)
|
Description of Business Continued)
|
|
|
|
|
|
The Company is exploring various oil and gas properties
at this time and recently completed drilling operations on its initial
exploratory well located in Piute Co., Utah.
|
|
|
|
|
|
The Company holds the exclusive rights to use all information
relating to minerals and hydrocarbons in the State of Utah derived from
a proprietary electromagnetic sensing technology.
|
|
|
|
|
b)
|
History
|
|
|
|
|
|
Royalite Petroleum Company Inc. (the Company),
formerly Worldbid Corporation, was incorporated on August 10, 1998 in
the State of Nevada as Tethercam Systems, Inc (Tethercam). On January
15, 1999, Tethercam changed its name to Worldbid Corporation (Worldbid).
|
|
|
|
|
|
Effective February 28, 2007, Worldbid completed the
acquisition of Royalite Petroleum Corporation (RPC), an exploration
stage company since its formation in the State of Nevada on December 2,
2005.
|
|
|
|
|
|
The acquisition of RPC was completed by way of a "triangular
merger" pursuant to the provisions of the Amended and Restated Agreement
and Plan of Merger (First Merger Agreement) among RPC, Worldbid
and Worldbids wholly owned subsidiary, Royalite Acquisition Corp.
(Worldbid Sub). Under the terms of the First Merger Agreement,
RPC was merged with and into Worldbid Sub, with Worldbid Sub continuing
as the surviving corporation (First Merger). Immediately following
the completion of the First Merger, Worldbid completed a second merger
whereby Worldbid Sub was merged with and into Worldbid, with Worldbid
continuing as the surviving corporation (Second Merger).
|
|
|
|
|
|
Under the terms and conditions of the First Merger Agreement
each share of RPCs issued and outstanding common stock, immediately
prior to the completion of the First Merger, was converted into one share
of Worldbids common stock. As a result, Worldbid issued a total
of 24,960,667 shares or approximately 67% of its issued and outstanding
common stock to the former shareholders of RPC. Following the transaction,
Worldbid had 35,875,270 shares of common stock issued and outstanding.
|
|
|
|
|
|
As a result of the completion of the First Merger and
the Second Merger (together known as the Royalite Transaction),
Worldbid acquired all the property and assets of RPC, including the rights
to oil and gas leases on approximately 69,000 net acres of land along
the Utah Hingeline Trend of south-central Utah and a 2.5% royalty interest
in all of the oil and gas produced, sold or used off of 285 acres of land,
also located along the Utah Hingeline Trend. In addition to acquiring
all of RPCs property and assets, Worldbid assumed all of RPCs
debts and liabilities.
|
F-10
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER
31
, 2007
(Unaudited)
(Stated in U.S. Dollars)
2.
|
OPERATIONS
(Continued)
|
|
|
|
|
b)
|
History (Continued)
|
|
|
|
|
|
As part of the Second Merger, Worldbid changed its name
to Royalite Petroleum Company Inc. (the Company). Effective
March 5, 2007, the Company changed its trading symbol on the OTC
Bulletin Board from WBDC to RYPE.
|
|
|
|
|
|
For accounting purposes, the Royalite Transaction is
considered to be a capital transaction in substance, rather than a business
combination. The Royalite Transaction is treated, in the accompanying
financial statements as equivalent to the issuance of shares by RPC (the
private company) for the assets of Worldbid (the public company). The
accounting for the Royalite Transaction is similar to that resulting from
a reverse acquisition. Accordingly, the historical financial information
of the accompanying financial statements is that of RPC.
|
|
|
|
|
|
The 10,914,603 shares of Worldbid at February 28, 2007
are presented in the Companys Statement of Stockholders Equity
as if RPC acquired Worldbid.
|
|
|
|
|
c)
|
Going Concern
|
|
|
|
|
|
As of October 31, 2007, the Company incurred cumulative
net losses of approximately $5,470,309 from operations and has a negative
working capital of $950,243. The Company is still in the exploration stage,
raising substantial doubt about its ability to continue as a going concern.
The Company will seek additional sources of capital through the issuance
of debt or equity financing, but there can be no assurance the Company
will be successful in accomplishing its objectives.
|
|
|
|
|
|
The ability of the Company to continue as a going concern
is dependent on additional sources of capital and the successful execution
of the Companys strategic plan. The financial statements do not
include any adjustments that might be necessary if the Company is unable
to continue as a going concern.
|
|
|
|
3.
|
SIGNIFICANT ACCOUNTING POLICIES
|
|
|
|
|
a)
|
Use of Estimates
|
|
|
|
|
|
The preparation of consolidated financial statements
in conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
|
F-11
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER
31
, 2007
(Unaudited)
(Stated in U.S. Dollars)
3.
|
SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
|
|
|
b)
|
Cash and Cash Equivalents
|
|
|
|
|
|
The Company considers all investments with an original
maturity of three months or less to be a cash equivalent.
|
|
|
|
|
c)
|
Oil and Gas Exploration Activity
|
|
|
|
|
|
The Company follows the full cost method of accounting
for oil and gas operations whereby all costs associated with the exploration
for and development of oil and gas reserves, whether productive or unproductive,
are capitalized.
|
|
|
|
|
|
Such expenditures include land acquisition costs, drilling,
exploratory dry holes, geological and geophysical costs not associated
with a specific unevaluated property, completion and costs of well equipment.
Internal costs are capitalized only if they can be directly identified
with acquisition, exploration, or development activities.
|
|
|
|
|
|
Expenditures that are considered unlikely to be recovered
are written off. On a quarterly basis the Board of Directors assesses
whether or not there is an asset impairment. The current oil and gas exploration
and development activities are considered to be in the exploration stage.
|
|
|
|
|
|
The costs of unproved leases, which become productive,
are reclassified to proved properties when proved reserves are discovered
in the property. Unproved oil and gas interests are carried at original
acquisition costs including filing and title fees. Depreciation and depletion
of the capitalized costs for producing oil and gas properties will be
provided by the unit-of-production method based on proved oil and gas
reserves.
|
|
|
|
|
|
Abandonment of properties are recognized as an expense
in the period of abandonment and accounted for as adjustments of capitalized
costs.
|
|
|
|
|
|
Ceiling Test
.
|
|
|
|
|
|
Under the full-cost accounting rules, capitalized costs
included in the full-cost pool, net of accumulated depreciation, depletion
and amortization (DD&A), cost of unevaluated properties and deferred
income taxes, may not exceed the present value of our estimated future
net cash flows from proved oil and gas reserves, discounted at 10%, plus
the lower of cost or fair value of unproved properties included in the
costs being amortized, net of related tax effects. These rules generally
require that, in estimating future net cash flow, we assume that future
oil and gas production will be sold at the unescalated market price for
oil and gas received at the end of each fiscal quarter and that future
costs to produce oil and gas will remain constant at the prices in effect
at the end of the fiscal quarter.
|
F-12
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER
31
, 2007
(Unaudited)
(Stated in U.S. Dollars)
3.
|
SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
|
|
|
c)
|
Oil and Gas Producing Activity (Continued)
|
|
|
|
|
|
We are required to write-down and charge to earnings
the amount, if any, by which these costs exceed the discounted future
net cash flows, unless prices recover sufficiently before the date of
our financial statements. Given the volatility of oil and gas prices,
it is likely that our estimates of discounted future net cash flows from
proved oil and gas reserves will change in the near term. If oil and gas
prices decline significantly, even if only for a short period of time,
it is possible that writedowns of oil and gas properties could occur in
the future
|
|
|
|
|
d)
|
Impairment of Properties
|
|
|
|
|
|
Unproved leasehold costs are reviewed periodically and
a loss is recognized to the extent, if any, that the cost of the property
has been impaired.
|
|
|
|
|
e)
|
Property and Equipment
|
|
|
|
|
|
Property and equipment are stated at cost less accumulated
depreciation. Depreciation is provided principally on the straight-line
method over the estimated useful lives of the assets, which are generally
3 to 10 years. The cost of repairs and maintenance is charged to expense
as incurred. Expenditures for property betterments and renewals are capitalized.
Upon sale or other disposition of a depreciable asset, cost and accumulated
depreciation are removed from the accounts and any gain or loss is reflected
in other income (expense).
|
|
|
|
|
|
The Company periodically evaluates whether events and
circumstances have occurred that may warrant revision of the estimated
useful life of fixed assets or whether the remaining balance of fixed
assets should be evaluated for possible impairment. The Company uses an
estimate of the related undiscounted cash flows over the remaining life
of the fixed assets in measuring their recoverability.
|
|
|
|
|
f)
|
Long-Lived Assets
|
|
|
|
|
|
Long-lived assets are evaluated for impairment when
events or changes in circumstances indicate that the carrying amount of
the assets may not be recoverable through the estimated undiscounted future
cash flows from the use of these assets. When any such impairment exists,
the related assets will be written down to fair value.
|
F-13
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER
31
, 2007
(Unaudited)
(Stated in U.S. Dollars)
3.
|
SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
|
|
|
|
g)
|
Fair Value of Financial Instruments
|
|
|
|
|
|
|
Statement of Financial Accounting Standards
(SFAS) No. 107, Disclosure About Fair Value of Financial Instruments,
requires the Company to disclose, when reasonably attainable, the fair
market value of its assets and liabilities which are deemed to be financial
instruments. The carrying amounts and estimated fair value of the Companys
financial instruments approximate their fair value due to the short-term
nature.
|
|
|
|
|
|
h)
|
Foreign Currency
|
|
|
|
|
|
|
These financial statements have been presented
in U.S. dollars. The functional currency of the operations of the Companys
wholly-owned operating subsidiary, Worldbid International Inc. which undertakes
the Worldbid Operations is the Canadian dollar. Assets and liabilities
measured in Canadian dollars are translated into United States dollars
using exchange rates in effect at the consolidated balance sheets date
with revenue and expense transactions translated using average exchange
rates prevailing during the period. Exchange gains and losses arising
on this translation are excluded from the determination of operating income
and reported as foreign currency translation adjustment (which is included
in the other comprehensive loss) in stockholders equity.
|
|
|
|
|
|
i)
|
Revenue Recognition
|
|
|
|
|
|
|
i)
|
Oil and Gas Revenues
|
|
|
|
|
|
|
|
The Company recognizes oil and gas revenues from its
interests in producing wells as oil and gas is produced and sold from
these wells. The Company has no gas balancing arrangements in place.
|
|
|
|
|
|
|
ii)
|
Worldbid Operations
|
|
|
|
|
|
|
|
The Company earns revenue by selling subscriptions to
its service, advertising on email communications to businesses using the
Companys website services, direct advertising by businesses on its
website and from data sales to consumer oriented companies. Revenue is
recognized once the service or product is delivered.
|
|
|
|
|
|
|
|
Subscriptions received in advance for access to the
Companys website services are recognized as income over the period
of the subscriptions.
|
|
|
|
|
|
j)
|
Comprehensive Income (Loss)
|
|
|
|
|
|
|
The Companys accumulated other comprehensive
loss consists of the accumulated foreign currency translation adjustments.
|
F-14
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER
31
, 2007
(Unaudited)
(Stated in U.S. Dollars)
3.
|
SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
|
|
|
k)
|
Earnings (Loss) Per Share
|
|
|
|
|
|
The Company follows SFAS No. 128, Earnings Per
Share and SFAS No. 150, Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and Equity, which establish
standards for the computation, presentation and disclosure requirements
for basic and diluted earnings per share for entities with publicly-held
common shares and potential common stock issuances. Basic earnings (loss)
per share are computed by dividing net income by the weighted average
number of common shares outstanding. In computing diluted earnings per
share, the weighted average number of shares outstanding is adjusted to
reflect the effect of potentially dilutive securities, such as stock options
and warrants. Common stock equivalent shares are excluded from the computation
if their effect is antidilutive.
|
|
|
|
|
l)
|
Research and Development
|
|
|
|
|
|
All research and development expenditures during the
period have been charged to operations.
|
|
|
|
|
m)
|
Income Taxes
|
|
|
|
|
|
The Company accounts for its income taxes in accordance
with SFAS No. 109, Accounting for Income Taxes, which requires
recognition of deferred tax assets and liabilities for future tax consequences
attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases and
tax credit carry-forwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
|
|
|
|
|
n)
|
Stock-Based Compensation
|
|
|
|
|
|
The Company accounts for stock based employee and director
compensation arrangements in accordance with provisions of Financial Accounting
Standard (SFAS) No. 123R, Share Based Payment. SFAS No. 123(R)
requires companies to measure all employee stock based compensation awards
using a fair value method and record such expense in their consolidated
financial statements. The Company adopted SFAS No. 123(R) on a prospective
basis on December 2, 2005
|
|
|
|
|
|
Stock based compensation arrangements for non-employees
are recorded at fair value as the services are provided and the compensation
earned.
|
F-15
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER
31
, 2007
(Unaudited)
(Stated in U.S. Dollars)
3.
|
SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
|
|
|
o)
|
Segmented Information
|
|
|
|
|
|
The Company discloses segmented information in accordance
with SFAS No. 131, Disclosures about Segments of an Enterprise and
Related Information, which uses a management approach to determine
reportable segments. The Company currently operates its business in the
USA and Canada.
|
|
|
|
|
p)
|
Expenses of Offering
|
|
|
|
|
|
The Company accounts for specific incremental costs
directly to a proposed or actual offering of securities as a direct charge
against the gross proceeds of the offering.
|
|
|
|
|
q)
|
Reclassification
|
|
|
|
|
|
Certain reclassifications have been made to the prior
years financial statements to conform to the current years
presentation
|
|
|
|
|
r)
|
New Accounting Pronouncements
|
|
|
|
|
|
In May 2005, the FASB issued SFAS No. 154, Accounting
Changes and Error Corrections. This statement applies to all voluntary
changes in accounting principle and to changes required by an accounting
pronouncement that do not include explicit transition provisions. SFAS
No. 154 requires that changes in accounting principle be retroactively
applied, instead of including the cumulative effect in the income statement.
The correction of an error will continue to require financial statement
restatement. A change in accounting estimate will continue to be accounted
for in the period of change and in subsequent periods, if necessary. SFAS
No. 154 is effective for fiscal years beginning after April 30, 2006.
The Company does not expect the adoption of SFAS No. 154 to have a material
impact on its financial position, results of operations or cash flows.
|
|
|
|
|
|
In February 2006, the FASB issued SFAS No. 155, Accounting
for Certain Hybrid Financial Instruments, which amends SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities,
and SFAS No. 140, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities. SFAS No. 155 permits
fair value measurement for any hybrid financial instrument that contains
an embedded derivative that otherwise would require bifurcation, establishes
a requirement to evaluate interests in securitized financial assets to
identify interests that are freestanding derivatives or hybrid financial
instruments containing embedded derivatives
.
The Company does not
expect the adoption of SFAS No. 155 to have a material impact on its financial
position, results of operations or cash flows.
|
F-16
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER
31
, 2007
(Unaudited)
(Stated in U.S. Dollars)
3.
|
SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
|
|
|
r)
|
New Accounting Pronouncements (Continued)
|
|
|
|
|
|
In March 2006, the FASB issued SFAS No. 156, Accounting
for Servicing of Financial Assets, which amends SFAS No. 140, Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities. SFAS 156 may be adopted as early as January 1, 2006,
for calendar year-end entities, provided that no interim financial statements
have been issued. Those not choosing to early adopt are required to apply
the provisions as of the beginning of the first fiscal year that begins
after September 15, 2006 (e.g., January 1, 2007, for calendar year-end
entities). The intention of this statement is to simplify accounting for
separately recognized servicing assets and liabilities, such as those
common with mortgage securitization activities, as well as to simplify
efforts to obtain hedge-like accounting. Specifically, the FASB said SFAS
No. 156 permits a servicer using derivative financial instruments to report
both the derivative financial instrument and related servicing asset or
liability by using a consistent measurement attribute, or fair value.
The Company does not expect the adoption of SFAS No. 156 to have a material
impact on its financial position, results of operations or cash flows.
|
|
|
|
|
|
In September 2006, the FASB issued SFAS No. 157, "Fair
Value Measurements," to define fair value, establish a framework for measuring
fair value in accordance with generally accepted accounting principles,
and expand disclosures about fair value measurements. SFAS No. 157 will
be effective for fiscal years beginning after November 15, 2007. The Company
intends to adopt the standard at commencement of its next fiscal year,
May 1. 2008. The Company is currently evaluating what effect, if any,
the adoption of SFAS No. 157 will have on the Company's consolidated results
of operations and financial position.
|
|
|
|
|
|
In February 2007, the FASB issued SFAS No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities.
SFAS No. 159 permits an entity to irrevocably elect fair value on a contract-by-contract
basis as the initial and subsequent measurement attribute for many financial
assets and liabilities and certain other items including insurance contracts.
Entities electing the fair value option would be required to recognize
changes in fair value in earnings and to expense upfront cost and fees
associated with the item for which the fair value option is elected. SFAS
No. 159 is effective for fiscal years beginning after November 15, 2007.
Early adoption is permitted as of the beginning of a fiscal year that
begins on or before November 15, 2007, provided the entity also elects
to apply the provisions of SFAS No. 157, Fair Value Measurements. The
Company intends to adopt the standard at commencement of its next fiscal
year, May 1. 2008. The Company is currently evaluating the impact of adopting
SFAS No. 159 on its financial condition and results of operations.
|
F-17
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER
31
, 2007
(Unaudited)
(Stated in U.S. Dollars)
3.
|
SIGNIFICANT ACCOUNTING POLICIES
(Continued)
|
|
r)
|
New Accounting Pronouncements (Continued)
|
In June 2007, the FASB issued EITF Issue
No. 07-03, Accounting for Non-Refundable Advance Payments for Goods or
Services to Be Used in Future Research and Development Activities
(
"EITF
07-03"). EITF 07-03 provides guidance on whether non-refundable advance payments
for goods that will be used or services that will be performed in future research
and development activities should be accounted for as research and development
costs or deferred and capitalized until the goods have been delivered or the
related services have been rendered. EITF 07-03 is effective for fiscal years
beginning after December 15, 2007. The Company does not expect adoption of this
standard to have a significant impact on the Company's financial position and
results of operations.
4.
|
ACQUISITION
|
|
|
|
On February 28, 2007, the Company acquired 100 percent
of the outstanding common stock of Worldbid Corporation by way of a triangular
merger accounted for as a capital transaction.
|
|
|
|
The following table summarizes the fair value of assets
acquired and liabilities assumed at the date of the acquisition, February
28, 2007:
|
Cash and cash equivalents
|
$
|
4,038,375
|
|
Receivables
|
|
6,602
|
|
Deposits
|
|
30,646
|
|
Equipment
|
|
4,941
|
|
Total assets acquired
|
|
4,080,564
|
|
|
|
|
|
Accounts payable and
accrued
|
|
|
|
liabilities
|
|
117,429
|
|
Due to related parties
|
|
21,680
|
|
Deferred income
|
|
15,925
|
|
Notes payable
|
|
20,000
|
|
Total liabilities assumed
|
|
175,034
|
|
|
|
|
|
Net Assets Acquired
|
$
|
3,905,530
|
|
F-18
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER
31
, 2007
(Unaudited)
(Stated in U.S. Dollars)
5.
|
PROPERTY AND EQUIPMENT
|
|
|
|
Property and equipment consists of the following:
|
|
|
|
OCTOBER 31
|
|
|
APRIL 30
|
|
|
|
|
2007
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Computer equipment and software
|
$
|
8,427
|
|
$
|
8,427
|
|
|
Support equipment
|
|
13,052
|
|
|
13,052
|
|
|
Less: Accumulated
depreciation
|
|
(5,805
|
)
|
|
(3,049
|
)
|
|
|
$
|
15,674
|
|
$
|
18,430
|
|
6.
|
LICENSE RIGHTS
|
|
|
|
License rights consist of the following:
|
|
|
|
OCTOBER 31
|
|
|
APRIL 30
|
|
|
|
|
2007
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Licensing rights
|
$
|
3,000
|
|
$
|
3,000
|
|
|
Less: Accumulated depreciation
|
|
(301
|
)
|
|
(201
|
)
|
|
|
$
|
2,699
|
|
$
|
2,799
|
|
7.
|
UNPROVEN OIL AND GAS PROPERTIES
|
|
|
|
Unproven oil and gas properties consist of the following:
|
|
|
|
OCTOBER 31
|
|
|
APRIL 30
|
|
|
|
|
2007
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Acquisition costs
|
$
|
2,540,111
|
|
$
|
2,413,684
|
|
|
Less: Write off of abandoned property
|
|
(92,000
|
)
|
|
-
|
|
|
|
|
2,448,111
|
|
|
2,413,684
|
|
|
|
|
|
|
|
|
|
|
Exploration costs
|
|
2,893,807
|
|
|
2,250,118
|
|
|
Less: Write off of cost on abandoned
well
|
|
(2,849,313
|
)
|
|
(2,250,118
|
)
|
|
|
|
44,494
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,492,605
|
|
$
|
2,413,684
|
|
On March 3, 2006 the Company acquired
oil and gas leases from the Bureau of Land Management (BLM) representing a 100%
working interest in 6 parcels totaling 10,127 acres situated in the Piute and
Sanpete Counties of Utah. The Company has paid the BLM a total of $288,510 for
the lease acquisition costs.
F-19
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER
31
, 2007
(Unaudited)
(Stated in U.S. Dollars)
7.
|
UNPROVEN OIL AND GAS PROPERTIES
(Continued)
|
|
|
|
On July 25, 2006 the Company acquired an oil and gas
lease from a private land owner representing a 100% working interest in
approximately 1,326 acres in Piute County, Utah. The lease continues for
5 years with an option to extend the lease for another 5 years at 150%
of the original payment.
|
|
|
|
The contract includes royalties of 1/8
th
of
the gross oil production proceeds from any well on the property each year,
payable monthly. The Company paid the private land owner $12,030 for the
lease acquisition costs.
|
|
|
|
On August 15, 2006 the Company acquired oil and gas
leases from the BLM representing a 100% working interest in 17 parcels
totaling 19,913 acres situated in the Piute, Sanpete and Wayne Counties
of Utah. The Company paid the BLM a total of $1,063,091 for the lease
acquisition costs.
|
|
|
|
On September 1, 2006 the Company acquired oil and gas
leases from the State of Utah representing a 100% working interest in
8 parcels totaling 3,094 acres situated in Piute County, Utah. The Company
paid the State of Utah a total of $180,157 for the lease acquisition costs.
|
|
|
|
On November 21, 2006 the Company acquired oil and gas
leases from the BLM representing a 100% working interest in 4 parcels
totaling 3,379 acres situated in Piute County, Utah. The Company paid
the BLM a total of $161,435 for the lease acquisition costs.
|
|
|
|
On January 30, 2007 the Company acquired oil and gas
leases from the State of Utah representing a 100% working interest in
5 parcels situated in Piute County, Utah. The Company paid the State of
Utah a total of $34,432 for the lease acquisition costs.
|
|
|
|
On February 7, 2007 the Company acquired oil and gas
leases from the BLM representing a 100% working interest in 5 parcels
totaling 9,300 acres situated in Piute County, Utah. The Company paid
the BLM a total of $13,952 for the lease acquisition costs.
|
|
|
|
On February 19, 2007 the Company acquired an undivided
2.5% mineral royalty interest to all oil and gas produced and sold off
land under the existing oil and gas lease agreement dated May 23, 2005
between Crazy R Ranch, Inc and Silver Summit, L.C., and all extensions
thereafter. Aforementioned lease from the Crazy R Ranch represents a 100%
working interest in 9 parcels totaling 298 acres situated in Sevier County,
Utah. The Company paid Crazy R. Ranch $200,000 for the mineral royalty
interest.
|
|
|
|
On February 20, 2007 the Company acquired oil and gas
leases from the BLM representing a 100% working interest in 11 parcels
totaling 18,631 acres situated in Piute County, Utah. The Company paid
the BLM a total of $301,943 for the lease acquisition costs.
|
F-20
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER
31
, 2007
(Unaudited)
(Stated in U.S. Dollars)
7.
|
UNPROVEN OIL AND GAS PROPERTIES
(Continued)
|
|
|
|
From October 1, 2006 to April 30, 2007, the Company
executed 34 oil and gas leases with private land owners, representing
a 100% working interest in approximately 11,836 gross acres situated in
the Piute, Garfield and Iron Counties of Utah. The Company paid the private
land owners $158,134 for the lease acquisition costs.
|
|
|
|
Lease terms are for 5 years, with an option to extend
for an additional 5 years. There are no future payment obligations on
the leases.
|
|
|
|
From May 1, 2007 to October 31, 2007, the Company capitalized
$44,494 in engineering costs related to regulatory reporting and filing,
and the mapping, surveying, permitting and site release of future planned
well drilling locations.
|
|
|
|
On September 28, 2007, the Company renewed oil and gas
leases with the BLM representing a 100% working interest in 17 parcels
totaling 19,913 acres situated in the Piute, Sanpete and Wayne Counties
of Utah. The Company paid the BLM a total of $29,876 for the annual lease
costs.
|
|
|
|
On October 1, 2007, the Company renewed oil and gas
leases with the State of Utah representing a 100% working interest in
8 parcels totaling 2,815 acres situated in Piute County, Utah. The Company
paid the State of Utah a total of $4,551 for the annual lease costs.
|
|
|
|
On October 1, 2007, Royal Petroleum Company Inc. (the
Company) entered into a Letter Agreement (the Letter
Agreement) with Central Utah Lease Acquisition, L.P., a Utah Limited
Partnership (CULA), whereby CULA granted the Company an option
to purchase 62.5% of CULAs interest in an oil and gas project known
as the Keystone Project. The Keystone Project is located in Sanpete, Juab,
and Severe Counties, Utah and consists of 66,700 net leasehold acres,
with a combined net revenue interest of 80%. If the Company exercises
the option, of which there is no assurance, the Company will have an opportunity
to earn approximately 41,688 net leasehold acres. In consideration for
this option, the Company issued to CULA 200,000 shares of common stock.
In order to exercise this option, the Company must provide CULA with a
written notice of exercise on or before November 21, 2007.
|
|
|
|
If the Company exercises its option, the parties will
enter into a formal agreement for the purchase of 62.5% of CULAs
interest in the Keystone Project with the following principal terms and
conditions:
|
|
(a)
|
To purchase the interest in the Keystone Project, the
Company will pay and issue the following consideration to CULA:
|
|
(i)
|
$1,500,000 in cash on or before November 26, 2007 (the
Keystone Closing Date);
|
F-21
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER
31
, 2007
(Unaudited)
(Stated in U.S. Dollars)
7.
|
UNPROVEN OIL AND GAS PROPERTIES
(Continued)
|
|
(ii)
|
7,300,000 shares of the Companys common stock
on or before the Keystone Closing Date. The Company will grant CULA piggyback
registration rights in respect of the shares issued. If the Company has
not filed a registration statement to register the shares on or before
May 1, 2008, the Company, at its own expense, will file a registration
statement to register the shares;
|
|
|
|
|
(iii)
|
$2,260,000 in cash on or before December 31, 2007;
|
|
|
|
|
(iv)
|
$2,500,000 in cash on or before June 15, 2008;
|
|
|
|
|
(v)
|
$2,500,000 in cash on or before December 15, 2008; and
|
|
|
|
|
(vi)
|
$2,500,000 in cash on or before June 15, 2009.
|
|
(b)
|
The Company will also be required to drill two oil and/or
gas wells within a specified area of the Keystone Project and to carry
CULA as a 25% working interest owner through the completion or plugging
of those wells (the Carried Wells).
|
Upon exercise of the option, the Company
and CULA will also enter into an operating agreement to further develop the
Keystone Project. Under the terms of the proposed operating agreement, the Company
will be the operator and CULA will be a non-operator of the Keystone Project.
A condition of the proposed operating agreement is that Clayton Williams Energy
Inc. (CWEI) must agree to be a party to the operating agreement.
CWEI owns an undivided 50% working interest in an area covering approximately
30,000 gross acres located on the southern portion of the Keystone Project.
In the event that CWEI is unwilling or unable to enter into the operating agreement
on or before the Keystone Closing Date and both the Company and CULA are prepared
to close the transaction, then the parties agree that the terms of the Letter
Agreement shall be extended until CWEIs signature has obtained
Subsequent to the October 31, 2007, the
Company failed to meet the conditions for the closing of the letter agreement,
and the fair value of the 200,000 common shares issued of $92,000 has been written
off in the period. The Company is currently in the process of renegotiating
the agreement with CULA.
F-22
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER
31
, 2007
(Unaudited)
(Stated in U.S. Dollars)
8.
|
LOANS PAYABLE RELATED PARTIES
|
|
|
|
Loans payable comprise the following:
|
|
|
|
OCTOBER 31
|
|
|
APRIL 30
|
|
|
|
|
2007
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Amount due to a director, is unsecured, payable
|
|
|
|
|
|
|
|
on demand and bears interest at 10% per
|
|
|
|
|
|
|
|
annum.
|
$
|
21,680
|
|
$
|
21,680
|
|
|
Amount due to significant shareholder,
|
|
|
|
|
|
|
|
unsecured, payable on demand and
non
|
|
15,000
|
|
|
-
|
|
|
interest bearing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
36,680
|
|
$
|
21,680
|
|
9.
|
NOTES PAYABLE
|
|
|
|
|
|
Notes payable of $20,000 (April 30, 2007 -
$20,000) are due upon demand, bear interest at 15% per annum, payable
annually, and are secured by a general security agreement over the assets
of Royalite Petroleum Company Inc. and by a subordination of intercompany
debt between Royalite Petroleum Company Inc and Worldbid Networks Inc.
|
|
|
|
|
10
|
STOCKHOLDERS EQUITY
|
|
|
|
|
|
a)
|
Common and Preferred Stock:
|
|
|
|
|
|
|
As of October 31, 2007, there were 37,107,270
shares of common stock outstanding and zero shares of preferred stock
outstanding. Outstanding shares of common stock consists of the following:
|
|
|
|
|
|
|
i)
|
On February 8, 2006, the Company issued 18,000,000 shares
of common stock to five individuals for cash at $0.001 per share.
|
|
|
|
|
|
|
ii)
|
On February 8, 2006, the Company issued 3,000,000 shares
of common stock for licensing rights at $0.001 per share.
|
|
|
|
|
|
|
iii)
|
On March 2, 2006, the Company issued 2,000,000 shares
of common stock to seven individuals for cash at $0.10 per share.
|
|
|
|
|
|
|
iv)
|
On March 3, 2006, the Company issued 100,000 shares
of common stock to an individual for cash at $0.10 per share.
|
|
|
|
|
|
|
v)
|
On April 30, 2006, the Company issued 1,860,667 shares
of common stock to 24 individuals for cash at $0.30 per share.
|
F-23
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER
31
, 2007
(Unaudited)
(Stated in U.S. Dollars)
10
|
STOCKHOLDERS EQUITY
(Continued)
|
|
vi)
|
On February 28, 2007, the Company issued 10,914,603
shares of common stock pursuant to the completion of the merger with Worldbid.
|
|
|
|
|
vii)
|
On March 23, 2007, the Company issued 1,032,000 units
at a price of $1.50 per unit, each unit consisting of one share of common
stock and one half of one share purchase warrant. Each whole warrant entitles
the holder to purchase on additional share of common stock at a price
of $1.75 per share, for a one year period from the date of issuance of
the units. The Company recorded a discount of $763,800 to reflect the
difference between the offering price and the market price on the date
the offering was entered into.
|
|
|
|
|
viii)
|
On October 12, 2007, the Company issued 200,000 common
shares pursuant to an oil and gas property agreement.
|
|
b)
|
Share Purchase Warrants
|
|
|
|
|
|
As at October 31, 2007, share purchase warrants are
outstanding for the purchase of commons shares as follows:
|
|
|
|
|
|
EXERCISE
|
|
|
|
|
|
|
|
NUMBER
|
|
|
|
|
PRICE
|
|
|
|
|
|
|
|
OF
|
|
|
|
|
PER
|
|
|
|
|
|
EXPIRY
|
|
SHARES
|
|
|
|
|
SHARE
|
|
|
|
|
|
DATE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,740,081
|
|
|
|
$
|
0.85
|
|
|
|
|
|
January 31, 2008
|
|
715,017
|
|
|
|
|
1.75
|
|
|
|
|
|
February 15, 2008
|
|
516,000
|
|
|
|
|
1.75
|
|
|
|
|
|
March 23, 2008
|
|
11.
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
a)
|
Commitments
|
|
|
|
|
|
The Company has operating leases for its offices. Future
minimum lease payments under the operating leases for the facilities are
as follows:
|
F-24
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER
31
, 2007
(Unaudited)
(Stated in U.S. Dollars)
11.
|
COMMITMENTS AND CONTINGENCIES
(Continued)
|
|
|
|
|
b)
|
Contingencies
|
|
|
|
|
|
The Company is a defendant in a suit that seeks the
return of certain funds invested in the Company, plus damages and costs.
Specifically, the Bank of Montreal (the Bank) has claimed
for the return of certain monies invested in the Company from funds they
claim were misappropriated from the Bank. The Company has filed a statement
of defense denying any liability on the basis that no misappropriated
funds were received by the Company. Management and legal counsel for the
Company are of the opinion that the Banks claim is without merit.
|
|
|
|
|
|
On September 13, 2007, the Company was served with notice
of a claim filed against us in the Colorado District Courts by DHS Drilling
Company (DHS). DHS has claimed that we are indebted to them
in the amount of $555,802 on account of materials and services provided
by them in connection with the drilling of the Royalite State 16-1 Well.
As at October 31, 2007, the Company had provided for costs of $555,802
in relation to this claim. The Company has not yet had an opportunity
to assess the merits of DHS action and are in the process of consulting
with legal counsel.
|
|
|
|
12.
|
RELATED PARTY TRANSACTIONS
|
|
|
|
|
a)
|
Included in accounts payable is $12,920 (April 30, 2007
- $5,836) due to directors of the Company. The amount is unsecured and
without specified terms of repayment.
|
|
|
|
|
b)
|
During the six month period ended October 31, 2007 and
2006, the Company accrued or was charged the following amounts by directors,
and companies with a common director or officer:
|
|
|
|
OCTOBER
31
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Income Statement Items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting fees
|
$
|
55,000
|
|
$
|
64,000
|
|
|
Interest expense
|
|
1,084
|
|
|
-
|
|
|
Management fees
|
|
60,000
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
$
|
116,084
|
|
$
|
64,000
|
|
F-25
ROYALITE PETROLEUM COMPANY INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER
31
, 2007
(Unaudited)
(Stated in U.S. Dollars)
13.
|
SEGMENTED INFORMATION
|
|
|
|
|
The Company currently operates in two geographic
and business segments as follows:
|
|
|
|
|
a)
|
the oil and gas industry (USA) and;
|
|
b)
|
the online business-to-business industry (Canada).
|
Details on a geographic basis of the
assets, liabilities and loss for the period at October 31, 2007 and 2006 are
as follows:
|
October 31, 2007
|
|
USA
|
|
|
Canada
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
$
|
2,632,630
|
|
$
|
83,335
|
|
$
|
2,715,965
|
|
|
Liabilities
|
$
|
907,013
|
|
$
|
189,555
|
|
$
|
1,096,568
|
|
|
Loss for the period
|
$
|
948,186
|
|
$
|
165,981
|
|
$
|
1,114,167
|
|
|
October 31, 2006
|
|
USA
|
|
|
Canada
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
$
|
1,927,175
|
|
$
|
-
|
|
$
|
1,927,175
|
|
|
Liabilities
|
$
|
1,813,915
|
|
$
|
-
|
|
$
|
1,813,915
|
|
|
Loss for the period
|
$
|
479,855
|
|
$
|
-
|
|
$
|
479,855
|
|
F-26
ITEM
2.
MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FORWARD LOOKING STATEMENTS
The information in this discussion contains forward-looking
statements. These forward-looking statements involve risks and uncertainties,
including statements regarding our capital needs, business strategy and
expectations. Any statements contained herein that are not statements of
historical facts may be deemed to be forward-looking statements. In some cases,
you can identify forward-looking statements by terminology such as may,
will, should, expect, plan, intend, anticipate, believe,
estimate, predict, potential or continue, the negative of such terms or
other comparable terminology. Actual events or results may differ materially. In
evaluating these statements, you should consider various factors, including the
risks discussed below, and, from time to time, in other reports we file with the
United States Securities and Exchange Commission (the SEC), including our
Annual Report on Form 10-KSB for the year ended April 30, 2007 filed with the
SEC on September 11, 2007. These factors may cause our actual results to differ
materially from any forward-looking statement.
As used in this Quarterly Report on Form 10-QSB, the terms
"we, "us, "our, Royalite and the Company mean Royalite Petroleum Company
Inc. and its subsidiaries unless otherwise indicated. All dollar amounts in this
Quarterly Report are in U.S. dollars unless otherwise stated.
OVERVIEW
We are an oil and gas exploration company with our current
exploration activities concentrated along the Utah Hingeline Trend of
South-Central Utah. To date we have leased 67,025 net acres covering 69,759
gross acres along the four main Hingeline faults located within a five county
area of Southern Utah. We do not currently own any productive wells or developed
acreage and we have not yet discovered any proven oil or gas reserves on any of
our properties.
We also own and operate an international business-to-business
and government-to-business facilitation service, which combines proprietary
software with the power of the Internet to bring buyers and sellers together
from around the world for interactive trade (the Worldbid Operations). We have
designed our Worldbid.com Internet website to enable companies throughout the
world to procure, source (buy) and tender (sell) products and services
nationally and internationally. Our Worldbid Operations are operated through our
wholly owned subsidiary, Worldbid International Inc. (formerly Worldbid Canada
Corporation).
RECENT DEVELOPMENTS
The following significant corporate developments have occurred
since the completion of our fiscal quarter ended July 31, 2007:
1.
|
Effective August 1, 2007, we entered into a consulting
agreement with Kapco Consultants Corp. (Kapco), pursuant to which Kapco
has agreed to provide us with certain investor relations and financial
advisory services. In exchange for their services, we have agreed to pay
Kapco a monthly fee of $6,000 per month. The agreement may be terminated
by either party with 60 days prior written notice.
|
|
|
2.
|
On September 13, 2007, we were served with notice of a
claim filed against us in the Colorado District Courts by DHS Drilling
Company (DHS). DHS has claimed that we are
|
3
|
indebted to them in the amount of $555,801.86 on account
of materials and services provided by them in connection with the drilling
of the Royalite State 16-1 Well. We have filed a defence and are in
discussion with DHS to resolve the claim. A court date is scheduled for
September 2008 if this matter cannot be resolved prior to that
date.
|
|
|
3.
|
On October 1, 2007, we entered into a Letter Agreement
(the Letter Agreement) with Central Utah Lease Acquisition, L.P., a Utah
Limited Partnership (CULA), whereby CULA granted us an option to
purchase 62.5% of CULAs interest in an oil and gas project known as the
Keystone Project. The Keystone Project is located in Sanpete and Juab
Counties, Utah and consists of 66,700 net leasehold acres, with a combined
net revenue interest of 80%. If we exercise the option, of which there is
no assurance, we will have an opportunity to earn approximately 41,688 net
leasehold acres. In consideration for this option, we have issued to CULA
200,000 shares of our common stock. The shares were issued pursuant to
Rule 506 of Regulation D of the Securities Act of 1933 (the Securities
Act). CULA has represented to us that it is an accredited investor as
defined under Rule 501 of Regulation D. On November 21, 2007, our option
to acquire 62.5% of CULAs interest in the Keystone Project
expired.
|
|
|
4.
|
On October 2, 2007, we signed an Amended Letter of Intent
dated (the Letter of Intent) with Twilight Resources, LLC (Twilight)
setting out the proposed terms under which we will acquire an undivided
50% of Twilights leasehold interest in a project known as the Green River
Prospect. The Green River Prospect is located in Grand and Emery Counties,
Utah and consists of approximately 6,216 net leasehold acres, with a
combined net revenue interest of 80%. On November 20, 2007, the Letter of
Intent expired as the parties were unable to reach a formal agreement. We
are attempting to negotiate an extension to acquire the leasehold interest
in the Green River Prospect. There is no assurance that the negotiations
will be successful.
|
|
|
5.
|
On November 30, 2007, we entered into a Consulting
Agreement (the Consulting Agreement) with CRG Partners, Inc. (CRG) to
provide us with certain services including shareholder information and
public relations. The Consulting Agreement is for a term of six (6)
months.
|
|
|
|
In consideration for CRGs services, we have has issued
100,000 shares of common stock to CRG. The shares were issued pursuant to
Rule 506 of Regulation D of the Securities Act of 1933 (the Securities
Act). CRG has represented to us that it is an accredited investor as
defined under Rule 501 of Regulation D.
|
|
|
6.
|
On December 4, 2007, our board of directors approved an
offering of up to $250,000 of 8% convertible notes. The convertible notes
will be due on December 31, 2009 and will bear interest at 8% per annum
payable annually and will be issued in reliance of exemptions from
applicable securities laws. There is no assurance that the offering of
convertible notes will be completed on the above terms or at
all.
|
PLAN OF OPERATION
We do not currently have sufficient capital resources to meet
all of the anticipated costs of our plan of operation for the next twelve
months. As such, our ability to complete the plan of operation for our oil and
gas exploration activities and pay for the ongoing costs of operating our
Worldbid Operations is dependent upon our ability to obtain additional
financing. The following summarizes our plan of operation for both our oil and
gas exploration activities and our Worldbid Operations. In
4
addition to the costs of pursuing our plan of operation, during
the next twelve months we expect to spend approximately $340,000 on management
fees, an aggregate of $100,000 on legal and accounting expenses, and an
additional $60,000 on general administrative expenses.
Oil and Gas Exploration Activities
Our oil and gas exploration and development operations have
been suspended pending our ability to obtain additional financing. The oil and
gas exploration and development activities that we engage in over the next
twelve months will depend upon the amount of financing that we are able to
obtain, and may involve:
(a) Drilling exploratory wells on the properties to which we
have secured oil and gas leases; and
(b) Conducting seismic surveys.
Worldbid Operations
Our management has determined that the Worldbid Operations no
longer form a part of our core business. Although we intend to continue our
Worldbid Operations at this time, we do not intend to spend additional financial
resources on further developing those operations. We intend to focus our efforts
and financial resources on developing our oil and gas operations and are
considering our options with respect to the Worldbid Operations.
RESULTS OF OPERATIONS
The merger with Royalite Petroleum Corp. (Royalite Corp.) has
been treated as a reverse merger for accounting purposes. As a result,
Royalite Corp. has been treated as the acquiring entity for accounting and
financial reporting purposes. As such, our consolidated financial statements
will be presented as a continuation of the operations of Royalite Corp. and not
Royalite Petroleum Company Inc. (formerly Worldbid Corporation). The operations
of Royalite Petroleum Company Inc. are included in the consolidated statement of
operations from the effective date of the merger, February 28, 2007.
Second Quarter and Six Months Summary
|
Second
Quarter Ended
|
Percentage
|
|
Six
Months Ended
|
Percentage
|
|
October 31,
|
Increase /
|
|
October 31,
|
Increase /
|
|
|
|
(Decrease)
|
|
|
|
(Decrease)
|
|
2007
|
2006
|
|
|
2007
|
2006
|
|
Revenue
|
$54,248
|
$-
|
n/a
|
|
$113,555
|
$-
|
n/a
|
Operating
|
(189,226)
|
(296,927)
|
(36.3)%
|
|
(1,128,742)
|
(479,855)
|
135.2%
|
Expenses
|
|
|
|
|
|
|
|
Other Expenses
|
(94,216)
|
-
|
n/a
|
|
(98,980)
|
-
|
n/a
|
Net Loss
|
$(229,894)
|
$(296,927)
|
(22.6)%
|
|
$(1,114,167)
|
$(479,855)
|
132.2%
|
5
Revenues
Our revenues are generated solely from our Worldbid Operations.
As discussed above, revenues from our Worldbid Operations have been included in
the Consolidated Statements of Operations included with this Quarterly Report
from February 28, 2007, the effective date of our acquisition of Royalite Corp.
Revenues from our Worldbid Operations for the six months ended October 31, 2007
were $113,555. Revenues from our Worldbid Operations for the six months ended
October 31, 2006 were $164,594.
Our primary sources of revenues during the six months ended
October 31, 2007 were membership subscriptions to our Worldbid websites and fees
received from our strategic partnership arrangements. We did not earn any
revenue from data mining sources during the period.
Our revenues from our Worldbid Operations for the six months
ended October 31, 2007 declined by approximately $26,282 or 18.8% from the six
months ended October 31, 2006. Over the last year, we have decreased the amount
that we spend on advertising our Worldbid websites and network. This, in turn,
has resulted in a decrease in our revenues. We do not intend to significantly
increase the amount that we spend on advertising for our Worldbid Operations
during the next twelve months. As a result, the decrease in our Worldbid
revenues is expected to be permanent.
We do not anticipate earning revenue from our oil and gas
exploration activities in the near future.
Operating Expenses
The major components of our expenses for the quarter are
outlined in the table below:
|
Three
Months Ended
|
Percentage
|
|
Six Months
Ended
|
Percentage
|
|
October
31,
|
Increase /
|
|
October
31,
|
Increase /
|
|
|
|
(Decrease)
|
|
|
|
(Decrease)
|
|
2007
|
2006
|
|
|
2007
|
2006
|
|
|
|
|
|
|
|
|
|
Oil and Gas Exploration
|
$(12,805)
|
$44,647
|
(128.7)%
|
|
$586,390
|
$117,750
|
398.0%
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, General and
|
200,603
|
251,401
|
(20.2)%
|
|
539,496
|
361,035
|
49.4%
|
Administrative Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
|
1,428
|
879
|
62.5%
|
|
2,856
|
1,070
|
166.9%
|
Amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expenses
|
$189,226
|
$296,927
|
(36.3)%
|
|
$1,128,742
|
$479,855
|
135.2%
|
The additional oil and gas exploration expenses for the six
months ended October 31, 2007 relate primarily to the cost of our exploratory
drilling operations on the Royalite State 16-1 Well, our first exploratory well.
Selling and administrative expenses related to our operations
for the six months ended October 31, 2007 were $539,496, as compared to $361,035
for the six months ended October 31, 2006. This increase in selling, general and
administrative expenses were primarily due to (i) additional legal and
accounting fees related to the merger with Royalite Corp.; (ii) the increase in
officers remuneration for the six months ended October 31, 2007 as compared to
2006; and (iii) the rise of the Canadian dollar against the US dollar has
increased Worldbids day-to-day operating costs.
6
Subject to our ability to obtain additional financing, we
expect that our total operating expenses will continue to increase in the
foreseeable future as we proceed with our oil and gas exploration and
development activities.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
|
|
|
|
Six Months ended
|
Six Months ended
|
|
October 31, 2007
|
October 31, 2006
|
Cash Flows used in Operating
Activities
|
$(556,426)
|
$(487,720)
|
Cash Flows used in Investing Activities
|
$(678,116)
|
$(1,294,319)
|
Cash Flows from Financing
Activities
|
$15,000
|
$1,669,131
|
Net Increase (decrease) in Cash During Period
|
$(1,219,542)
|
$(112,908)
|
Working Capital
|
|
|
|
|
|
|
Percentage
|
|
|
|
Increase /
|
|
At
October 31, 2007
|
At
April 30, 2007
|
(Decrease)
|
Current Assets
|
$146,325
|
$1,444,685
|
(89.9)%
|
Current Liabilities
|
$(1,096,568)
|
$(1,290,574)
|
(15.0)%
|
Working Capital Surplus (Deficit)
|
$(950,243)
|
$(154,111)
|
516.6%
|
We have two credit card facilities which require an aggregate
security deposit of approximately $31,000, which we continue to maintain. These
security deposits must be maintained by us in order to cover credit card
charge-backs. Credit card charge backs are amounts that are billed, and paid by,
the credit card company where the owner of the credit card later claims that it
was used without his or her authorization. In the event of a credit card
charge-back, we are required to reimburse the funds advanced to us by the credit
card company.
As of October 31, 2007, we had cash on hand of $106,208 and a
working capital deficit of $950,243.
During the quarter ended October 31, 2007, we recorded a net
loss of $229,894. We do not anticipate earning revenues from our oil and gas
activities in the near future and, to date, we have not earned sufficient
revenues from our Worldbid Operations to cover the costs of our operations.
Accordingly, we will require additional outside financing in order to carryout
our intended oil and gas exploration and development activities for the next
twelve months and to maintain our Worldbid Operations. We will also require
additional financing in order to pay our current liabilities as they come due.
If we fail to repay our creditors or fail to make satisfactory arrangements to
extend our current liabilities, our business could fail.
Historically, we have been dependent on sales of equity
securities, issuances of convertible debt securities, and related party loans as
sources of financing. As of October 31, 2007, we owed a total of $21,680 to
Logan B. Anderson, currently our Chief Financial Officer, Treasurer and
Secretary and a member of our Board of Directors. The amounts owed to Mr.
Anderson bear interest at a rate of 10% per annum, are unsecured and due on
demand. There are no assurances
7
that we will be able to obtain additional financing from these
sources in the future. We do not currently have any underwriting, long-term debt
financing or other financing arrangements in place.
OFF-BALANCE SHEET ARRANGEMENTS
None.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements in conformity with
generally accepted accounting principles requires our management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Our management routinely makes judgments and estimates about the effects of
matters that are inherently uncertain.
We have identified certain accounting policies, described
below, that are most important to the portrayal of our current financial
condition and results of operations. Our significant accounting policies are
disclosed in Note 1 to the audited financial statements included in our Annual
Report on Form 10-KSB, filed with the SEC on September 11, 2007.
Revenue Recognition
(i)
|
Oil and Gas Revenues We recognize oil and gas revenues
from our interests in producing wells as oil and gas is produced and sold
from these wells. We have no gas balancing arrangements in
place.
|
|
|
(ii)
|
Worldbid Operations We earn revenue by selling
subscriptions to our service, advertising on email communications to
businesses using our website services, direct advertising by businesses on
our website and from data sales to consumer oriented companies. Revenue is
recognized once the service or product is delivered. Subscriptions
received in advance for access to our website services are recognized as
income over the period of the subscriptions.
|
Oil and Gas Exploration Activities
We follow the full cost method of accounting for oil and gas
operations, whereby all costs associated with the exploration for, and
development of, oil and gas reserves, whether productive or unproductive, are
capitalized. Internal costs are capitalized only if they can be directly
identified with acquisition, exploration or development activities.
Expenditures that are considered unlikely to be recovered are
written off. On a quarterly basis, our Board of Directors assess whether or not
there is an asset impairment. The current oil and gas exploration and
development activities are considered to be in the exploration stage.
The costs of unproven leases that become productive are
reclassified to proved properties when proven reserves are discovered in the
property. Unproven oil and gas interests are carried at original acquisition
costs, including filing and title fees. Depreciation and depletion of the
capitalized costs for producing oil and gas properties will e proved by the
unit-of-production method based on proven oil and gas reserves.
8
Abandonment of properties are recognized as an expense in the
period of abandonment and accounted for as adjustments of capitalized costs.
Ceiling Test
. Under the full-cost accounting rules,
capitalized costs included in the full-cost pool, net of accumulated
depreciation, depletion and amortization (DD&A), cost of unevaluated
properties and deferred income taxes, may not exceed the present value of our
estimated future net cash flows from proved oil and gas reserves, discounted at
10%, plus the lower of cost or fair value of unproved properties included in the
costs being amortized, net of related tax effects. These rules generally require
that, in estimating future net cash flow, we assume that future oil and gas
production will be sold at the unescalated market price for oil and gas received
at the end of each fiscal quarter and that future costs to produce oil and gas
will remain constant at the prices in effect at the end of the fiscal quarter.
We are required to write-down and charge to earnings the amount, if any, by
which these costs exceed the discounted future net cash flows, unless prices
recover sufficiently before the date of our financial statements. Given the
volatility of oil and gas prices, it is likely that our estimates of discounted
future net cash flows from proved oil and gas reserves will change in the near
term. If oil and gas prices decline significantly, even if only for a short
period of time, it is possible that writedowns of oil and gas properties could
occur in the future.
RISKS AND UNCERTAINTIES
Risks Relating to the Company
If we do not obtain additional financing, our business will
fail.
Our current revenues are not sufficient to pay for our
anticipated operating expenses. In addition, our cash reserves are minimal and
we have a substantial working capital deficit. Accordingly, we will require
additional financing in order to complete our plan of operation for our oil and
gas activities, meet the ongoing costs of operating the Worldbid Operations, and
satisfy our existing creditors. In addition, we may not be able to make the
required rental payments on our existing oil and gas leases when they become
due. If we fail to make the required rental payments when they are due, we may
lose our rights under those leases.
We have financed our operations to date from sales of equity
securities, the issuance of convertible notes and loans advanced by related
parties. However, we do not currently have any agreements in place to obtain
additional financing from these, or any other, sources. There is no assurance
that we will be able to continue to obtain financing in amounts sufficient to
enable us to maintain our business operations. If we are not able to obtain
additional financing if and when need, our business could fail.
If we never generate operating profit, then our business
will fail.
We have sustained net losses from operations since our
inception. We recorded a net loss of $229,894 during the six months ended
October 31, 2007 and we expect to incur net losses for the foreseeable future.
We may never generate operating profits or, even if we do become profitable from
operations at some point, we may be unable to sustain that profitability. We
will not be able to achieve operating profits until we generate substantial
revenues from our business operations. Our business model is not proven and
there is no assurance that we will be able to generate the revenues. If we do
not realize significant revenues from our business operations, then our
operating expenses will continue to exceed our revenues and we will not achieve
profitability.
9
If we are unable to hire and retain key personnel, then we
may not be able to implement our business plan.
We depend on the services of our senior management and key
technical personnel. In particular, our future success will depend on the
continued efforts of our President and Chief Executive Officer, Michael Cass,
and our Chief Financial Officer, Logan Anderson. The loss of the services of
either of these gentlemen and the further erosion of staff could have an adverse
effect on our business, financial condition and results of operations.
The quotation price of our common stock may be volatile,
with the result that an investor may not be able to sell any shares acquired at
a price equal to or greater than the price paid by the investor.
Our common shares are quoted on the OTC Bulletin Board under
the symbol "RYPE. Companies quoted on the OTC Bulletin Board have traditionally
experienced extreme price and volume fluctuations. In addition, our stock price
may be adversely affected by factors that are unrelated or disproportionate to
our operating performance. Market fluctuations, as well as general economic,
political and market conditions such as recessions, interest rates or
international currency fluctuations may adversely affect the market price of our
common stock. In addition, to date, the trading volume for our shares on the OTC
Bulletin Board has been limited. As a result of this potential volatility and
potential lack of a trading market, an investor may not be able to sell any of
our common stock that they acquire that a price equal or greater than the price
paid by the investor.
We may conduct further offerings of our equity securities in
the future, in which case your shareholdings will be diluted.
Since our inception, we have been reliant upon sales of our
common stock to fund our operations. We may conduct further equity offerings in
the future to finance our current projects or to finance subsequent projects
that we decide to undertake. If common stock is issued in return for additional
funds, the price per share could be lower than that paid by our current
stockholders. We anticipate continuing to rely on equity sales of our common
stock in order to fund our business operations. If we issue additional stock,
your percentage interest in us will be diluted.
Because our stock is a penny stock, stockholders will be
more limited in their ability to sell their stock.
The SEC has adopted rules that regulate broker-dealer practices
in connection with transactions in penny stocks. Penny stocks are generally
equity securities with a price of less than $5.00, other than securities
registered on certain national securities exchanges or quoted on the Nasdaq
system, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or quotation
system.
Because our securities constitute "penny stocks" within the
meaning of the rules, the rules apply to us and to our securities. The rules may
further affect the ability of owners of shares to sell our securities in any
market that might develop for them. As long as the quotation price of our common
stock is less than $5.00 per share, the common stock will be subject to rule
15g-9 under the Exchange Act. The penny stock rules require a broker-dealer,
prior to a transaction in a penny stock, to deliver a standardized risk
disclosure document prepared by the SEC, that:
1.
|
contains a description of the nature and level of risk in
the market for penny stocks in both public offerings and secondary
trading;
|
10
2.
|
contains a description of the broker's or dealer's duties
to the customer and of the rights and remedies available to the customer
with respect to a violation to such duties or other requirements of
securities laws;
|
3.
|
contains a brief, clear, narrative description of a
dealer market, including bid and ask prices for penny stocks and the
significance of the spread between the bid and ask price;
|
4.
|
contains a toll-free telephone number for inquiries on
disciplinary actions;
|
5.
|
defines significant terms in the disclosure document or
in the conduct of trading in penny stocks; and
|
6.
|
contains such other information and is in such form,
including language, type, size and format, as the SEC shall require by
rule or regulation.
|
The broker-dealer also must provide, prior to effecting any
transaction in a penny stock, the customer with: (a) bid and offer quotations
for the penny stock; (b) the compensation of the broker-dealer and its
salesperson in the transaction; (c) the number of shares to which such bid and
ask prices apply, or other comparable information relating to the depth and
liquidity of the market for such stock; and (d) a monthly account statements
showing the market value of each penny stock held in the customer's account. In
addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from those rules; the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitably statement. These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for our stock.
Risks Relating to Our Oil and Gas Operations
We have no proven reserves or current production and may
never have any.
We do not have any proven reserves or current production of oil
or gas. There are no assurances that any wells will be completed or, if
completed, that such wells will produce oil or gas in commercially profitable
quantities.
If we do not find any oil or gas reserves or if we cannot
complete the exploration of the mineral reserve, either because we do not have
the money to do it or because we will not be economically feasible to do it, we
may have to cease operations. Oil and gas exploration is a highly speculative
endeavor. It involves many risks and is often non-productive. Even if we are
able to find oil and gas reserves on our properties our ability to put those
reserves into production is subject to further risks including:
1.
|
costs of bringing the property into production including
exploration work, preparation of production feasibility studies, and
construction of production facilities, all of which we have not budgeted
for;
|
2.
|
availability and costs of financing;
|
3.
|
ongoing costs of production; and
|
4.
|
environmental compliance regulations and
restraints.
|
The marketability of any oil and gas deposits acquired or
discovered may be affected by numerous factors which are beyond our control and
which cannot be accurately predicted, such as market fluctuations, the lack of
drilling equipment near our oil and gas properties, and such other factors as
government regulations, including regulations relating to allowable drilling,
production, importing and exporting of oil and gas deposits, and environmental
protection.
11
Our oil and gas operations are in the exploration stage with
a limited operating history, which may hinder our ability to successfully meet
our objectives.
Our oil and gas operations are in the exploration stage with
only a limited operating history upon which to base an evaluation of our future
prospects. We acquired Royalite Corp. on February 28, 2007 and we do not have an
established history of locating and developing properties that have oil and gas
reserves. As a result, the revenue and income potential of our oil and gas
operations is unproven. In addition, because of our limited operating history,
we have limited insight into trends that may emerge and affect our business. We
may make errors in predicting and reacting to relevant business trends and will
be subject to the risks, uncertainties and difficulties frequently encountered
by early-stage companies in evolving markets. We may not be able to successfully
address any or all of these risks and uncertainties. Failure to adequately do so
could cause our business, results of operations and financial condition to
suffer.
The successful implementation of our business plan is
subject to risks inherent in the oil and gas business, which if not adequately
managed could result in additional losses.
Our oil and gas operations will be subject to the economic
risks typically associated with exploration and development activities,
including the necessity of making significant expenditures to locate and acquire
properties and to drill exploratory wells. In addition, the availability of
drilling rigs and the cost and timing of drilling, completing and, if warranted,
operating wells is often uncertain. In conducting exploration and development
activities, the presence of unanticipated pressure or irregularities in
formations, miscalculations or accidents may cause our exploration, development
and, if warranted, production activities to be unsuccessful. This could result
in a total loss of our investment in a particular well. If exploration efforts
are unsuccessful in establishing proved reserves and exploration activities
cease, the amounts accumulated as unproved costs will be charged against
earnings as impairments.
In addition, in the event that we commence production, of which
there are no assurances, market conditions or the unavailability of satisfactory
oil and gas transportation arrangements may hinder our access to oil and gas
markets and delay production. The availability of a ready market for our
prospective oil and gas production depends on a number of factors, including the
demand for and supply of oil and gas and the proximity of reserves to pipelines
and other facilities. Our ability to market such production depends in
substantial part on the availability and capacity of gathering systems,
pipelines and processing facilities, in most cases owned and operated by third
parties. A failure to obtain such services on acceptable terms could materially
harm our business. We may be required to shut in wells for lack of a market or
because of inadequacy or unavailability of pipelines or gathering system
capacity. If that occurs, we would be unable to realize revenue from those wells
until arrangements are made to deliver such production to market.
Our future performance is dependent upon our ability to
identify, acquire and develop oil and gas properties, the failure of which could
result in under use of capital and losses.
The future performance of our business will depend upon an
ability to identify, acquire and develop oil and gas reserves that are
economically recoverable. Success will depend upon the ability to acquire
working and revenue interests in properties upon which oil and gas reserves are
ultimately discovered in commercial quantities, and the ability to develop
prospects that contain proven oil and gas reserves to the point of production.
Without successful acquisition and exploration activities, we will not be able
to develop oil and gas reserves or generate revenues. There are no assurances
oil and gas reserves will be identified or acquired on acceptable terms, or that
oil and gas deposits will be discovered in sufficient quantities to enable us to
recover our exploration and development costs or sustain our business.
12
The successful acquisition and development of oil and gas
properties requires an assessment of recoverable reserves, future oil and gas
prices and operating costs, potential environmental and other liabilities, and
other factors. Such assessments are necessarily inexact and their accuracy
inherently uncertain. In addition, no assurance can be given that our
exploration and development activities will result in the discovery of any
reserves. Operations may be curtailed, delayed or canceled as a result of lack
of adequate capital and other factors, such as lack of availability of rigs and
other equipment, title problems, weather, compliance with governmental
regulations or price controls, mechanical difficulties, or unusual or unexpected
formations, pressures and or work interruptions. In addition, the costs of
exploration and development may materially exceed our initial estimates.
The geographic concentration of all of our properties in the
Utah Hingeline Trend may subject us to an increased risk of loss of revenue or
curtailment of production from factors affecting that area.
The geographic concentration of all of our leasehold interests
in the Utah Hingeline Trend means all of our properties could be affected by the
same event should the region experience severe weather; delays or decreases in
production; an unavailability of equipment, facilities or services; delays or
decreases in the availability of capacity to transport, gather or process
production; or changes in the regulatory environment.
The oil and gas exploration and production industry
historically is a cyclical industry and market fluctuations in the prices of oil
and gas could adversely affect our business.
Prices for oil and gas tend to fluctuate significantly in
response to factors beyond our control. These factors include, but are not
limited to:
|
(a)
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weather conditions in the United States and
elsewhere;
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(b)
|
economic conditions, including demand for petroleum-based
products, in the United States and elsewhere;
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(c)
|
actions by OPEC, the Organization of Petroleum Exporting
Countries;
|
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(d)
|
political instability in the Middle East and other major
oil and gas producing regions;
|
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(e)
|
governmental regulations, both domestic and
foreign;
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(f)
|
domestic and foreign tax policy;
|
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(g)
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the pace adopted by foreign governments for the
exploration, development, and production of their national
reserves;
|
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(h)
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the price of foreign imports of oil and gas;
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(i)
|
the cost of exploring for, producing and delivering oil
and gas; the discovery rate of new oil and gas reserves;
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(j)
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the rate of decline of existing and new oil and gas
reserves;
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(k)
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available pipeline and other oil and gas transportation
capacity;
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(l)
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the ability of oil and gas companies to raise
capital;
|
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(m)
|
the overall supply and demand for oil and gas;
and
|
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(n)
|
the availability of alternate fuel
sources.
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Changes in commodity prices may significantly affect our
capital resources, liquidity and expected operating results. Price changes will
directly affect revenues and can indirectly impact expected production by
changing the amount of funds available to reinvest in exploration and
development activities. Reductions in oil and gas prices not only reduce
revenues and profits, but could also reduce the quantities of reserves that are
commercially recoverable. Significant declines in prices could result in
non-cash charges to earnings due to impairment. We do not currently engage in
any
13
hedging program to mitigate our exposure to fluctuations in oil
and gas prices. Changes in commodity prices may also significantly affect our
ability to estimate the value of producing properties for acquisition and
divestiture and often cause disruption in the market for oil and gas producing
properties, as buyers and sellers have difficulty agreeing on the value of the
properties. Price volatility also makes it difficult to budget for and project
the return on acquisitions and the development and exploitation of projects.
Commodity prices are expected to continue to fluctuate significantly in the
future.
Our ability to produce oil and gas from our properties may
be adversely affected by a number of factors outside of our control.
The business of exploring for and producing oil and gas
involves a substantial risk of investment loss. Drilling oil and gas wells
involves the risk that the wells may be unproductive or that, although
productive, the wells may not produce oil or gas in economic quantities. Other
hazards, such as unusual or unexpected geological formations, pressures, fires,
blowouts, loss of circulation of drilling fluids or other conditions may
substantially delay or prevent completion of any well. Adverse weather
conditions can also hinder drilling operations. A productive well may become
uneconomic if water or other deleterious substances are encountered that impair
or prevent the production of oil or gas from the well. In addition, production
from any well may be unmarketable if it is impregnated with water or other
deleterious substances. There can be no assurance that oil and gas will be
produced from the properties in which we have interests. In addition, the
marketability of oil and gas that may be acquired or discovered may be
influenced by numerous factors beyond our control. These factors include the
proximity and capacity of oil and gas, gathering systems, pipelines and
processing equipment, market fluctuations in oil and gas prices, taxes,
royalties, land tenure, allowable production and environmental protection.
The unavailability or high cost of drilling rigs, equipment,
supplies, personnel and oil field services could adversely affect our ability to
execute our exploration and development plans on a timely basis and within our
budget.
Shortages or the high cost of drilling rigs, equipment,
supplies or personnel could delay or adversely affect our exploration and
development operations, which could have a material adverse effect on our
business, financial condition and results of operations. Since our operations
and properties are concentrated in the Utah Hingeline Trend, we could be
materially and adversely affected if drilling rigs are unavailable or cost of
rigs, equipment supplies or personnel increase significantly over current costs.
We may be unable to retain our leases and working interests
in leases, which would result in significant harm to our business.
Our properties are held under oil and gas leases. If we fail to
meet the specific requirements of each lease, that lease may terminate or
expire. There are no assurances the obligations required to maintain those
leases will be met. Our property interests will terminate unless we fulfill
certain obligations under the terms of our leases and other agreements related
to such properties, including making any applicable rental payments.
As of the date of filing of this Quarterly Report, we had a
substantial working capital deficit and there are no assurances that we will be
able to meet the rental obligations under our federal and state oil and gas
leases. If we are unable to make our rental payments and satisfy any other
conditions on a timely basis, we may lose our rights in these properties. The
termination of our interests in these properties may harm our business.
14
Title deficiencies could render our leases worthless.
The existence of a material title deficiency can render a lease
worthless and can result in a large expense to our business. It is our practice
in acquiring oil and gas leases or undivided interests in oil and gas leases to
forgo the expense of retaining lawyers to examine the title to the oil or gas
interest to be placed under lease or already placed under lease. Instead, we
rely upon the judgment of oil and gas landmen who perform the field work in
examining records in the appropriate governmental office before attempting to
place under lease specific oil or gas interest. This is customary practice in
the oil and gas industry. However, we do not anticipate that we, or the person
or company acting as operator of the wells located on the properties that we
currently lease or may lease in the future, will obtain counsel to examine title
to the lease until the well is about to be drilled. As a result, we may be
unaware of deficiencies in the marketability of the title to the lease. Such
deficiencies could render the lease worthless.
If we fail to maintain adequate insurance, our business
could be materially and adversely affected.
Our operations are subject to risks inherent in the oil and gas
industry, such as blowouts, cratering, explosions, uncontrollable flows of oil,
gas or well fluids, fires, pollution, earthquakes and other environmental risks.
These risks could result in substantial losses due to injury and loss of life,
severe damage to and destruction of property and equipment, pollution and other
environmental damage, and suspension of operations. We could be liable for
environmental damages caused by previous property owners. As a result,
substantial liabilities to third parties or governmental entities may be
incurred, the payment of which could have a material adverse effect on our
financial condition and results of operations. Any prospective drilling
contractor or operator which we hire will be required to maintain insurance of
various types to cover its operations with policy limits and retention liability
customary in the industry. Therefore, we do not plan to acquire our own
insurance coverage for such prospects. The occurrence of a significant adverse
event on such prospects that is not fully covered by insurance could result in
the loss of all or part of our investment in a particular prospect which could
have a material adverse effect on our financial condition and results of
operations.
Complying with environmental and other government
regulations could be costly and could negatively impact an prospective
production.
Our business is governed by numerous laws and regulations at
various levels of government. These laws and regulations govern the operation
and maintenance of our facilities, the discharge of materials into the
environment and other environmental protection issues. Such laws and regulations
may, among other potential consequences, require that we acquire permits before
commencing drilling and restrict the substances that can be released into the
environment with drilling and production activities. Under these laws and
regulations, we could be liable for personal injury, clean-up costs and other
environmental and property damages, as well as administrative, civil and
criminal penalties. Prior to commencement of drilling operations, we may secure
limited insurance coverage for sudden and accidental environmental damages as
well as environmental damage that occurs over time. However, we do not believe
that insurance coverage for the full potential liability of environmental
damages is available at a reasonable cost. Accordingly, we could be liable, or
could be required to cease production on properties, if environmental damage
occurs.
The costs of complying with environmental laws and regulations
in the future may harm our business. Furthermore, future changes in
environmental laws and regulations could occur, resulting in stricter standards
and enforcement, larger fines and liability, and increased capital expenditures
15
and operating costs, any of which could have a material adverse
effect on our financial condition or results of operations.
The oil and gas industry is highly competitive, and we may
not have sufficient resources to compete effectively.
The oil and gas industry is highly competitive. We compete with
oil and natural gas companies and other individual producers and operators, many
of which have longer operating histories and substantially greater financial and
other resources than it does, as well as companies in other industries supplying
energy, fuel and other needs to consumers. Our larger competitors, by reason of
their size and relative financial strength, can more easily access capital
markets than we can and may enjoy a competitive advantage in the recruitment of
qualified personnel. They may be able to absorb the burden of any changes in
laws and regulation in the jurisdictions in which we do business and handle
longer periods of reduced prices for oil and gas more easily than we can. Our
competitors may be able to pay more for oil and gas leases and properties and
may be able to define, evaluate, bid for and purchase a greater number of leases
and properties than we can. Further, these companies may enjoy technological
advantages and may be able to implement new technologies more rapidly than we
can. Our ability to acquire additional properties in the future will depend upon
its ability to conduct efficient operations, evaluate and select suitable
properties, implement advanced technologies and consummate transactions in a
highly competitive environment.
Risks Relating to Our Worldbid Operations
Financial results for our Worldbid Operations are difficult
to predict and our Worldbid Operations may fail.
The future financial results of our Worldbid Operations are
uncertain due to a number of factors, many of which are outside our control.
These factors include:
1.
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our ability to increase usage of the Worldbid
Websites;
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2.
|
our ability to generate revenue through the sale of
membership subscriptions for the Worldbid Websites;
|
3.
|
our ability to sell advertising on the Worldbid websites
and the timing, cost and availability of advertising on websites
comparable to ours and over other media;
|
4.
|
the success of our strategic alliances in generating
revenues for our Worldbid Websites;
|
5.
|
the amount and timing of costs relating to expansion of
our operations;
|
6.
|
the announcement or introduction of competing websites
and products of competitors;
|
7.
|
the general economic conditions and economic conditions
specific to the Internet and electronic commerce; and
|
8.
|
with the reduction in staffing levels we no longer employ
a full time person responsible for security or technical problems that may
occur on the websites.
|
These factors could negatively impact on our financial results,
with the result that our Worldbid Operations may never achieve profitability and
may fail.
If we do not succeed in selling subscription fees to users
of our Worldbid websites, then we may not be able to achieve our projected
revenues.
Our business and marketing strategy contemplates that we will
earn the majority of our revenues from subscription fees sold to registered
users of our Worldbid websites. There is no assurance that we will be able to
generate substantial revenues from subscription fees or that the revenues
16
generated will exceed our operating costs. Businesses using our
Worldbid websites may not accept paying subscription fees for access to the
Worldbid websites and may decide not to use our Worldbid websites rather than
pay a subscription fee. Businesses may not be prepared to pay a fee in order to
post requests for tenders or offers for sales on the website or to receive
e-mails of requests for tenders. If businesses are not prepared to pay a fee for
the use of Worldbid websites, then our business may fail.
If our strategic relationships for our Worldbid websites do
not provide the benefits we expect, then we may not realize significant revenues
from these relationships.
We have entered into strategic relationships for the marketing
of our Worldbid websites. These include our referral agreements and our sub-site
strategic alliance agreements. We anticipate the benefits from the strategic
relationships will be increased usage of our Worldbid websites, additional
exposure of our brand name and subsequent increases in sales of membership
subscriptions and advertising. We believe that these relationships are critical
to our success because they offer us the possibility of generating additional
revenues for each of our revenue streams and increasing our public recognition.
However, there is no assurance that these strategic relationships will generate
further revenues. Apart from one of our sub-site alliances, none of these
strategic relationships guarantee us revenue. We are relying on these strategic
relationships as a means for marketing of our Worldbid websites.
If our strategic alliance agreements for our regional and
industry specific sub-sites do not attract new users to our websites, then we
will not realize significant revenues from these strategic alliances.
We have entered into strategic alliance agreements with our
partners for the operation of our regional and industry specific sub-sites. We
are relying on these partners to market our Worldbid sub-sites and to attract
business in the particular region or industry that the sub-site is focused on.
There is no assurance that our partners will be successful in attracting new
businesses to the Worldbid websites or creating public recognition of our
Worldbid websites in the target market. The failure of our partners to attract
new businesses and create public recognition in any target market will mean that
we may not create revenues from the sub-site that exceed our costs of
development and operation of the sub-site, with the result that our business and
financial condition will be harmed.
If we do not succeed in generating public recognition of the
Worldbid websites, then we may not be able to attract a sufficient number of
users to the Worldbid websites in order for us to achieve profitability.
We believe that the successful marketing, development and
promotion of the Worldbid websites are critical to our success in attracting
businesses and advertisers. Furthermore, we believe that the importance of
customer awareness will increase as low barriers to entry encourage the
proliferation of websites targeting the business to business market. If our
marketing and promotion efforts are not successful in developing strong public
recognition of the Worldbid websites, then we may not be able to achieve
revenues and our business may fail.
If the computer systems that we depend on for the operation
of the Worldbid Websites fail, then we may lose revenues.
Substantially all of our communications hardware and computer
hardware is located at a facility in Victoria, British Columbia, Canada, owned
by an arms-length Internet service provider. Our systems are vulnerable to
damage from earthquake, fire, floods, power loss, telecommunications
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failures, break-ins and similar events. Despite our
implementation of network security measures, our servers are also vulnerable to
computer viruses, physical or electronic break-ins, deliberate attempts by third
parties to exceed the capacity of our systems and similar disruptive problems.
Our coverage limits on our property and business interruption insurance may not
be adequate to compensate for all losses that may occur. If our computer systems
are rendered inoperable by any of these factors, then we may not be able to
operate our Worldbid websites until the problem with our computer systems is
cured. We may lose users and potential revenue if we are unable to operate our
Worldbid websites for any extended period or if we have successive periods of
inoperability.
We may be unable to protect our intellectual property.
Our performance and ability to compete are dependent to a
significant degree on our ability to protect and enforce our intellectual
property rights, which include the following:
1.
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the proprietary technology that is incorporated into our
Worldbid websites;
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2.
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our trade names; and
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3.
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our Internet domain names, the vast majority of which
relate to our Worldbid brand.
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We may not be able to protect our proprietary rights, and our
inability or failure to do so could result in loss of competitive and commercial
advantages that we hold. Additionally, we may choose to litigate to protect our
intellectual property rights, which could result in a significant cost of
resources and money. We cannot assure success in any such litigation that we
might undertake.